Corporate report

Board minutes: 26 September 2024

Published 20 January 2025

Minutes of the 54th Board Meeting

held at 100 Parliament Street, SW1 and via video-conference

26 September 2024 10:00-15:00

Board members present:	Others present:
Hannah Nixon (Chair)	Malcolm Botting (for part)
Roy Barker	Colin Hill
Peter Freeman	Sam Lawson-Baker (for part)
Alastair Groom	Ben Johnson (for part)
Hugh Kelly	Ben Johnson (for part)
John Russell	Jane McGovern (for part)
Joanne Watts	Siobhan O’Donoghue (minutes)
Claire Williams	Sean Paice (for part)
	Akhlaq Shah (for part)
	Colin Sharples (for part)
	Apoorvan Thamilmaran
	Tara Usher (MOD Representative)
	Amar Vara (for part)

1. 1. Closed Board discussion

The Chair held a private session with Non-executive Board Members (NEBMs) regarding the Chief Executive’s annual pay award.

The Chair held a private session with NEBMs, the Chief Executive and the Chief Regulatory Officer.

2. 2. Welcome, apologies, announcements, and declarations of interest

The Chair welcomed Board members and attendees to the meeting.  In particular, Apoorvan Thamilmaran, Business Intelligence Analyst in the Compliance Team, was welcomed as the first ‘open chair’ representative, which had been introduced as an opportunity for staff to engage with the SSRO Board.

There were no apologies for absence.

NEBM Claire Williams had been appointed to the Audit and Risk Assurance Committee, effective from 1 September 2024.

2.1 Declarations of Interest

NEBM Hugh Kelly advised of a new Trustee role, which would be added to the Members’ Register of Interests.  There were no further declarations of interest.

3. 3. Minutes of 53rd meeting held on 18 June 2024 (SSRO 01-0924), and action tracker (SSRO 02-0924)

The minutes of the Board meeting held on 18 June 2024 were approved as a correct record.  There were no outstanding actions.

The Board approved as a correct record the minutes of the 53rd SSRO Board meeting held on 18 June 2024.

4. 4. Chief Executive’s Report (SSRO 03-0924)

The Chief Executive presented his regular report covering recent activities, future priorities, publications and stakeholder engagement, and key issues not covered elsewhere on the agenda.  Matters discussed included the SSRO’s developing submission to the Strategic Defence Review (SDR) and engagement on this; recent and upcoming personnel changes at MOD; updates from across Defence; recent stakeholder engagement and site visits; the development of the SSRO’s ‘thought leadership’ work; and an update on non-referral advice activity.

The Board noted the introduction of new spending controls across MOD and its ALBs, and considered how the controls could have implications for how the SSRO’s independence was perceived.  The issue would be raised in the Chair and Chief Executive’s introductory meeting with Deana Rouse, the incoming Director, Head Office & Business Operations, and MOD Deputy Chief Operating Officer, scheduled for 3 October 2024.  ACTION:  Chief Executive

The Board noted the information provided in the report.

5. 5. Corporate Performance Report (SSRO 04-0924)

The Board discussed the Corporate Performance Report (CPR), which summarised performance against the SSRO’s strategic priorities and Corporate Plan objectives, budget to date, and a summary of the corporate risks being managed.  The Board’s discussion focused on updates on work to support the Review of Legislation; management of potential workload peaks later in autumn; and the continuing improved working relationships with MOD and industry.  An item on strategic engagement would be added to the December Board agenda.  ACTION:  Head of Policy, Referrals and Support

The Board noted the Corporate Performance Report.

6. 6. Revised Corporate Governance arrangements (SSRO 05-0924)

Following the Board’s agreement at its June 2024 meeting to revise the SSRO’s corporate governance arrangements, the Board received an update on subsequent activity and was presented with a revised and streamlined Corporate Governance Framework (CGF) for approval.  This included revised Board terms of reference, reflecting the re-allocation of regulatory and operational responsibilities previously managed by the Regulatory and People Committees.  Prior to presentation at this meeting, the proposed re-allocation of responsibilities had been discussed and informed by the Regulatory Committee, the chair of the People Committee, and the Audit and Risk Assurance Committee.  The Board also noted the suite of updated documents that underpinned the CGF, including a table of delegated powers, terms of reference for the Board-level People Champion, and Standing Orders.

The Board welcomed the revised CGF, noting the removal of duplicative content and the availability of additional detail through weblinks to other sources, such as the Framework Document with the MOD.  At the suggestion of a Non-Executive Board Member, further edits would be made to the terms of reference for Referral Committees (appendix 3 of the CGF) outside of the meeting.  Subject to these changes, the Board approved the CGF for publication.  ACTION: Board Secretary / Chief Regulatory Officer

Subject to final edits to the terms of reference for Referral Committees, to be agreed outside of the meeting, the Board:

• approved the Corporate Governance Framework; and
• noted the table of delegated powers; the People Champion terms of reference; Standing Orders; and the summary of the GIAA’s matters for consideration arising from its advisory review, and the SSRO’s response.

7. 7. Defence Insights (SSRO 06-0924)

The SSRO Defence Advisor updated the Board on recent developments and relevant issues across the defence landscape, with a particular focus on Defence Reform and the Integrated Procurement Model.  Members welcomed the briefing and discussed potential implications for the SSRO and its work, including links with the SDR and the Defence Industrial Strategy.

The Board noted and discussed the defence insight update.

8. 8. SSRO’s Strategic response to the external environment (SSRO 07-0924)

The Head of Policy, Referrals and Support introduced the strategic discussion item, outlining the current operating environment and seeking the Board’s views on where the SSRO might most appropriately focus its resources, including contributions to the Strategic Defence Review (SDR) and other upcoming defence reform activities.  The SSRO’s draft submission to the SDR consultation had been shared with the Board, and members had contributed to its development, including at a recent workshop.

The Board welcomed the SSRO’s draft SDR submission including the range of proposals it contained and its constructive tone. The Board supported the ongoing engagement with the SDR, recognising it as a positive opportunity for the SSRO, whilst also acknowledging that any follow-up work might necessitate a re-prioritisation of resources.

The Board suggested some final drafting points, but endorsed the SSRO’s draft for submission.  The final draft would be re-circulated to members.  It was also suggested that preparing a high-level communications plan in due course would be beneficial.  The Board also noted the positive engagement to date with MOD officials, including representatives from the Review Team, and encouraged this to continue.

Given the current complex operating environment and overlapping workstreams, the Board endorsed a pragmatic approach to developing the 2025-28 Corporate Plan and pausing the usual corporate planning process for the time being.  An update would be provided at the December 2024 meeting.  ACTION:  Head of Policy, Referrals and Support

The Board:

• reviewed and, subject to final drafting edits, approved the draft submission to the Strategic Defence Review;
• provided thoughts and input on the external environment; and
• noted that an update on corporate planning activities would be provided at December Board meeting, as the external environment developed.

9. 9. Sub-committee minutes and updates (SSRO 11-0924 and SSRO 12-0924)

The Chairs of the sub-committees presented the minutes and oral updates from recent meetings.

The Regulatory Committee had held its final meeting on 24 July 2024, in advance of new corporate governance arrangements taking effect.  On behalf of the Board and SSRO colleagues, the Chair paid tribute to Peter Freeman, chair of the Regulatory Committee, and the committee’s other members and staff for their work on the committee and its contribution to the SSRO.

The Board noted the: * minutes of the 4 June 2024 Audit and Risk Assurance Committee; and * minutes of the 24 July 2024 Regulatory Committee; * oral updates from the most recent meetings.

** The MOD Observer left the room for the duration of the following item **

10. 10. 2025-26 Profit Rate Assessment (SSRO 08-0924)

Members of the Pricing and Economics team joined the meeting.  The paper sought the Board’s approval of the methodology for the 2025-26 rates assessment, which would underpin the recommendation to the Secretary of State in January 2025.  The Board discussed the proposed changes to the methodology, which it had also considered at its June 2024 meeting and subsequently consulted on over summer.  In light of feedback received, two of the proposals included in the consultation would not be taken forward at this stage, but would be subject to further development.

Considering factors such as the new government and the timing of other defence activities, including emerging findings from the SDR, the Board encouraged early engagement with MOD officials regarding messaging around the final profit rate recommendation, although it was noted that the approach and messaging would largely depend on the final rate recommendation relative to prior years.  It was suggested that refreshing the SSRO’s profit rate briefing material and FAQs could also be helpful.

The Board would receive an interim update on the profit rates assessment at its December 2024 meeting, in advance of its consideration of final proposals in January 2025.

The Board:

• agreed the changes to the methodology, following consultation;
• approved the methodology to be applied for the 2025-26 assessment of the baseline profit rate (BPR), capital servicing rates, and the ‘government owned contractor rate’;
• noted that two of the proposed changes set out in the consultation would not be adopted, and that the SSRO would engage further with stakeholders and consider if they should be progressed; and
• approved he publication of the SSRO’s response to the consultation on our changes to the methodology.

** The MOD Observer re-joined the meeting **

11. 11. DefCARS Technology Strategy update (SSRO 09-0924)

The Board received a presentation on the current DefCARS system and associated Technology and Data strategies, along with an overview of progress against these.  The presentation also highlighted a range of issues and limitations of the current system and sought the Board’s support for rationalising the current strategies into a single Digital Strategy.  The Board was also asked to consider and provide its steer on the strategic options presented for taking forward the development of the DefCARS system.

The Board supported the consolidation of the current strategies and development of a single overarching Digital Strategy.  Regarding the strategic options for the DefCARS system, the Board agreed that two of the options should be explored further, focused around replacing the WebApp and building-in additional functionality to future-proof the DefCARS system.  The Board also encouraged extensive soft market testing with a broad range of suppliers to inform any subsequent procurement exercise.

The Board would receive an update on development of the Digital Strategy at its December 2024 meeting.  ACTION:  Chief Regulatory Officer

The Board:

• agreed that the SSRO should update and consolidate its data strategy and DefCARS future technology strategy into a single Digital Strategy for the SSRO;
• agreed that the SSRO focus on the development of strategic options 2 and 3, as set out in the presentation; and
• noted the need to undertake a major project, covering the strategy setting, options for the DefCARS development and IT procurements.

12. 12. Review of Legislation – update and guidance publication (SSRO 10-0924)

Members of the Operations group joined the meeting to present new Final Price Adjustment (FPA) guidance ahead of consultation; as well as the outcomes of and the SSRO’s response to consultations on pricing and reporting guidance, prior to their final publication.  The item also updated the Board on the Review of Legislation programme, the anticipated MOD plans for Tranche 2 legislative changes, and the SSRO’s proposed response.

The Board particularly welcomed the new FPA guidance, which had been developed in response to stakeholder feedback, and which reflected the first use of the SSRO’s new powers to produce new guidance on the application or interpretation of the law governing the single source defence contracts.  The Board was particularly supportive of the new approach aimed at enhancing the user experience by addressing real-world scenarios of common issues.  The FPA guidance consultation would close on 14 November 2024, and the resulting final guidance would be shared with the Board in January 2025.

The Board:

• approved the publication of the pricing and reporting consultation response documents;
• approved the publication of the pricing and reporting guidance changes explained in the consultation response documents;
• approved the publication of the new draft Final Price Adjustment guidance for consultation;
• delegated authority to the Chief Regulatory Officer to approve any final changes to the pricing and reporting consultation responses and guidance documents prior to publication;
• noted the minor and uncontroversial changes made to reporting guidance;
• noted the changes to the SSRO’s compliance methodology; and
• noted that the SSRO had stopped any further work to support Tranche 2 legislative changes in response to the MOD’s pause to its plans to bring forward further legislative changes for the time being.

13. 13. Future workplan (SSRO 13-0924), reflections on meeting and any other business

The Board reflected on the business considered at the meeting and noted the summary of future Board meeting business.

14. 14. Any other business

There was no further business.

15. 15. Next Board meeting

The next meeting of the Board would take place on 17 December 2024.