Transparency data

Board minutes: 12 December 2019

Published 17 February 2020

Single Source Regulations Office

Minutes of the 29th Board Meeting

Board Room, Finlaison House, 15-17 Furnival Street, London EC4A 1AB

Thursday, 12 December 2019 14:00 to 17:00

Board members present:	Others present:
George Jenkins (Chairman)	Colin Hill
David Johnston	Mike Wetherell
Marta Phillips	Malcolm Botting
Mary Davies	Nigel Lees (UKGI, item 3)
Peter Freeman	Colin Sharples (item 5)
Terence Jagger	Alan Brennan (item 6)
Neil Swift	Adrian Wallace (item 6)
David Galpin	Adrian Wallace (item 6)
Matthew Rees	Ian Pankhurst (item 6)
	Monika Kochanowska-Tym (item 6)

1. Welcome, apologies, announcements and declarations of interest

1.1. The Chairman welcomed members to the 29th meeting of the Board.

1.2. This was Terence Jagger’s last meeting as a member of the Board, and the Chairman thanked him on behalf of the Board. The Chairman noted that in his leadership of the referrals process Terence Jagger had been diligent and skilled at drawing out the right conclusions, and that he had made a substantial contribution as a Board member across a variety of areas. Terence Jagger responded that he was grateful for the Chairman’s words.

No interests were declared.

2. Minutes of 28th meeting of the Board, 26 September 2019, and action tracker

2.1. The Chairman introduced the minutes of the Board meeting held on 26 September 2019. Four actions had been recorded on the action tracker and had been completed or were reported on in papers elsewhere on the agenda.

2.2. The minutes of the 28th meeting of the Board were approved as a correct record.

3. Tailored Review – presentation of final report

3.1. The Chairman welcomed Nigel Leese from UK Government Investments to the meeting. The SSRO welcomed the draft report and recommendations following the Tailored Review, which had been undertaken by a review team comprised of staff from UKGI, including Nigel Leese. The Chairman noted that the SSRO had sought to contribute openly at all stages and would work jointly with the MOD on the implementation of the recommendations from the review.

3.2. Nigel Leese presented the draft report. The review, carried out in line with Cabinet Office guidelines for Tailored reviews, had considered the performance and governance effectiveness of the SSRO and its relationship with the MOD.

3.3. The report was compiled following evidence from, and discussion with, a wide range of stakeholders across the SSRO, the MOD, DE&S, the defence industry and HM Treasury. The review team’s view was that the process had gone well, and the team was appreciative of the input from all stakeholders including the SSRO. Open engagement and feedback from stakeholders had allowed the team to produce a fully informed report.

3.4. Following the presentation, the Chairman invited Board members to ask questions about the UKGI’s work on the review, the recommendations in the draft report and next steps, including implementation.

3.5. Nigel Leese said that the report had been welcomed and endorsed by the MOD’s Executive Committee and would be submitted to MOD Ministers for approval in the New Year. Subject to Ministerial approval the report would be published by the Department. Responsibility for taking forward the recommendations rested variously with the MOD and the SSRO Board.

4. Chief Executive’s Report

4.1. Neil Swift, Chief Executive, presented his report to the Board, which provided an update on items not included elsewhere on the agenda. The Chairman and executive members had continued to meet with senior representatives from industry, the MOD and the enabling organisations, and the Chairman reported to the Board on his recent telephone call with DG Finance at the MOD.

4.2. The Chairman and Chief Executive had attended the MOD Enabling Organisations Event on 8 October 2019, at which there had been presentations from the Permanent Under Secretary and senior MOD staff on the MOD’s direction and the role Enabling Organisations play, as well as governance and sponsorship. Following the event, the MOD has circulated slides on its themes of “Mobilise, Modernise and Transform”, which focused on empowerment and giving staff working in defence the authority, skills, motivation and resources to drive improvements. The Board considered whether to invite MOD representatives to present on these themes but agreed not to do so at the current time.

4.3. The SSRO had published three consultations on 14 October and was now analysing stakeholder responses to each. They were: proposed referrals guidance on appeals against assessment as a QSC and notices of cessation; changes to the SSRO’s compliance methodology; and changes to the Allowable Costs guidance. Two documents were due to be published in the days following the Board meeting: the Reporting guidance version 7 and the quarterly statistics bulletin.

4.4. The Chairman has reviewed the membership of the Board’s sub-committees. The members on the Regulatory Committee would be Peter Freeman, the Chairman and Marta Phillips. The members of the Audit Committee would be Marta Phillips, Mary Davies and David Johnston. Members would be appointed to referral committees on a case-by-case basis.

4.5. The Chief Executive had written to Board members regarding the financial framework between the MOD and SSRO. The MOD had provided an updated draft interim framework, proposing that the existing framework should be extended in its current form for up to a year. The Board approved the amendments to the framework and agreed that the Chief Executive would sign the framework on the SSRO’s behalf. Action: Neil Swift.

4.6. A data breach had arisen following the SSRO’s recent move to a new payroll provider. This had been discussed by the Audit Committee at its last meeting. The Chief Executive informed the Board of action taken, including logging a formal report with the ICO, writing to staff, requesting an explanation from the provider and confirming that appropriate mitigation would be implemented in future. The ICO had been content that no further action was necessary.

4.7. At the Operational Working Group meeting on 16 October, an industry participant had raised an issue about the minutes of the 27 June 2019 Board regarding the SSRO’s consultation on the baseline profit rate methodology. The participant had stated that a passage in the minutes implied that the changes to the baseline profit rate methodology had been agreed with the MOD in advance of the consultation. The Board discussed the issue, noting that the SSRO had met with the Head of SSAT before the consultation to discuss the proposals but had also considered representations from industry stakeholders at meetings, in correspondence, and at workshops before the consultation commenced. The Board did not ask for the minutes to be amended.

4.8. The Chief Executive thanked Board members for responding to the recent exercise to update the SSRO’s register of interests. The revised register would be published in the new year. The register would not in future include membership of professional bodies but would quote all other roles disclosed to the SSRO.

4.9. Board members asked about the reaction of staff to the SSRO’s plans around long-term accommodation. The Chief Executive confirmed that feedback had been positive and that it had been helpful to provide clarity following the Board’s decision not to move until the end of the lease unless alternative opportunities arose.

4.10.Board members asked whether previous Board papers would be transferred to the new Board management software in 2020, the point of transition to a new provider. It was confirmed that all documents from the last 12 months would be transferred and that documents from previous years could be transferred if requested. Action: Mike Wetherell.

The Board

• approved the draft interim financial framework, at Appendix 2; and
• noted the information provided in the report.

5. Corporate Plan

5.1. David Galpin, Director of Legal and Policy, presented a report that updated the Board on progress with the development of the Corporate Plan for 2020-2023.

5.2. The report provided an outline structure, vision and set of corporate objectives. The Board considered the vision and suggested alternative wording and edits to the language in some places. Board members also discussed the areas covered by the objectives and suggested some drafting changes. It was agreed that the suggestions on, for example, data security, sustainability and efficiency would be reflected in the detailed commentary underneath the objectives or in other sections of the Corporate Plan.

5.3. The Board had agreed at its workshop on 21 November that the SSRO’s corporate values (independent, transparent and authoritative) remained valid and should be retained, but that the supporting narrative should be developed with an addition of a value reflecting the importance of the team.

5.4. The next step would be to present the Board with a full draft of the Corporate Plan at its January 2020 meeting. A consultation draft of the Plan would then be shared with the MOD and industry, with the final Plan being published on 31 March 2020.

The Board:

• approved the draft outline of the structure for the Plan set out in section 3 of this paper;
• approved the proposed vision and objectives set out in Appendix 2; and
• noted that work will continue to develop the Plan, with engagement and input from stakeholders, and in parallel the Internal Business Plan.

6. Review of legislation: draft consultation on recommendations

6.1. David Galpin, Director of Legal and Policy, presented a draft consultation document regarding the proposed recommendations from the SSRO’s review of the single source regulatory framework.

6.2. The SSRO had focused its 2020 review on two areas: reporting requirements and contract profit rates. There were five broad workstreams in the document: the cost risk adjustment; the profit on cost once adjustment; the defined pricing structure; amendments and variance; and overheads. The consultation suggested measured, technical improvements to the regulatory framework, rather than substantial amendment. Much of the document was concerned with matters within the SSRO’s control, such as changes to guidance and DefCARS.

6.3. The SSRO had engaged with stakeholders in developing the document by holding workshops and meetings and issuing working papers for consultation. Board members considered the audience for which the consultation document was intended, as it was a complex and lengthy document. It was noted that the consultation was primarily for stakeholders within the regime with a technical understanding of the legislation.

6.4. The Board considered the section on the cost risk adjustment, and executive members provided an update on stakeholders’ views regarding the adjustment. Board members proposed some amendments to the wording in this section.

6.5. The MOD had proposed joint working arrangements in connection with the Secretary of State’s 2020 review of the legislation and had provided a list of topics that it intended to address. ADS had also prepared a list of topics to feed into the review. The Board noted that this workstream was significant in scope and that the SSRO’s contribution to it would need to be incorporated into its Corporate Plan for 2020-2023.

6.6. The paper addressed the suggestion that DefCARS should be developed to enable the reporting of different contract profit rates for a qualifying contract – or “segmentation”. This issue had been considered as part of the SSRO’s 2017 review. The Board agreed that this issue should be included in the consultation document.

6.7. The Board delegated to the Chairman the approval of changes to the consultation document made following the Board discussion. The Chairman would also decide on the timing of the publication and consultation timetable, but it was likely that the consultation would be issued in the week commencing 16 December 2019 for a period of ten weeks.

The Board:

• agreed the consultation documents and the proposed consultation period; and
• commented on the approach to segmentation.

7. Annual governance review

7.1. Mike Wetherell, Interim Director of Corporate Resources, introduced the annual governance review, which proposed changes to the SSRO’s Corporate Governance Framework. The paper set out limited amendments to the governance framework, including removing the requirement for a programme of significant publications to be approved by the Board; clarifying that executive members would be required to absent themselves from Board discussions about executive members’ contract terms and remuneration; and amending the table of delegations to clarify delegated responsibilities at the executive level.

7.2. The report also proposed changes to the Code of Conduct for Board and referral panel members. Key changes included separating financial and non-financial interests and amending the test for declarations of interest to ensure they were in line with Cabinet Office guidance. The Board requested that additional wording should be added to this test before publication. Action: Mike Wetherell.

7.3. The Board considered the proposed changes to the framework and discussed whether to establish a Remunerations Committee to consider issues such as staff salaries, terms and conditions. It was agreed that a new committee should not be established and that the function should be retained by the Board, with executive members leaving the meeting for discussions on such issues.

The Board:

• approved the changes to the SSRO’s Corporate Governance Framework (Appendix 1 of this report); and
• approved the changes to the Code of Conduct (Appendix 2 of this report).

8. Corporate Performance Report

8.1. Mike Wetherell, Interim Director of Corporate Resources, introduced the Corporate Performance Report, which provided a regular update on how the organisation was delivering against its priorities as set out in the Corporate Plan. The report drew together all relevant matters relating to the SSRO’s performance, including progress against key performance indicators, budgetary updates and the delivery of key tasks.

8.2. The Board discussed performance related pay, and it was agreed that the Chief Executive would provide an update to staff on this issue at the next staff Open Forum. Action: Neil Swift.

The Board:

• reviewed and commented on the Corporate Performance Report.

9. Draft minutes from the Regulatory Committee on 10 October 2019 and 21 November 2019

9.1. Peter Freeman, Chair of the Regulatory Committee, presented the minutes of the Committee’s meeting held on 10 October and 21 November. The Committee had discussed matters relating to the regulatory review and agreed that the issues arising should be put to the Board for consideration.

The Board noted the minutes.

10. Draft minutes from the Audit Committee on 24 September 2019 and 28 November 2019

10.1.Marta Phillips, Chair of the Audit Committee, provided an update on the Audit Committee meetings of 24 September and 28 November. The Board noted in particular Marta Phillips’s comments about the Audit Committee’s consideration of the Corporate Risk Register and the associated risk appetite for each of the risks. It considered the balance of risks and risk appetite and decided that it was satisfied with the current risk profile.

10.2.As part of its discussion on risk, the Committee had considered the SSRO’s KPIs and had invited the Director of Legal and Policy to present on this subject. The Committee had also received the organisation’s first report on equality and diversity and had considered the timetable for producing the Annual Report and Accounts.

10.3.The Committee had considered an internal audit review on data quality, and the Board discussed the findings.

The Board noted the minutes.

11. Future agendas and any other business

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

11.2.The next meeting would take place on 28 January 2020 at 2:00pm.