NATIONAL AUDIT OFFICE REPORTBY THE COMPTROLLERAND AUDITOR GENERAL Ministryof Defence:Developments in Controland 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 National Audit Office Comptroller and Auditor General 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 Page Introduction and background 1 Developments in Control and Use of Manpower 1 Conclusions 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 MINISTRY OF DEFENCE: DEVELOPMENTS IN CONTROL AND “SE OF MANPOWER 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!Z8,300million, 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 Departmental action Control and Use of Manpower 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 RoyalNay 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 MINISTRY OF DEFENCE: DEVELOPMENTS IN CONTROL AND USE OF MANPOWER General developments 5 Since the Committee of Public Accounts reported, two key events have occurred tieding progress 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 COmmittee 7 (i) The Committee recognised that the Department had in many respects recommendations 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 assessedrequirements, 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. Treasury Minute 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. Subsequent 9 To meet their defence objectives, the Department’s policy is to employ a mixture developments of Service personnel, civilians, contractors and reservists. The type of manpower employed in a particular post is determined as far as possible within financial 2 MINISTRY OF DEFENCE: DEVELOPMENTS IN CONTROL AND USE OF MANPOWER 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.