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Sunday, 25 February

What's Ours is Yours - Government Hell-bent on MoD Sell-off

In the most significant changes to defence land since the Second World War, 91 sites owned or managed by the MOD are set to be sold.

The latest round of the ‘Better Defence Estate’ strategy, was announced in November, with the claim that every penny raised from the sales will be reinvested back into defence, creating areas of military expertise in specific locations around the country.

Unfortunately, once the land is sold to private investors who see the value of property investment and recurring revenues, the only way to raise further monies will be to sell more of the MoD estate at knock-down prices as in the case of the Chelsea Barracks fiasco that saw the Qatari government effectively buy prime London real estate and then add insult to injury by avoiding paying tax.

 

Better facilities

Defence Secretary Michael Fallon said: "We have been spending billions maintaining a defence estate that doesn’t meet the needs of our Armed Forces. This plan delivers an estate fit for our forces and their families. By putting money where it is needed, we will provide better facilities to train our Armed Forces and deliver more stability for military families.

"The plan will see sites and bases moved to locations that offer better opportunities for military families - increasing employment prospects for partners and spouses, helping them to settle into communities buy their own homes and have their children benefit from more stable schooling."

More than 32,500 acres of excess defence land is being released, including ten surplus airfields and five golf courses with a target for developers to profit from the construction of 55,000 homes.

As at 1 April 2016, the MOD currently controls around 2% of UK land, owning more than 568,000 acres of land and foreshore in the UK (either freehold or leasehold) and holding the rights over a further 548,573 acres. The estate includes approximately 50,000 houses, 60,000 technical assets such as hangars or workshops and 20,000 other key assets such as runways and electrical networks.

The cost of maintaining the estate is, approximately £2.5bn per annum.

 

Opinion of the National Audit Office

The following came from the National Audit Office (NAO) in November: The Ministry of Defence has set out a strategy to make better use of its built estate but much of this is uncertain and carries risks.

For many years the Department has not had a clear plan regarding the future size and shape of its estate. The resulting lack of certainty about where to invest its limited funding, combined with general underinvestment, means that the condition of much of the estate is poor and deteriorating.

As a result of under investment there is an increasing risk that the poor condition of the estate could affect defence capability. The estate is an important element of defence capability, enabling the Armed Forces to train and undertake operations, and providing accommodation for personnel and their families. As the estate’s condition deteriorates, some parts may wholly or partially close which will exacerbate other risks and could reduce operational readiness.

 

Sell and lease back millstone

Constraints on the Department’s funding for its estate are also leading it to making decisions that are poor value for money in the longer term. In addition, the 1996 decision to sell and lease back the majority of Service Family Accommodation is now limiting the Department’s ability to manage this element of the estate cost-effectively. Poor accommodation for service families is also affecting the morale as well as the recruitment and retention of service personnel.

The government has set targets for the Department to reduce its built estate by 30% by 2040. The Department is also the largest contributor to the government’s objective of releasing land to build 160,000 new homes between 2015 and 2020.

After many years of limited progress, the Department has set out a new vision for its future estate that supports military capability while meeting government targets. It has developed a Footprint Strategy which will contribute 15,000 toward the housing target by 2020 and enable it to dispose of 25% of its estate by 2040. This is based on assumptions and estimates and the Department expects that its plans will evolve over time. According to the NAO, however, implementing this strategy will be extremely challenging as many of the estate disposals, re-provisioning of essential facilities on sites to be disposed of and personnel moves are interdependent.

As a result of the steady decline in the condition of the estate the Department now faces significant costs over the next 30 years to improve the condition of the estate. Although implementation of the Footprint Strategy will reduce these costs, the Department will still face estimated unfunded costs of at least £8.5 billion. The NAO has found that risks to military capability will continue unless the Department takes further action to address the shortfall in funding to sustain the estate. According to the NAO, the Department has not yet set out how it intends to address the significant challenges it faces sustaining the whole estate in the longer term.

The NAO also found that, whilst some progress has been made, the Department does not yet have an overall model for managing the estate effectively. In 2011 the Department undertook large scale change of how the estate was managed. It believed that both creating the Defence Infrastructure Organisation (DIO) to centrally manage the estate and prioritising the Commands’ estate needs, would improve its management and enable it to cut costs. In 2014, it made further changes by contracting with a strategic business partner, led by Capita, to run the DIO and help it achieve savings. However, this overall model has not worked. Roles and responsibilities are unclear, governance arrangements are confused and DIO still does not have the skills and capabilities it needs.

 

Weaknesses in Capita contract

There were fundamental weaknesses in the Department’s contracting with the strategic business partner. The Department failed to transform DIO prior to contracting, including putting in place a single IT system. This failure has affected the partner’s performance and created complexity in relation to the Department’s ability to hold the partner to account for its performance. The Department is undertaking a fundamental review of how its estate is managed, the role that the private sector will play, and how funding will be delegated to the Front Line Commands which report to the Defence Board in the coming months.

Article written by Brian Shillibeer

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