Transparency data

Board minutes: 25 March 2021

Published 19 July 2021

Minutes of the 37th Board Meeting

Meeting held remotely Thursday 25 March 2021

14:00 to 17:00

Board members present:	Others present:
George Jenkins (Chairman)	Andy Brittain (MOD Representative)
Peter Freeman	Colin Hill
David Johnston	Mike Wetherell
Marta Phillips	Malcolm Botting
Neil Swift	Alan Brennan (item 4)
David Galpin	Ben Johnson (item 4)
	Colin Sharples (item 4 and 5)
	Nick Ratcliffe (item 5)
	Simon Mahony (item 6)
	Dagmar Jeschin (item 7)

1. Welcome, apologies, announcements and declarations of interest

1.1. The Chairman welcomed members to the 37th meeting of the Board.

1.2. 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.

1.3. Board members were asked to declare any relevant interests. Neil Swift declared an interest for the agenda item regarding the Chief Executive’s performance.

1.4. The Chairman informed the Board that Nicky Macquarie had resigned as a referrals panel member. The Board noted its gratitude to Nicky Macquarie for her work at the SSRO.

2. Minutes of the 36th meeting of the Board, 26 January 2021, minutes of the extraordinary Board meeting, 25 February 2021, and action tracker

2.1. The Chairman introduced the minutes of the Board meetings held on 26 January and 25 February 2021. Six actions were recorded and were marked as complete.

• The Chief Executive had written to DG Finance regarding the budget for 2021/22 on 1 February 2021.
• The MOD Representative to the Board had relayed to DG Finance the Board’s views on the review of the Framework Document following the meeting.
• The Corporate Plan had been revised to include a Chairman’s introduction reflecting the change of circumstances within which the SSRO was operating.
• Changes had been made to the Chief Operating Officer job description and the Chairman had written to all staff regarding the appointment on 27 January 2021.
• The Chief Executive had written to DG Finance regarding the baseline profit rate on 29 January 2021 and 25 February 2021.
• An update on the review of legislation had been provided to the Regulatory Committee on 17 March 2021.

2.2. The minutes of the 36th meeting of the Board and the extraordinary Board meeting of 25 February 2021 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 presentation that the Chairman had given to the Public Chairs Forum on 23 February on “Seeking Assurance for our Arm’s Length Bodies”. The Chairman had shared this presentation with the staff team.

3.2. The recruitment panel that was overseeing the process to appoint new non-executive members to the SSRO Board had recently held interviews. The Chairman was a member of the panel and informed the Board that several well-qualified candidates had applied. The panel would now recommend candidates for appointment to the Minister for Defence Procurement.

3.3. The Secretary of State had announced the baseline profit rate for 2021/22 on 15 March 2021, and the SSRO had published a series of factsheets and supporting analysis on the same day. The SSRO’s consultation on the baseline profit rate guidance would be published on 19 March, and the Board delegated to the Chairman the approval of amendments to the consultation document before publication. Should the Chairman consider the proposed amendments would make the consultation document significantly different from the version the Regulatory Committee had approved in March, the document would be put to the Committee for further consideration. Action: Chairman.

3.4. The Chief Executive reported on the procurement of the Orbis database, which was required to support the annual assessment of the baseline profit rate. The current contract for access to Orbis was due to expire on 27 July and the Executive Committee would be asked to approve the placement of a new contract with BvD at a forthcoming meeting. The contract for the provision of quality assurance on the calculation of the baseline profit rate included an option for a further year of service, in addition to the 3 years already delivered. The Executive Committee would also be asked to exercise that option. Board members noted the importance of early market-making work to ensure a range of parties were interested in bidding for the contract when the current one expired.

3.5. The Chief Executive had written to Mark Preston (Director of Sponsorship and Organisational Policy at the MOD) regarding initial priorities for the transfer of sponsorship to DSOP. The letter had suggested that the early focus of all parties should be on the framework, arrangements and timetable for the sponsorship relationship. Putting such arrangements in place would enable the two organisations to deal with any subsequent matters in the most effective way.

3.6. The SSRO continued to follow government advice regarding accommodation and Finlaison House was open full-time on a limited capacity basis, with attendance requiring pre-approval. The government had set out a four-step roadmap to ease lockdown restrictions in England. The detailed guidance supporting this set out that by step 4 the government would complete a review of social distancing and other measures that would inform guidance on working from home. The Chief Executive had informed staff that they would continue to work from home where possible until the government’s review was complete.

3.7. A project considering ways of working had commenced and would be trialled over the next 12 months. The project was incorporating lessons learned from remote working during the pandemic and considering what changes were necessary and could be accommodated within the SSRO’s accommodation strategy, HR policies and ways of working. The SSRO was also engaging with the Government Property Agency to understand its position on post-pandemic accommodation needs for the public sector and how this would impact the choices available to the SSRO when the lease on Finlaison House ended in 2023. Progress on such issues would be reported to the Board in June 2021. Action: Mike Wetherell. The SSRO was also engaging with the Government Property Agency regarding options for better utilising space at Finlaison House in advance of the lease ending in 2023.

The Board noted the information provided in the report.

4. Review of legislation

4.1. David Galpin, Chief Operating Officer, introduced a report setting out the SSRO’s plans to engage with the Secretary of State’s review of legislation, including the timing and possible content of the SSRO’s substantive recommendations. The report described MOD officials’ approach to the Secretary of State’s review of legislation and the progress made to date.

4.2. Colin Sharples, Head of Strategy and Policy, informed the Board that the SSRO was expected by MOD officials to submit its recommendations in June 2021, following Board approval. The draft recommendations would be brought to the May Board meeting before submission on or before 17 June. The recommendations document would highlight or de-emphasise specific draft findings in the document that the SSRO had published in June 2020. It would also look to address, as appropriate, some of the issues proposed by the MOD or industry and would recommend a general advisory role for the SSRO.

4.3. The SSRO had been participating in workshops on the review with the MOD and industry. The workshops had covered a range of issues, and the Board considered the discussions to date and the SSRO’s position, noting the direction provided in the recently published Defence Security and Industrial Strategy. The Board considered the scope of the changes being proposed by the MOD, noting that profit and cost mechanisms were likely to be amended to give more flexibility in contract negotiations.

4.4. Should the review result in legislation, it was likely that changes would be required to statutory guidance and DefCARS in time for implementation, which might be as early as April 2022. The Board considered how the SSRO might prepare for such changes and the risks associated with doing so.

4.5. In readiness for the workshop on the subject of profit, Ben Johnson, Head of Financial and Business Advice, informed the Board that the SSRO was drawing together its previous publications and strands of thinking into a statement setting out the SSRO’s views on profit. The MOD was proposing to refine how a fair contract profit rate is determined, and the SSRO’s evidence should prove a useful source that would allow calibration. It was noted that the current arrangements in place for setting profit rates in single source contracts worked well, with a stable methodology for calculating the baseline profit rate and further steps that allowed the baseline rate to be adjusted to reflect specific circumstances for each QDC. There was emerging evidence that the profits contractors were earning (or were forecast to earn) tended to align to profits in relevant industries.

4.6. Board members agreed that the SSRO should continue to engage positively with the Department’s agenda, while highlighting risks where necessary. The Board noted the importance of constructive, mutual engagement from all parties involved. To support the review, there was Board support for the SSRO taking a more collaborative and forward leaning approach, although this was likely to have implications for the manner in which the SSRO worked. It was noted that some of the activities in the internal business plan might require re-prioritisation as a result.

The Board:

• agreed the approach to engaging with the MOD in section 4;
• agreed the timing of the SSRO’s recommendations outlined in section 5;
• agreed the approach to preparing final recommendations in section 6; and
• provided input to the matters to be addressed in the SSRO’s recommendation.

5. Corporate Plan

5.1. David Galpin, Chief Operating Officer, presented the 2021-2024 Corporate Plan for approval.

5.2. The report set out the feedback received from stakeholders during the recent consultation on the Plan and outlined how the feedback had affected the Plan’s development. The Plan referred to the responses received at several points. Several changes had been made, including that:

• Objective 1 now included a reference to work on the SSRO’s approach to its policy on the development of guidance, and to how it would respond to issues raised outside the formal referral process.
• The SSRO had considered the feedback received on key performance indicators, with new or amended indicators for objectives 2 and 5.
• The Plan provided further information in objective 2 relating to the recovery of overhead costs and why it was a difficult issue.
• Objective 6 included a commitment to undertake a further skills audit over the life of the Plan as part of implementing the SSRO’s Workforce Strategy.

5.3. Colin Hill, Defence Adviser, provided an overview of the recently published Integrated Review and David Galpin summarised the themes from the Defence Security and Industrial Strategy. The Board discussed both reports, noting that the Chairman’s foreword in the Plan linked areas of the SSRO’s work with them.

5.4. The Board noted that the SSRO might need to review and reschedule some activities in response to changed circumstances, such as the MOD’s plans to publish a command paper in September 2021 and have legislative changes in place in March 2022, which the SSRO would have to reflect in amended or new guidance and developments to DefCARS. The SSRO would continue to monitor developments and engage with stakeholders.

The Board:

• approved the Corporate Plan 2021-2024;
• agreed the Corporate Plan should be formally submitted to the MOD and published on or around 31 March 2021;
• agreed the Stakeholder Feedback Summary and that it should be provided to stakeholders who were invited to comment on the proposed plan;
• authorised the Chairman, after consultation with the Chief Executive, to agree minor changes to the final documents and changes that were consistent with the Board’s views.

6. DefCARS Continuity of Service procurement strategy

6.1. Colin Hill, Defence Adviser, and Simon Mahony, Chief Analyst, presented a report setting out a draft procurement strategy for continuity of service for the Defence Contract Analysis and Reporting System (DefCARS) for the Board’s approval.

6.2. The SSRO’s existing contract with Synectics Solutions Ltd for hosting, support, and development of DefCARS expired on 31 July 2022. Procurement of a new contract for the system was planned to commence in late Summer 2021 and conclude with a new contract in place around April 2022. The procurement would follow the open procedure set out in Part 2 of the Public Contracts Regulations 2015, with an open competition process that should widen the pool of potential bidders.

6.3. The contract would enable additional development of DefCARS in order to comply with legislation and further the SSRO’s strategic objectives. It would also support progress towards the future development of DefCARS, which was a separate project. A vision and technical strategy for DefCARS, the target architecture and a roadmap to achieve these would be presented to the Regulatory Committee in July 2021 and the Board in September 2021.

6.4. In discussion, the Board commended the paper and discussed the future budget for the work. The Board noted that, while in-year efficiencies would ensure the project was affordable in 2021/22, additional Grant in Aid or further efficiencies and re-prioritisation were likely to be required in future years.

The Board:

• agreed the following procurement strategy:
• procurement of a two-year contract, with two options, each to extend for an additional year (2+1+1);
• use of the open procedure; and
• a requirement to host, support and develop DefCARS in line with the DefCARS Future roadmap.
• agreed the procurement timetable in Table 2.

7. Core IT Contracts Procurement

7.1. Mike Wetherell, Interim Director of Corporate Resources, introduced a paper that sought the Board’s approval to commence a procurement for contracts to provide SSRO core IT services.

7.2. Dagmar Jeschin, Head of IT and IM, provided an overview of the proposed approach, which was to re-consider the boundaries that were currently in place between three separate IT services and procure for all three (IT Managed Services including network architecture; security operations centre; and Microsoft licenses and cloud services) concurrently. The three contracts were due to terminate at the same time, allowing for the procurement of new contracts for repositioned service groupings to provide services from 1 April 2022, ensuring continuity of service when the current contracts expired. This procurement approach could result in a single supplier providing all three elements, or two to three separate providers.

7.3. The procurement was likely to be conducted through the Crown Commercial Services’ G-cloud framework. This approach was well suited to off-the-shelf and flexible cloud service procurements such as the SSRO required, with services able to be on- or off- boarded, or to vary in quantity, throughout the contract.

7.4. The Interim Director of Corporate Resources would be Senior Responsible Owner for the project, and the Head of IT and IM would be the project manager. The majority of resources for the project would be internal, mainly drawn from within the IT team, with some support required from Finance and Legal. This had been factored into the SSRO’s business plan.

7.5. The report set out the SSRO’s IT strategic principles, which would underpin the procurement and shape service provision and future developments.

The Board:

• approved the procurement for services covered by the three core IT contracts, on a 2+1+1 year basis, using Crown Commercial Service frameworks or appropriate alternative;
• delegated, following the procurement, the award decisions for the contracts and the approval of expenditure to the Chief Executive Officer, provided the overall budget did not exceed £288,000 per annum inc. VAT; and,
• noted the extant IT strategic principles and that the project would be run with the Interim Director of Corporate Resources as Senior Responsible Owner and the Head of IT and IM as project manager.

8. Risk Management

8.1. Mike Wetherell, Interim Director of Corporate Resources, and Malcolm Botting, Head of Governance, introduced the Corporate Risk Register for the Board’s review. The SSRO’s risk policy required the Board to review the full Register each March. The overview page from the Register was included in the Corporate Performance Report, which the Board considered at each meeting.

8.2. The Register recorded one crystallised issue: that “The SSRO’s business has been disrupted due to the Covid-19 pandemic”. It included ten live risks, which were rated for their likelihood, proximity and potential impact, and set out what actions were being taken in mitigation. The report also summarised the action taken and amendments made to the Register since the Audit Committee had discussed it on 16 March 2021.

8.3. In discussion, Board members welcomed the changes that had been made to the Register following the Audit Committee’s review. It was agreed that the wording of risk 8 would be updated to reflect the MOD’s recently published reviews. Action: Mike Wetherell.

The Board:

• considered the Corporate Risk Register; and
• considered and agreed the risk appetite for each risk within the Register.

9. Annual Board effectiveness review

9.1. The Chairman introduced the annual review of Board effectiveness. The Chairman was required by the Corporate Governance Framework to undertake such a review each year, with independent input sought once every three years. The Government Internal Audit Agency (GIAA) had been selected to undertake the review this year, reporting to the Chairman. The findings of GIAA’s report were broadly positive, finding that the SSRO had appropriate arrangements in place to enable the Board to discharge its responsibilities effectively and that the Board complied with the good practice requirements provided by the Treasury and Cabinet Office.

9.2. The Chairman endorsed the report and the Board considered the implementation of the two recommendations:

• The first recommendation related to the induction process for new non-executive Board members. The Chairman recommended that the SSRO should provide an “induction plus” programme, which would include a structured programme of induction over their first two to three months at the SSRO.
• The second recommendation related to the appraisal process for the Chairman. The SSRO would discuss arrangements for such appraisals with the MOD following the transfer of sponsorship in April. For this year, he would ask Board members to provide 360-degree feedback on his performance, which would be collated and provided to him by the Chair of the Audit Committee.

9.3. In discussion, the Board noted that it was a positive report and suggested that it could be shared with the MOD as part of the transition to the new sponsor arrangements. Action: Neil Swift.

The Board:

• discussed the implementation of the two recommendations; and
• approved the recommendations from the Board effectiveness review 2020/21.

10. Corporate Performance Report

10.1. 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.

10.2. Board members asked how the executive was engaging with staff during the pandemic. The Chief Executive confirmed that regular organisational updates were scheduled, and that other social arrangements were in place including the “virtual kitchen”. A degree of lockdown fatigue had been reflected, although the re-opening of schools had eased pressure on those staff with caring responsibilities. The Operations Directorate would be meeting in April to explore ways to improve collaboration. It was noted that SSRO staff members continued to work effectively and to perform well against high expectations, as the quality of papers brought to Board meetings demonstrated. The Board noted that the green ratings attributed to all seven corporate objectives further demonstrated the skills and experience of the wider staff team.

The Board reviewed and commented on the Corporate Performance Report.

11. Update from Regulatory Committee meeting of 17 March 2021 and minutes from meeting of 21 January 2021

11.1. Peter Freeman presented an update from the meeting of the Regulatory Committee on 17 March 2021. The Committee had discussed DefCARS procurement and had received a presentation on the DefCARS Future project from a team of advisers. The Committee had also discussed the Baseline Profit Rate consultation and considered the progress made on updating the reporting guidance. The Committee had approved a consultation regarding referral costs.

11.2. The minutes of the meeting on 21 January 2021 were also provided for the Board’s attention.

The Board noted the update and minutes.

12. Minutes from Audit Committee of 16 March 2021

12.1. Marta Phillips presented the minutes from the Audit Committee’s meeting of 16 March 2021. In addition to its discussion on risk and the SSRO’s risk appetite, the Committee had scrutinised the Interim Director of Corporate Resources’ report and had discussed the SSRO’s budget and ways of working. There had been two substantive reports relating to the Annual Report and Accounts, and GIAA had provided an update report.

12.2. The Committee had requested that all non-executive Board members should undertake virtual training on counter-fraud and cyber-security. An email would be circulated with joining instructions. Action: Mike Wetherell.

The Board noted the minutes.

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.

13.2. The Chairman noted that a pre-election embargo on publications would be in place from 15 April until 6 May. The Cabinet Office had issued guidance to the effect that starting consultations or making announcements during this period was to be avoided. The SSRO would move forward any publications that were due to fall during that time.

13.3. The next meeting would take place on 27 May 2021 at 2:00pm.

14. Chief Executive’s performance

14.1. All executive members and attendees other than Mike Wetherell left the meeting for a discussion on the Chief Executive’s performance. Non-executive members had been asked to prepare feedback in advance of the item. Following the discussion, the Chairman would use the views shared to inform his annual appraisal with the Chief Executive.