Transparency data

Board minutes: 27 September 2022

Published 9 January 2023

Minutes of the 45th Board Meeting

Meeting held remotely, Tuesday 27 September 2022

10:00 to 16:30

Board members present:	Others present:
Hannah Nixon (Chair)	Anthony Bende-Nabende (item 7)
Peter Freeman	Alan Brennan
Alastair Groom	Léonie Duff (Jyre, item 10)
David Johnston	Arabella Ellis (Jyre, item 10)
Hugh Kelly	Colin Hill (not present for item 2)
Neil Swift (not present for item 2)	Gordon Hull (Jyre, item 10)
Joanne Watts (not present for item 2 or 7)	Ben Johnson (item 7)
Claire Williams	Monika Kochanowska-Tym (item 11)
	Samuel Lawson-Baker (item 8)
	Veli Koc (item 7)
	Simon Mahony (item 8)
	Jane McGovern (item 12)
	Sarah Quartermain (item 8)
	Peter Regan (item 9)
	Alun Rogers (Risual, item 8)
	Colin Sharples (item 9 and 11)
	Tara Usher (MOD Representative, not present for item 7)
	Mike Wetherell (not present for item 2)
	Chris Wilcox (item 7)

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. Joanne Watts, Chief Regulatory Officer, declared a financial interest that was in the process of being resolved. Because of this, it was agreed that she would remove herself from the item on the baseline profit rate.

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

2. Non-Executive Board Member discussion

2.1. The Non-Executive Board Members discussed the ongoing process to recruit a Chief Executive.

The Non-Executive Board Members:

• approved the job description;
• noted that the appointment panel would comprise the Chair, Claire Williams, Andrew Forzani (MOD) and Kevin Craven (ADS).

3. Minutes of the 44th meeting of the Board, 16 June 2022, and action tracker

3.1. The Chair introduced the minutes of the Board meeting held on 16 June 2022. Three actions were recorded and their status was noted.

• Action 133 – The Corporate Governance Framework had been updated to include the People Committee’s terms of reference and the changes to the Audit Committee’s terms of reference. The updated Corporate Governance Framework had been published on 20 June 2022.
• Action 134 - The Corporate Performance Report had been amended to reflect comments from Board members, and had been submitted to the MOD for circulation in advance of the Performance and Risk Review meeting of 21 July 2022.
• Action 135 - The NAO and DSOP had been asked to consider future scheduling to accommodate the review process of the SSRO’s Annual Report and Accounts. Board members noted that this was an ongoing action, and that it should remain open until it was resolved. It was suggested that the Minister should be asked to consider the Annual Report and Accounts in parallel with the Audit Committee and Board, rather than after the SSRO’s review. Action: Mike Wetherell.

3.2. The minutes of the 44th meeting of the Board were approved as a correct record.

4. Chair’s introduction

4.1. The Chair discussed the recent progress on the recruitment of a Non-Executive Board Member. The appointment had been posted to the Public Appointments website and advertised in the Times, Financial Times, Women on Boards and other relevant websites. Board members were encouraged to share the link to the advert with their networks. 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 the second week of January 2023.

4.2. A new Minister for Defence Procurement had been appointed, and the Chair had written to congratulate him and seek to arrange an introductory meeting. It was likely that the meeting would take place in December.

4.3. The non-executive Board members were due to meet on 17 and 18 October, and the Chair provided a summary of the working agenda for the meeting, which included a presentation by a senior official at the MOD and a presentation from Jyre on the final report from the capability review of the SSRO.

5. Chief Executive’s Report

5.1. Neil Swift, Chief Executive, presented his report to the Board. The report provided an overview of stakeholder engagement, including recent site visits to industry facilities, which had been very positive. SSRO staff were continuing to follow up on issues discussed at these meetings at a working level.

5.2. The Chief Executive discussed recent publications, including the laying of the SSRO’s Annual Report and Accounts in Parliament, and the publication of the determination on the treatment of Research and Development Expenditure Credit. There had been some feedback from industry on the determination process, and the SSRO was due to meet with the MOD to receive its feedback on the same issue.

5.3. The Chair, Chief Executive and Chief Regulatory Officer had recently attended a Performance and Risk Review meeting with the sponsor department at the MOD.

5.4. The terms of appointment of two referral panel members had been extended by one year, as they were due to end in September 2022.

5.5. The pay remit had been submitted to the MOD and had now been approved. The next step was for it to be implemented across the team.

5.6. Board members discussed the regular Statistics Bulletins, noting that there was due to be a workshop on data utilisation in the near future. It was noted that the Statistics Bulletins shadowed the process for producing official statistics, and that flexibility about what information could be included was therefore limited, but agreed that the data within them could be more widely used to engage stakeholders.

The Board noted the information provided in the report.

6. Corporate Performance Report

6.1. Neil Swift, Chief Executive, introduced the Corporate Performance Report, which provided an update to the Board 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 that were not covered in greater detail elsewhere on the agenda.

6.2. The Chief Regulatory Officer provided an update on the progress of the Procurement Bill and Review of Legislation, and the drafting of the SSRO’s annual Compliance Report.

6.3. The Director of Corporate Resources discussed the SSRO’s long-term accommodation strategy, and the planned move away from Finlaison House in 2023. He also discussed progress on ongoing recruitments and the IT Managed Services procurement.

6.4. Board members asked about performance against the measures on training, and it was noted that training plans for all staff were established at the beginning of the year as part of the appraisal process; the majority of training typically fell within Q3 and Q4, as training opportunities were identified. There had been some delay in training being picked up this year in anticipation of the findings of the capability review. A sense of the priority training areas would be provided in the corporate performance report in future. Action: Mike Wetherell.

6.5. An abridged version of the Corporate Performance Report would be submitted to the MOD as part of the Performance and Risk Review process.

The Board reviewed and commented on the Corporate Performance Report.

7. Baseline Profit Rate assessment approach

7.1. Ben Johnson, Head of Pricing and Economics, introduced the item.

7.2. The Board had previously approved the publication of the consultation response and methodology on the calculation of an Information Technology Services activity group benchmark. The SSRO had received representations that it should include this benchmark, for information, in the rates assessment for 2023/24 and beyond, alongside those for construction and ancillary services. It would not be incorporated into the baseline profit rate for the coming year.

7.3. The Board was asked to consider the basis on which the underlying baseline profit rate would be calculated for 2023/24. It was recommended that the SSRO’s established methodology should be used to calculate an underlying rate using FY2021 company financial data. The preferred option at this stage was to continue to exclude FY2020 company financial data from the assessment, in view of the wider macro-economic conditions in 2020.

7.4. The Board considered the publication of the response to the SSRO’s consultation on how the SSRO should proceed with this year’s assessment, and discussed whether the document should be clearer on the SSRO’s direction of travel. The Board had considered at an earlier workshop whether to signal to stakeholders its intent to include or exclude specific years from the methodology, and the text in the draft consultation response included some signalling of the SSRO’s intention. The Board agreed that the text in the draft consultation response was in line with the direction of travel discussed in the workshop but highlighted some improvements that could be made. Board members requested drafting changes to the consultation response and provided a steer on messaging. Action: Ben Johnson.

7.5. The Board discussed the plan for engagement with the MOD, and it was noted that this would be discussed further at the Regulatory Committee.

The Board:

• approved the calculation of an Information Technology Services activity benchmark;
• approved the publication of the SSRO’s response to the BPR consultation;
• agreed that the SSRO funding adjustment and capital servicing rates should be calculated using the normal approach set out in our methodology;
• agreed that the SSRO should proceed using its established methodology to calculate an underlying rate using FY2021 company financial data;
• agreed our plan for engagement with the MOD;
• agreed our plan for Board engagement;
• noted the 2023/24 rates assessment approach;
• noted that the preferred option at this stage is to continue to exclude FY2020 company financial data from this year’s assessment; and
• noted the final recommendation on the exclusion or use of FY2020 and FY2021 data will be put to Regulatory Committee in January 2023, and that an updated provisional position will be provided at the November meeting.

8. DefCARS update

8.1. Jo Watts, Chief Regulatory Officer, and Simon Mahony, Head of Analysis and Data Platform, provided a presentation on the modernisation of the SSRO’s Defence Contracts Analysis and Reporting System (DefCARS). It was noted that this was an important point in the modernisation of the system, because it was beginning to generate more, and more useful, management information, which would be shared with MOD and then utilised in procurement decisions.

8.2. The team had been implementing the DefCARS Future Technology Strategy that had been agreed by the Board in 2021. It had been focusing in particular on improving engagement with DefCARS users. There were two priorities in this area: the first was to ensure that DefCARS was moved to the public cloud, so the SSRO could use the capabilities that existed; the second was to develop analytical capability.

8.3. The presentation discussed progress over the previous year, which included the SSRO working with Risual on the service design of the system, migrating the web app and then moving to the data transformation stage, which had recently completed. The presentation also covered the priorities that the team was now working on, which included sharing Management Information with the MOD and seeking its feedback on how it could be improved, and integrating charts from the recent amendments and variance project into the system.

8.4. It was important that MOD staff gained access to the analytics and management information reporting in the new system. While progress had been made, there remained some technical issues to resolve. Following resolution, there would be a considered roll-out of access and use within the Department. There was work to do on how to build on the greater granularity of data that would be available.

8.5. Board members discussed the use of data within the MOD and how utilisation could be improved. It was acknowledged that utilisation was partly dependent on the SSRO demonstrating the value of the data, and it was suggested that SSRO resource should be put into this and into demonstrating the benefits of the new system. Greater utilisation might also be achieved through engagement with a selected MOD team, which could act as a champion. Secondments might be another route. A Board workshop on data utilisation was due to take place in the near future.

8.6. In the longer term to 2023/24, the SSRO was considering changes resulting from the Secretary of State’s review of legislation. In preparation for this, work was being undertaken to simplify how DefCARS worked for the SSRO and for contractors, for example through making it more straightforward to upload data into the system.

8.7. Alun Rogers thanked the Board and the team for working with Risual on DefCARS modernisation. The decision had been made early in the project that the system should be future proofed, which had made some of the early implementation phases more challenging but had resulted in a very good platform, built on scalable public cloud technology. Security and roles-based access was built for the future; requirements could be added to ensure that the data was useful for the MOD and SSRO.

The Board noted the presentation.

9. Stakeholder engagement strategy

9.1. Jo Watts, Chief Regulatory Officer, introduced a paper presenting a revised stakeholder engagement strategy for consideration by the Board. The refreshed strategy had built on the successful elements of the SSRO’s approach to engagement over the last two years, while acknowledging that further development would help the SSRO to achieve its priorities as it transitioned from developing the regime to focus on the use of the regime. It did not represent a significant change in how the SSRO engaged, because the external environment had not changed significantly, but signalled a shift in focus towards supporting benefit realisation. The strategy would also be an important component of the SSRO’s corporate planning.

9.2. Amendments to the strategy had been informed by the feedback provided by respondents to the SSRO’s recent stakeholder survey. The strategy would continue to engage in a hybrid manner, based on successful operation of that during the pandemic and feedback from stakeholders that they would like the option to be able to choose the ways they engaged with the SSRO. It committed to improving the feedback provided to stakeholders who took part in the SSRO’s consultations. It also sought opportunities to take the views of stakeholders in shorter surveys after training sessions or meetings with industry.

9.3. The Board discussed the SSRO’s engagement with stakeholders beyond industry and the MOD, including the Treasury, the NAO, select committees and other interested agencies. It was noted that the SSRO engaged closely with the UK Regulators Network, which was often the route through which it engaged other regulators.

9.4. The Board discussed whether the strategy could be incorporated into the Corporate Plan in future, so that there was a single formal document. In response, the executive noted that the stakeholder engagement strategy was of interest externally and had been discussed actively at recent meetings with industry. Publishing the document had also acted as a method of responding to and completing the biennial stakeholder survey process, because findings from the survey were incorporated into the updated strategy. The Board agreed that the strategy should continue to be a separate document.

9.5. Board members noted that it was an external facing document and suggested that the strategy could be more focused on the internal work needed to achieve the strategy. It was noted that there was already in place an internal document focused on how staff engaged on projects and guidance development.

9.6. Board members stated that the strategy would benefit from the inclusion of more wording around how the SSRO welcomed ideas from others, and also about the SSRO’s independent status.

9.7. While there was agreement that the document should be published, the Board considered the timing of publication, and whether it should be delayed to take account of the findings of the Capability Review. It was agreed that publication would be delayed, to factor in the Capability Review, but that it should be published in advance of the draft Corporate Plan.

The Board

• approved the refreshed stakeholder engagement strategy;
• approved publication of the refreshed stakeholder engagement strategy on the SSRO’s website, at a later time; and
• noted that the refreshed stakeholder engagement strategy is not formally consulted on, but will be discussed with stakeholders again at the next Operational Working Group on 19 October.

10. Capability review: interim findings

10.1. Arabella Ellis, Gordon Hull and Léonie Duff from Jyre presented the interim findings from the Capability Review that they had undertaken of the SSRO. They set out the emerging themes from the review and the structure the report would take, and provided an opportunity for Board members to correct errors or misunderstandings before the report was completed.

10.2. In discussion, Board members noted that it was important for the SSRO to ensure there was clarity about its purpose and role, and that this was understood by all stakeholders. With further clarity about its role, the SSRO could ensure that the right skills were in place within the organisation. It would also provide certainty about who was responsible for delivering the benefits of the regime. It was noted that legislation would need to be amended if the SSRO’s mandate and substantive role were to be changed.

10.3. Board members discussed the value of the SSRO having more skills and experience in negotiating major defence contracts, alongside the technical skills and experience that it already had.

The Board noted that the final report will be discussed at the NEBM meeting on 18 October 2022.

11. Corporate Planning

11.1. Jo Watts, Chief Regulatory Officer, provided the Board with a process and timeline for the development of the Corporate Plan 2023-2026 and the Operational Plan 2023-2024.

11.2. The paper set out the engagement plan for the team and stakeholders, to ensure that each stakeholder group had an opportunity to put forward their views. The planning process took account of lessons learned from development of the Corporate Plan 2022-2025, and it was intended that the plan would also provide sufficient time and opportunity for the Board to discuss and consider issues emerging. More time was being factored into the timetable for Board discussion this year, with the addition of a discussion at the NEBM meeting in October and two workshops.

11.3. The SSRO intended through the Corporate Plan to place greater emphasis on supporting the MOD and industry in realising the benefits brought by the regime, while still delivering its statutory functions.

11.4. In discussion, Board members recommended that the development process for the Corporate Plan should begin from first principles. The document would benefit from brevity, and should be 10-15 pages long at most, with the number of elements in each section (including the corporate objectives and the vision) made more concise. Board members asked to see the structure of the document in advance of drafting, so that they could agree which sections should be included, while acknowledging that some sections were mandatory. Action: Jo Watts.

11.5. Board members asked for the link between financial planning to be made more explicit with corporate planning, and more clarity provided on resource deployment between the functions and objectives. Action: Neil Swift.

The Board

• approved the process and the timeline for the development of the Corporate Plan 2023-2026 and the Operational Plan 2023-2024.

12. SSRO financial planning

12.1. Mike Wetherell, Director of Corporate Resources, introduced the SSRO’s 2023/24 financial plan for review and clearance by the Board ahead of presentation to the MOD on 3 October 2022.

12.2. The presentation covered the forecast outturn for the 2022/23 SSRO corporate budget. It identified the potential risk areas that had arisen since the budget was agreed with the MOD that could affect the final outturn figures, and options to mitigate them. Towards the beginning of the financial year, additional expenditure had been identified that would have led to an overspend without any action being taken. Over the second quarter, the executive had therefore reviewed resource requirements and taken action to manage such spending to within the current forecast position of a small overspend. This would be managed within the remainder of the financial year, through in year savings or the review and reallocation of call-off budgets.

12.3. The MOD had indicated that funding for 2023/24 would be capped at the 2022/23 amount. Any additional funding above this level would require a detailed business case. Key assumptions included inflation, retained income generated from the sub-let of the SSRO’s accommodation. Inflationary and other changes represented a cost pressure of £370,000 (including dilapidations costs). As work programmes and resource requirements for 2023/24 became clearer, the SSRO would consider how agreed funding was allocated and cost pressures met.

12.4. The MOD Representative asked whether the SSRO had a written record of the MOD agreeing to cover the cost of dilapidations. Action: Mike Wetherell.

12.5. In discussion, Board members noted the financial risk around the SSRO’s accommodation move in 2023, and uncertainty as to what would be included in the estimate. Desk utilisation was being considered.

The Board

• noted the 202/23 forecast outturn; and
• approved the 2023/24 draft financial plan, draft budget and initial assumptions and risks for presentation to the MOD.

13. Risk management

13.1. Mike Wetherell, Director of Corporate Resources, introduced a presentation on risk management. In his introduction, he set out a range of background and other supporting material to assist members in considering their views of the most significant risks for the SSRO. The material drew on best practice, internal and external feedback, and the history of identified risks within the regime.

13.2. The Board would in future discuss the broader risk environment annually.

13.3. Colin Hill, Defence Adviser, facilitated the discussion and break-out groups within the room. The focus of the Board members’ discussion was to reach consensus on the risks to take forward in the corporate risk register. They were asked to identify significant risks to the SSRO’s objectives that were not currently captured in the register. The risks discussed by the Board would be developed using the agreed format, in accordance with the SSRO’s risk management policy, and would be further discussed and iterated upon as the 2023/24 to 2024/25 Corporate Plan was developed. Action: Mike Wetherell.

The Board

• considered the list of potential risks to be included within the SSRO’s CRR; and
• considered the potential impact, proximity and likelihood of the most significant risks.

14. Minutes from Regulatory Committee meeting of 27 July 2022

14.1. Peter Freeman presented the minutes from the Regulatory Committee meeting of 27 July 2022. The Committee had discussed several papers relating to the SSRO’s statutory functions. It had agreed to move the meeting planned for 22 March 2023 to 8 March 2023, so that it would take place before the Secretary of State had announced the baseline profit rate.

The Board noted the minutes.

15. Minutes from Audit Committee meeting of 7 June 2022 and oral update from meeting of 14 September 2022

15.1. Alastair Groom presented the minutes from the Audit Committee meeting of 7 June 2022 and provided an update from the meeting of 14 September 2022. The Committee had received internal audit reports that had provided positive assurance about the systems of governance and control within the organisation. It had discussed the Annual Report and Accounts, and sought to ensure it had sufficient time to consider them during the production of the 2022/23 report. It had also requested information on resource allocation within the SSRO.

The Board noted the update

16. Minutes from People Committee meeting of 18 July 2022 and oral update from meeting of 12 September 2022

16.1. Claire Williams presented the minutes from the People Committee meeting of 18 July 2022, and provided an update from the meeting of 12 September 2022. The Committee had considered the pay remit and the Pay Management Policy and Guide. The Guide considered issues such as pay awards, grading, bench-marking and providing guidance to managers. The Committee had also discussed the SRSO’s Single Equalities Scheme and the plans in place to develop it, and the role of the staff EDI Group.

The Board noted the update

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

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

17.2. Reflecting on the meeting, Board members said that it was important that they had sufficient time to consider issues, and that there was appropriate spacing between meetings of the Board and meetings of the other Committees. Other Board members had a preference for shorter Board meetings, organised well in advance, although this meeting was felt to have been a good use of time in view of its significant business.

17.3. The next meeting of the Board would take place on 15 December 2022 (subsequently moved to 13 December 2022) at 14:00.