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NATIONAL AUDIT OFFICE

REPORT BY THE

COMPTROLLER AND

AUDITOR GENERAL

Ministry of Defence: Developments in Control and Use of Manpower

ORDERED BY THE HOUSE OF COMMONS TO BE PRINTED 4 DECEMBER 1992

LONDON: HMSO 319 f5.85 NET

MINISTRY OF DEFENCE: DEVELOPMENTS IN CONTROL AND USE OF MANPOWER

This report has been prepared under Section 6 of the National Audit Act, 1983 for presentation to the House of Commons in accordance with Section 9 of the Act.

John Bourn Comptroller and Auditor General

National Audit Office 27 November 1992

The Comptroller and Auditor General is the head of the National Audit Office employing some 900 staff. He, and the NAO, are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.

MINISTRY OF DEFENCE: DEVELOPMENTS IN CONTROL AND “SE OF MANPOWER

Contents

Introduction and background

Developments in Control and Use of Manpower

Conclusions

Page

1

1

14

Appendices:

1. Main Conclusions and Recommendations of the PAC’s 41st Report 1988-89 - Control and Use of Manpower - and Departmental Response in Treasury Minute dated 31 January 1990 (Cm 964) 16

2. Recent, Current and Planned Special Reviews by the Department Affecting Manpower Requirements 20


Report

Introduction and 1 At 1 April 1992 the Ministry of Defence (the Department) employed 302,400

background Service personnel and 166,400 civilians (see Table 1). They could also call on some 349,100 reservists. The total cost of pay and allowances for this manpower in 1991-92 was some z!Z8,300 million, 34 per cent of the Defence budget, of which Service personnel, including the reservists, accounted for nearly g5,500 million.

2 In May 1989, following a report by the National Audit Office (HC 342 of 1988-89), the Committee of Public Accounts examined the Department on their arrangements for the planning, control, organisation and use of manpower. In their Forty-first Report, Session 1988-89 (HC 397) the Committee accepted that the Department had in many respects successfully controlled manpower but noted that the Department acknowledged there was scope for improvement. The Committee stressed the importance of the Department continuing to keep under review the possible need for change if they were to achieve value for money from the enormous resources invested in manpower. The Committee also expressed their wish to review the Department’s progress in due course.

3 The Treasury Minute of 31 January 1990 (Cm 964) included a constructive response to the Committee’s specific conclusions and recommendations and reported that action was underway, or promised, in a number of areas (see Appendix 1). The National Audit Office have examined the Department’s progress towards implementing the Committee’s recommendations.

Developments in Control and Use of Manpower

Departmental action

4 Following the publication of the report from the Committee of Public Accounts, the Department drew up an action plan showing the action required to achieve the Committee’s recommendations, those responsible for carrying it out and a time frame for completion. A Departmental senior level Steering Group and a supporting Executive Committee were responsible for oversight of the work and reported in April 1991 that good progress had been made on all the issues raised by the Public Accounts Committee.

Table 1: Defence Manpower (excluding reservists) as at 1 April 1988 and 1 April 1992

1 April 1999 (a] 1 April 1992 (b)

Service Civilians TOtal Service Civilians TOtal

Central Stan5 1.300 17.300 16,600 17,000 23,700 40,700

Royal Nay 64,600 32,400 97,000 59,700 30,100 89,800

Army 157,000 40,900 197,900 135,500 36,200 173,700

Royal Air Farce 92,600 19,900 112,700 79,700 18,300 98,000

Procurement Executive 1,200 32,600 34,000 1,500 29,100 30,600

Sub Total 316,900 143,300 460,200 293,400 139,400 432.300

Locally Employed 9,400 31,800 41,200 9,000 27,000 36,000

TOtal 326,300 175,100 501.400 302,400 166,400 463,800

Note: (a) HC 342 C&AS’s Reporf paragraphs 1.3 and Table 1 (b) SDE 9< Tab 2.1.

1


General developments tieding progress

COmmittee recommendations

Treasury Minute

Subsequent developments

5 Since the Committee of Public Accounts reported, two key events have occurred which are relevant to the control and use of manpower.

(a) In April 1991 the Department introduced their New Management Strategy, which is based on a new system of budgetary control for expenditure other than major procurement expenditure.

(b) The Options for Change review, and the related Departmental ‘Prospect’ report on ways of achieving a 20 per cent saving in the Department’s Headquarters staffing, are leading to substantial reductions in both Service and civilian manpower.

In addition the conflict in the Gulf in 1990-91 and the aftermath imposed constraints and led to lessons being learnt, especially regarding the use of Reserves and civilians in front-line situations.

6 Subsequent paragraphs consider the Department’s progress on the Committee’s recommendations under three headings, although some recommendations are aPProPciale to uwt: Llrau ~111: heading:

(a) recommendations relating to future methods for the tighter control and use of manpower stemming from the New Management Strategy;

(b) recommendations affected by Options for Change:

[cl recommendations relating to good practice and management in the use of manpower.

Committee recommendations (i), (ii), (iv) and (xv) relating to future methods for the tighter control and use of manpower stemming from the Department’s New Management Strategy

7 (i) The Committee recognised that the Department had in many respects successfully controlled manpower, but noted that the Department acknowledged the scope for further improvements.

(ii) The Committee welcomed the Department’s New Management Strategy and supported the objective of freeing line managers horn unnecessary rigidities and constraints.

(iv) The Committee noted the Department’s arguments for setting complements at levels lower than the assessed requirements, but considered that tightly drawn assessments of requirements were more likely to lead to the most efficient manning levels.

[xv) The Committee stressed the importance of the Department keeping under review the possible need for change if they were to achieve value for money from the enormous resources invested in manpower.

8 The Department stated that they would pursue further improvements primarily through the objective and budget setting process of the Department’s New Management Strategy. They proposed to consider further the Committee’s views on tightly drawn assessments of requirements as they formulated new procedures for the New Management Strategy.

9 To meet their defence objectives, the Department’s policy is to employ a mixture of Service personnel, civilians, contractors and reservists. The type of manpower employed in a particular post is determined as far as possible within financial

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constraints by the different operational requirements of peace, transition to war and war. Prior to the introduction of the New Management Strategy, control of numbers and gradings was exercised by the Services and other management areas within the manpower plans issued by the Department’s Office of Management and Budget. These plans took account of any manpower ceilings imposed by the Treasury or Defence Ministers. Each Service determined their operational requirements and the level of support required to maintain units at an acceptable state of readiness. The manpower implications of these decisions were determined mainly through the scrutiny of requirements in the budgetary process and the audit and complementing of individual units, ships or squadrons.

10 The Department told the Committee in 1989 that they had progressively moved away from the use of rigid numerical ceilings as a means of manpower control to the use of money as the main determinant, and under their New Management Strategy, the various activities within the Department would be controlled by money budgets. Line management would have as much freedom as could be devised to move things about to best effect without being constrained by rigid barriers.

11 The New Management Strategy is based on the principle of clear objectives set out in management plans emanating from a Departmental Plan, and the achievement of those objectives within budgets allocated by the Office of Management and Budget. The Department aim to delegate financial authority to match managerial responsibility. Previously the Department exercised central control over each area of Defence expenditure as shown in the published Vote structure. In 1991-92 overEl7 billion (net) was allocated to 22 Top Level Budget holders to cover the operating costs of their organisations and the services they give to the budget holders. Typically manpower costs comprise some 46 per cent of budgets under the New Management Strategy at the top level, rising to 70 per cent or more at lower levels because not all elements of the budgets are delegated to lower levels.

12 The Departmental Plan sets out the aims and objectives of the Ministry of Defence and the Services for the next four years against which the Department’s overall performance will be assessed. It focuses on the provision of Defence capability and other required outputs within available resources. It also identifies the Department’s current main management priorities, both to meet these requirements and to improve the Department’s efficiency. As yet there is no detailed correlation between the budgetary and management planning systems though the need for this has been recognised and action is in hand to bring it about.

13 The Department’s performance against the Departmental Plan is reviewed in the middle and at the end of each year on the basis of reports submitted by lower level plan holders. The end year review contributes to the Defence Programme Overview which is subsequently submitted to Ministers. The Programme Overview will make an assessment of resources against tasks. It will also assess the effectiveness of the United Kingdom’s current and planned military capabilities and the structures, policies and procedures which support them; identify issues relevant to the development of forward policy and programmes and propose appropriate strategies for the future. It will therefore set the framework for the construction of the next Departmental Plan and associated Long Term Costing exercise.

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MIN‘STRY OF DEFENCEz DEVELOPMENTS IN CONTROL AND USE OF MANPOWER

14 The New Management Strategy is intended to provide maximum flexibility to managers to determine the means of carrying out the approved programme and achieving their objectives within budgetary limits, rather than to place a limit on any particular resource input. The Department aim to free line managers horn unnecessary rigidities and constraints and give them the flexibility to vary the mix of resources they need to achieve their tasks in the most efficient way. In practice this aim still has to be reconciled with a number of central policy considerations, including: (a) the Service manpower requirements for war and transition to war; (b) any overall manpower targets or ceilings set by the Department, such as

those resulting from the Options for Change exercise; (c) the need for Service career structures and Navy sea to shore ratios;

(d) recruitment and training considerations.

15 The National Audit Office noted in particular that a result of the Options for Change review was the need for both Service and civilian establishments to be brought down to specific manpower levels. Setting manpower levels is contrary to the philosophy behind the New Management Strategy and has had a constraining effect on the flexibility available to budget holders to switch funds between categories of expenditure within their total resources. This constraint is likely to last until 1995 by which time all the Options for Change policies should have been implemented. The Department told the National Audit Office that although the above factors affected the way in which the New Management Strategy was implemented by exacerbating some of the difficulties of introducing new systems and procedures, the main thrust of policy will remain unaltered.

16 The Department aim to continue the progressive move towards substituting budgetary control for control of manpower through numbers or ceilings. Under New Management Strategy procedures, scrutiny of Service proposals by the Office of Management and Budget is based primarily on cash and not manpower numbers. Nevertheless, manpower requirements are reflected in programme assumptions which Top Level Budget holders are invited to cost. During the resource allocation process the bids from Budget holders based on their assessments of requirements to fulfil their objectives have to be reconciled with the total resources available and factors such as those referred to at paragraph 14. The Department believe that this process and the constraints on total resources will result in tightly drawn assessments of requirements. Budget holders may be required to make changes to their agreed tasks during the reconciliation of tasks and resources. Budget holders in front line units have, in practice, less discretion to vary numbers than those in the support areas.

17 The Department recognise the need to monitor manpower requirements relating to the approved programmes which result from the system of budget setting, partly to inform the calculation of margins and requirements for recruitment and training and to correct deficiencies. The system allows for temporary shortfalls of manpower to be met through a mechanism allowing budget holders to present castings of other ways of meeting their tasks; for example through contract assistance or other forms of manpower substitutes which are affordable within guidelines.

18 The National Audit Office did not examine in detail the operation of the new procedures. This will be undertaken as part of a study of the New Management Strategy when the Department have had more time to overcome the inevitable teething problems associated with the introduction of such a major change in procedures.

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19 However, the National Audit Offlce visited three Top Level Budget areas to obtain initial reactions to the New Management Strategy at the end of its first year in relation to the control of manpower. The majority of those interviewed were enthusiastic about the greater freedom to manage resulting from the new procedures. However some felt that they did not have sufficient flexibility to reap the maximum benefits from varying the mix of resource inputs. The amount of flexibility is closely related to the extent of the delegation by senior budget managers. It is also influenced by manpower strengths reflected in programme assumptions. The Department are to review the operation of the New Management Strategy during 1992 and may wish to consider levels of delegation as part of this review. The National Audit Office passed to the Department details of other points noted during their discussions with budget holders.

Committee recommendations (x), (vii), (xi) and [xiii) affected by Options for Change.

Committee recommendation

Treasury Minute

20 (x) The Committee considered it important that the Services maintain up-to-date assessments of numbers and skills of personnel in transition to war and war.

21 The Department accepted that assessments of the range of skills and numbers of personnel required in transition to war and war should be kept up-to-date.


22 Options for Change, announced by the Secretary of State in July 1990, identified ways in which the United Kingdom’s Forces would be restructured by the mid-1990s. The Department subsequently examined a range of different force structure options designed to meet the changed commitments, and horn these derived the manpower requirement in each Service. The process involved setting different scenarios, then analysing the commitments under each in terms of tasks, the number of ships, units or squadrons required, the number of weapons systems required to support them, manpower requirement and the cost implications. The work was led by the Defence staff working closely with the Department’s Office of Management and Budget, who costed the proposals at each stage of the process. This led to an announcement by Ministers in July 1991 of a revised structure for the three Services.

23 The Department are now refining their assumptions. The projected threat has been revised throughout 1991 and 1992, as a result of the dissolution of the Soviet Union, and the manpower structure has been fine-tuned as the plans have been reflected in the Department’s Long Term Costings. The post-Options manpower structures (Table 21, including assessments of numbers and skills of personnel required in transition to war and war, continue to be refined. Top Level Budget holders through the process described in paragraph 16 above, have to justify their bids during each Long Term Costing round for the resources which they consider necessary to carry out their peacetime, transition to war and wartime tasks to enable them to meet their objectives.

24 The Secretary of State’s decisions on the future re-structuring of the Armed Forces following Options for Change have led to a wide-ranging study of the long term balance between Regular and Reserve Forces. The aim of the study was to develop a Defence-wide manpower structure for the period from 1995 onwards best matched to anticipated tasks (in Europe, out of area, and at short notice), reduced readiness requirements and extended warning and preparation time. The working group examination included the scope for employing resources other than regular Service manpower in both peace and war in the light of the reduced

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MINISTRY OF DEF’ENCX DEVELOPMENTS IN CONTROL AND USE OF MANPOWER

COmmittee recommendation

Table 2: Britain’s Defence for the 1990s compared with 1 April 1990 levels

1 April 1990 Britain’s Defence Percentage Manpower levels 1or the 90s Change

Royal Navy/Royal Marines

R N Regulars 55,700 47,760 -14 R M Regulars 7,600 7,260 3 Regular Reserves’ 26,300 25,000 -12 Volunteer Remves &Auxiliary Forces 10,000 9,000 -10

Army (including Gurkhas)

Regulars 160,400 116,000 -28 Regular Reserves* 163,500 195,000 t6 Volunteer Reserves &Auxiliary Forces 75,700 63,600 -16

Royal Ak Force

Regulars 69.7Ocl 75,000 -16 Regular Reserves* 39,900 45,000 r13 Volunteer Reserves &Auxiliary Forces 2,000 2,000 0

Total Regulars 313,300 246.000 Total Reserws 339,400 339,500

Civilians

United Kingdom-based Civilians 141,400 120,000 Locally Entered Civilians 30,900 15,000

Total Civilians 172,300 135,000

*!Smembers of Ule Reoular Fmces W a current r.?se!ve hbliiq hot all are ohned to be called w on mob&?tion).

-21 0

-15 -51

-22

Soum: Minisby of Defence

threat following the thaw in East/West relations. Their report proposed more flexible use of Reservists in areas where, until now, Regulars only would have been considered. It suggested that a limited category of high readiness Reserves could be introduced in all three Services, as well as suggesting that a greater proportion of the support to front-line Forces might be undertaken by civilians from private industries and Defence Support Agencies, provided those civilians accepted a Reserve liability. An open Government document “The Future of Britain’s Reserve Forces” setting out these proposals was published in March 1992. Policy decisions will be taken, and the need for further legislation considered, when the process of consultation both inside and outside Government is completed.

25 (vii) The Committee considered that the Department should vigorously pursue their review of the corps in the Adjutant General’s command and should also continue to keep under review the scope for rationalisation in the support area. They should also carry out the proposed review of the district structure.

Treasury Minute 26 TheDepztmentreportedtheircontinuingreviewof selectedcorpsintheAdjutant General’s area with a view to possible rationalisation, and noted the Committee’s conclusion that the scope for rationalisation of the Army’s support area should be kept under review. The Department accepted the Committee’s view that a review of the district structure should be carried out at an early stage, and had set in hand one which would assess the scope for meeting war and peacetime commitments in a more efficient and cost effective manner.


27 The Adjutant General’s Corps-Following an announcement to Parliament on 18 December 1990 a new Adjutant General’s Corps was formed on 6 April 1992. This includes the Royal Military Police, the Royal Army Pay Corps, the Royal

6


Army Education Corps, the Army Legal Corps, the members of the Women’s Royal Army Corps not Ye-badging’ to their employing Corps, the Military Provost Staff Corps and an administrative group of staff clerks from the Royal Army Ordnance Corps and, from April 1993, all Army Clerks. The Adjutant General’s Corps will provide a framework for a major rationalisation of the Army’s administrative support structure, and the opportunity to achieve greater efficiency and cost effectiveness in the provision of personnel services.

28 The Army Logistic Support Structure-A review of the Army’s logistic support systems and structure began in August 1990 and covered the command, control and management of the Quarter Master General’s area, the functions and organisation of the logistic corps and the manning, deployment and tasks of the Army’s logistic units. The main change resulting from the review is the adoption of a functional approach to,Army logistics based on Service support (the supply chain for combat forces) and equipment support (covering the maintenance and availability of equipment). This includes the grouping of logistic personnel from six existing corps into two logistic corps with all major moves planned to be completed by April 1994.

29 The Army District Structure-Initial proposals on the future of the Army District structure were presented by the Commander in Chief United Kingdom Land Forces in June 1990. They have since received further consideration within the Department. Since reorganisation of the existing District structure is fundamental to the successful implementation of changes flowing from the Options for Change exercise, the Department have put in hand further work to take account of this new development. The first of the five new mainland Districts (reduced from nine) was formed on 1 April 1991. The objective is to ensure that the new United Kingdom Army command structure is as tightly drawn and economical as possible without jeopardising the security of the United Kingdom. The Department estimate that the reduction in the number of Districts will save about 230 military posts.

Committee recommendations

30 (xi) The Committee noted the Department’s assurance that they now had better information on the costs and efficiency of the various manpower options open to them, and the reviews they had underway in this area.

(xiii) The Committee noted the Department’s intention to proceed with ‘contractorisation’ where cost-effective and consistent with military requirements; and that quicker progress would be made now that the constraint of civilian manpower ceilings had been removed.

Treasury Minute 31 The Department stated that they were concerned to achieve the most cost- effective mix of manpower, including the employment of more women and civilians, and contractorisation, where these options were feasible and compatible with operational needs.


32 Cost information-The Department regularly promulgate capitation rates including pension costs for different grades of staff in their “Ready Reckoner for Staff Costs”. Guidance to management areas on the costing of in-house services for the purpose of comparisons with the costs of contracting-out services stresses that actual staff costs should be used where available, otherwise the Ready Reckoner should be used. National Audit Office enquiries suggested that the Ready Reckoner was used in most cases for the purpose of comparing the costs of manpower options, but the Department expect that the New Management Strategy will in future provide budget holders with the means to

7


identify more accurately the actual full costs for staff and other items. In general Service personnel cost more to employ than the equivalent grade in the Civil Service.

33 The Treasury have introduced a new approach to the treatment of pensions costs in departmental budgets to be effective from 1 April 1993. All departments will be charged each year for the accruing superannuation liability cost for civil servants in the Principal Civil Service Pension Schema. For the Ministry of Defence, charges will also be raised for Service personnel covered by the Armed Forces Pension Scheme. These charges will be incorporated at the lowest budget levels in the Department with the aim of bringing home very directly to budget managers the full costs of each category of manpower that they currently use.

34 Expanding the role of civilians - As a result of the fundamental restructuring of the Department arising out of the New Management Strategy, Options for Change and the Prospect report (see paragraph 51, progress in this area has not been as quick or as wide ranging as the Department would have wished. Indeed in some areas Service personnel have been substituted for civilian staff in order to make the most economic use of resources during run-down.

35 The Department believe that there are a number of factors which in certain circumstances have limited the extent to which civilians might be substituted for Service personnel. In the case of all Services, there has been a need to consider how any task would be carried out in war. Some jobs required military skills and there was a need to consider factors such as conditions of service, security, the maintenance of a viable manpower structure and other tasks such as guard duty. These factors still reduce the flexibility available to managers to change their resource mix. However they do not apply in all cases and the reduction in the threat may increase the opportunities for civilianisationand contractorisation, and the Regular/Reserve Force Mix Study (see paragraph 24) should add impetus to the work already in hand.

36 The Department believe that reviews arising from Options for Change, and the downward pressure on costs and resources brought about by the New Management Strategy should lead to a more cost effective mix in the ratio of civilian to military manpower. The use of civilians is expected to increase in response to economic imperatives.

37 The National Audit Office have also conducted a separate study of the Department’s progress in contracting out [Ministry of Defence: Competition in the Provision of Support Services (HC 133 of 1992-93)). This showed that between 1988 and 1991,2,500 civilian and 1,500 military posts were saved by contracting out work. However, the Government White Paper “Competing for Quality” (Cmnd 1730) which calls for fresh impetus to market tasting, should lead to more contractorisation in future. As announced, Ministers have initiated an exercise to market test over El billion worth of activities over the next four years.

38 The extent of civilianisation in the three Services is summarised below:

(a) Royal Navy United Kingdom based civilians comprised 33 per cent of the workforce at 1 April 1992, the same percentage as at 1 April 1988. Although the military content of some jobs makes them potentially suitable for further civilianisation, the Department believe this process is constrained by the need to ensure a proper ratio of sea billets to shore billets. The Department

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MNLSI’RY OF DEFENCE: DEVELOPMENTS IN CONTROL AND USE OF MANPOWER

stated in October 1992 that the Royal Navy aimed to market test activities to the value of E200 million in the next four years, and had already identified plans amounting to over El51 million. This would involve approximately 5,000 civilian and 1,000 military posts.

United Kingdom based civilians comprised 22 per cent of the workforce at 1 April 1992, compared with 21 per cent at 1 April 1988. Civilianisation of units and support areas has remained an objective in the Army, although the Department believe that many support and training posts which could be civilianised or placed under contract in peacetime require military manning for transition to war and war, and must therefore remain staffed by Service personnel. They also recognise the scope for wider reliance on contractorisation or Reserves and are pursuing work accordingly. The Department stated in October 1992 that so far, plans existed to market test over the next four years activities valued at E246 million, involving some 7,500 civilian and 2,300 military posts.

(c) Royal Air Force United Kingdom based civilians comprised 19 per cent of the workforce at 1 April 1992, compared with 18 per cent at 1 April 1988. In their search for greater efficiency and cost-effectiveness, the Royal Air Force have set up a Contractorisation Working Group to develop proposals, through market testing, for further contractorisation, and for civilianisation. The Department stated in October 1992 that thus far, the Group aimed to market test over the next four years activities valued atE217 million, involving some 7,000 Service and 5,700 civilian posts.

Committee recommendations (iii), (viii), (ix], (xii) and (xiv) relating to good practice and management in the use of manpower


39 (iii) Manpower forward.planning should be developed further; special reviews should continue; more comparisons should be made between areas; and the increasing number of t&Service audits should seek to ensure that good pmctiw in CUE Service was achieved in another.

Treasury Minute 40 The Department agreed that manpower forward planning should be developed and special reviews should continue. They accepted that there was a continuing need to identify and adopt best practice and agreed that t&service audits should contribute to this.


41 Forward Planning-The Departmental Planning process, and the linkage between the objective and budget-setting processes and the Long Term Costing under the New Management Strategy, provide the frame-work for manpower forward planning at all levels. Under the New Management Strategy the traditional manpower numbers approach to planning is being replaced by a cash driven system whereby Top Level Budget holders are required to balance the affordability of manpower against their programmes and budget. However, the manpower targets resulting from the Options for Change process mean that manpower numbers will continue to be significant in forward planning.

42 Special reviews - Special reviews of manpower continue to be a feature of the Department’s forward planning. Recent, current and planned reviews are listed at Appendix 2, and the Regular/Reserve Force Mix Study is described at

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MINISTRY OF DEFENCF: DEVELOPMENTS IN CONTROL AND USE OF MANPOWER

paragraph 24. Many of the studies and special reviews carried out by the Services since 1990 have laid the groundwork for Options for Change. For example in 1991 the Department carried out a special review of the Army’s Adjutant General’s Corps, and the findings were incorporated into Options for Change. The Department are maintaining the momentum of special reviews. Currently the three Services are examining officers’ careers and structures in the light of Options for Change: in the case of the Army and the Royal Air Force, the studies will also encompass careers of other ranks.

43 Comparisons between areas and Tri-Service audits - On 1 April 1991 the single Service audit divisions were amalgamated into a tri-Service division, Directorateof ManpowerAudit [Services).Althoughthreesingle-Serviceelements are retained within the Directorate, the aim is to have frequent exchanges of auditors between the three elements and to encourage tri-Service audits. The aims of the Directorate in the first year were to achieve consistency in manpower audit and to provide the basis for delegation of significant audit responsibilities to Top Level Budget holders in the single-Service areas in April 1992.

44 From October 1992, line management of the dispersed audit teams will become the responsibility of single-Service Top Level Budget holders but in order to ensure the proper application of technical standards, functional responsibilities remain with the central Directorate. Top Level Budget holders are responsible for the funding of their audit staff, and will initiate audit plans. Audit independence is maintained by the continuing oversight of the audit activities by the central Directorate. These arrangements should facilitate the adoption of best audit procedures, by utilising the greater scope for comparison and the dissemination of good practice across the three Services.

45 Although the Department aremaintainingthemomentum of this work, in 1991-92 the Directorate were folly occupied assisting the Services and the Centre implement the recommendations flowing from Options for Change and the Prospect report.

Committee 46 (viii) The method of assessing Service manpower margins should be put on a recommendation common basis as soon as possible.

Treasury Minute


47 The Department stated that the study to examine the differences of approach to margins used by the three Services and to identify the likely scope for a common

approach was well under way: when completed in Spring 1990 the Department would act speedily on its recommendations.

48 The Services consider that because of unavoidable absences from productive duty, more manpower is required than the total number of posts alone would indicate. Thus the Services add a manpower margin to allow for absences such as training, long term sickness, leave after overseas service, and for non-effective time between appointments.

49 Following a study into tri-Service Manning Margins which reported in March 1990, the Department adopted standard manpower terms and definitions. They also agreed a standard formula for calculating the number of people in the margin but concluded that it was impossible to compare manning margins directly in each of the Services because complements, from which margins are derived, ape calculated differently by each Service. The study recommended a further review into complementing methods to see if there were lessons that could be learned

10


from the best practice of each Service and to explore the potential for a common approach. This study reported in February 1992 that:

(a) the alignment of tasks to be performed and the personnel required was carried out by the Services on a broadly similar basis, but less commonality was found in the management of trade and branch structures;

I$) the maintenance of data to support the planned use of manpower in war was an essential element in complementing; there was a need for greater attention to validation of war complements and their management;

(c) there was no best practice in the use of scales, ie approved standard requirements for specific tasks. The use of scales had much to commend it and the potential for applying scaling techniques should be investigated in those areas where two or more Services have common functions;

(d) manpower margins should be used to avoid overstretch, gapping and overmanning; but the Services employed different interpretations of similar activities in calculating margins. The application of a common standard would facilitate the compilation, comparison and inspection of margin calculations, and the application of best practice should result in better value for money and limit the potential for inflation and under assessment.

50 The Department are considering these recommendations and the Royal Air Force have proposed changes which may lead to a reduction of up to 1,200 posts in their trained requirement. The Department underline that within the tight budgetary system of the New Management Strategy, Service manpower margins will continue to be restricted to their essential purpose - as a manpower addition to take account of ‘non-productive’ aspects of Service life. They consider that budgetary pressures will militate against any possibility of greater margins than are necessary, since budget holders will bear the cost of any personnel accepted by them from the margin to cover for absences of their own personnel.


51 (ix) The Committee recognised the need for career structures but the cost- effectiveness of reductions in the numbers of career specialisms should be pursued.

Treasury Minute 52 The Department agreed they should continue to pursue cost-effective reductions in career specialisms, consistent with the need to retain acceptable levels of skills and expertise.


53 Career Specialisms -the Department have made useful progress in pursuit of reductions in career specialisations consistent with the need to maintain acceptable levels of Service skills and expertise and to expand job and career opportunities for women. Work is continuing in each Service to ensure that, as the Services contract following decisions under Options for Change, the number of career specialisations in specific trade groups reflect the new structure.

(a) Since 1989, there has been some useful, if modest, rationalisation in Royal Navy rating specialisations, mainly by amalgamation of branches. Overall, however, there has been a nominal increase in the number of specialisations to take account of the entry of women to specialisations hitherto only open to men. Since the Women’s Royal Naval Service is still a separate Service, discrete specialisations for women have had to be created, but these are the same as the Royal Navy specialisations. Several major studies (referred to in Appendix 2) are underway and the Department expect that these, together

11


with full integration of the Women’s Royal Naval Service into existing structures, will lead in due course to a significant reduction in the overall number of specialisations.

Ibl In the same period the Army have reduced the number of specialisms &om 165 to 120 as a result of reviews of arms and corps, the integration where possible of females into their equivalent male specialisms and the deletion of duplicated career employment groups. In particular the formation of the Adjutant General’s Corps from April 1992 has led to further reductions and the abolition of separate specialisations for women in the Army.

(c) In the Royal Air Force, a number of reviews have been completed and by 1 April 1993 they will have reduced the number of ground trades from 102 in 1989 to 90, which represents a reduction from 75 to 60 specialisms. The Officer branches remain at 24 and airmen (aircrew) trades at four.

54 The Department expect that continuing work in each of the Services, and the implementation of the Options for Change proposals, will result in further reductions in career specialisms.


55 (xii) The Committee welcomed the studies on expanding the range of functions allocated to women, and the recent decision to use women as pilots and navigators in non-combat aircraft; and hoped that quick conclusions would be reached on other studies.

Treasury Minute


56 The Department reported on the progress of their studies into the role of women.

57 The Department have made considerable progress in expanding job and career opportunities for women in the Services. In most respects male and female personnel are interchangeable and women now enjoy the same conditions of service as men. In particular the ‘X-factor’ element of Servicewomen’s pay, which is designed to compensate for the greater demands of Service life, is now the same as that paid to Servicemen.

58 In addition, in 1991 the High Court ruled that the policy under which Servicewomen were dismissed on becoming pregnant was in breach of the 1978 Equal Treatment Directive of European Community Law. As a result the Department have estimated that some 5,500 women may be entitled to claim compensation after being compulsorily discharged on grounds of pregnancy between August 1978 and August 1990 when the Department introduced maternity leave arrangements based on the statutory provisions. In December 1991 the Department brought these arrangements into line with those for women in the Civil Service and now include 14 weeks maternity leave on full pay.

69 Some constraints remain, for example, in certain combat arms, and where, in the short term, the Services have been unable to provide separate accommodation for women. The Royal Navy have a particular problem finding space for separate facilities on submarines.

60 The position reached in each of the Services is as follows:

(al In the Royal Navy members of the Women’s Royal Navy Service are now serving in 16 Royal Navy ships and were deployed to the Gulf. All suitable surface ships will have been modified to provide accommodation for women by 1995. The role of women has been extended to the Fleet Air Arm, where

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MINISTRYOFDEFENCEzDE"ELOPMRNTSDJCONTROLANDUSEOFMANPOWR

women are eligible to fly all aircraft, and the Royal Marines Band Service. The extension of Service to submarines and the Royal Fleet Auxiliary is being studied further.

(b) In the Army less restrictive deployment rules allow women to serve in more forward posts. The only combat arms Tom which women are now excluded on grounds of operational effectiveness are the Infantry and the Royal Armoured Corps but this is shortly to be reviewed. In addition, pilot and observer posts in the Army Air Corps are now open to women. The wider employment of women in the Army led to the progressive integration of women into their employing Corps, culminating in the disbandment of the Women’s Royal Army Corps bn 5 April 1992. The Army is also studying the possibility of introducing gender-free testing which is designed to assess the physical capability of personnel to perform tasks, regardless of sex.

(c) Female Royal Air Force personnel are now employed in almost all branches and trades without significant restrictions other than physical capability. The training of women as aircrew, for non-combat roles started in 1989. In early 1991, employment opportunities for female aircrew were extended to include Nimrods and Support Helicopters; and in December 1991 women were given the opportunity to fly in all Royal Air Force aircraft including front-line jet combat aircraft.


61 (xiv) In considering how to provide security services for Departmental and Service establishments, the Department’s prime consideration must be the safety of the Services and other personnel employed there.

Treasury Minute 62 The Department accepted that the safety of personnel must be the prime consideration.


63 The Department have stated that considerable security enhancements have been implemented covering a range of manpower measures, as well as equipment and physical improvements. The safety of personnel has been a prime consideration in providing security services for Departmental and Service establishments.

64 In February 1989, the Department embarked on a three year programme of security enhancements. An additional 1,945 security personnel were in post by March 1992 and this programme has recently been extended. This increase includes a significant additional number of Ministry of Defence Police posts, additional police for the Royal Air Force and a rise in the number of counter- terrorist posts.

65 The Department set up a unified Ministry of Defence Guard Service with its own career structure and training programme on 1 October 1992. However, commercial firms are still one of the options available where there is a requirement for security services. Their use is subject to certain restrictions; for example they cannot be armed and so they cannot be the sole means of protection if there is a requirement for armed guarding. Tight guidelines for monitoring the standards and performance of commercial guards have also been developed. In general, the requirements for physical security resources, including manpower, remain under continuing review.

Savings and benefits achieved

66 The Department told the National Audit Office that it was not possible to quantify the savings and benefits achieved as a result of the Committee of Public Accounts’ Report. The effects of that Report, the introduction of the New

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MINISTRY OF DEFXNCE: DEVELOPMENTS IN CONTROL AND “SE OF MANPOWER

Management Strategy and the general thrust of international changes reflected in the Department’s Options for Change study had lad, in combination, to considerable savings and benefits in the way both Service and civilian manpower were controlled and used.

The National Audit Office’s conclusions

67 Overall, the Department have responded very positively to the conclusions and recommendations of the Committee of Public Accounts, and have pursued them in a systematic manner through the Departmental Action Plan. Audit findings on particular aspects were as follows:

(a) Detailed procedures have been developed for control of manpower through budgets under the New Management Strategy. whilst the emphasis in future will increasingly be on control through cash budgets, the Department will continue to have regard to requirements for transition to war and war, manpower targets set by Ministers as a result of Options for Change, and factors such as the need for career structures (paragraphs 9-19).

III) A key factor in the success of the New Management Strategy will be the extent to which considerations such as those at (a) above restrict the flexibility available to budget holders to take decisions on manpower matters. The National Audit Office will report separately on the operation of the New Management Strategy at a later date when the Department have had time to overcome the teething problems inevitably associated with the new systems (paragraph 18).

(c) In the longer term the Department’s proposed combined management planning, budgetary and review mechanism, supplemented by a comprehensive audit programme, should enable the Department to keep under regular review the need for change to achieve value for money from resources invested in manpower (paragraphs 12 and 13).

(d) Good progress has been made in most of those matters which relate to good practice and management in the organisation and use of manpower. This is particularly so as regards the rationalisation of the support corps and district structure in the Army, forward planning, special reviews, the creation of a tri-service manpower audit division, reductions in career specialisms, an expanded role for women in the Services and improving the provision of security services (paragraphs 27-29,41-45,53-54,57-60,63-65).

(el Progress has been slower than expected in expanding the role of civilians, who are generally less costly to employ than Service personnel, and achieving a more cost-effective mix of manpower, although this has been affected by the major developments which have occurred in the last two years. The percentage of civilians employed in the three Services was the same in 1991 as it was in 1988 but the Department expect it to increase as a result of Options for Change and the New Management Strategy. They believe the latter will provide budget holders with better information on the costs of staff resources (paragraphs 34-38).

(0 Progress has also been slower than expected in achieving a common approach to manpower margins in the three Services. But the Department believe that within the tight budgetary system of the New Management Strategy, manpower margins will be further constrained (paragraphs 48-50).

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MINISTRY OF DEFENCE DEVELOPMENTS IN CONTROL AND USE OF MANPOWER

(g) The impetus provided by the Committee of Public Accounts’ Report is being carried forward in the forther work arising from the Options for Change review and in the working practices which have been adopted with the introduction of the New Management Strategy. The Deparbnent consider the latter will enable them to manage the restructuring flowing from Options for Change in a sensible and well- ordered manner. III particular the Department need to ensure that the opportunities for civiliaoisation are folly explored.

(h) Overall, the National Audit Office conclude that although the Department have been unable to attribute savings or benefits to any single cause, the introduction of good practice, good management and good house-keeping methods described in this Report should increasingly result in a tauter and more economic use of Defence manpower in the restructuring of the Department which has followed Options for Change.

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MINISTRY OF DEFENCE DEVELOPMENTS IN CONTROL AND USE OF MANPOWER

Appendix 1 Main conclusions and recommendations of the PAC’s 41st Report 1988-89 - Control and Use of Manpower - and Departmental response in Treasury Minute dated 31 January 1990 (Cm 964)

Conclusions and recommendations

PAC Report/Treasury Minute paragraph references

On whether the Ministry’s Central Headquarters have established effective systems of manpower planning and control

PAC 2(i)

TM 70

PAC 2(ii)

TM 71

PAC 2(iii)

TM 72

We recognise that the Ministry have in many respects successfully controlled manpower in what is a very complex area, with substantial savings in civilian manpower, but note that the Ministry acknowledge there is scope for further improvements.

MOD welcomes the Committee’s recognition of its success in controlling manpower, and will pursue further improvements primarily through the objective and budget-setting processes of the New Management Strategy.

Manpower ceilings successfully achieved the Government’s objective of substantial reductions in civilian numbers but also had some adverse effects. We therefore welcome the introduction by the Ministry of the New Management Strategy; and we support their objective of freeing line managers from unnecessary rigidities and constraints.

MOD welcomes the Committee’s support for the approach taken by the New Management Strategy.

We also welcome the Ministry’s agreement that they should further develop their forward planning for manpower; that they will continue to supplement their manpower audit programme with special reviews; that they will tend to make more comparisons between different areas of manpower use; and that their increasing number of t&service audits should seek to ensure that good practice in one Service is achieved in another.

MOD notes the Committee’s findings and agrees that manpower forward planning should be developed and special reviews should continue. MOD accepts that there is a continuing need to identify and adopt best practice, and that tri-Service audits should contribute to this in line with the Committee’s recommendations.

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PAC Z(iv) We note the Ministry’s arguments for setting complements at levels lower than the assessed requirements, but we consider that tightly drawn assessments of requirements are more likely to lead to the most efficient manning levels.

TM 73 MOD has sought to encourage efficiency by planning and funding a lower level of manpower than is expressed in requirements or complements (which are virtually synonymous). MOD notes the Committee’s views and proposes to consider them further as it formulates the procedures for the New Management Strategy.

On whether the organisation of the Setices has been adapted to take account of changes in circumstances

PAC Z(v)

TM 74

PAC Z(vi)

TM 75

PAC Z(vii)

TM 76

We note the Ministry’s views on the contribution of the Army’s regimental structure to operational effectiveness and the Army’s efficiency and morale; and we recognise the strength of their arguments against undertaking enquiries which could disrupt and upset units where the sense of identity, corporate adhesion, and loyalty is one of the Army’s major assets.

MOD welcomes the Committee’s acceptance of MOD’s view on the contribution of the Army’s regimental structure to operational effectiveness, efficiency and morale and on the arguments against undertaking such enquiries where these could be unfruitfully disruptive.

We welcome the fact that the Royal Navy and the Royal Air Force have changed their command structures to reflect changes in circumstances.

MOD notes the committee’s findings that the Royal Navy and the Royal Air Force have changed their structures to reflect changes in circumstances.

It is not clear to us why the Army’s support structure needs to be so complex by comparison with the other Services. We consider that, as a first step, the Ministry should vigorously pursue their review of the corps in the Adjutant General’s command and should also continue to keep under review the scope for rationalisation in the support area. They should also carry out the proposed review of the district structure at an early stage following their review of training and the introduction of the New Management Strategy.

MOD is continuing its review of selected Corps in the Adjutant General’s area with a view to possible rationalisation. It is intended to complete the review by the end of 1990.,MOD notes the Committee’s conclusion that the scope for rationalisation of the Army’s support area should be kept under review, and will ensure that this is done. Two specific areas, the Base Repair Organisation and the Postal and Courier Service, are the subject of current studies: the former is planned for completion by the end of 1990 and the latter early in 1990. Elements of the Transport and Movements organisation are being considered for possible Defence Support Agency status. MOD accepts the Committee’s view that a review of the district structure should be carried out at an early stage, and has since set in hand one which, inter alia, will assess the scope for meeting existing war and peacetime commitments in a more efficient and cost-effective manner. Completion is planned for the end of 1990. The Ministry undertakes to reach early decisions on the recommendations in these reviews.

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MINISTRY OF DEFENCE: DEVELOPMENTS IN CONTROL AND USE OF MANPOWRR

PAC Z(viii)

TM 77

PAC Z(ix)

TM 78

PAC Z(x)

TM 79

PAC 2(xi)

PAC ?&iii)

On whether there is scope for reducing identified manpower needs

We agree that the methods of assessing Service manpower margins should as far as possible be put on a common basis and we consider this should be done quickly. The Ministry should therefore complete their study of this subject and act on it as soon as possible.

The study to examine the differences of approach to margins used by the three Services and to identify the likely scope for a common approach is well under way, and when it is completed in Spring 1990 the Ministry will act speedily on its recommendations.

We recognise the need to have career structures which will help to recruit and retain high quality personnel, but the cost-effectiveness of reductions in the number of career specialisms should be pursued.

MOD welcomes the Committee’s recognition of the need for career structures, and agrees that it should continue to pursue cost-effective reductions in career specialisms, consistently with the need to retain acceptable levels of skills and expertise. Progress continues towards this aim; further reductions have been made since the PAC hearing.

We also consider it important that the Services should maintain up-to-date assessments of the numbers and skills of personnel required in transition to war and war. Since these assessments are the basis of Service manpower requirements in both war and peace, we are surprised that so much work remained to be done at the time of the NAO examination.

MOD accepts that assessments of the range of skills and numbers of personnel required in transition to war and in war should be kept up-to-date. Such assessments are continuously revised. Major reviews and refinements of all the Services’ requirements are now broadly complete, but work continues on particular aspects.

On whether there is scope for meeting manpower needs more cost effectively

We note the Ministry’s assurance that they now have better information on the costs and efficiency of the various manpower options open to them, and the reviews they now have underway in this area.

We note the Ministry’s intention to proceed with “civilianisation” or “contractorisation” where this is cost-effective and consistent with military requirements. We trust that quicker progress will be made than hitherto now that the constraint of civilian manpower ceilings has been removed.

TM 80 MOD notes the Committee’s conclusions. MOD is concerned to achieve the most cost-effective mix of manpower, including the employment of more women and civilians, and contractori,:ation, wherever these options are feasible and compatible with operational needs. MOD accepts that the removal of civilian manpower ceilings offers greater flexibility in securing the most efficient and economical mix, subject to the availability of suitable staff in the required locations.

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PAC 2(xii) We welcome the studies now in progress in all three Services to see whether women can be given a wider range of functions than are currently allocated to them. We also welcome the Ministry’s recent decision to use women as pilots in non-combat aircraft and share the Ministry’s hope that conclusions will be reached in their other studies at some point this year.

TM 81

PAC 2(xiv)

TM 82

PAC 2(x”)

TM 83 MOD notes the Committee’s views and its wish to review progress in due course.

MOD has made further progress on the studies into the role of women in the Royal Navy and Army. The Royal Navy’s review is nearly complete and it is planned to announce the results early in 1990. The Army’s study has been completed, and work is proceeding to confirm those posts which can be opened to women, and to enable women to join previously all-male corps if they choose. The Royal Air Force aims to increase the number of Service airwomen by some 2,000 over five years from 1989.

We recognise that decisions must take into account factors other than costs; in particular, we stress that in considering how to provide security services for Departmental and Service establishments, the Department’s prime consideration must be the safety of the Service and other personnel employed there.

MOD accepts fully that in discharging its responsibility for security, whether by means of directly-employed personnel or through contractors’ staff, the safety of personnel must be the prime consideration. Following terrorist incidents at military establishments in 1988 a very large security enhancement programme is in train. Where units employ commercial guards, tight guidelines for their employment and monitoring have been developed and issued.

We recognise the very high standards achieved by the Services in the past but we stress the importance of the Ministry continuing to keep under review the possible need for change if they are to achieve value for money from the enormous resources invested in manpower.

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Appendix 2 Recent, current and planned special reviews by the Department affecting manpower requirements

Royal Navy

Studies in progress or completed

- Warfare Branch Development - Air Engineering Manpower - Air Engineering Trade Structure - Marine Engineering Branch Development - Training Strategy (including Equipment) - Fleet Support - Fleet Administration - WRNS to Sea - PROSPECT (Rationalise HQ Activity) - Naval Base Study

Progressing Options for Change including

- An examination into the structure of the Officer Corps

Army


- The Adjutant General’s Corps (paragraph 26) - Quartermaster General’s Logistic Support (paragraph 26) - United Kingdom Land Forces District Structure [paragraph 27) - The Wider Employment of. Women (paragraphs 54-57) - Individual Training Organisation - Review of Senior Officers’ Posts (follow up report) - Army Manpower and Material Asset and Liability Management

Progressing Options for Change including studies into

- The operational and organisational implications of Options - The effects on manpower manning and logistics - “Cadreisation” and the size and structure of the reserve - Peacetime commitments, Home Defence requirements - The implications for command and control, equipment procurement and

sustainability - The matching of barrack availability with the post-Options structure

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Royal Air Force


- Rationalisation of Trades Specialisations and Branches - Revision of Terms of Service to Improve Retention of Experienced Staff - The Engineering Branch for Officers - The Training and Career Structures of Aircraft Trade Groups - The Training Pattern and Structure of Ground Based Trade Groups - Rotary Wing Training - Officers under Development - RAF Manning and Training Margins - Officer Training - further work

Progressing Options for Change including studies into

- The RAF Manpower Structure - Air Traffic Control and Fighter Control - The Training and Career Structure of Mechanical Transport, Safety and Surface

and other Ground Trades

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