Title: United Kingdom. Organisation and Management of Defence - Planning Defence

PLANNING DEFENCE

DEFENCE POLICY

British defence policy is designed to support our security policy. It guides the contribution of our armed forces to defence and security goals, and shapes our force structures and capabilities.

The aim of Britain's defence policy is:

* to deter any threats to and, if necessary, defend the freedom and territorial integrity of the United Kingdom and its Dependent Territories, including provision of support, as necessary, to the civil authority in countering terrorism;

* to contribute to the promotion of Britain's wider security interests, including the protection and enhancement of freedom and democratic institutions and the promotion of free trade;

and thus to promote peace and to help maximise the United Kingdom's international prestige and influence.

To achieve this policy requires forces with a high degree of military effectiveness, at sufficient readiness and with a clear sense of purpose, for conflict prevention, crisis management and combat operations. Our forces must therefore be able to undertake a full spectrum of military tasks.

Between 1992 and 1997 the planning framework that supported the formulation of our defence policy was based on three Defence Roles, and flowing from them fifty mission-oriented military tasks. A new planning framework has been developed, based on the likely Mission Types in which we might expect our Armed Forces to be engaged. These are:

* Security of the United Kingdom and its citizens in peacetime.
* Security of the Dependent Territories.
* Defence support to wider British interests.
* Support of international order and humanitarian principles.
* Regional conflict outside NATO.
* NATO regional crisis.
* General war.

Military Tasks are allocated against these Mission Types, and provide components for more detailed planning. This is the mechanism by which forces are matched to policy, and by which capabilities, commitments and resources are kept in balance.

The formulation of defence policy therefore requires an accurate assessment of all kinds of developments that might affect Britain's defence needs. But our defence policy is not formulated in isolation. NATO remains the cornerstone and a wide range of issues is discussed in the Alliance. Britain also works to increase security through its membership of other important international organisations. It is a permanent member of the UN Security Council, and is a member of the Western European Union (WEU), the European Union (EU) and the Organisation for Security and Co-operation in Europe (OSCE).

Our defence policy also addresses bilateral defence relations with countries round the world, and multilateral, regional and short-term issues as well as the long-term issues. Technological development and available resources play their part in the policy process, as do other Government Departments, such as the Foreign and Commonwealth Office, the Home Office, the Northern Ireland Office, the Department of Trade and Industry, and the Treasury.

All of this work is carried out by civilians and military personnel of the Central Staff. It is the purest pol-mil business in the Department.

(Further information on defence policy can be found in the annual Defence White Paper, 'Statement on the Defence Estimates'.)

RESOURCES FOR DEFENCE

The Government allocates money to the MOD (click here to see a chart showing a breakdown of the Defence Budget) and the Armed Forces each year, as to other Departments, in the Public Expenditure Survey (PES). There is much competition for funds between spending Ministers around the Cabinet table, where Defence is just one voice among many. The Cabinet's challenge is to balance its policy priorities and departmental needs within the overall level of public expenditure it determines the country can afford.

In the spring, Departments tell the Treasury the likely cost in cash of the programmes they wish to carry out over the next three financial years. Detailed discussions take place between officials and the Treasury over several months, and final decisions are taken collectively by Cabinet Ministers. The Chancellor of the Exchequer announces the results in his budget statement in late November or early December. These plans cover a period of three financial years. The budget set for the first year (the 'Estimates Year' starting the following April) is a fixed cash sum. The cash totals for the second and third years are firm plans but form the basis for the following year's PES round when they are reviewed in the next annual negotiation.

THE LONG-TERM COSTING

To provide forces and infrastructure to deliver the required military capability the MOD constructs a plan and programme. These objectives and targets give expression to Defence policy to objectives, and force levels, equipment, logistics and personnel support which can be afforded within the cash allocated in PES. Each year the previous year's plan and programme are rolled forward and revised to take account of changes in policy, resources and circumstance. This process of resource allocation within the MOD is known as the Long Term Costing (LTC).

The LTC looks forward four years for operating costs and ten for equipment, rather than the three of PES. It does not start with a blank sheet of paper each year but with the programme which the Secretary of State approved the previous year. So the costing exercise is essentially a re-costing. The programme is issued for re-costing in April each year in the form of the Departmental Plan: this is an internal, classified document which sets out a range of management and performance objectives which the MOD must meet, and the force levels and readiness requirements for the Military Tasks. It goes to the single-Service Chiefs of Staff and Top-Level Budget (TLB) holders, who in turn have their own management plans which set out in increasing levels of detail the specific outputs required from each Command and management area. In this way, the programme assumptions are passed down the budgetary chain to more than 1,000 individual budget holders and to the project directors of equipment programmes.

The assumptions are then re-costed by budget holders and project directors. At each level, two key issues are addressed:

* First, is the programme tautly costed in a way which maximises value for money? Each budget holder must show how he or she could manage his activities within previously-agreed resources. In other words, they must show how any cost growth in particular areas can be offset elsewhere.

* The second issue for the budget holder is to illustrate how reductions in his or her budget can be achieved. This identifies how we might compensate for unavoidable cost growth elsewhere in the programme, and creates the headroom for enhancements to be introduced. A key requirement is to identify efficiency savings to contribute towards meeting the Department's efficiency savings targets.

Budget holders are also given the opportunity to propose enhancements which they would like to see added in their areas.

The costings are progressively aggregated up the budgetary hierarchy and closely scrutinised by each level of management. Minor changes to the programme, both upwards and downwards, are incorporated at this stage. The process also highlights particular problem areas which need to be studied further. Ultimately, draft plans and re-costed budgets are submitted to 2nd PUS. The relevant Service Chief of Staff is responsible for ensuring that TLBs' bids for his Service's operating costs are tautly costed and reflect agreed Departmental requirements.

The central assessment of the full re-costing begins in earnest in December each year, following the Chancellor's announcement of the new three-year plans for public expenditure. We use the new cash plans to calculate a ten-year benchmark against which we can judge the re-costed programme. The savings measures offered by budget holders and potential enhancements are prioritised against key policy and military objectives in the light of the Government's decisions in PES on the overall resources to be allocated to Defence. This assessment allows us to take a view across all three Services and all of the MOD and to decide the particular areas of concern that need addressing, the particular military capabilities that need enhancing, and the best package of savings measures to provide the headroom to make enhancements and offset cost growth

The 2nd PUS and VCDS consult the Service Executive Committees and the Procurement Board before the FPMG decides what is to be submitted to Ministers. Final decisions on the content of the programme are taken by the Secretary of State.

The result is a long-term plan and costings which set objectives and match policy, commitments and resources. It forms the basis of the request to Parliament to vote Estimates provision for the new financial year; and for the allocation of cash to budget holders and the setting of objectives down the management hierarchy. It also provides the programme assumptions on which the Department bases its next PES bid and LTC cycle.

The LTC process is run by the civilian staff working for the AUS (Programmes) in the Central Staff, in concert with the military staff under the ACDS (Programmes). These include the single-Service Resources & Programmes branches and their sister military Plans & Programmes directorates. While part of the Central Staff, they support their own Service's Chief of Staff, including in the carrying out of his responsibilities for the overall financial management of his Service's TLBs.

SETTING EQUIPMENT REQUIREMENTS

Within the framework established by the LTC, the procurement of major equipment proceeds on a step-by-step basis. The obsolescence of an existing system is not a sufficient reason to buy a replacement. A replacement must be justified from first principles by showing that a gap exists in our capability and demonstrating the military value of filling it in the context of Defence policy and the planning assumptions about the sort of operations to which British forces might be committed. Click here to see a figure describing the acquisition process

Within the Central Staff, the Operational Requirements (OR) branches in the Systems area are responsible for the formal statements which define the characteristics required of new equipment. The Staff Target expresses the function and desired performance in broad terms before the feasibility of meeting the requirement has been assessed in depth. If it survives critical scrutiny, the Staff Target will form the basis of one or more feasibility studies, usually involving both the Defence Evaluation and Research Agency (DERA) and industry. On completion of these studies, the OR sponsor refines and amplifies the Staff Target to produce a Staff Requirement. If this in turn survives fresh scrutiny, it becomes the authoritative statement of goals to which subsequent work is directed.

The OR branches work very closely with colleagues elsewhere in the Central Staff and others outside it. The Services who will operate and maintain the equipment, the Procurement Executive's (section on Defence Procurement) technical and project management experts, DERA and industry all make important contributions.

EQUIPMENT APPROVALS COMMITTEE

This process is managed by the Equipment Approvals Committee (EAC), which makes recommendations to Ministers on the largest projects and authorises others within its own delegated powers. It consists of CSA in the chair, CDP, VCDS, and 2nd PUS. This membership reflects the views of the Services as users of the equipment, those of the PE who will be responsible for acquiring it, and those of the Central Staff which is responsible for policy and resource allocation.

The EAC's interest in any given project is not of a once-and-for-all kind; it is a step-by-step process which scrutinises a project before each of the major stages in the procurement cycle (described in figure 5): the feasibility study, the project definition stage and the full development and production stages. (In practice, these last two are usually considered together).

The scrutiny involved is a careful comparison of the relative cost and operational effectiveness of alternative solutions to the requirement. We begin with the option of doing nothing and look at potential trade-offs such as upgrading an existing system rather than buying a new one, or buying a few relatively expensive systems or more, cheaper ones. Systems are assessed against a wide range of scenarios because of the many possible uses for the Armed Forces in today's uncertain strategic environment. And we look at the cost of operating a system through its entire life, which means taking into account reliability, maintainability and the people needed to man, sustain and support the system. This process is known as a Combined Operational Effectiveness and Investment Appraisal (COEIA).

In addition to the COEIA many other issues are examined. What is the best procurement route: develop a new system, collaboratively or nationally, or buy one "off the shelf"? What risks attach to each option? What are the implications from British industry? The LTC process addresses whether or not a particular new system is affordable and where it stands in relation to Defence-wide priorities. Normally a project will not proceed unless there is provision for it in the LTC.

The EAC will expect convincing answers to these questions and more before it decides to allow a project to go on to the next stage. It may need to establish a consensus among differing views held by the various interests represented. For example, it may be necessary to reconcile the desire to have a new equipment brought into service as quickly as possible with the need not to cut corners. Experience has often shown that trying to rush projects can have quite the opposite effect to that desired: mistakes are made and cost overruns and delays result. It is part of the EAC's job to ensure that lessons learned from experience are applied to future projects.

DEFENCE SCIENTIFIC STAFF

The Central Staff includes a number of scientists and engineers, some bedded-out in the Systems area, the remainder working directly for the Deputy Under Secretary (Science & Technology). These latter provide objective scientific advice in support of policy-making, planning, programming, and equipment procurement. They ensure that the potential of science and technology is recognised and exploited, particularly in support of the equipment programme and operations.