Defence Estates Conference 2001

Keynote Speech

Geoffrey Hoon, Secretary of State for Defence

I want to try to do three things this afternoon:

• First, to demonstrate the commitment of Ministers to the work of Defence Estates, and to the initiatives that we are driving forward across the whole Department to improve the way in which we manage our estate.
• Second, to put that programme of reform into a wider context – the context of the Government’s approach to sustainability, to construction and to public investment in buildin, and in the context of the continuing implementation of the Strategic Defence Review.
• Finally, to announce a significant new programme of investment in accommodation for Servicemen and women.

The Defence Estate and its effective management matter a great deal to all Defence Ministers for a number of reasons:

• It is right that when we ask Service personnel to risk their lives on our behalf that we give them somewhere decent to live.
• That has a direct impact on the morale and training of Service personnel, and hence on their operational effectiveness.
• It is both valuable and costs a great deal of money.
• And its ownership demands the Ministry of Defence be a standard-bearer for wider Government objectives, especially in the environmental field and in driving through change in the construction industry.

Last June I launched our Strategy for the Defence Estate. This was a significant step forward for the Department and a clear indication of the Estate’s importance. The strategy contains important commitments from Ministers:

• First, we will use the land we hold ‘in trust and on trust’ for the nation as efficiently as possible, and look to concentrate its development on core sites.
• Second, we will improve public access to the rural areas of the Defence Estate as far as we can.
• Third, we will adopt Strategic Environmental Appraisal and take the environment to the heart of decision-making in the Ministry of Defence, leading the way across Government.
• Finally, we will publish an annual report on our stewardship of the estate to demonstrate that we are living up to our commitments.

The Strategy was put in place as a result of the Strategic Defence Review. It is part of the response to the problem we know we have with the estate.

Some of it is very good, but too much of it is mediocre. Some of it is simply unacceptable.
Its condition is positively damaging to operational effectiveness, to retaining Service men and women, and to the day-to-day efficiency of Defence.
And we know that it is getting worse.

The obvious issue is that, over many years, not enough money has been spent on keeping the estate fit for its different purposes.
But the problem is not just about the size of budgets. It is also about efficient management.

What we need, in fact, are better ways of turning taxpayers’ money into results on the estate. Better ways to get the maximum value from the money which the estate’s users within the MoD and the Armed Forces have to spend. At the top of the list comes Public Private Partnerships, but while PFI remains our first choice, it is not the only one.

Defence is, of course, not unique in Government in spending large sums on property and buildings. Other departments and other public bodies share our interest in being able to turn to a first-class industry. The Government is therefore concerned about the industry as a customer.

But it is also concerned about it as a Government. I know that John Prescott has left you in no doubt of that.

We are very aware of the importance of the construction and property industry to the general economy of the United Kingdom. You and your colleagues contribute around 8% of our GDP.

But it is a matter of concern that the industry is not held in the highest regard. That it is not as competitive as previously in world markets. That it cannot earn sufficiently high margins to fund investment and research and development. And that it remains fragmented with all the problems and risks that brings, for example in terms of safety and fraud.

We want to see an industry that pulls together to deliver real value to all its clients. One where both clients and suppliers can work confidently together.

You are all very familiar with Sir John Egan’s report on ‘Re-thinking Construction’ and its two main themes:

1. The need for public sector clients to drive reform by placing greater emphasis on real value for money rather than lowest price.
2. Collaborative working with a fully integrated supply chain to deliver solutions to requirements defined in terms of outputs.

The Ministry of Defence has wholeheartedly embraced the Egan Report and Latham's, before him. We have placed ourselves at the forefront of the Government’s Achieving Excellence initiative to change the way in which the public sector client approaches procurement. And we have invested, jointly with our colleagues in DETR, in the development of processes which will help the industry to respond.

So far we have completed two pilot projects under the Building Down Barriers initiative. These were the design and construction of Physical Recreation and Training Centres at Aldershot and Wattisham. I opened the Aldershot centre last year and I was very impressed with its facilities.

I can tell you that it has some particularly fine squash courts of which I have direct personal experience. I made the mistake of telling my office that I would rather play squash than have lunch during my visit. They duly invited the Army to arrange a suitable game but the Army clearly decided that this was an excellent opportunity to get their own back on the Secretary of State. They brought in the Army champion!

As he had travelled some considerable distance to be there I could hardly decline to play but it wasn’t really a match. But the journalists and photographers loved it!
But facilities aside, I was also very impressed with the reports I heard of the benefits to both customer and supplier of the new approaches in these two projects. I want to see more of that across all our programmes.

The Government has also put in place a policy for 'Better Public Buildings'. This is in the vanguard of 're-thinking construction' and is something with which the Prime Minister has closely identified himself.

The aim is good design. Not some expensive piece of decoration fixed onto buildings as an afterthought but the dividend from creative thinking at every stage in the construction process.

Design brings optimum planning, a smart energy-efficient building envelope, well-serviced internal spaces. It can run right down to the design of the small lever on a toilet cistern. Good design affects everything we touch and see and it adds value.
We are fortunate to live at a time when our expectations have increased dramatically – cars are better designed, clothes are better designed. So there is no reason why the MoD's personnel shouldn’t enjoy similar benefits in the buildings where they live and work.

And let us not forget – good design for us should mean good business for you.
So, we are working closely with key organisations such as the Commission for Architecture & the Built Environment and the Design Council. I am sure that together we can apply best practice in design to the great variety of buildings that the Ministry of Defence needs – everything from rooms for single soldiers to jetties for nuclear submarines.

We can demonstrate the MoD's commitment to Better Public Buildings by our new Excellence Awards. The competition is in progress at the moment and we will announce the winners in June. I won’t put a curse on any of the entrants by mentioning them now.

The Ministry of Defence is also committed to supporting measures to tackle the construction industry’s toll of accidents. We recognise the role clients must play in improvement, and Government clients in particular. For that reason, Defence Estates is a founder member of the new Confederation of Construction Clients.

We will insist that health and safety is of paramount importance to us. We will expect contractors to reflect that in their design work, in the involvement of all key suppliers in design teams, and in the actual conduct of every project. And we will take it into account in our selection decisions.

We will also be taking into account the risk of fraud, which the National Audit Office reminded us of so firmly last summer. There is much that we can, and will do ourselves.

There is much the industry could, and indeed should do, to help us. By co-operating closely with our suppliers we believe we stand a good chance of eliminating fraud on our contracts for construction and property management. We will be looking very carefully at the previous record of bidders for our work, at their management approach and their attitude to the prevention of fraud.

When my predecessor George Robertson carried out the Strategic Defence Review, a central part of it was what we now call ‘Smart Acquisition’. This is a broader label than the original ‘Smart Procurement’ because we want to apply the same principles across all our activities. That includes all the services which you can offer us.

Our procurement route of choice remains solutions which engage Private Finance, with a proper specification of the outputs required by us as the customer, and proper incentives on industry to deliver.

We have such an arrangement in place now for the refurbishment of the MoD’s headquarters in Main Building on Whitehall, and we are pursuing similar solutions for our major military garrisons, such as Tidworth.

But PFI will not always be feasible. Therefore, alongside it sits Prime Contracting. This is not a novelty in the Ministry of Defence because we have used Prime Contracts to purchase weapons systems and support from the private sector for many years. Indeed, it is our standard form of procurement in these areas.

But extending it to construction and estate management is new. And it is going to produce real benefits in terms of both the functionality of our estate and better value for the very substantial sums of money that we spend on it.

So, the Estate Strategy includes among its objectives the same sort of goals as we have sought in our equipment programme – shortening the delivery timeframes of building projects, minimising overall running costs, and reducing through-life costs. In short achieving more effective expenditure on maintaining our estate.

I noted earlier that one of the estate’s problems was that in the past not enough money had been spent on it.

Now, not only is the Strategic Defence Review giving results but – for the first time for many years – the Government has been able to increase the money to be spent on Defence. We have also recognised that the estate could not be sustained without additional expenditure. That without new investment it would decline until it no longer met the needs of the Armed Forces.

One of our most pressing areas of weakness on the estate is single living accommodation for Service personnel. Much of our accommodation is modern and of a high quality, but by no means all of it.

I have visited several examples of the worst kind of single living accommodation. Some, like Montgomery Lines in Aldershot, are frankly appalling.

I am determined this should not continue. I am determined to ensure that those who serve their country are provided with decent, comfortable and up-to-date accommodation.

Therefore, as a major example of the Government's commitment to Defence, I want to take this opportunity today to announce a very significant programme of expenditure on single living accommodation for our Servicemen and women.

Not only are we making a significant new investment, but we will also apply the principles of ‘Smart Construction’ to the programme. In other words this programme will be a Prime Contract or Contracts covering the whole country.

This is the Ministry of Defence putting its money where its mouth is on Prime Contracting. This is Egan in action.

We believe that you have the capacity to take on the challenge of moving us towards our goal as quickly and as efficiently as possible. You can bring all your experience to our problem; you can innovate better than we can; you can spot the quick wins for us.
So, a scoping study is currently being carried out and a project team being formed. In view of the importance I and my colleagues attach to this requirement I want to see it proceed quickly. I hope we will come to the market within a matter of weeks.

In the end, I do not care whether the end results are red or blue or green, in engineering brick or in glass and steel. But I do care that our Service personnel are properly housed, and that taxpayers’ money is spent to best effect. I am convinced that Prime Contracting is the best way to achieve that in this new programme.

The upgrade programme will involve a major investment year on year for the next decade. We plan to build up to investment levels of around £200 million per year on new and upgraded single living accommodation.

Some upgrade and rebuild programmes are already under way – for example at Andover in one of our first stand-alone Prime Contracts. And, as you will know, we have action in hand to let other contracts shortly for specific projects. Those will go ahead.

But, as well as those projects, we have allocated well over £100 million per year to the new arrangements I have just described.

Therefore, as well as the projects under way or about to be let, this new programme could involve investment of well over £1 billion over a ten-year period.

I am very pleased with the general progress that has been made with the roll-out of Prime Contracting across the Defence estate. In particular, that we are now in the marketplace in Scotland with the first of what will be five regional Prime Contracts.
I see this roll-out as vital to the continuing improvement of the fabric of the estate and its management.

I would like to take this opportunity to express my own thanks to you for the interest and support provided by industry throughout the development of this initiative.

I understand that the value of the work in the individual regions and the longer duration of the contracts make them extremely attractive to the industry. I want these contracts to provide a real basis for long-term collaborative working with partners who will be innovative and pro-active in their approach. There will also be opportunities for you to work as consultants in support of our Integrated Project Teams.

Indeed, my only concern about the regional programme is that I would like to see it implemented rather quicker. I have asked Ian Andrews to consider whether we could go to the market rather earlier with the South-West and South-East regions.

We are also looking to spread the innovation of Prime Contracting to other areas of the management of our estate. This could cover disposing of surplus sites, managing property, town and country planning, and environmental management.

We will look at embracing the whole range of professional executive services undertaken on our estate, excepting only those which are central to our responsibilities as a department of state, or to our ability to be an intelligent client.

Just as in construction, we hope that we can find the most cost-effective solution by involving one or more partners with single-point responsibility in national or regional Prime Contracts.

Not only is this another radical step for the Ministry of Defence but we believe it is a real opportunity for the industry, a major new opportunity for service delivery.

You know we have one of the largest and most diverse estates in the United Kingdom. So I hope you be willing to come forward and give us your views and opinions to help us shape the way forward to the advantage of both customer and supplier.

You can see that we are determined to pursue change on a considerable scale, on both the construction and property sides. A great deal of work is in hand to persuade clients and industry alike that these new ways of doing business are indeed the best ways of doing business.

I hope that you will agree with us and help us to make them work because these initiatives are designed not only to deliver better value from the Defence budget. They are also designed to support the Government's ‘Achieving Excellence’ programme.
Achieving Excellence is intended to help make Government, in John Prescott’s words, the most demanding of the industry's clients. And in doing so, it will go some way towards helping the industry to become one of the most forward-thinking and dynamic.
But new processes and procedures are only starting the foundations. To achieve best value we need your best people – your most creative people. They are the essential catalyst to bring about what the Prime Minister has described as an essential 'step change'.

The success of Prime Contracting will depend on your people and ours engaging with teamwork, energy and imagination.

These are the characteristics which the Armed Forces display whenever we call upon them to risk their lives for us. I am sure we can do the same for them.

Finally, as Secretary of State for Defence, I am very pleased to be able to make today’s announcement of new investment in improving accommodation for Service personnel.
This investment is a significant proportion of the new money allocated to the Defence budget in last year’s Spending Review. But it is also possible because of the success of the Ministry of Defence and the Armed Forces in meeting the challenges of the Strategic Defence Review.

They are delivering the efficiencies which we identified in embracing Smart Procurement, in disposing of assets and stocks we no longer needed, and in finding new and better ways of doing business. Those processes are not yet finished but we are now seeing the benefits.

I have no doubt that the Strategic Defence Review allowed the Armed Forces to enter the 21st century with confidence. I have no doubt that it has given us a secure foundation for continued success, both on the estate where our attention is focused today, and in general across all that we ask the Armed Forces to do.