Market Testing (Hansard, 4 June 1996)

§ Mr. Arbuthnot

These matters fall to the chief executives of my Department's agencies and I have asked the chief executives to write to the hon. Member.

Letter from J. R. Drew to Mr. Martin Redmond, dated 4 June 1996: I am replying to your Question to the Secretary of State for Defence about market testing in Defence Agencies. As Chief Executive of one such agency (the Army Base Repair Organisation (ABRO), I am replying with respect to the market testing we have been conducting. Since the launch of ABRO on 1 April 1993 the Agency has completed one market test. This competition covered the complete range of services provided by one its major business units—ABRO Bovington (covering re-manufacture of armoured fighting vehicles, including the Challenger Main Battle Tank, and also equipment repair support to the Royal Armoured Corps Centre and other local affiliated military units). The market test was won by the in-house team and a Service Level Agreement has been in place since July 1994. The Agency is currently engaged on the market test of the equipment repair support service that it provides to Army Land Command. Recommendations on the results of this competition are due to be made to Ministers by 31 January 1997. ABRO will then have market tested activities amounting to 65% of its running costs. The final phase of the Agency's current Competing for Quality programme will be to evaluate and implement the strategy for ABRO Donnington. This can only begin once we have the full set of experiences from the market test currently in train. I have enclosed a copy of our Corporate Plan which will give you a fuller picture of our activities.

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Letter from K. J. W. Goad to Mr. Martin Redmond, dated 4 June 1996: I reply to your Question to the Secretary of State for Defence regarding Market Testing activity by this Agency. As Chief Executive I submit a nil return on behalf of the Army Base Storage and Distribution Agency (ABSDA).

Letter from C. L. Elliott to Mr. Martin Redmond, dated 4 June 1996: I am replying to your Question to the Secretary of State for Defence about market testing in Agencies as this matter falls within my area of responsibility as Chief Executive of the Army Individual Training Organisation (AITO). No market tests have been completed to date. However, the AITO is in the early stages of carrying out market testing at 6 of our training establishments. The outcome of this programme of tests will not be known for at least 18 months, and therefore I am unable to report any results at this stage. Please let me know if I can be of any further assistance.

Letter from J. R. Prince to Mr. Martin Redmond, dated 4 June 1996: I am replying to your question to the Secretary of State for Defence about market testing into services provided by this agency, as this matter falls within my area of responsibility as Chief Executive of the Army Technical Support Agency (ATSA). ATSA launched in October 1995 and, to date, no market testing has been carried out.

Letter from A. H. Roache to Mr. Martin Redmond, dated 4 June 1996: As Chief Executive of the Defence Animal Centre (DAC) I am replying to your Question to the Secretary of State for Defence regarding what Market Testing has been carried out into the services provided by the DAC, and what were the results. An independent study into Competing for Quality by Shreeveport Limited concluded that Market Testing was not viable for the DAC and therefore the matter was taken no further.

Letter from Paul Altobell to Mr. Martin Redmond, dated 4 June 1996: I am replying to your question to the Secretary of State for Defence about market testing as this matter falls within my area of responsibility as Chief Executive of the Defence Analytical Services Agency (DASA). A market testing review of the Agency was carried out shortly after its launch in July 1992. The study team concluded that the Agency as a whole should remain in the public sector. A reappraisal in February 1995 also considered that the bulk of the work of the Agency should be retained in-house though there was some opportunity for contracting out. Competing for Quality figures for the period between April 1995 and March 1996 are being compiled for the Agency's Efficiency Plan. It is anticipated that this information will be published in the 1996 Next Steps Review.

Letter from T. R. Thurgate to Mr. Martin Redmond, dated 4 June 1996: I am replying to your Question to the Secretary of State for Defence about market testing of the Defence Bills Agency as this matter falls within my area of responsibility as Chief Executive. There are no plans to market test the work of the DBA. The task of the DBA was formerly carried out by the now disbanded Defence Accounts Agency. Under market testing rules, an in-house bid which represented substantial savings was submitted. Ministers accepted the bid and the DBA was formed.

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Letter from R. N. Dixon to Mr. Martin Redmond, dated 4 June 1996: I am replying to your Question to the Secretary of State for Defence about market testing in the Defence Clothing and Textiles Agency (DCTA) as this matter falls within my area of responsibility as Chief Executive of the Agency. As part of the procedure which resulted in the formation of the DCTA on 22 November 1994, full consideration was given to the "prior options". This included an exhaustive examination of whether the services of the Agency could be better provided through contractorisation or privatisation, in whole or in part. The conclusion then was that they could not. There has been no market testing of the services provided by the Agency in the period since it formation. It should be noted, however, that a very substantial proportion of DCTA expenditure is already being placed externally through the normal competitive process. Cash expenditure by DCTA in 1995/96 totalled £137M of which £124M (90%) represented money spent on the purchase of clothing, textiles and general stores, as well as externally-sourced R&D effort and support services. Contracts for these goods and services were placed in full compliance with government requirements for open competition between suppliers.

Letter from C. Roberts to Mr. Martin Redmond, dated 4 June 1996: Your question to the Secretary of State for Defence about Market Testing falls within the responsibilities of the Chief Executive of the Defence Dental Agency. I am responding on the Chief Executive's behalf during his absence on duty. The Defence Dental Agency was formed on 1 March 1996. This was in line with the recommendation of Defence Cost Study 15 that the three single Service dental branches should be brought together into a single tri-Service Directorate and considered for Agency status. Prior to the launch of the Agency a Competing for Quality feasibility study was completed by outside consultants. The Study concluded that neither market testing, privatisation nor contractorization of Defence primary dental services were feasible options, but made a number of recommendations on efficiency which are now being implemented. I hope that this is of help.

Letter from John Chisholm to Mr. Martin Redmond, dated 4 June 1996: Your recent question to Secretary of State for Defence asked for details on market testing carried out in his Department's agencies. I am replying on behalf of the Defence Evaluation and Research Agency (DERA). I should begin by explaining that DERA was only formed on 1 April 1995 when the Defence Research Agency (DRA) joined with other Ministry of Defence research and evaluation organisations to form a single science and technology Agency. The figures for Market Testing initiatives, which I set out below, however refer mainly to the period from April 1991 when the DRA was a separate Agency. They are:

Area	Financial year	Value of service reviewed	Outcomes
		(£ million)
a. DRA Experimental Flying	1992–93	26.2	Contract award to in-house MOD team based at Boscombe Down.
b. DRA	1993–94	45.0	Market Test suspended in
Site Services	1994–95	90.0	May 1994 when competition at early sites in programme revealed that equivalent savings could be obtained organisationally by restructuring requirements.

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Area	Financial year	Value of service reviewed (£ million)	Outcomes
c. DRA	1994–95	47.0	Market Test suspended.
Engineering Services			Savings achieved by combination of prior options review of requirement and rationalisation.
d. DRA	1994–95	3.1
Financial Accounting			Award made to in-house team after competition.
e. IS Data Telecoms	1994–95	1.0	Overtaken by rationalisation measures.

Market Testing is only one part of a wider Competing for Quality Programme pursued by this Agency. For the period between April 1995 and March 1996 this programme has been incorporated into the DERA's Corporate Planning process. This has resulted in the proposal, currently under consideration, for the privatisation of the support services elements of DERA as announced by the Minister of State for Defence Procurement on 27 March 1996. It is anticipated that information on this efficiency programme will be published in the 1996 Next Steps Review. I hope this is helpful.

Letter from T. McG Brown to Mr. Martin Redmond, dated 4 June 1996: I am replying to your question to the Secretary of State for Defence about market testing as this matter falls within my area of responsibility as Chief Executive of the Defence Postal and Courier Services Agency. Three Agency functions have been market tested so far. The Mill Hill catering and stewardship functions where the contract was awarded to Gardner Merchant Ltd. The mall sorting functions at St Giles Court and Mill Hill together with the MOD Van Service were subsumed into our Mail 2000 Initiative, part of the Defence Cost Studies programme, and hence remained in house. I hope this is helpful, please let me know if you require any further information.

Letter from J. C. R. Hunt to Mr. Martin Redmond, dated 4 June 1996: I am replying to your question to the Secretary of State for Defence about market testing of services provided as this matter falls within my area of responsibility as Chief Executive of the Meteorological Office. Contractorisation of Meteorological Office work has historically run at a high level. The attached table gives the details, in terms of staff costs, of what further gains we have so far achieved as a consequence of the Government's market testing initiative. Work continues to examine the scope for market testing in a number of other areas of the Office. I hope you find this information useful.

Activity	Number of staff (before efficiencies)	Annual value (£000) (staff costs)	Efficiencies made (Percentage)
Library and Archives	17	230	25
Corporate Communications	25	510	11
Personnel Administration Services	19	240	22
It Operations Centre	22	598	32
Supply and Services	61	851	22

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Letter from R. G. Smith to Mr. Martin Redmond, dated 4 June 1996: I am replying to your Question to the Secretary of State for Defence about market testing by Agencies as this matter, in respect of my Agency, falls within my area of responsibility as Chief Executive of the Defence Secondary Care Agency (DSCA). The DSCA was only launched on 30 April 1996; I have not yet implemented any market testing programmes. However, we are undertaking scoping work in order to identify areas suitable for market testing in the future. In this respect, I regard support services as being particularly suitable for this sort of exercise. I therefore intend, if the possibility exists, to subject all support services to some form of competition including market testing where appropriate. I hope this information is helpful.

Letter from M. G. R. Hodson to Mr. Martin Redmond, dated 4 June 1996: I am replying to your Question to the Secretary of State for Defence, about market testing, as this matter falls within my area of responsibility as Chief Executive of the Defence Transport and Movements Executive Agency. The only market test taking place in this agency is that of the MOD Freight Distribution Service. The Feasibility Study commenced in October 1994 and, following Trades Unions consultation, an Invitation to Tender was issued on 26 January 1996 to 4 commercial tenderers and a tri-Service in-house bid team. Tenders were due in by 30 May 1996. Results are currently planned to be announced in November 1996. Once this particular market test is completed, over 90% of DTMX business will have been market tested.

Letter from Keith Ellender to Mr. Martin Redmond, dated 4 June 1996: I am replying to your Question to the Secretary of State for Defence about market testing in my agency as this matter falls within my area of responsibility as Chief Executive of the Disposal Sales Agency. No market testing was carried out within the Disposal Sales Agency between October 1994, when we achieved agency status, and March 1995. CFQ figures for the period between April 1995 and March 1996 are being compiled for my agency's Efficiency Plan. It is anticipated that this information will be published in the 1996 Next Steps Review.

Letter from G. H. Wilson to Mr. Martin Redmond, dated 4 June 1996: I am replying to your Question to the Secretary of State for Defence about market testing as this matter falls within my area of responsibility of Chief Executive of the Duke of York's Royal Military School. No market testing was carried out prior to March 1995 into the services we provide. CFQ figures for the period between April 1995 and March 1996 are being compiled for our Agency's Efficiency Plan. It is anticipated that the information will be published in the 1996 Next Steps Review.

Letter from J. P. Clarke to Mr. Martin Redmond, dated 4 June 1996: You recently asked the Secretary of State for Defence a Parliamentary Question concerning the extent to which market testing had been carried out within Agencies of the Ministry of Defence. As the Chief Executive of the Hydrographic Office Defence Agency, the issue raised falls within my area of responsibility and I have been asked to reply to you. The simple answer to your question is that no market testing has been carried out into the services provided by the Hydrographic Office. Given the paucity of this response it might be of some benefit if I were to expand a little on this statement. 351W The Hydrographic Office, during 1993 and 1994 conducted a number of internal studies into various activities to ascertain if market testing represented a feasible and realistic method of achieving value for money. In the event, the Hydrographic Office Board concluded that a formal Market Testing programme would not be conducted as it was not, for various reasons, considered to be an appropriate option. However, the various feasibility studies highlighted a number of areas and activities where it was felt further efficiency savings could be made. In light of this a formal Efficiency Programme was instigated with the aim of realising savings, commensurate with those which could have been expected from market testing. This programme was successful with savings targets being met in both financial years 1994/95 and 1995/96. I hope the above information has been helpful.

Letter from N. J. Pearson to Mr. Martin Redmond, dated 4 June 1996: I am replying to your Question to the Secretary of State for Defence about market testing as this matter falls within my area of responsibility as Chief Executive of the Joint Air Reconnaissance Intelligence Centre Defence Agency. The Agency, which is only 2 months old, has not carried a market test of any of the services which it provides.

Letter from A. W. Pollard to Mr. Martin Redmond, dated 4 June 1996: I am replying to your Parliamentary Question to the Secretary of State for Defence about what market testing has been carried out into the services that Agencies provide. As Chief Executive, this falls within my area of responsibility for the Logistic Information Systems Agency (LISA). Although LISA was included in the Market Testing programme prior to its launch as an Agency in November 1994, the activity to be tested was subsumed by the Agency's CFQ Partnership initiative. This culminated in the award of a contract in December 1995 to EDS. Under the terms of this contract, all LISA non-core activity is being transferred to the Private Sector partner who will continue to provide these services on site under GOCO arrangements. The bulk of the transfer took place on 1 March 1996 with the remainder to follow by April 1997. It is anticipated that final CFQ figures for the year ending March 1996 will be published in this year's Next Steps Review. If you require any further information, please do not hesitate to contact me.

Letter from B. E. Nimick to Mr. Martin Redmond, dated 4 June 1996: I am replying to your Question to the Secretary of State for Defence about Market testing, as this matter falls within my area of responsibility as Chief Executive of the Medical Supplies Agency. The Medical Supplies Agency was established "to ensure the cost effective and timely provision of medical, dental and veterinary material, blood and blood products, technical and logistic support and trained personnel to the UK Armed Forces worldwide". It was initially proposed that the provision of these services be subject to a market test. However, Defence Cost Study 15 recommended that this should be cancelled and that the wider system covering medical supply, provisioning points and other medical stores should undergo agency review. As a consequence of this review, this Agency came into being on 1 March 1996 and copies of the Framework Document and Corporate Plan have been placed in the Library of the House of Commons. Our efficiency programme is estimated to achieve savings of £27m over the 10 year Long Term Costing period. Clearly it is too early in the life of the Agency to have completed market testing exercises for the services we provide, but our corporate plan identifies the strategies designed to deliver value for money and cost effective services. In brief these strategies are to:

(a) Utilize the Private Sector for direct deliveries of medical material of end users and the setting up of dormant contracts, where appropriate, to enable a percentage of War Maintenance Reserve (WMR) to be held by trade. This 352 would drive down the need to hold stocks and limit the storage facilities to the minimum required for operational purposes.
(b) Factor out the non-core functions to the most cost effective provider, whether Public or Private sector. This in turn will enable a further rationalisation of sites within the medical supply organisation. There are a number of areas where Service Level Agreements with other MOD authorities, who are also pursuing efficiency programmes, would be appropriate, for example, Anny Base Storage and Distribution Agency (ABSDA) and Director of Transport and Movement Executive (DTM(X)). Emphasis will be placed on customer satisfaction through both control of supply and distribution. With the resultant rise in customer confidence, it is expected that there will be a corresponding reduction in local stock holdings.
(c) Develop partnership arrangements with authorities beyond MOD either in Industry or other elements of the Public Sector such as the Buying Agency and the National Health Service Supplies Authority (NHSSA). Discussions with a variety of existing and potential suppliers are being carried out.
(d) Commission a review of policy concerning range and standardisation of material. Proposals for rationalising range and prescribing policy will be submitted to the Surgeon General for approval. This will achieve a reduction in programme costs.

As these measures are carried out, the Medical Supply Organisation will reduce in size and will eventually have a core of service medical personnel, with the necessary clinical skills, working closely with a civilian team to provide a compact multi-disciplined team. This will be the source of purchasing, provisioning, clinical and technical support to advise the Surgeon General and provide him with advice with regard to the acquisition of material and related services and to support Operations more effectively through integrated Operational Supply Chains. I hope this is helpful.

Letter from P. R. Wildman to Mr. Martin Redmond, dated 4 June 1996: I am replying to your Question to the Secretary of State for Defence about market testing carried out by government agencies. This matter falls within my area of responsibility, as Chief Executive, as far as the Military Survey Defence Agency is concerned. No market testing has been completed by Military Survey to date. The three initiatives started in 1993 ceased to be candidates when they fell below revised financial thresholds. However, these initiatives have now been reviewed under Competing For Quality (CFQ) guidelines and a new CFQ programme is being developed. It is anticipated that further information will be published in the 1996 Next Steps Review and the 1996/7 Agency Annual Report.

Letter from W. E. E. Boreham to Mr. Martin Redmond, dated 4 June 1996: I am replying to your Question to the Secretary of State for Defence about market testing, as this falls into my area of responsibility as Chief Constable/Chief Executive of the Ministry of Defence Police Agency. The non-core activities of Ministry of Defence Police business were market tested as part of our prior options exercise, which resulted in the placement of contracts, at MDP Wethersfield, covering catering, estate management, grounds maintenance, accommodation services, cleaning and administration, effective from April 1993. The resultant savings are in excess of £300K per annum.

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Letter from W. S. Graham to Mr. Martin Redmond, dated 4 June 1996:

1. I am replying to your Question to the Secretary of State for Defence, that asked what market testing has been carried out into the services provided by the 'Naval Aircraft Repair Organisation (NARO)' and what were the results, as the matter falls within my area of responsibility as Chief Executive of the NARO.
2.No market testing has been carried out in respect of services provided by the NARO.

Letter from J. H. S. McAnally to Mr. Martin Redmond, dated 4 June 1996: The Secretary of State for Defence has asked me to reply to your Parliamentary Question, about agency Market Testing (MT) initiatives, in my capacity as Chief Executive of the Naval Recruiting and Training Agency (NRTA). The NRTA came into being on 1 April 1995. During the 1980s and prior to the formation of the Ministry of Defence Market Testing Organisation, the Royal Navy contracted out a number of shore establishment support activities, such as catering, cleaning and grounds maintenance. In March 1995, one small Market Test was successfully concluded at the Britannia Royal Naval College boat maintenance facility at Sandquay, Dartmouth. In addition, MT feasibility studies were conducted in late 1994, at two NRTA shore training establishments. Both of these studies concluded independently that further scope for possible savings from MT were likely to be limited and would involve multiple, management intensive, tests of small identifiable units, with the accompanying need for, and expense of, consultancy support for in-house team bidders. As a consequence, the NRTA is developing a Partnering Initiative as an alternative to the traditional MT approach, whilst still complying with Governmental Competing for Quality (CFQ) policy. The Partnering Initiative will, in addition to providing "standard" CFQ savings in services delivery, provide a third party income stream to help offset the overhead costs of the NRTA infrastructure.

Letter from M. A. Rowe to Mr. Martin Redmond, dated 4 June 1996: I am replying to your Question to the Secretary of State for Defence about market testing where it relates to my area of responsibility as Chief Executive of the Pay & Personnel Agency. My Agency was launched on 1 February 1996 and no market testing of the services we provide has been carried out.

Letter from S. B. Burdess to Mr. Martin Redmond, dated 4 June 1996 I am replying, on behalf of Air Vice-Marshal R. H. Kyle, who is currently on leave, to your Question to the Secretary of State for Defence about market testing within his Department's Agencies as this matter falls within his responsibility as Chief Executive of the Royal Air Force Maintenance Group Defence Agency (RAF MGDA). Competing for Quality figures for the period between April 1995 and March 1996 are being compiled for our Agency's Efficiency Plan. It is anticipated that this information will be published in the 1996 Nest Steps Review.

Letter from P. C. Ayee to Mr. Martin Redmond, dated 4 June 1996: I am replying to your question to the Secretary of State for Defence asking if he would list for each of his Department's Agencies what market testing has been carried out into the services they provide, and what the results were. This matter falls within my area of responsibility as Chief Executive of the Royal Air Force Signals Engineering Establishment. My Agency is currently market testing a multi-activity package of its supporting activities, covering motor transport, provisioning, catering, information technology, communications and selected administrative services, and valued at £8m per annum in pay costs. Five external bids and one in-house bid have been received and are currently being evaluated. The successful bidder is expected to be announced in time for implementation of the results in January 1997.

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Letter from J. A. G. May to Mr. Martin Redmond, dated 4 June 1996: I am replying to your Question to the Secretary of State for Defence about market testing of services insofar as this bears on my responsibilities for the Royal Air Force Training Group Defence Agency. Up to 31 March 1995, the following activities contributed to the Agency's response to the Defence Market Testing Initiative and the targets set by Departmental Plan 92:

(a) Support Services at Royal Air Force Scampton. The Support Services at Royal Air Force Scampton were contractorized. The Station has since been closed.
(b) The Joint Elementary Flying Training Squadron at Royal Air Force Topcliffe. The Joint Elementary Flying Training Squadron at Royal Air Force Topcliffe was contractorized. The Squadron, together with the Contractor, has since moved to Royal Air Force Barkston Heath.
(c) Supply Services at Royal Air Force Locking. The market test of the Supply Services at Royal Air Force Locking was put into abeyance pending decisions on the future of the Station. It has since been decided to close the Station.

Except for the outcome of the recent competition in respect of Support Services at Royal Air Force Valley, which we hope will be announced shortly, the Agency's Competing for Quality forward programme for the period from 1 April 1995 to 31 March 1996 has yet to be finalized. It is expected that the outstanding conclusions will be published in the 1996 Next Steps Review. I am sending a copy of this letter to my Air Officer Commanding-in-Chief.

Letter from I. S. Mitchelson to Mr. Martin Redmond, dated 4 June 1996: I am replying to your question to the Secretary of State for Defence relating to market testing within each of his Department's Agencies, insofar as this matter falls within my area of responsibility as Chief Executive of Service Children's Education. For the period up until March 1996 this Agency had not yet completed the market testing of any of its services. This Agency is, however, currently involved in a wider market test concerning Army Catering and Mess Services in Germany. The project is being led by the United Kingdom Support Command (Germany) and the market test includes catering and cleaning in Service Schools in Germany; contractual arrangements are planned to be effective from 1 October 1997.

Letter from Brian Raine to Mr. Martin Redmond, dated 4 June 1996 I am replying to your Question to the Secretary of State for Defence about what market testing has been carried out into the services we provide and the results thereof as this matter falls within my area of responsibility as Chief Executive of Queen Victoria School. Since Queen Victoria School became an Agency on 1st April 1992 no market testing has been carried out into the services we provide. We currently have no plans to carry out market testing in the future. If you have any further questions about this please do not hesitate to contact me.