Ministry of Defence: Agency Changes

The Minister of State, Ministry of Defence (Lord Drayson)
My right honourable friend the Minister of State for the Armed Forces (Adam Ingram) has made the following Written Ministerial Statement:

With effect from 1 April 2007, the Defence Procurement Agency (DPA), the British Forces Post Office (BFPO), the Defence Communication Services Agency (DCSA), the Disposal Services Agency (DSA), Defence Estates (DE), the Defence Bills Agency (DBA) and the Duke of York's Royal Military School (DYRMS) will cease to hold agency status. It has also been decided that the Defence Diversification Agency (DDA) should be closed later this year.

Given that many of the reasons for making these organisations agencies are now embedded in the wider department, particularly for those that are also top level budgets, agency status now adds little value.

In recognition of this, the “Enabling Acquisition Change” (EAC) report of June 2006 recommended that, in creating a new integrated procurement and support organisation, neither the new organisation (Defence Equipment & Support) nor any of its sub-divisions should retain agency status. Agency status is accordingly being removed not only from the DPA, which is currently a top level budget, but also from the BFPO, DCSA and DSA. Only the Defence Storage and Distribution Agency will retain its agency status in the new Defence Equipment & Support organisation.

Agency status will also be removed from DE, which will remain a top level budget. Oversight of DE by the Defence Estates Committee will also continue.

Removal of agency status from the DBA has been precipitated by the advent of MoD's new financial management Shared Service Centre, which has responsibility for end-to-end accounting processes.

Removal of agency status from the DYRMS will bring it into line with other state-maintained boarding schools.

In addition, although the Defence Diversification Agency (DDA) does not have the same formal agency status as the organisations mentioned above, the department also wishes to announce the conclusions of the consultation process into its future, which began last September.

The DDA was formed in 1999 to encourage the civil exploitation of defence technology; help inform industry about MoD’s future equipment needs; and facilitate the spin-in of civil technology to defence. However, since it was formed, the environment in which it operates has fundamentally changed.

Regarding the civil exploitation of defence technology, the creation of QinetiQ in July 2001 transferred three-quarters of the MoD’s Science and Technology base directly into a company with strong commercial incentives to exploit defence technologies in civil markets. In 2005, the MoD’s Defence Science and Technology Laboratory established Ploughshare Innovation Ltd as a direct route for diversification and commercial exploitation of its intellectual property. Ploughshare has demonstrated growing success in this role: developing new licensing agreements; managing a technology innovation fund, and creating three new spin-out companies

In terms of spinning-in new technology, the MoD’s research programme has been progressively opened to competition, encouraging a broader range of suppliers to become directly involved in the supply of defence technology. Recent initiatives, such as the formation of defence technology centres and the “Competition of Ideas”, have also provided new ways to encourage innovation. On the equipment side, the recent review of acquisition policy supports the conclusion that, the route to market for small and medium-sized enterprises in defence should be via prime contractors rather than directly to the department.

When it comes to informing industry about the department's requirements, there have also been significant changes since the formation of the DDA. The Defence Industrial Strategy in 2005 set out publicly the technologies and capabilities required to support future defence requirements. In 2006, the Defence Technology Strategy identified our priorities for research and development. It identifies the actions the defence sector must take to maintain an appropriate level of R&D investment in those areas key to defence capability and national competitiveness. Taken together, these strategies, and the work in hand across MoD to implement them, generate a more direct engagement with industry than was possible through the DDA.

Consultation on the future of the DDA has included discussions with industry, defence trade associations and trade unions. Our conclusion is that, given the changes over the past eight years which have embedded diversification into the department's wider activities, there is no longer a requirement for a separate organisation to facilitate the diversification role. Consequently, the department has decided to proceed with the closure of the DDA.

The DDA has been a good champion for diversification, and we would like to thank the director and staff for their significant contribution. Attempts will now start to find alternative employment for the 35 staff, most of whom are on secondment from other organisations. We will engage with stakeholders to ensure that remaining issues are resolved effectively, and that the value of information generated within the DDA is not lost. In parallel with this announcement, the department will be writing in more detail to the DDA’s stakeholders.

This decision does not lessen the Government's commitment to diversification and technology transfer. As highlighted in the Defence Industrial Strategy this remains an important objective and one which we are fully committed to meeting through the mechanisms which I have described above. These initiatives are all evidence of the continuing importance we place on maintaining momentum in this key area.