Transparency data

Board minutes: 13 December 2022

Published 3 April 2023

Minutes of the 46th Board Meeting

Meeting held remotely, Tuesday 13 December 2022

14:00 to 17:00

Board members present:	Others present:
Hannah Nixon (Chair)	Akhlaq Shah (item 7)
Peter Freeman	Alan Brennan
Alastair Groom	Colin Hill (not present for item 14)
David Johnston	Ben Johnson (item 6)
Hugh Kelly	Simon Mahony (item 7)
Neil Swift (not present for item 14)	Sarah Quartermain (item 7)
Joanne Watts (not present for item 14)	Tara Usher (MOD Representative, not present for item 6)
Claire Williams

1. Welcome, apologies, announcements and declarations of interest

1.1. The Chair welcomed Board members to the meeting.

1.2. No apologies had been received.

1.3. Jo Watts informed the Board that she had now formally sold all residual shares in defence contractors, and had no relevant financial interests to declare.

1.4. Tara Usher would recuse herself from attending the item on the baseline profit rate, in line with the MOD Representative Protocol.

2. Minutes of the 45th meeting of the Board, 27 September 2022, and action tracker

2.1. The Chair introduced the minutes of the Board meeting held on 27 September 2022. Seven actions were recorded and their status was noted. The actions were:

• Action 136, regarding the timetabling of the Annual Report and Accounts. It was noted that a paper had been put to the November Audit Committee meeting stating that the ARA would be shared with the Minister’s office on 8 June, after the Audit Committee had reviewed it, but on the same date that it was dispatched to the Board for approval.
• Action 137, that the corporate performance report should provide information on priority training areas. A slide on training has been included in the December Corporate Performance Report.
• Action 138, that changes should be made to the baseline profit rate consultation response. After the Board meeting, the text of the consultation response was amended and shared with the Chair before publication.
• Action 139, that Board members should review the structure of the Corporate Plan before the document was drafted. It was noted that the Corporate Plan structure and draft objectives had been circulated to Board members for review in advance of the December Board meeting. The link between the workshop following the Capability Review and the development of the Corporate Plan was also noted. A further workshop for Board members on corporate planning would be organised early in the new year. Action: Jo Watts.
• Action 140, that financial planning should be more closely linked with corporate planning, and clarity provided on resource deployment between the SSRO’s objectives. Information on resource deployment had been included in the Corporate Performance Report, and further information would be brought back in the next stage of the corporate planning process. It was agreed that a discussion on resource deployment would take place at the proposed corporate planning workshop. This action would remain open until the Corporate Plan was finalised. Action: Neil Swift.
• Action 141, regarding responsibility for the cost of dilapidations at Finlaison House. This was discussed at the Performance and Risk Review meeting on 25 October 2022, and had been further discussed at meetings between the SSRO and MOD Finance.
• Action 142, that corporate risks would be further discussed and iterated upon as the 2023/24 to 2024/25 Corporate Plan was developed. A final list of risks would be put to the January 2023 meeting of the Board for review.

2.2. The minutes of the 45th meeting of the Board were approved as a correct record, with one amendment regarding the advertisement of the Non-Executive Board Member vacancy.

3. Chair’s introduction

3.1. The Chair provided an update on the Capability Review, which had been shared with SSRO staff. The issues raised from the review would be discussed in the proposed workshop with the MOD and industry on the SSRO’s role. The Chair noted that the majority of respondents to the review believed that the SSRO performed its core role well, reaffirming the stakeholder survey findings from earlier in the year. The review also noted the SSRO’s professionalism and the improvements in effectiveness made over the last seven years.

3.2. The Chair discussed her recent engagement with stakeholders, which included positive discussions with the Treasury and a Crown Representative, exploring how the data held by the SSRO could be further utilised.

3.3. Shortlisting had taken place for the recruitment of a Non-Executive Board Member. The appointment panel would comprise the Chair, Tara Usher, Kevin Craven (ADS) and Kate Ellis (Chair of the Oil and Pipelines Agency). The interviews were scheduled for 12 January 2023.

3.4. The process to recruit a Chief Executive was ongoing. Longlisting had taken place, with shortlisting due to take place on 18 January 2023.

3.5. The Chair was due to meet with the new Minister for Defence Procurement in early January 2023.

4. Chief Executive’s Report

4.1. Neil Swift, Chief Executive, presented his report to the Board. The report provided an overview of stakeholder engagement, including recent meetings and site visits to industry facilities.

4.2. The Chief Executive discussed recent publications, including the response to the consultation on the SSRO’s baseline profit rate methodology, updated guidance on allowable costs, the Annual Compliance Report and the quarterly statistics bulletin.

4.3. The SSRO had recently attended a Performance and Risk Review meeting at the MOD, where items discussed included progress on the review of legislation, the SSRO’s overall financial position, data transformation and DefCARS future, and governance structures at the MOD.

4.4. The SSRO had completed its procurement process to secure suppliers for its IT managed services and Security Operations Centre contract, and its Microsoft Licenses contact, ensuring continuity of service when the current contracts expired on 31 March 2023. In line with the Board’s delegation, the Chief Executive had approved the award of the two contracts; they fell within the cost parameters agreed by the Board. The contracts were for a fixed price, and their duration was for 2+1+1 years. The executive was asked to respond to a question regarding the provisions in the contract around inflation. Action: Neil Swift.

4.5. Following approval by the MOD and Cabinet Office, the balance of the pay remit funds were to be distributed to staff in December. This would be a non-consolidated one-off payment to all staff (excluding the Chief Executive) which provided for a nominal amount to staff in higher grades, with the residual balance distributed to those on lower salaries.

4.6. The Chief Executive discussed the provisional results from the staff survey. He would set out the final results of the survey in his next report to the Board. Action: Neil Swift.

The Board:

• approved an amendment to the March 2022 Board minutes, to ensure that the minutes better reflected the discussion at the meeting; and
• noted the information provided in the report.

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. He noted that information on staff training had been provided in the report, and drew attention to the financial position, with expenditure projected to fall within the SSRO’s target.

5.2. Directors then discussed issues arising within their work areas that were not covered in greater detail elsewhere on the agenda. The Chief Regulatory Officer provided an overview of the action being taken on reporting issues. The Chief Executive noted that a paper had been put to the Regulatory Committee on this issue earlier in 2022, and that this included a plan for addressing the backlog of issues. Board members asked for more granularity to be provided about the priority of the remaining issues, the time to answer, whether they were externally or internally raised and whether it was within the SSRO’s gift to move the issue forward. Action: Jo Watts.

5.3. Board members discussed the SSRO’s ongoing responses to Freedom of Information requests.

The Board:

• reviewed and commented on the Corporate Performance Report.

6. Baseline Profit Rate progress report

6.1. Jo Watts, Chief Regulatory Officer, and Ben Johnson, Head of Pricing and Economics, provided a presentation on the provisional assessment of the baseline profit rate, capital servicing rates and SSRO funding adjustment. The assessments were being calculated using the methodology that had been consulted on and published earlier in 2022. The methodology used a three year average of FY2021, FY2019 and FY2018, and removed the effects of the COVID-19 pandemic by excluding data for FY2020.

6.2. The Chair of the Regulatory Committee stated that the assessment had been discussed at the Regulatory Committee on 30 November 2022. The Committee had also noted the response to the consultation on the SSRO’s methodology at that meeting. The recommendation to the Secretary of State would be considered by the Regulatory Committee at its 18 January 2023 meeting. This would result in the recommendation to the Secretary of State being provided before 31 January 2023, accompanied by a letter from the Chair.

6.3. Board members discussed the SSRO funding adjustment, noting that while the MOD was putting forward a legislative proposal to remove the adjustment, the requirement for the SSRO to provide an assessment of the adjustment would remain in place for the 2022/23 exercise since the adjustment would continue to be used for at least part of 2023/24.

The Board:

• noted the update.

7. Data utilisation

7.1. Jo Watts, Chief Regulatory Officer, and Simon Mahony, Head of Analysis and Data Platform, provided a presentation on the proposed approach to improving the utilisation of the data captured in the SSRO’s DefCARS system.

7.2. The paper sought approval for the evolution of the SSRO’s approach on data utilisation towards a more customer-focused model. The proposed approach was to increase direct engagement with selected MOD teams (in commercial and other functions) in order to understand better the management information that would support their work. Focused team engagement such as this was likely to increase demand for the information that the SSRO was able to provide. It would also help the SSRO to improve the DefCARS system, the quality of the data within it, the SSRO’s reporting guidance and the guidance it provided for MOD users on DefCARS.

7.3. At a senior level, the SSRO’s engagement with the MOD would focus on identifying appropriate leads for data utilisation within the MOD and the creation of a DefCARS data champion. The SSRO was currently contributing to the SSAT’s presentation to the MOD’s Commercial Board, which would demonstrate the management information that had been generated relating to amendments and variance.

7.4. In discussion, Board members were supportive of the proposed approach. They challenged the executive to be ambitious and asked that estimates in the proposed workplan specifically consider the appropriate resources that should be allocated to this workstream. Action: Jo Watts.

7.5. It was noted that a discussion about resources would be held at the forthcoming workshop on the Corporate Plan.

7.6. Board members discussed the access issues that were currently preventing MOD staff from using the DefCARS system, noted the importance of resolving these issues and considered potential solutions.

7.7. Board members suggested that a short illustrative brochure could be developed showing the potential uses for DefCARS data, including for example comparisons across suppliers or profit rates. This could be developed following engagement with MOD project teams, building on already existing illustrative documents. Action: Jo Watts.

7.8. It was suggested that a Board member could in future be identified as a Board lead on data utilisation.

The Board:

• approved the evolution in our approach to improving MOD data utilisation; and
• noted our planned priority work for the balance of 2022/23.

8. Accommodation update

8.1. Neil Swift, Chief Executive, provided an update on the SSRO’s relocation to new accommodation in 2023. While the Board had previously agreed that the SSRO would move to a government hub in outer-London, more recently it had emerged that accommodation was available in other locations on the government’s estate. The SSRO had been identified by the Government Property Agency as a good fit for available office space at 100 Parliament Street. The proposal had been discussed at the London Plan Board, which was considering utilisation of space in the London area. While the decision was not yet finalised, the SSRO had been provided with assurance that the relocation would go ahead if the Board agreed.

8.2. The Board noted that moving to 100 Parliament Street would provide easier access to stakeholders while also providing the SSRO with accommodation that met its security requirements. The 100 Parliament Street office provided SC-cleared-only access, which was necessary for the SSRO, whereas the outer-London hub locations had open-plan layouts and were therefore less appropriate. The building had also been refurbished to ensure DDA-compliance and to support the adoption of smarter working, optimising the use of the workplace, technology and resources.

8.3. SSRO staff had been informed about the new offer, and an Equality Impact Assessment would be undertaken should the Board support the recommendations of the paper. The SSRO would look to move to the new accommodation in May/June 2023.

8.4. The Board considered the number of desks available at the new office. There would be around 15 desks, representing around 50 per cent utilisation, which was in line with government guidance on space utilisation.

The Board

• noted and approved the proposed offer from the GPA of office space within 100 Parliament Street;
• approved signing the MoA, which was attached as an appendix; and
• delegated to the Chair / Chief Executive the signing of the formal MOTO (memorandum of terms of occupation), in accordance with the terms of the MoA.

9. Annual review of governance

9.1. Neil Swift, Chief Executive, introduced a paper that proposed changes to the SSRO’s Corporate Governance Framework. Several changes to the text were highlighted to reflect the updated wording in the Framework Document between the SSRO and MOD, which had been approved by the Board at its March 2022 meeting.

9.2. The paper proposed two changes to the People Committee’s terms of reference, regarding membership of the Committee and the appointment, remuneration and annual pay award and non-consolidated award decisions for the Chief Executive. The Chief Executive proposed that the Terms of Reference for the People Committee should be updated to include oversight and scrutiny of HR policies and procedures. The Board agreed that oversight and scrutiny of HR Policies and procedures would be added to the People Committee terms of reference.

9.3. Board members discussed the delegation to the People Committee of the ability to make a recommendation on the Chief Executive’s remuneration to the Chair of the SSRO. It was suggested that the Corporate Governance Framework should include an express statement that the Board delegates the final decision on remuneration to the Chair, taking into account the views of the People Committee. This should be similarly reflected in the People Committee terms of reference. Action: Neil Swift.

9.4. The MOD Representative noted that the MOD would review the section in the Corporate Governance Framework on the approval of the Corporate Plan, to ensure that it was in line with best practice. The MOD Representative also questioned whether the Corporate Governance Framework should include a requirement for an annual review of Board effectiveness. The SSRO would review best practice and write back to Board members. Action: Neil Swift.

The Board

• approved the changes to the SSRO’s Corporate Governance Framework, subject to the Chief Executive setting out the changes requested via email; and
• approved the minor changes to the Code of Conduct.

10. Minutes from Regulatory Committee meetings of 1 November 2022 and update from 30 November 2022

10.1. Peter Freeman presented the minutes from the Regulatory Committee meeting of 1 November 2022. At this meeting, the Committee had considered the consultation on the allowable costs guidance on overheads and indirect costs. The Committee had also considered the Annual Compliance Report and had asked for amendments to be made, including to the letter from the Chair that accompanied the report. The Committee also approved a consultation on the compliance methodology and discussed the referrals procedure, which was subsequently followed up at a Board workshop.

10.2. At its meeting on 30 November 2022, the Committee had considered supplementary guidance on inflation, which was currently out for consultation. It had also received an update on the review of legislation programme, and reviewed its terms of reference.

The Board noted the minutes.

11. Minutes from Audit Committee meeting of 14 September 2022 and update from 29 November 2022

11.1. Alastair Groom presented the minutes from the Audit Committee meeting of 14 September 2022, at which the Committee had discussed the SSRO’s risk management and corporate risk register.

11.2. At its meeting on 29 November 2022, the Committee had reviewed the risks relating to corporate resources, and had received an update on cyber security risks. The Committee had received a planning report on the Annual Report and Accounts, and was satisfied that there was sufficient time in the production timetable to allow the Audit Committee and Board to scrutinise the report before it was put to the Minister. The Committee had also discussed GIAA’s report on IT and security governance, and had been reminded that it was important that all Board members undertook mandatory training on information security.

The Board noted the update

12. Minutes from People Committee meeting of 12 September 2022 and update from 21 November 2022

12.1. Claire Williams presented the minutes from the People Committee meeting of 12 September 2022.

12.2. The Committee had also met on 21 November 2022, where it received an update on current staffing levels and vacant posts, the recruitment of the Chief Executive and Non-Executive Board Member and the Capability Review. The Committee had asked to receive a skills matrix, in order to understand the spread of expertise within the organisation. The Committee had also discussed the distribution of the pay award among staff, and approved the Equality, Diversity and Inclusion Strategy, subject to some minor amendments.

The Board noted the update

13. Future agendas, reflections on meeting and any other business

13.1. The Chair introduced a two-page document showing the business of all Board and sub-committee meetings for the next 12 months.

13.2. The next meeting of the Board would take place on 26 January 2023 at 14:00.

14. Non-Executive Board Member discussion

14.1. Only Non-Executive Board Members remained for this discussion. The members discussed and approved the People Committee’s recommendation on the Chief Executive’s remuneration.