The Ministry of Defence has done much to improve the management of the major repair and overhaul of land equipment but there is more to do, including addressing the future role and shape of its in-house provider, the Army Base Repair Organisation (ABRO), Sir John Bourn, Head of the National Audit Office, told Parliament today.
The major repair and overhaul of land equipment is large and complex. The Department owns a large and diverse range of land equipment worth around £5.6 billion and there are over 15,000 different repairable items in the inventory.
There is scope for it to be more cost effective. For example, repair loop times are very long – it takes over 180 days on average from the time an item is sent from a unit for repair to the time it is repaired and returned to the depot. Repair loop times compare unfavourably with some sectors of industry, leading to excessive stocks of some repairable items.
The Department has made important changes to its supply organisation and the way it conducts business. These changes, such as the creation of the Defence Logistics Organisation and the introduction of Integrated Project Teams (IPTs), should improve the management of repair and overhaul.
Industry is set to get a wider role in major repair and overhaul. This is because of the through life approach to equipment support, where the original provider takes on much of the responsibility for repair. This could reduce whole life costs and improve reliability and capability.
In taking this forward the Department will need to resolve questions over the future role and shape of ABRO. There are a number of clear benefits from ABRO’s move to Trading Fund status but the Department will need to keep under consideration what minimum in-house logistics capability is required to support military operations, including in-house repair and overhaul.
There are some unresolved risks, for example, that IPTs may make individual decisions on repair sourcing that will erode ABRO’s capabilities or capacity to provide effective competition. ABRO may also take decisions that constrain the Department’s future options. The Department has put in place arrangements to mitigate this risk but it needs to define more clearly its key requirements for repair and overhaul of land equipment and consider the implications of this for the size, shape and ownership of ABRO.
To date, the Department has achieved very little competition in the major repair and overhaul of land equipment – around 20 per cent of repair lines in our sample – and it has now set a target for competing 30 per cent of ABRO’s workload, by value, within three years. One significant constraint on increased competition is the ownership of intellectual property rights, as most intellectual property is owned by the manufacturer. The Department need to take stock of how sensible competition for repair and overhaul work can be enhanced, including reviewing whether it needs to negotiate additional intellectual property rights.