Transparency data

Board minutes: 27 May 2021

Published 19 July 2021

Minutes of the 38th Board Meeting

Meeting held remotely Thursday 27 May 2021

14:00 to 16:00

Board members present:	Others present:
George Jenkins (Chairman)	Andy Brittain (MOD Representative)
Peter Freeman	Colin Hill
David Johnston	Mike Wetherell
Marta Phillips	Malcolm Botting
Neil Swift	Alan Brennan (item 4)
David Galpin	Ben Johnson (item 4)
	Colin Sharples (item 4)

1. Welcome, apologies, announcements and declarations of interest

1.1. The Chairman welcomed members to the 38th meeting of the Board.

1.2. The Chairman announced that, in view of the situation regarding COVID-19, government guidance on this matter and in accordance with Standing Order 3.10, the Board meeting was being undertaken remotely by telephone for all Board members.

2. Minutes of the 37th meeting of the Board, 25 March 2021, and action tracker

2.1. The Chairman introduced the minutes of the Board meeting held on 25 March 2021. Five actions were recorded and were marked as complete.

• Action 96 – The Chairman had approved amendments to the consultation on the baseline profit rate guidance, and the consultation document was published on 26 March 2021.
• Action 97 – Progress on accommodation issues had been added to the June Board agenda.
• Action 98 – The wording of risk 8 in the Corporate Risk Register had been updated as requested by the Board.
• Action 99 – The Government Internal Audit Agency’s review of the SSRO Board’s effectiveness has been shared with DSOP and also incorporated into the induction provided on 26 May 2021.
• Action 100 – The SSRO’s HR Manager had written to Board members regarding virtual courses.

2.2. The minutes of the 37th meeting of the Board were approved as a correct record.

3. Chief Executive’s Report

3.1. Neil Swift, Chief Executive, presented his report to the Board. The report provided an overview of stakeholder engagement, including the first SSCR profit summit held on 4 May and the Chairman’s recent meetings with senior representatives from the defence industry. The Chairman was due to meet with further representatives from the major prime contractors in advance of the second profit summit. The Chairman provided an overview of the issues discussed in his recent meetings and stated that he would summarise and share a note with Board members. Action: Chairman. The Chairman was due to meet the Minister for Defence Procurement on 7 June.

3.2. The SSRO’s consultation on profit related matters had been published on 26 March and the SSRO team had met with the Defence SSCR Advisory Group on 10 May regarding the consultation and recent correspondence on the methodology. The final Corporate Plan for 2021-24 had been published on 31 March and the consultation on requiring the payment of costs in referrals had been published on 7 May.

3.3. The SSRO was engaging with the Government Property Agency regarding the potential repurposing of space on the third floor of Finlaison House. Key to the SSRO proceeding was that the new arrangement would have no impact on the SSRO’s security accreditation; that it would not be detrimental to the SSRO’s operational delivery of its functions; and that it would be at minimum financially neutral to the SSRO. The Chief Executive confirmed that these criteria had been met and it was noted that the retention of potential cost savings had been agreed by the Chairman with DG Finance. The Board discussed the proposal and highlighted some issues to consider in progressing the matter. These included specific points regarding security and ensuring that the SSRO’s space continued to allow for stakeholder engagement and referral meetings in the future.

3.4. The MOD had circulated a direction that all Enabling Organisations should support a new approach to acquisition through “category management”. The Chief Executive had been asked to ensure that this direction was brought to the Board’s attention. The Board discussed the issue and agreed that a nil response should be provided, noting that the majority of the SSRO’s expenditure was on staffing costs or fixed into longer-term contracts, such as accommodation. Only a small amount of the SSRO’s addressable expenditure would fall within the remit of the category management approach to be adopted. Action: Mike Wetherell.

3.5. The Chief Executive set out three areas in which progress had recently been made against the recommendations from the Tailored Review of the SSRO. These included that the Directorate of Sponsorship and Organisational Policy had now assumed sponsorship of the SSRO. Early engagement had been constructive, and executive members had provided an induction to the DSOP’s senior team. Initial discussions were taking place with DSOP about the project to review the Framework Document, which was likely to commence in autumn 2021 with the final document submitted to the January 2022 Board meeting for approval. Three new SSRO Non-Executive Board Members had now been appointed, two of whom were appointed from 1 June and would attend the June meeting of the Board. An induction programme was being organised and administrative on-boarding was currently taking place. The Chief Executive would provide a table setting out progress against all Tailored Review recommendations in his report to the next meeting. Action: Neil Swift.

3.6. The Board discussed the proposed Performance and Risk Reviews that would be coordinated by DSOP and it was noted that the terms of reference for these had recently been agreed. The SSRO was currently liaising with DSOP on the evidence that would be required for the quarterly meetings and the Board stated that this should not represent an onerous requirement. The SSRO had proposed using its Corporate Performance Report as evidence, as it contained objectives, business plan activities and corporate risks. The MOD Representative provided an overview of the Performance and Risk Review process and offered to discuss the issue in more detail with the Chief Executive in advance of the first meeting. Action: Neil Swift.

3.7. Staff were continuing to work from home where they could. Finlaison House was open full-time on a limited capacity basis, with attendance requiring pre-approval. The protocols for the safe use of the building remained in place. A paper on accommodation would be brought to the June Board meeting, setting out a road-map and the principles the SSRO would use to guide future ways of working. A consultation proposing changes in the Operations directorate had been launched on 19 April and the Chief Operating Officer was currently considering the responses received.

The Board

• noted the potential release of part of the third floor of Finlaison House back to GPA;
• agreed that the SSRO should issue a nil response to DSOP regarding category management; and
• noted the information provided in the report.

4. Review of legislation

4.1. David Galpin, Chief Operating Officer, introduced a report that presented the SSRO’s draft recommendations to inform the Secretary of State’s Review of Legislation. The Regulatory Committee had discussed the draft document at its last meeting, and the document had been updated to reflect the Committee’s discussion. It now included an executive summary and the text had been amended in several places.

4.2. The recommendations document presented the SSRO’s recommendations for legislative change and advised on additional matters. The recommendations were intended to optimise the regulatory framework, consistent with the SSRO’s statutory aims and the speed and simplicity objectives in the government’s Defence and Security Industrial Strategy (DSIS).

4.3. The sections of the recommendations document covered pricing matters, transparency, the SSRO’s supporting role and the review process and implementation. The section on pricing offered advice about the issue of fairness and set out recommendations from a variety of sources including the SSRO’s previous recommendations. The SSRO’s position was that the regulatory framework was already capable of delivering fair profits across the portfolio of qualifying contracts broadly consistent with the BPR comparator group. If an increased focus is sought on fairness at the level of individual contracts, there is merit in an approach based on activity types, and this could be complemented by setting the bounds of the cost risk adjustment by reference to the cost of capital and specific risk. On transparency, the document noted that the SSRO continued to undertake work aimed at improving transparency arrangements, including the ongoing Amendments and Variance and Overheads projects. On implementation, it drew attention to process considerations and implementation challenges, acknowledging that improved outcomes for both the MOD and industry would require agreed proposals to be deftly implemented.

4.4. The report also provided the Board with an outline of the current status of the MOD’s work on the Secretary of State’s review and a list of the possible changes to the regulatory framework being considered by the MOD.

4.5. In discussion, Board members reflected that the recommendations document was well written and coherent, and that its tone was appropriate. The proposed recommendations were supportive, forward-leaning and aligned with the MOD’s aspirations for reform, while also recognising the practical challenges of delivering the changes required to guidance and DefCARS.

4.6. Board members stated that the executive summary was good but could be made even shorter and less detailed. They asked for changes around the description of the recommendation on multiple profit rates. They also asked for the report to note the need for additional transparency and controls in the decision-making process for the cost risk adjustment, to reflect the increased flexibility arising from proposed changes. Further clarity would be required from the MOD in this area to enable the SSRO to draft guidance to support the new arrangements.

4.7. The Board considered the planned submission date for the document of 17 June. Board members noted that it was important to remain nimble in response to external events. The Board thanked the team for the work it had undertaken, noting that the document well reflected previous Board and Regulatory Committee discussions.

4.8. The Chairman would be asked to review and approve the final document as well as a covering letter. Should the Chairman consider the amended document was significantly different from that reviewed by the Board he would ask Board members to consider the draft again. Action: Chairman.

The Board:

• agreed the draft recommendations document;
• agreed that the recommendations should be submitted to the Secretary of State by 17 June 2021;
• agreed that the recommendations document is published on the SSRO’s website; and
• authorised the Chairman to agree changes to the draft recommendations document prior to submission and publication.

5. Corporate Performance Report

5.1. Neil Swift, Chief Executive, introduced the Corporate Performance Report, which provided an update on how the SSRO was delivering against its corporate priorities as set out in the Corporate Plan. All Directors then discussed issues arising within their work areas.

5.2. Board members discussed progress in responding to the FOI request referred to in the report. They also discussed various budget lines within the financial information provided in the report.

The Board reviewed and commented on the Corporate Performance Report.

6. Update from Regulatory Committee meeting of 20 May 2021

6.1. Peter Freeman presented an update from the meeting of the Regulatory Committee on 20 May 2021. The Committee had discussed the Review of Legislation recommendations document, a report on compliance issues and the refreshed approach to the Amendments and Variance project. The Committee was next due to meet on 28 July.

The Board noted the update.

7. Future agendas and any other business

7.1. The Chairman introduced a two-page document showing the business of all Board and sub-committee meetings for the next year.

7.2. The Chairman noted that two new Non-Executive Board Members would attend the June Board meeting. Following their appointment the Chairman would look to review sub-committee membership and to strengthen the committees as appropriate. An item on committee membership would be added to the next Board agenda. Action: Neil Swift.

7.3. The next meeting would take place on 23 June at 11:00am.