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Departmental Cost Effectiveness

Volume 502: debated on Monday 7 December 2009

To ask the Secretary of State for Defence what efficiency savings projects (a) his Department and (b) its agencies put in place under the Operational Efficiency Programme; on what date each such project was initiated; how much each such project was expected to contribute to departmental savings; how much had been saved through each such project on the latest date for which figures are available; and if he will make a statement. (300926)

The MOD is firmly committed to delivering the recommendations of the Operational Efficiency Programme (OEP). My hon. Friend the Minister for Veterans, my hon. Friend the Member for North Durham, (Mr. Jones) has been appointed Value for Money (VFM) Minister and is supported by a board composed of the Minister for Strategic Defence Acquisition Reform, the Vice Chief of the Defence Staff, the second permanent under-secretary and the directors general finance and strategy, ensuring senior ownership for driving efficiency throughout the Department. A single programme has been established to deliver the VFM agenda.

MOD’s response to the OEP was a £450 million increase in its comprehensive spending review 2007 (CSR07) VFM target to a total of £3.15 billion VFM savings by 2010-11. There is no separate OEP target in this spending review period beyond this contribution to the CSR07 £35 billion cross government target.

By the end of FY 2008-09 MOD had achieved around £650 million VFM savings. An indicative breakdown of the initiatives that make up this figure, along with their anticipated savings by FY 2010-11 are described as follows.

£ million


VFM savings at end of FY 2008-09

Approximate VFM savings expected by FY 2010-11

Improvements in corporate enabling services



Improvements in the way we support defence equipment



Driving down costs in the nuclear warhead capability sustainment programme



Savings following a review of Headquarters British Forces Cyprus



Drawdown in both military and civilian personnel in Northern Ireland



Reprioritisation of research programmes



Over-delivery from SR04 (agreed with HMT)



Additional VFM savings are being delivered through the Department’s planning round, which includes discrete efficiency initiatives and allocative savings, where the Department has chosen to reprioritise its expenditure to ensure its highest priority, delivering success on operations, is supported most effectively. Further progress will be reported in our autumn performance report, which will report VFM savings of around £1.2 billion in the first 18 months of the CSR07 period. We are therefore broadly on track for delivery of the £3.15 billion target.

Work is also in progress to deliver the specific OEP recommendations, which will contribute to the £9 billion which will be delivered across Government in the next spending review. Progress to date includes:

An annual benchmarking of Defence (including trading funds) finance, human resource, estates, information technology, and back office costs;

A review of several MOD assets (the Met Office, the Oil and Pipelines Agency, the Defence Storage and Distribution Agency); and

Exploration of collaborative procurement opportunities.

A number of VFM studies to explore further savings within the Department.