SSRO: An Arm’s Length Body?
16 November 2016
With the introduction of the SSRO, single source MOD procurement now involves three parties rather than two. Like the in-laws moving close by, the dynamic changes. It is an Executive Non-Departmental Public body, but it is also paid for and governed by the MOD, so how independent is it really? We believe that there are key differences in what drives the SSRO and the MOD, and that understanding these differences is key to having a constructive rather than adversarial relationship.
The Coalition Government brought in the new regime, when Phillip Hammond was Secretary of State for Defence, so it is safe to assume that Ministers in the MOD and Her Majesty’s Treasury (HMT) want it to work. For Ministers success means lower prices. But it will also mean a lack of bad news, a stable SSRO that is not too critical of the MOD, and defence suppliers who have begrudgingly accepted the regime. Ministers also care strongly about the softer benefits of innovation and prosperity, and (post-Brexit) are highly pro-export, so will be wary of any changes that might undermine these. And perhaps most importantly, the MOD needs the goods and services defence suppliers provide… any change that puts delivery at risk will be seen as a failure.
The SSRO, on the other hand, has different drivers. Any new Government body needs to prove itself in the complex and fast changing world of Whitehall, and quangos are never flavour of the month. The SSRO will feel under pressure to prove they are worth their £5m/year. But their powers are quite limited… they recommend the profit rate, provide opinions and determinations only if asked (one of each published last year), and publish guidance on allowable costs and profit. They have no direct open book rights, and no power to directly intervene.
Success for the SSRO will mean demonstrably saving money. But it will also mean making a name in the wider Government arena, such as with HMT and the Cabinet Office. As a new body, success will mean setting the right precedents on budget and governance with the MOD, and recruiting and keeping quality staff (which requires giving them things to do), and maybe increasing their powers. And, of course, showing independence. All these concerns and priorities are inward looking: increase my status, show that I’m worth it, and make sure I set things up right. This is an understandable consequence of their youth.
How does the SSRO show they are worth it? A reduction in profit rate and more cost disallowances is certainly one way, and they are unencumbered by the wider issues the MOD is subject too. How do they show their independence? Well, stuck as they are between two established beasts, criticising both and sticking to their guns might serve. How do they increase their profile? Perhaps a barrage of announcements, publications, and talks at high profile defence events. And how do they increase their powers? Take a look at the consultation on the “Review of the single source regulatory framework: call for input” (May 2016).
Understanding where the SSRO is coming from is key to suppliers establishing an effective relationship with them. Where there are things at the coal face of procurement and delivery you would like to change, but little political will, there is now a new way of getting things up the political agenda. The SSRO would love to be seen helping to drive improvements. Half of their remit is ensuring ‘a fair and reasonable price’, so how about an independent report into the opportunities and threats to the UK’s defence industry? Or even new look at what changes to MOD behaviour could increase value for money.
If you can help the SSRO show their value, and can give them something important to do, a constructive relationship could be closer than you think.