Transparency data

Board minutes: 30 September 2021

Published 25 January 2022

Minutes of the 40th Board Meeting

Finlaison House Thursday 30 September 2021

11:30 to 15:00

Board members present:	Others present:
George Jenkins (Chairman)	Alastair Groom
Peter Freeman	Andy Brittain
Hugh Kelly	Tara Usher
David Johnston	Colin Hill
Claire Williams	Mike Wetherell
Neil Swift	Malcolm Botting
David Galpin	Colin Sharples – items 4 and 7
	Alan Brennan – item 4
	Ben Johnson – item 5
	Adrian Wallis – item 5
	Anthony Bende-Nabende – item 5
	Dagmar Jeschin – item 6
	Simon Mahony – item 6
	Samuel Lawson-Baker – item 6
	Ben Sawyer – item 6

1. Welcome, apologies, announcements and declarations of interest

1.1. The Chairman welcomed members to the 40th meeting of the SSRO Board.

1.2. The Chairman welcomed Alastair Groom, who was attending this meeting in advance of his appointment as a Non-Executive Board Member on 1 October 2021, and Tara Usher, who would in future attend Board meetings as the MOD Representative.

1.3. The Chairman noted that Marta Phillips’s was not in attendance as her appointment term had now finished. The Chairman would meet with Marta separately to thank her for her significant contribution to the SSRO since 2014 as a Non-Executive Board Member and Audit Committee Chair.

1.4. The Chairman noted the change in the Board’s composition, with three new Non-Executive Board Members appointed in the past four months. A Board away day would be organised in the near future. Action: Colin Hill.

1.5. The Board noted its gratitude to staff for their high-quality work throughout the period of remote working since March 2020. The Chairman would join an all-staff call within the next week to thank them personally.

1.6. The MOD Representatives declared an interest in item 5 of the agenda; they would leave the meeting for that item.

2. Minutes of the 39th meeting of the Board, 23 June 2021, and action tracker

2.1. The Chairman introduced the minutes of the Board meeting held on 23 June 2021. Four actions were recorded and marked as complete.

• Action 107 – a workshop for new Board members had been held on 28 July 2021 regarding the Review of Legislation, DefCARS and reporting issues.
• Action 108 – it had been agreed at the Performance and Risk Review meeting with DSOP that a joint submission should be made to the Chief Operating Officer of the MOD regarding progress against all recommendations from the Tailored Review. The SSRO had since contributed to the development of the joint submission.
• Action 109 - The changes made to the Annual Report and Accounts by the Board had been shared with the Minister for Defence Procurement on 25 June 2021. The Annual Report and Accounts were laid in Parliament in July 2021.
• Action 110 - Neil Swift met with Marta Phillips in the week following the Board meeting to discuss her comments on the Corporate Performance Report.

The minutes of the 39th meeting of the Board were approved as a correct record.

3. Chief Executive’s Report

3.1. Neil Swift, Chief Executive, presented his report to the Board. The report provided an overview of stakeholder engagement, including the Chairman’s recent meetings with Charles Woodburn, BAES, Sir John Manzoni and Peter Morton, AWE, and Kevin Craven, ADS. Recent engagement had focused on the Secretary of State’s review of legislation, and the Chairman, Chief Executive and Chief Operating Officer had attended the MOD’s two profit summits with industry.

3.2. Recent SSRO publications included the outcome of the SSRO’s consultation on profit related matters, the qualifying defence contract statistics bulletin for quarter 1 2021/22 and revised versions of the Allowable Costs guidance and Reporting guidance.

3.3. The Chairman and Chief Executive had attended the “Enabling Organisations – Chairs and CEOs” event hosted by the MOD’s Department of Sponsorship and Organisational Policy (DSOP) on 5 July 2021. The agenda had included updates on developments in defence, the ongoing review of MOD Head Office and the proposed ‘Board Charters’ for all Enabling Organisations. The SSRO would reflect the requirement for a Board Charter in its annual review of the Corporate Governance Framework. Action: Mike Wetherell.

3.4. The SSRO was developing with DSOP a protocol setting out the scope of the MOD Representative role. This would be circulated in draft to Board members for comment. Action: Neil Swift.

3.5. The first Performance and Risk Review (P&RR) meeting with DSOP had taken place on 19 July 2021, and the second was scheduled for 13 October.

3.6. The MOD’s appointment process for a new SSRO Board Chair was progressing, and the role had been advertised with a closing date for applications of 4 October 2021.

3.7. The report set out the outcome from a recent review of remuneration and job grading at the SSRO. The proposed approach provided a job evaluation and grading framework that included the levels of contribution and the factors that would be used to measure the job challenge of each role. The Chief Executive noted that setting a clear framework for remuneration and grading represented a sensible and constructive way forward. The feedback received from staff to date related mainly to matters of practical application, which would be addressed in the implementation plan. Board members discussed the report and raised points relating to employment contracts, the management of the impact on key individuals, and benchmarking and implementation issues. The Chief Executive expected that most staff would fit within the grading bands set out in the report, with any costs arising likely to be managed within the existing budget. Having discussed the report, the Board approved the grading framework.

3.8. The SSRO intended to carry out its third stakeholder survey in two parts from January to March 2022. There would be an initial online survey of all stakeholders, followed by a set of qualitative telephone or online interviews with a representative sample of stakeholders. A report setting out the results would be presented to the Board in May 2022, and Board members would be provided with an opportunity to discuss the survey during the forthcoming Board workshops on the Corporate Plan. Board members discussed how to improve response rates among certain stakeholder groups.

The Board

• approved the grading framework set out at Appendix 2; and
• noted the information provided in the report.

4. Corporate Performance Report

4.1. 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. All Directors then discussed issues arising within their work areas.

4.2. The notable recent work of the Corporate Resources directorate had included support for several ongoing procurements, the development of financial plans, recruitment exercises to cover vacant positions and the transition to a zero trust architecture for the SSRO’s IT services. Board members asked for the Corporate Performance Report to include data on staff turnover in future. Action: Mike Wetherell.

4.3. The Operations Directorate’s recent work had included support for the Secretary of State’s Review of Legislation, the establishment of and support for a Referral Committee to consider a determination, and the progression of projects such as the Amendments and Variances project. Board members discussed the reporting against objective 4 and the utilisation of data by the MOD more generally, and it was noted that the Board would consider such issues further through the corporate planning process.

4.4. The Corporate Performance Report would be submitted to the MOD as part of the Performance and Risk Review process, and Board members considered changes to the report in advance of submission.

The Board reviewed and commented on the Corporate Performance Report.

5. Review of legislation

5.1. David Galpin, Chief Operating Officer, introduced a report that provided an update on the Secretary of State’s review of legislation. The SSRO expected the outcome of the review to be published in a Command Paper, which would identify in broad terms how the regulatory framework should be modified. The SSRO was committed to supporting the Secretary of State’s review and the implementation of any changes to the regulatory framework that resulted from it.

5.2. At its meeting in March 2021, the SSRO Board had agreed that the SSRO should engage positively with the MOD on the review. The executive had subsequently met regularly with MOD officials, with a focus on supporting and preparing for the MOD’s priority one proposals [REDACTED]. The SSRO was aiming to consult on changes to guidance and DefCARS in anticipation of the changes being implemented. The timetable was likely to be challenging and was dependent on the timing of the publication of the Command Paper. The SSRO was taking a flexible approach to the timetabling of its own work and was working to ensure that it was prepared for any changes.

5.3. The report identified risks associated with the timetable and set out how the SSRO was seeking to manage them. The risks included that the SSRO might have insufficient capacity and that it might be unable to update guidance and DefCARS in time for the commencement of legislative changes should there be insufficient information available. Mitigation included engaging regularly with the MOD to provide input and obtain information.

5.4. The Board thanked the Chief Operating Officer for the report and for the team’s positive engagement with the MOD. Board members discussed the effect that potential changes to legislation would have on the pricing framework, the wider regime and the SSRO’s twin statutory aims. Board members asked whether feedback had been received on the SSRO’s contribution to the review, and discussed the methods through which the SSRO would communicate any issues relating to implementation. The MOD Representative stated that they would be able to communicate such issues to the MOD.

5.5. A further update on the Review of Legislation would be provided to the Regulatory Committee in October, along with a draft consultation document on the SSRO’s proposed changes to guidance and DefCARS in support of the MOD’s priority one proposals.

The Board:

• considered and commented on the SSRO’s implementation plans.

6. 2022/23 profit rates recommendation

6.1. David Galpin, Chief Operating Officer, introduced a report that set out a proposed methodology for the SSRO’s 2022/23 recommendation of the baseline profit rate, capital servicing rates and SSRO funding adjustment. The underlying methodology was unchanged from the previous year, but the report drew out changes that the SSRO intended to make to the company review process. The changes related to company data affected by the COVID-19 pandemic, which required developments to the detailed review and some additional analysis. [REDACTED].

6.2. The paper proposed that the SSRO should assess an appropriate government owned contractor rate (“GOCR”) for 2022/23. This rate would be used to deliver a contract profit rate of zero on Qualifying Defence Contracts between the Secretary of State and companies wholly owned by the Secretary of State. The Secretary of State determined such a rate for 2021/22 and its application had created a continuing need for it.

6.3. The SSRO had also developed proposals for an IT services rate that addressed the development of bespoke IT software and the integration of off-the-shelf components to deliver a bespoke IT solution. It intended to undertake a four-week consultation on the IT services rate.

6.4. In discussion, Board members considered the potential impact of the pandemic on historical rates of profit for companies within the activity groups. Company profit rates, which were used as the basis for the SSRO’s recommendation, were affected by a range of economic factors. It was noted that the methodology, when applied appropriately, was consistent with ensuring the SSRO’s statutory aims. Care would be taken to check, by reference to reliable data, that companies undertook comparable activities in sufficient numbers. The methodology seeks to mitigate undesirable effects in a variety of ways, including by taking a three-year average. It was noted that the baseline profit rate is a starting point for several adjustments included within the determination of the contract profit rate for each Qualifying Defence Contract.

6.5. Board members had specific comments on the text of the draft consultation document, and these would be reflected in the final version. Action: David Galpin.

The Board approved:

• the baseline profit rate, capital servicing rates, and SSRO funding adjustment methodology to be applied for the 2022/23 rates assessment, including the standard baseline profit rate and an additional rate that may apply to contracts with government-owned companies.
• the proposed mitigations should the standard methodology not be successful; and
• a consultation on the development of an additional IT services comparator group.

7. DefCARS future

7.1. David Galpin, Chief Operating Officer, introduced a report that presented a Technology Strategy for the future of the Defence Contract Analysis and Reporting System (DefCARS) and proposals for procurement of the new system.

7.2. The Technology Strategy provided a future vision in which DefCARS continued to be the primary tool for securely capturing, storing and facilitating the use of the information submitted in the statutory reports specified in the Single Source Contract Regulations. It set out the SSRO’s approach to delivering improvements to DefCARS and addressed how technology requirements would be delivered in a way that provided value to users. The Technology Strategy would be published in the autumn and would be used as the basis for future development of DefCARS and engagement with stakeholders.

7.3. The report also provided an update on procurement planning for the new DefCARS contract. The services that the SSRO wished to procure were based on the proposed move to a public cloud and included service design and planning, migration and on-going development. The SSRO intended to procure a development partner before the end of 2021 to begin the design and migration work in the current financial year. The same supplier would then support and develop the migrated DefCARS throughout the life of the contract, with hosting procured separately. In discussion, it was noted that the successful supplier would be required to review the existing code for DefCARS and would design the new system in the cloud, before migrating and supporting it. Board members discussed whether the code should be made available to all bidders.

7.4. The Board considered the delivery of the strategy and the procurement, and how the SSRO should continue to engage with MOD. It also discussed whether the MOD’s IT infrastructure could be better utilised, with steps taken towards harmonizing systems through for example moving to Azure. It was noted that potential changes resulting from the Review of Legislation were being flagged, as these would require changes to DefCARS, and that some of these changes would be contingent on formal legislative change.

7.5. Board members discussed the financial implications of the procurement. It was noted that some costs were being brought forward into the current year, and the Board discussed this timing. While there would be implementation costs and potential costs emerging from legislative change, the move to a public cloud-based solution was likely to realise efficiencies and provide greater access to a ready market of developers.

The Board:

• approved the DefCARS Future Technology Strategy and its publication in early October, and authorised the Chairman, after consultation with the Chief Executive, to agree minor changes to the technology strategy and changes consistent with the Board’s views;
• agreed to procuring a new DefCARS provider to provide the Services;
• agreed to using the Technology Services 3 framework to seek a 2+1+1 year contract for the Services with an initial value estimate of [REDACTED];
• authorised the Chief Executive to approve the award of the contract for the Services following the procurement procedure and to enter into all necessary contracts on behalf of the SSRO; and
• increased the budget limit on the delegation agreed by the Board in March 2021 to the Chief Executive on the core IT procurements to [redacted] per annum, to allow for DefCARS hosting.

8. Corporate Planning

8.1. David Galpin, Chief Operating Officer, introduced a report that provided the process and timeline for the development of the Corporate Plan 2022-2025 and the Internal Business Plan 2022-2023.

8.2. The process took account of the lessons learned from the development of the previous Corporate Plan. Board workshops would again be central to the planning, as would input from all staff and from external stakeholders including the SSRO’s new sponsorship team from DSOP at the MOD. The Board workshops would be in-person while staff workshops would be remote. The dates of the Board workshops would be checked, to ensure they were correct in all participants’ calendars. Action: Neil Swift.

8.3. In discussion it was noted that the development of the key performance indicators would be a key focus of the planning process for this year and would be elevated for the Board’s consideration. That focus reflected feedback that had been received from both DSOP and the Government Internal Audit Agency.

8.4. The Chairman announced that he had asked David Johnston to be the lead Non-Executive Board Member supporting the development of the Corporate Plan. David Johnston had agreed to undertake this role as he had in the previous year, and it was noted that the role continued to have a positive impact on the process.

The Board:

• provided feedback on the Corporate Planning round in 2020-21 and any changes they wished to see for the planning round 2021-22;
• approved the process and the timeline in Appendix 1 for the development of the Corporate Plan 2022-2025; and
• agreed the role description for the Board Lead for Corporate Planning in Appendix 2 and appointed David Johnston to carry out this role for the 2021-2022 planning round.

9. SSRO Financial planning

9.1. Mike Wetherell, Interim Director of Corporate Resources, introduced a report that presented the SSRO’s 2022/23 draft financial plan for review and clearance by the Board ahead of presentation to the MOD on 14 October. The SSRO had prepared its draft budget based on delivery of the current Corporate Plan, utilising the existing staffing structure, accommodation at Finlaison House and known contractual commitments. As work commenced on the 2022/23 internal business plan, which mapped resources to work programmes, the initial budget assumptions would be revisited to ensure they remained appropriate ahead of the final budget submission to the MOD in January 2022.

9.2. The Board discussed the proposed plan, noting that it was set within a likely flat financial settlement for 2022/23. The plan set a balanced budget for submission while highlighting unfunded or unmitigated pressures such as implementation costs resulting from potential legislative changes, as well as likely underspends in areas such as travel and utilities.

9.3. The report also provided an update on the forecast outturn for the 2021/22 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 included plans to mitigate them.

The Board:

• approved the 2022/23 draft financial plan, draft budget and initial assumptions and risks for submission to the MOD; and
• noted the 2021/22 forecast outturn.

10. Complaints Policy

10.1. Mike Wetherell, Interim Director of Corporate Resources, introduced the SSRO’s Complaints Policy, which had been amended following review. The existing policy remained generally fit for purpose, although some changes were required to improve clarity and ensure that the procedure was in line with guidance from the Parliamentary and Health Service Ombudsman.

10.2. The Board considered the updated policy, noting that the updated policy would be published on the SSRO’s website.

The Board:

• noted the updated Complaints Policy; and
• delegated approval of the final policy to the Chief Executive, in consultation with the Chairman.

11. Minutes from Regulatory Committee meeting of 28 July 2021

11.1. Peter Freeman presented the minutes from the meetings of the Regulatory Committee on 28 July 2021. At the meeting, the Committee had discussed several of the topics that were on the Board agenda. It had asked that issues relating to the Review of Legislation should be escalated to the Board.

11.2. It was noted that the GIAA was currently reviewing the terms of reference of the Regulatory Committee.

The Board noted the minutes.

12. Update from Audit Committee meeting of 21 September 2021

12.1. David Johnston provided an update from the Audit Committee meeting of 21 September 2021. The Committee had welcomed Alastair Groom as a guest, recognising that he was appointed Chair of the Committee from 1 October.

12.2. The Committee had discussed the corporate risk register at length and had made several points for the Executive Committee to consider.

12.3. The Committee had also considered an internal audit report on corporate planning and performance and was pleased to note that this provided substantial assurance.

12.4. It had been Marta Phillips’ last meeting as Chair, and the Committee recognised the high standards of Chairing since her appointment in 2014 and wished her well for the future.

The Board noted the update.

13. Future agendas and any other business

13.1. The Chairman introduced a two-page document showing the business of all Board and sub-committee meetings for the next year. It was agreed that Board and committee dates for the next year should be finalised. Action: Neil Swift.

13.2. The Board noted that the Strategic Update on 19 October 2021 would be a virtual meeting.

13.3. The Chairman noted that the Board had previously had an equality and diversity representative, whose role was to liaise with staff about equality and diversity issues and ensure that they remained a priority – both at the Board and at a working level. Expressions of interest for undertaking this role were requested.

13.4. The next meeting would take place on 16 December 2021 at 2:00pm.