Transparency data

Board minutes: 27 June 2019

Published 9 October 2019

Single Source Regulations Office

Minutes of the 27th Board Meeting Board Room, Finlaison House, 15-17 Furnival Street, London EC4A 1AB

Thursday, 27 June 2019 14:00 to 17:00

Board members present:	Others present:
George Jenkins (Chairman)	Colin Hill
David Johnston (except item 4)	Graham Payne
Marta Phillips	Malcolm Botting
Mary Davies	Ben Johnson (item 4)
Peter Freeman	Monika Kochanowska-Tym (item 5)
Terence Jagger	Simon Mahony (item 5)
Neil Swift	Robin Cartwright (UKGI Observer)
David Galpin	Nigel Leese (UKGI Observer)
Matthew Rees

1. Welcome, apologies, announcements and declarations of interest

1.1. The Chairman welcomed members to the 27th meeting of the Board.

1.2. There were no apologies.

1.3. The Chairman welcomed and introduced the attendees from the UKGI, who would be observing the meeting as part of the Tailored Review of the SSRO.

1.4. The Chairman thanked Mary Davies, who had been appointed to the role of SSRO Diversity Champion to support the executive in introducing the SSRO’s Single Equalities Scheme.

1.5. David Johnston had previously declared in the SSRO’s register of interests that he was a deferred member and member nominated trustee of Gemplus Limited Staff Pension Scheme. He informed the Board that the company was part of a parent group that had now been taken over by Thales. The scheme had a parent company guarantee in place. The register of interests would be amended to make clear that the company with obligations to fund the scheme had been acquired by Thales. Action: Graham Payne.

1.6. The Chairman thanked David Johnston for this declaration and asked him to keep the Chief Executive informed of the developing situation and notify him if Thales provided any guarantees in respect of the scheme. Given the current uncertainty around the declaration it was agreed that David Johnston would absent himself for item 3 on the agenda. The executive was asked to further consider the matter and report back to the Chairman in advance of the next Board meeting. Action: Neil Swift.

2. Minutes of 26th meeting of the Board, 28 March 2019, and action tracker

2.1. The Chairman introduced the minutes of the Board meeting held on 28 March 2019. Four actions had been recorded on the action tracker and had been completed or were reported on in papers elsewhere on the agenda.

2.2. The minutes of the 26th 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, which provided an update on items not included elsewhere on the agenda.

3.2. The SSRO had continued to engage with its senior stakeholders. Such engagement included Cat Little and Andrew Forzani’s visit to Finlaison House in April, the Chairman’s regular meetings with the Minister for Defence Procurement and continued positive meetings with the UK Chief Executives or Managing Directors of BAES, Rolls Royce, Boeing, Lockheed Martin and Marshalls.

3.3. The SSRO was engaging with the team that was undertaking the Tailored Review of the SSRO and had provided a day-long workshop on its statutory functions, which had been well received. Several Board members had been interviewed by the Tailored Review team, and interviews were also under way with stakeholders from the MOD and industry.

3.4. Initial interviews for the Interim Director of Corporate Resources post were due to take place in the week commencing 1 July. The recruitment process would use mixed gender panels, with awareness of unconscious bias issues factored in at all stages, in line with the Single Equalities Scheme. With a strong pool of candidates, it was expected that a successful candidate would be appointed by the end of July 2019 with sufficient time to allow for a handover with the incumbent.

3.5. Board members discussed recent engagement with the MOD, including the cancellation of SSCR Steering Group meetings and the reframing of the group’s terms of reference. It was likely that the Tailored Review would make recommendations around improving engagement, and there may be opportunities to do so for example through the Defence Suppliers Forum.

3.6. The Chairman and David Johnston reported on a recent event held at the MOD for non-executive Board members. The focus of the event had been on utilising non-executives across the Department and it was likely that a group would be formed to discuss cross-departmental issues at regular intervals. There was also an emphasis on transformation, change management, capability and preparation for the spending review. The Chairman had written to Stephen Lovegrove, the Permanent Under Secretary, regarding an issue he had raised in conversation at the event.

The Board noted the information provided in the report.

4. Baseline Profit Rate methodology consultation

4.1. Matthew Rees, Director of Regulation and Economics, introduced a paper that presented a public consultation document on changes to the baseline profit rate, capital servicing rates and funding adjustment methodology.

4.2. The Board had been provided with a series of materials for consideration, and members had been offered the opportunity to discuss the consultation with the executive before the Board meeting. The most significant proposals in the consultation were that the methodology should be amended to:

• remove ‘small’ companies from the result by introducing a more sophisticated company-size criteria, aligned to those used by other organisations, to further improve stability of the comparator group and to enhance the objectivity of that aspect of the methodology;
• calibrate the automatic filters that identify a company’s activities to further reduce the need for manual intervention; and
• clarify or codify existing practice in the activity characterisations to provide additional transparency and give further assurance that the methodology is applied in a consistent way.

4.3. The SSRO had discussed the consultation with the Single Source Advisory Team at the MOD, and the Department was aware of the anticipated impact of the proposals on future baseline profit rate recommendations.

4.4. The SSRO was proposing these changes because it wanted to further enhance the stability of the methodology and ensure it is as reliable and robust as possible. It was acknowledged that stability of the methodology was important and that the SSRO should seek to avoid introducing volatility to the process. A risk was also acknowledged in discussion that the document could raise expectations that more far reaching changes to the methodology could be made. This would be partly mitigated through discussion about the document at the SSRO’s Operational Working Group in the following week.

4.5. Board members expressed their support for the approach set out in the consultation and for the consultation process itself, which would allow stakeholders to raise issues for the SSRO to consider according to a structured timetable.

4.6. The Board would be asked to consider the methodology post-consultation in September. An informal meeting would be organised before that time to inform the Board members of likely changes resulting from the consultation, and to allow a discussion of the final methodology. Action: Matthew Rees.

The Board agreed the consultation documents.

5. Data strategy

5.1. Matthew Rees, Director of Regulation and Economics, presented the SSRO’s data strategy, which had been finalised following a consultation between February and March 2019. Respondents to the consultation had focused primarily on implementation of the strategy. There was general support for the SSRO’s plan to review the reporting requirements and agreement that it was important to establish the extent to which the data gathered improved procurement. Some respondents expressed the view that the reports were underutilised.

5.2. The final strategy explained the SSRO’s vision for the use of data, signalled its commitment to data quality, and stressed the importance of engagement with industry and MOD to deliver the vision. The strategy also considered how DefCARS might develop in the long term beyond the current contract. The strategy had been revised following the consultation to emphasise the need to understand the cost of reporting and, where appropriate, to minimise the burden of reporting.

5.3. Board members noted that the summary of the Acquisition Review, which had been provided by the MOD, highlighted the Department’s priority of better use of information and data to drive decision making. The MOD had requested that the outcome of the Tailored Review should be factored in to the SSRO’s thinking on data and, as with any strategy, the SSRO would revisit the data strategy should the external environment change.

The Board:

• Commented on the finalised data strategy and response document.
• Agreed the Data Strategy should be published in July alongside the response document and non-confidential responses to our consultation.
• Agreed to authorise the Chairman, after consultation with the Chief Executive, to agree the final document before publication, provided it remained consistent with the Board’s views.

6. Long term accommodation

6.1. Graham Payne, Interim Director of Corporate Resources, introduced a report on long-term accommodation for the SSRO. Seven options had been identified for the location of the SSRO’s future accommodation and an options appraisal conducted in line with Treasury guidance. The options had been assessed against the SSRO’s business need requirements for: its workforce accommodation and facilities; security of operations; perceptions of independence; access to relevant labour markets; accessibility for stakeholders; and ‘fit’ with the government’s public sector estates and workforce strategies.

6.2. The paper put forward two location options: accommodation in central London, or a shared site in a ‘strategic hub’ in outer London. The latter option was recommended on the basis of the results of the appraisal. A business case would be developed for the Board’s preferred option or options, for approval by MOD and Cabinet Office ministers.

6.3. Board members discussed the options within the paper. The SSRO was a people-centred, knowledge-based organisation and it was noted that a move outside of London or to an outer-London hub might impact on the SSRO’s ability to retain key staff and to fulfil its statutory functions.

6.4. Board members considered whether there were opportunities to share facilities with other organisations and encouraged the executive to seek examples from elsewhere. It discussed occupancy levels and the relative merits of working environments and noted potential independence issues around sharing accommodation with the MOD.

6.5. Several Board members noted the difficulties in making an argument for somewhere analogous to the SSRO’s current accommodation in central London. While the option of moving to an outer-London hub was considered less disruptive than moving outside of London, resulting in some cost savings, Board members also stated that the SSRO should not discount the possibility of moving to a hub outside of London. This would allow the SSRO to have control over the relocation process, should it identify a desirable location, and would also be aligned with the government’s policy objectives. It was acknowledged that the option of moving out of London was likely to impact on staff retention.

6.6. At the conclusion of the discussion it was agreed that initial cases should be further developed for following three options: central London, an outer-London hub, and a hub outside of London. The development of these cases should include an assessment of staff commute times and possible churn, as well as a consideration of potential redundancies and likely business impact. The cases should be discussed in the first instance with the MOD and other relevant stakeholders to assess support for a favoured option, which could then be put to Cabinet Office ministers for consideration and approval in line with the government’s Places for Growth policy and spending controls.

The Board:

• reviewed and commented on the Options Appraisal; and
• agreed the location option(s) to be developed further for a decision by the Board prior to a full business case for approval by MOD and Cabinet Office ministers.

7. Annual Report and Accounts 2018/19

7.1. Graham Payne, Interim Director of Corporate Resources, introduced the Annual Report and Accounts 2018/19. The Audit Committee had considered the document at its meeting on 18 June 2019 and the Chair of the Audit Committee confirmed the Committee’s approval of the document and provided an overview of the Committee’s discussion.

7.2. The Board approved the document, subject to minor changes, which would now be presented to the Comptroller and Auditor General and printed and laid in Parliament in July. The private office of the Minister had asked to see a copy of the document for information ahead of it being laid in Parliament and the document would be shared with the Department following Board approval.

The Board approved the SSRO’s Annual Report and Accounts 2018/19.

8. Corporate Performance Report

8.1. Graham Payne, Interim Director of Corporate Resources, introduced the Corporate Performance Report, which provided a regular update on how the organisation was delivering against its priorities as set out in the Corporate Plan. The report drew together all relevant matters relating to the SSRO’s performance, including progress against key performance indicators, budgetary updates and the delivery of key tasks.

The Board:

• reviewed and commented on the Corporate Performance Report including on the revised format of the report; and
• agreed the proposed amendment to the basis for measuring the KPI on staff engagement.

9. Draft minutes from the Regulatory Committee on 30 May 2019

9.1. Peter Freeman, Chair of the Regulatory Committee, presented the minutes of the Committee’s meeting held on 30 May 2019.

The Board noted the minutes.

10. Draft minutes from the Audit Committee on 18 June 2019

10.1.Marta Phillips, Chair of the Audit Committee, presented the draft minutes of the Committee’s meeting held on 18 June 2019. At the meeting the Committee had reviewed the corporate risk register and asked for changes and further information to be added. The Board noted the Audit Committee’s consideration of the register and the associated risk appetite for each of the risks. It considered the balance of risks and risk appetite and decided that it was satisfied with the current risk profile.

10.2.The Committee discussed internal audit reports on stakeholder engagement and GDPR implementation. The Committee had also been informed of the rotation in the post of GIAA Head of Internal Audit.

The Board noted the minutes.

11. Future agendas and any other business

11.1.The Chairman informed the Board that his appointment as SSRO Chair had been extended to 2022. The appointment terms of four non-executive Board members were due to end in 2020, and the Chairman would develop a NEBM strategy for the future appointment or reappointment of members, with the support of two NEBMs on a Task and Finish Group. A draft strategy would be presented to the September Board for approval before it was sent to the MOD as a recommended strategy for future appointments.

11.2.The next meeting would take place on 26 September at 2pm.