Minutes of the 34th Board Meeting
Meeting held remotely
Tuesday 29 September 2020
14:00 to 17:10
|Board members present:
|George Jenkins (Chairman)
||Andy Brittain (MOD Representative)
||Alan Brennan (item 4)
||Colin Sharples (item 5)
||Jane McGovern (item 6)
||Ben Johnson (item 7)
||Adrian Wallis (item 7)
||Sarah Quartermain (item 8)
||Dagmar Jeschin (item 9)
||Steve Dunsmuir, Hex Security (item 9)
1. Welcome, apologies, announcements and declarations of interest
1.1. The Chairman welcomed members to the 34th meeting of the Board.
1.2. Apologies had been received from Peter Freeman.
1.3. The Chairman announced that, in view of the situation regarding COVID-19, government guidance on this matter and in accordance with Standing Order 3.10, the Board meeting was being undertaken remotely by telephone for all Board members.
1.4. Board members were asked to declare any relevant interests. Executive members and attendees declared their interest regarding the staff pay award, which was covered in the Chief Executive’s Report elsewhere on the agenda. Executive members and attendees would leave the meeting for this discussion.
1.5. A member of the Regulatory Committee was unable to attend the meeting on 13 October, and the Chairman stated his intention to appoint a non-executive Board member as a member of the Regulatory Committee for that single meeting. Action: Chairman. The Chairman subsequently appointed David Johnston as a member of the Regulatory Committee for its meeting on 13 October 2020.
2. Minutes of 33rd meeting of the Board, 25 June 2020, and action tracker
2.1. The Chairman introduced the minutes of the Board meeting held on 25 June 2020. Two actions were recorded from the meeting and both were complete:
- that a briefing note should be provided to Andy Brittain regarding the separation of the MOD’s policy and sponsor teams in advance of his scheduled meeting with DG Finance; and
- that formatting issues should be addressed in the Stakeholder Engagement Strategy before publication and an implementation plan should be developed.
The minutes of the 33rd 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 recent stakeholder engagement, which included meetings with Morag Stewart, the new Commercial Director of DE&S, and the Chairman and Chief Executive’s meeting with Ian Booth and Robert Holden of the SDA.
3.2. Since the last Board meeting the SSRO had published a note to assist the MOD and contractors in identifying and applying relevant SSRO guidance to qualifying contracts affected by the COVID-19 pandemic. The note did not amend or alter the SSRO’s published guidance but aimed to promote consistency in the application of the regulatory framework. The SSRO had also published its Annual Compliance Report on 17 September.
3.3. Board members had participated in a workshop in June on the establishment of a community of experts. It was agreed that the executive should be able to procure access to experts as required for advice and support on specific project deliverables. The advice would be provided to the executive only, in line with the approach used in referrals. The Board agreed in principle that preparatory work should be undertaken to support the establishment of a community of experts. Provision would be included in the budget submission to the MOD, either as a specific amount or funds that could be called upon as required.
3.4. A joint action plan had been agreed with the SSAT on the implementation of recommendations from the Tailored Review of the SSRO.
3.5. The Chairman indicated that any forthcoming Board events from September to the New Year would be undertaken remotely unless otherwise advised.
3.6. The non-executive Board members discussed the SSRO’s pay remit. Following action by, and discussion with, the MOD the executive recommended that the 2020/21 pay award should be adjusted to 2.5 per cent. The Board agreed to set the award at this level but noted that for future pay awards the SSRO should consider the impact of blanket awards on different pay levels across the organisation. Action: Mike Wetherell.
- approved a revised pay award of 2.5 per cent for all SSRO staff, including the Chief Executive; and
- agreed in principle that preparatory work should be undertaken to support the establishment of a bench of experts, with indicative figures and timelines included in the forthcoming budget submission for the MOD; and
- noted the information provided in the report.
4. Review of legislation
4.1. David Galpin, Director of Legal and Policy, introduced a report outlining how the SSRO intended to input into the Secretary of State’s periodic review of Part 2 of the Defence Reform Act 2014 and the Single Source Contract Regulations 2014. The Secretary of State’s review was paused in March 2020 to respond to the COVID-19 pandemic and align with the government’s Integrated Review but had now re-commenced.
4.2. The SSRO had published its findings after detailed reviews of reporting requirements and contract profit rates in June 2020. It did not plan to undertake further work beyond that committed to in its Corporate Plan and did not anticipate making recommendations that were materially different from those in the previously published document. It would continue to engage with the Secretary of State’s review and would comment on emerging proposals where possible.
4.3. The SSRO continued to provide evidence in support of the SSAT’s work on profit. The Director of Regulation and Economics and his team had drawn together material to support the SSAT’s work and had met with MOD officials. In discussion the Board noted that the SSRO should make efforts to contribute to the MOD’s programme but that, in view of the SSRO’s size, the focus should be on areas that would be of greatest benefit.
4.4. A report would be submitted to the Board in December providing an overview of the SSRO’s work on the review and issues for the Board to consider. The Board would be asked to decide whether a further submission should be made.
- considered the information within the report; and
- agreed the approach for making formal recommendations to the Secretary of State by 17 December 2020.
5. Corporate Planning
5.1. David Galpin, Director of Legal and Policy, and Colin Sharples, Head of Strategy and Policy, introduced a report that provided the Board with a proposed timeline and process for the development of the Corporate Plan 2021-2024 and the Internal Business Plan 2021-2022. The process for developing both plans would take into account the lessons learned from the 2020-2023 exercise.
5.2. The report set out the context in which the plan was being developed, including the impact of the Covid-19 pandemic, the MOD’s Integrated Defence, Security and Foreign Policy Review and the revised Defence & Security Industrial Strategy. The SSRO would take into account these and other environmental factors in developing its strategy.
5.3. Work to develop the SSRO’s future strategy would proceed with appropriate engagement and input from staff and stakeholders. The engagement plan included workshops with Board members and staff, and meetings with the MOD and industry, for example at the Operational Working Group on 21 October. David Johnston had agreed to act as the lead Board member providing additional scrutiny throughout the preparation of the Plan.
5.4. The first draft of the Corporate Plan would be put to the Board in January 2021, before consultation with stakeholders in February and publication in March 2021.
5.5. In discussion, Board members discussed the impact of the ongoing review of legislation on the future SSRO’s strategy and delivery. The MOD Representative encouraged the SSRO to develop a skills plan to address concerns raised previously about skills within the SSRO, and it was noted in response that the Board had agreed in principle to the establishment of a bench of experts and that the SSRO was keen to move forward on the recruitment process for new non-executive Board members.
The Board agreed the arrangements in sections 5 to 8 of the report for development of the Corporate Plan 2021-2024, including the timeline in Appendix 1.
6. Financial planning
6.1. Mike Wetherell, Interim Director of Corporate Resources, presented the SSRO’s 2021/22 financial plan for review and clearance by the Board.
6.2. The 2021/22 draft budget had been prepared based on delivery of the current Corporate Plan and the need for the key work areas to be adequately resourced. The Board discussed and agreed the proposed budget for 2021/22, noting requests for funding for the use of experts and further investment in DefCARS.
6.3. The Director of Regulation and Economics had been leading on discussions with the MOD about the value that could be drawn and the benefits that could accrue from the next generation of DefCARS. The Board discussed the plans for future development of DefCARS. The SSRO had ambitious development plans and it was noted that there may be opportunities for savings resulting from this work. Further technical work was required to establish the SSRO’s opportunities to develop the system beyond the current contract and ensure the SSRO was well positioned for future procurements.
6.4. As work progressed on the 2021/22 internal business plan the SSRO would revisit the initial draft budget assumptions to ensure they remained appropriate ahead of the final budget submission to the MOD in January 2021.
6.5. The report provided an update on the forecast outturn for the 2020/21 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. The forecast outturn projected an underspend (mostly due to Covid-19 restrictions) and set out the action that was being taken in response.
- approved the 2021/22 draft financial plan, draft budget and initial assumptions and risks; and
- noted the 2020/21 forecast outturn.
7. Baseline profit rate methodology
7.1. Matthew Rees, Director of Regulation and Economics, introduced a report on the single source baseline profit rate, capital servicing rates, and funding adjustment methodology to be applied for the 2021/22 recommendation. The methodology that had been used by the SSRO to date was a stable, predictable and transparent approach, which had been accepted by the Secretary of State and other stakeholders.
7.2. The report set out the work that had been undertaken to consider how the 2021/22 assessment may be affected by Covid-19’s impact on comparator companies and financial markets. The Board noted that the methodology included features that made it resilient to shocks, with evidence from data monitoring suggesting there would be sufficient data to undertake the 2021/22 assessment using the methodology from 2020/21. One change was proposed to paragraph 7.4 of the previous year’s methodology, to ensure that delays in company reporting this year did not adversely impact future assessments. The SSRO would continue to monitor data, develop cross-checks and consider the consequences for future recommendations.
7.3. The SSRO would need to consider if a full or targeted review of the methodology would be required in the first half of 2021.
7.4. The Board discussed communications with stakeholders regarding the methodology. The SSRO should continue to assure industry that any issues it raised would be actively considered. Action: Matthew Rees.
- approved the methodology to be applied for the 2021/22 rates recommendation.
- reviewed and commented on the measures the SSRO is taking to mitigate the risk of COVID-19 to the 2021/22 recommendation and beyond.
8. Staff engagement survey – follow up
8.1. Neil Swift, Chief Executive, introduced a report summarising the findings of the staff focus groups that met in June 2020 to discuss the Staff Engagement Survey. The Board expressed its gratitude to all members of staff that took part in the focus groups, and in particular to the report authors Sarah Quartermain and Simon McCullough for facilitating the groups and developing the final recommendations.
8.2. Sarah Quartermain noted that the report synthesised staff views and that colleagues had engaged positively in focus groups. Staff wished to be involved in ongoing discussions about improvements that could be made but were realistic about the pace of change on all recommendations.
8.3. The Chief Executive had drafted a report in response to the recommendations from the focus groups and this responded to the issues raised on engagement, delegation and communication with a series of actionable points. Some of the actions had been undertaken immediately, while others would require work either with the management team or the organisation as a whole.
8.4. In discussion the Board noted that the response to the survey was comprehensive, but that it was important to prioritise the response to areas of greatest concern. Line managers should be given training and clear guidance, particularly with respect to developing their staff and giving proper feedback. It was important to ensure that the SSRO was a good and welcoming place to work.
8.5. Questions remained around the implementation and monitoring of actions, and it was noted that all who worked at the SSRO had a responsibility to ensure that the actions were implemented. The implementation of the recommendations would be a regular item on the Board agenda. Action: Neil Swift.
- discussed the responses to the recommendations; and
- noted the series of actions.
9. Cyber-security briefing
9.1. Mike Wetherell, interim Director of Corporate Resources, introduced a presentation on cyber security, which was given by Steve Dunsmuir of Hex Security. The Board considered the issues raised in the presentation and discussed areas of concern.
The Board noted the presentation.
10. Corporate Performance Report
10.1. Mike Wetherell, interim Director of Corporate Resources, 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.
10.2. The Board discussed information security with regards to remote recruitment and induction, and the steps being taken to manage this risk. The Audit Committee would consider the risk while reviewing the corporate risk register at its next meeting. The Committee should also consider the risk of the impact of COVID-19 lasting for a significant period of time. Action: Mike Wetherell.
The Board reviewed and commented on the Corporate Performance Report.
11. Minutes from Audit Committee meeting of 17 September 2020
11.1. Marta Phillips presented the minutes from the meeting of the Audit Committee on 17 September 2020. The Audit Committee had reviewed the Corporate Risk Register, which had been edited to include only pertinent information. The Board noted Marta Phillips’s comments about the associated risk appetite for each of the risks in the Corporate Risk Register. It considered the balance of risks and risk appetite and decided that it was satisfied with the current risk profile.
11.2. The GIAA had appointed a new internal auditor to the SSRO. One of the directors from GIAA had attended the meeting and provided an overview of the cross-government work currently being undertaken by GIAA.
The Board noted the minutes and update from the Committee.
12. Future agendas and any other business
12.1. The Chairman introduced the two-page document showing the business of all Board and sub-committee meetings for the next year. The next meeting would take place on 15 December 2020 at 2:00pm.