Transparency data

Board minutes: 30 March 2022

Published 9 January 2023

Minutes of the 43rd Board Meeting

Finlaison House, Wednesday 30 March 2022

09:00 to 12:00

Board members present:	Others present:
Hannah Nixon (Chair)	Colin Hill (not Item 16)
Peter Freeman	Mike Wetherell (not Item 16)
Alastair Groom	Ben Johnson (item 7)
Hugh Kelly	Peter Regan (item 5)
David Johnston	Peter Roche (item 7)
Claire Williams	Colin Sharples (item 5 and 6)
Neil Swift (not Item 16)	Nick Ratcliffe (item 6)
David Galpin (not Item 16)	Tara Usher (MoD Representative)
	Andy Brittain (MoD Representative)

1. Welcome, apologies, announcements and declarations of interest

1.1. The Chair welcomed members to the 43rd meeting of the SSRO Board.

1.2. The Chair opened by welcoming Andy Brittain to the meeting and to thank him for his contribution as he was attending his final meeting of the Board as an MoD representative.

1.3. No apologies had been received and all members were present.

1.4. No other declarations of interest were made.

2. Minutes of the 42nd meeting of the Board, 27 January 2022, and action tracker

2.1. The Chair introduced the minutes of the Board meeting held on 27 January 2022. Six actions were recorded:

• Action 122 – the executive had drafted a response to the consultation on the Arm’s-Length Body Sponsorship Code of Good Practice and submitted it on 4 February 2022.
• Action 123 - a paper on reporting issues was discussed at the Regulatory Committee. The Committee Chair will provide feedback to the Board via the minutes.
• Action 124 – the review of Board effectiveness included a recommendation on the length of cover papers which is being actioned.
• Action 125 - supporting information was to be made available to Board members on Decision Time regarding the resources allocated to specific SSRO functions within the SSRO budget.
• Action 126 – changes were made to the Corporate Plan text and KPIs ahead of it being circulated to stakeholders on 1 February 2022.
• Action 127 – the issue of measuring the impact of the regulatory framework was raised with the MoD at the Performance and Risk Review meeting.

2.2. The minutes of the 42nd meeting of the Board were approved as a correct record.

3. Chair’s introduction

3.1. The Chair summarised the findings of the recent review of Board effectiveness, which considered comments received from Board members, responses to the evaluation questionnaire, the Audit Committee’s review of its own effectiveness and the GIAA report on the Regulatory Committee. Five recommendations would be taken forward to inform the Board’s activities and improve effectiveness:

• additional Board workshops would be arranged;
• a “People Committee” would be formed, to cover remuneration, nominations, diversity and inclusion;
• there would be time following Board meetings for non-executive members to have a discussion without executive members and staff present;
• non-executive members would be appointed to lead on specific areas; and
• plans would be progressed for a community of experts.

3.2. The Board discussed arrangements for the annual appraisal of the Chair. The standard approach adopted by the Sponsor Team with other enabling organisations was for the Director, DSOP to conduct the reviews. It was agreed to continue the dialogue directly with DSOP outside of the meeting. Action: Chair/Neil Swift.

3.3. The Chair reflected on the recent Board away session in Wiltshire, with an evening hosted by Ian McPherson, a morning discussion, and a visit to the REME museum organised by the Defence Advisor. It was a valuable exercise, and more opportunities should be made available for the Board to come together, both formally and informally. Members were invited to express their thoughts and it was agreed that future away sessions should be programmed, including visits involving the wider staff and smaller group visits to meet with senior industry leads. The Corporate Resources Team would be asked to coordinate diaries and provide suitable dates for the coming year. Action: Mike Wetherell

4. Chief Executive’s Report

4.1. Neil Swift, Chief Executive, presented his report to the Board. Recent stakeholder engagement included his and the Chair’s meetings with Andrew Forzani, the MoD’s DG Commercial, and the Chair’s meetings with CEOs of BAE Systems, Rolls Royce and Lockheed Martin.

4.2. Since the January Board meeting, the Q3 annual statistics bulletin had been published. In the first nine months of 2021/22, the SSRO had received contract reports for 59 new QDCs/QSCs, with an estimated total contract price of £7.2 billion. To 31 December 2021, there were 425 QDCs/QSCs with estimated prices totalling £62.1 billion. The average reported estimated contract profit rate across all QDCs/QSCs was 9.40 per cent.

4.3. The Secretary of State had determined the rates for 2022/23 and went further in removing the effects of COVID-19 by excluding 2020 data from the rate that had been recommended by the SSRO. The determination had been announced to Parliament but had not been formally published in the Gazette. Once published, the SSRO would provide a statement on its website, the text of which had been shared with the SSAT.

4.4. The results from the recent staff engagement survey were set out in Appendix 2 of the report. The survey comprised core questions grouped into themes, allowing year-on-year comparisons. The results were positive, with an improvement in scores in most areas. The scores for engagement, which formed a KPI in the Corporate Plan, had increased by 14 per cent from last year, to 62 per cent. The target for the KPI was 70 per cent, and the civil service average in 2019 was 60 per cent. There were some areas still to work on and the Executive Committee would engage with the team via the staff group and directly at all staff meetings. Board members noted the scores relating to staff retention and that work was underway to provide continued development opportunities and internal promotion whenever possible.

4.5. The recruitment of a Chief Regulatory Officer had been successful. Jo Watts had accepted the post and her planned start date was 1 June 2022. Jo had prior experience gained within the defence industry and the MoD and was currently a finance director with HMRC. The Chair would be asked to write to the Director, DSOP seeking the Secretary of State’s approval for Jo to be appointed to the SSRO Board as an Executive Member. Action: Chair/Neil Swift.

4.6. As reported at the last Board meeting, the SSRO had received a request on 23 November 2021 from the MoD under section 37 of the Act to provide analysis to help the SSAT monitor the MoD’s compliance review activity. The SSRO had provided the requested information as a PowerBI report on 24 February, completing the request.

4.7. On 4 February, the SSRO responded to the Cabinet Office and Treasury’s consultation on the Arm’s-Length Body Sponsorship Code of Good Practice, which aims to improve the consistency and delivery of sponsorship by departments across government. The Code suggested a risk-based, proportionate approach and the application of common sense, which the SSRO supported. The SSRO’s response suggested the Code could be improved by setting out the Cabinet Office’s full offer on ALB sponsorship, addressing how it interfaced with Tailored Reviews (or their replacement) and providing standardised, proportionate models for P&RRs.

4.8. The SSRO had passed its annual Cyber Essentials Plus certification. The Chief Executive reminded the Board of the continued need to be aware and resilient in handling information, whether electronically or via other media.

4.9. The SSRO had contracted with Risual Ltd to replace DefCARS. There had been delays agreeing the service design and associated costs, but it was expected that transition and transformation would commence in April. We remained on track for the new DefCARS system to be in place for the end of the current contract in July 2022.

The Board - noted the information provided in the report.

5. Corporate Performance Report

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

5.2. Within Corporate Resources, it was reported that the year-end forecast demonstrated an underspend of c£125,000, or 1.8% of the annual budget total; however, it was noted that the figure was only provisional at this stage. The target KPI was for in-year spending to come within 2% of the set budget.

5.3. In Operations, a provisional determination on the RDEC referral was expected to be shared with parties by 6 April. The DefCARS procurement in objective 4 was expected to return to schedule and revert to green from its current amber rating.

The Board reviewed and commented on the Corporate Performance Report.

6. Corporate Plan 2022-2025

6.1. The Chief Operating Officer introduced the Corporate Plan, setting out the SSRO’s purpose and vision and identifying the strategic priorities for the next three years. The report on the draft plan included feedback from stakeholders and set out how this was used to refine some of the objectives that would be set to ensure the SSRO delivered its statutory functions and met its strategic priorities.

6.2. External factors had been a key consideration in the development of the Corporate Plan and may further impact its delivery. It might be necessary to reschedule certain deliverables within the plan to respond to the outcome of the Secretary of State’s review of legislation and the Government’s intention to introduce legislation in time for April 2023.

6.3. In response to comments received from stakeholders, the plan included a commitment to undertake a proportionate review of the baseline profit rate methodology under Objective 2 in line with the written ministerial statement. The Board noted the importance of engagement to solicit the full breadth of views from stakeholders.

6.4. The Board noted and discussed the feedback from stakeholders relating to the skills available to the SSRO to enable it to deliver its functions. The Corporate Plan set out plans to address the issues raised which included conducting a skills audit of SSRO staff. The outputs of this would be used to inform the next iteration of the SSRO Workforce Strategy.

6.5. Stakeholder feedback supported review of legislation as the number one priority. Industry emphasised review of the baseline profit methodology and informal MOD feedback supported work on allowable costs guidance. The Board noted that these activities appeared in the plan and endorsed prioritisation of the use of reported data and the encouragement of its use by the MoD’s commercial teams.

The Board:

• approved the Corporate Plan 2022-2025 subject to minor revisions;
• delegated to the Chair and Chief Executive authority to make minor revisions to, and approve, the final Corporate Plan for submission to the MoD for consideration by the Minister for Defence Procurement;
• agreed to publish the Corporate Plan following ministerial approval; and
• agreed the collected responses to the consultation document should be shared with the respondents.

7. IT services activity group

7.1. The Chief Operating Officer introduced a report on the development of an IT comparator group. The SSRO had consulted on the group and published a general response to consultation in December 2021. We subsequently continued to analyse the feedback, sought expert views, and held further discussions with the MOD.

7.2. A detailed response to consultation was proposed for publication. Though it was noted that four written responses had been received to the consultation, an IT Services Group was of significant interest to stakeholders. The Secretary of State’s review had raised the potential for activity-based cost risk adjustments and stakeholders were interested in further review of activity descriptions.

7.3. There was support for an IT services benchmark to sit alongside those for ancillary services and construction. It was proposed to recommend to the Board in September that the SSRO’s profit rate methodology include an IT Services benchmark for 2023/24. Action: David Galpin/Jo Watts.

The Board noted the consultation responses and approved their publication.

8. Framework Document

8.1. The Chief Executive introduced the latest version of the Framework Document, which had been drafted to replace the existing framework. This agreement defined the operational and governance procedures that were in place and helped set the working relationship between the SSRO and its sponsor.

8.2. The revised Framework Document had been developed over several iterations between the SSRO and DSOP. The tabled draft had been agreed, subject to two unresolved matters: how to capture that the SSRO was ‘operationally independent’ of the MoD; and whether it was appropriate to stipulate the MoD’s engagement in any future surveys involving stakeholders, and specifically, in relation to the skills the SSRO required to deliver its functions. The Board invited and considered the views of the MOD representatives.

8.3. The Board noted that references to independence had reduced by comparison to the first framework document. It was of continued importance to reflect the SSRO’s ability to operate free of influence on relevant matters. It was usual for UK-based regulators occupying a space between ‘providers’ and ‘customers’ to adopt an independent stance, and especially when required to mediate between parties from each side.

8.4. Board members discussed the deleted paragraph requiring the SSRO to engage with the MoD when assessing the skills the SSRO required to deliver its functions. The Board agreed that such operational matters should not be covered within the Framework Document and were the responsibility of the Board and the Executive. Stakeholder engagement could be discussed via the formal P&RR process between the SSRO and its sponsor, at which there was representation from DSOP and SSAT.

8.5. The Board discussed the wording within the Treasury’s template Framework Document regarding the availability of financially qualified persons on the Board. It was agreed to remove the requirement of such a qualified person from the SSRO’s Framework Document. Action: Neil Swift.

The Board:

• considered the draft Framework Document;
• agreed to maintain reference to the SSRO’s independence; and
• delegated to the Chair and Chief Executive the responsibility for approving any further changes to the draft, ahead of signing on behalf of the SSRO.

9. Annual Review of the Corporate Risk Register

9.1. The Chair invited the Chair of the Audit Committee, Alastair Groom, to summarise the discussion that had taken place at the most recent Audit Committee meeting on the SSRO’s risk management approach. The Audit Committee Chair reported that the Committee agreed that the process of identifying and managing risk was highly effective, supported by the very positive assessment of the process given by the GIAA, following its internal audit on risk and had approved the SSRO’s Risk Management Policy.

9.2. The Chair of the Audit Committee stated that he would find it useful to consider how the outcome of the current risk management process could be presented in such a way that specific mitigations were directly aligned with identified risks, and any duplication rationalised. The Board agreed that the Executive would develop a strawman to apply to a sample risk, and to meet with the Audit Committee Chair to discuss if the revised process met the Committee’s request for a ‘clearer and more concise’ report for it to receive. Action: Neil Swift.

9.3. The Board discussed and agreed to undertake a further review of the corporate risk register and discuss the individual risks at the September 2022 meeting.

The Board received the corporate risk register and noted the feedback from the Audit Committee Chair.

10. Accommodation Strategy

10.1. The Interim Director of Corporate Resources presented the revised accommodation strategy. The specification and requirements for the next SSRO office had been adjusted since the strategy was presented to the Board in December 2020.

10.2. The overall number of desks required had been reduced from 25 to 15, reflecting changes to how we work and expectations of lower staff to desk ratios across government. The preferred location remained Canary Wharf, with Stratford and Croydon being the other two Greater London hubs available.

10.3. Discussions had taken place with the Cabinet Office’s Places for Growth Team and the Government Property Agency. Both had confirmed their support for the SSRO to remain located within the London area in the medium term.

The Board approved the changed business requirements and endorsed the SSRO seeking to relocate to Canary Wharf.

11. DefCARS Update

11.1. The Board noted the report and thanked staff for providing it. The contents had been discussed as part of the Chief Executive’s report to the Board under item 3.

12. Minutes from Regulatory Committee meeting of 14 March 2022

12.1. Peter Freeman, Chair of the Regulatory Committee, presented the draft minutes from the meeting of the Regulatory Committee held on 14 March. The Chair of the Committee reported that they discussed in detail the latest position on the review of legislation. The Committee had considered the SSRO’s approach to reporting issues, following a request at the Board, and was satisfied these are being appropriately handled. There is a documented process for dealing with reporting issues, which had recently been reviewed and areas for improvement identified. The issues log collects all issues, many of which are identified internally by the SSRO. The Committee received an update on the DefCARS Futures project.

The Board noted the minutes.

13. Minutes from Audit Committee meeting of 22 March 2022

13.1. Alastair Groom presented the draft minutes from the Audit Committee’s meeting on 22 March 2022. At its meeting, the Committee had considered a report from internal audit and received updated policies as part of the annual review cycle.

13.2. The Audit Chair informed the Board that he had attended an MoD-run meeting of EO/TLB Audit Committee chairs where a number of updates were provided on matters including the annual expenditure plan and the impacts of IFRS 16. It was reported that the transition of the MoD’s own internal audit team across to GIAA was nearing completion.

The Board noted the minutes.

14. Future agendas and any other business

14.1. The Board noted the forward plan, and it was agreed that the Secretariat would be asked that workshops should also be included within the scheduling. Action: Mike Wetherell.

14.2. The timing of Board meetings and sub-committees was raised with the aim of ensuring there was sufficient time to receive the papers and properly discuss the issues raised before bringing recommendations to the Board; approving the draft Annual Report & Accounts (ARA) was given as an example. The Chief Executive recognised the challenge on the ARA and would endeavour to factor in as much time as the process permitted. It was noted that timings on this matter were beyond the direct control of the SSRO due to the required involvement of the NAO, the C&AG and the Minister for Defence Procurement.

15. Reflections on meeting

15.1. The Chair led a discussion on Board members’ reflections of the meeting and drew out actions and learning points for future meetings. The members felt the meeting had been constructive and discussed whether the agenda was too crowded, and how to ensure future meetings remain focussed on the more strategic issues, and less on operational matters.

16. Chief Executive’s performance

16.1 The COO and staff attendees were asked to leave the meeting and a confidential discussion was held, notes of which were recorded by the Chair.