Defence Reviews (whether given formal Review status or not) have 3 phases. First, the bright young things of the MOD (ministers, military and officials) busy themselves with developing clever initiatives,which they are absolutely convinced will produce greater effectiveness at lower cost. These are mixed with a leavening of sensible evolutionary management fixes, which combine low risk with modest savings. At the appointed hour, a fanfare of trumpets announces the most successful and radical review ever. The second phase - the implementation - is long and hard and much less exciting. Now the bright ideas have to be turned into reality, and that must be done without losing the already assumed benefits of the evolutionary measures. Finally, the difference between assumptions and reality become so stark that the only solution is the third phase: a new Review.
Will the Strategic Defence Review (SDR), published in July 1998, suffer the fate of its predecessors? Certainly there is more hope that the prolonged consultation process means that it has probably been constructed on a more reliable risk assessment than has been the case in the past. We are now well into the hard grind of implementation, and this period is also more likely to be successful given that the hounds of the Treasury are to be kept muzzled for the next two years. Nevertheless, there are a number of areas where the time is short and the risk is high. The areas of greatest risk are smart procurement, joint logistics, efficiency savings, defence lands and manpower. In the longer term, the decision to provide two new large aircraft carriers with a complement of new aircraft will undoubtedly bring resource difficulties, but this is not yet a major concern.
Smart Procurement was a key aspect of the SDR, although work had started ahead of the Review. Equipment expenditure is set to rise from £6 billion in the current year to about £6.8 billion in 2001/02. Smart procurement is assumed to make the relatively modest savings of £2 billion over the next 10 years. This figure is scarcely different from the 3% efficiency savings that the department is expected to make without major organisational change. The test of how well smart procurement is working will be in delivery of equipment into service on time, to price and on specification. It may be that the greater delegation of authority, and the more intimate involvement by industry will help. However, there are those that worry that such changes could as easily increase the risks of projects running over cost and time. It will be an area that will require very careful performance monitoring. For the moment, progress seems to be satisfactory and the process has good visibility.
The establishment of a powerful post of Chief Of Defence Logistics, with General Sir Sam Cowan in the hot seat, signalled a revolutionary change in the logistics support for the three Services. The time scales for the melding of the three areas into one is relatively short and the complexity of the task is very high. The SDR has not assumed early savings from the rationalisation of three logistics organisations. This does not necessarily make it a low risk area, as previous experience suggests that such rationalisation can result in significant unplanned costs. When the Front Line First Review proposed a rationalisation of officer staff training, it was initially expected to result in modest savings. This relatively simple project has in the event turned into a high cost measure, which also resulted in some very difficult political issues over the disposal of Greenwich. The time scales have extended, and an expensive temporary solution at Bracknell added to the cost and inefficiencies. The logistics organisations are much more complex. They have each been struggling with modernising their IT systems. It would be unwise to expect this project to be completed on time and without significant unplanned extra expenditure. The Defence Select Committee, in their report on the SDR, indicated that they would be monitoring progress, but gave little detail on how they would measure success.
Since the late 1980s, the MOD has undertaken to provide efficiency measures each year. The figure has varied but has been of the order of 3% per annum for most of the last 10 years. By its nature, such a target becomes progressively more difficult to achieve. The most obvious, and least painful efficiency gains are taken in the early years. As the room for manoeuvre decreases, the efficiency exercise turns into a savings exercise. Budget holders are expected to find the necessary cuts, and inefficiency is likely to increase. Staff effort is wasted in creative accounting to ensure that efficiency targets are met. The problem is compounded when major changes are also taking place as a result of Review initiatives. Efficiency measures, which are designed to have early effect, may cut across the longer term proposals and in the end drive up costs. They can also have a significant negative effect on morale as they may appear arbitrary and unfair to the troops who are affected. While the efficiency measures do not have a high profile within the SDR, they can cause political difficulties in unexpected ways as individual illogical cuts are highlighted in the media.
The SDR assumes an income from estate disposals of £700 million by 2001/02. This represents about double the normal rate. The SDR will certainly throw up a number of extra sites for disposal, but they will only be freed as the reorganisations (TA, logistics, joint forces and others) take place. This means that the extra sales will tend to bunch towards the end of the period. The risk is that the property market may by then be considerably less buoyant than at the time of the SDR. Additionally, other government departments are increasingly looking to asset sales to balance their budgets. This may make it more difficult to sell MOD sites quickly.
The fifth, and perhaps greatest, high risk area for successful implementation of the SDR is in the manpower area. It is already clear that there are significant urgent manning problems in various specialisations. Despite the reductions in combat aircraft numbers in the SDR, the RAF will still be unable to provide sufficient fast jet pilots to man its diminished fleet in the immediate future. The army establishment was rightly increased in the SDR, but, as it was unable to man its previous establishment, this makes the recruiting and retention problem more acute. Army recruiting figures appear reasonable, but retention gives little cause for comfort. The worthy attempt to repair the damage done in previous Reviews to the medical services will be a challenging problem. In all these cases, extra resources will be needed for recruiting, training and retention measures. There is little evidence to suggest that sufficient provision has been made.
What does this somewhat gloomy analysis mean? As Defence Reviews go, the SDR was better and more honest than most. Nevertheless, it seems set to follow the paths of its predecessors as the true costs and problems emerge from the detailed implementation work.This Review of course, as all its predecessors did, assumes level funding in the longer term. This is the most heroic assumption of all.