Dr Bill Egginton, senior lecturer in Defence Management & Leadership at Cranfield University, presents the second of three papers examining defence reform in the UK
In Part 1, we recognised that Defence Reform was shaped by the confluence of two key streams of activity: political and professional. Politically, the election and SDSR of 2010, the Levene Report that followed in 2011 and the Government’s push for greater transparency and accountability highlighted the need for improved MOD performance requiring structural changes and new ways of working. Meanwhile, the increased visibility and maturity of P3M principles provided government with an opportunity to leverage those principles to support its agenda and objectives within and across the public sector. The 2015 election and SDSR15 maintained that political impetus. At the same time the launch of the Major Projects Leadership Academy (2012) and the Civil Service Project Delivery Profession (2015) followed by the award of Chartered status to the Association for Project Management (APM) in April 2017 and publication of the Government’s own Project Delivery Profession Competence Framework (in May 2017) has continued the push towards greater professionalisation.
Although Lord Levene made no mention of ‘portfolio’, his recommendations resonated fully with a portfolio management approach: stronger strategic corporate governance, more effective prioritisation, better alignment of investment to strategic objectives with greater empowerment and accountability underpinning improved performance management. The principles of P3M have since shaped many of the changes made as part of Defence Reform, as stated in ‘How Defence Works’ (December, 2015):
Head Office and TLBs manage the way major programme spending is managed using a Portfolio, Programme and Project Management (P3M) approach, following best practice across government. This supports a better, evidence-based balance of investment decisions clearly linked to aims, priorities and available resources. It also makes sure we can successfully deliver change programmes and clarifies who has authority and accountability.
Given this pivotal role that P3M has played, it might be useful at this juncture to provide some brief explanation as to what is meant by ‘project’, ‘programme’ and ‘portfolio’, before we take a look at how these disciplines have been applied in the context of the Ministry of Defence and TLBs’ own operating models.
The Association for Project Management  defines a ‘project’ as “a unique, transient endeavour undertaken to achieve planned objectives” and a ‘programme’ as “a group of related projects and change management activities that together achieve beneficial change for an organisation”. An alternative definition comes from AXELOS guidance Managing Successful Programmes (MSP) which defines a ‘programme’ as “a temporary, flexible organisation created to coordinate and oversee the implementation of a set of related projects and activities in order to deliver outcomes and benefits related to the organisation’s strategic objectives”. Finally, in Management of Portfolios (MoP) a ‘portfolio’ is defined as “the totality of an organisations investment (or segment thereof) in the changes required to achieve its strategic objectives” and ‘portfolio management’ as “a co-ordinated collection of strategic processes and decisions that together enable the most effective balance of organisational change and Business as Usual”.
So, in summary, projects deliver outputs and are generally of a relatively short and clearly defined duration. Programmes bring together a number of related projects and so tend to be longer in duration with a less clear path aimed at the delivery of benefits associated with a future outcome. An organisation’s portfolio represents its total investment in change - projects and programmes - that it is making to achieve its strategic objectives within the constraint of the resources available to invest in both changing the business as well as running the business.
So, what is the here and now of the application of P3M within defence?
The delegated operating model described in ‘How Defence Works’ was declared to be fully operational on 1 April 2014. Under the model, the head of each of the six TLBs is personally accountable for the performance of their organisation. Whilst each TLB has been required to adopt ‘How Defence Works’ (akin to a set of building regulations), differences in detail have inevitably arisen in the design and construction of be-spoke TLB level operating models. However, despite these differences in interpretation and implementation, significant progress has been made in the adoption of standard P3M terminology such that now, across all TLBs, there is mutual understanding and an increasingly common taxonomy. This combined with senior level buy-in and universal acceptance of the relevance of P3M to the ‘business space’ of defence has already led to some improvements in performance. Lord Levene, in his report published in December 2014, stated that “a leopard really can change its spots” and that TLBs were now more active in owning plans and setting priorities.
The overall aim of strategic planning as described in the ‘How Defence Works’ is to translate government policy into Defence Strategic Direction (DSD) with specific aims and targets that can then be passed down to TLBs with clear authorities against which progress can be assessed. This ‘top down’ comprehensive planning process – the SDSR - is now conducted at least every five years in line with the electoral cycle. The SDSR should ensure that National Security Strategy (NSS) is reflected in DSD which in turn is used to inform delivery plans at the command level – the Command Plan (CP). This link from policy, to strategy, to direction and ultimately to plans is often referred to as the ‘Golden Thread’ of strategic alignment. Each Command is now responsible for managing its own ‘sub-portfolio’ of investment with a CP that is matched to policy, affordable and supported by analysis that informs decisions and reduces the risk associated with any future decisions. This highlights a key point: it is the Commands that hold and allocate their budgets against the delivery of prioritised requirements for which defence business leaders – the Single Service Chiefs - are accountable. Each CP essentially forms a contract between the respective Chief and PUS. This is important, because in the event that a Command considers policy or DSD to be unaffordable, then it is incumbent on that Service Chief to challenge the underlying policy, or alternatively, seek additional resources and / or make clear the risks that are being taken: easier said than done, no doubt, requiring as it does a tide change in behaviours, which of course takes time.
Moreover, in addition to the five-year comprehensive planning cycle, there is an annual budgeting cycle (ABC) during which Command budget allocations may be challenged, and for example, savings required. In this case, money that was previously allocated to spend on meeting the strategic requirements coming from Head Office may no longer be available and a change is needed. The operating model makes clear that major changes should only take place at the time of an SDSR, and changes in the intervening period should not be significant and only made on an exceptional basis. Nevertheless, the Commands’ management systems must be capable of informing, and Command governance structures capable of making, evidenced based decisions on priorities in light of these annual disruptions to plans. Commands must therefore have the means to ‘veer and haul’ resources as and when circumstances change, in order to both create and maintain a set of balanced and affordable plans. Treasury rules, however, often frustrate this objective, as highlighted by Levene in his 2015 update.
Some of the requirements coming from Head Office may require changes to the way in which a TLB runs its business. Others may involve the need for new military capability. So, to take Navy as an example, the strategic security objective of a continuous at sea deterrent has led to a major submarine programme, within which each boat is treated as a project. In the same way, the security objective of power projection has led to a carrier strike programme comprising ships, aircraft and sustainment vessel projects. These ‘strategic’ requirements involve long term investments (and therefore contracts) and as a result, the capacity to veer and haul funds on a short term basis is again hampered. Even so, the principle of prioritisation remains and the opportunity for a Command to at least recommend an investment that had previously been approved to be stopped, exists. Again, implementing that option is inevitably easier to say, than to do.
The detailed ‘user’ requirements for new equipment projects (boats, ships, planes) are defined by the customers, the Commands, but delivered on their behalf by Defence Equipment and Support (DE&S). Levene found the relationship between ‘customer’ and ‘enabler’ to be ‘sloppy’ and a more ‘robust’ commercial arrangement (tantamount to a contract of sorts) between the parties involved has been implemented as part of defence reform. Equipment projects are supplemented by projects in other ‘lines of development’ (e.g. infrastructure, training) that collectively results in a coherent military capability programme managed by the lead Command. The drive towards better governance and genuine accountability for programme delivery has led to a more systematic process for the appointment and training of Senior Responsible Owners (SROs), individuals that lead these programmes and are personally accountable to Government under the so-called Osmotherly Rules.
Where a programme (or indeed project) is of national importance or interest, it may find itself part of the Government Major Project  Portfolio (GMPP) with an SRO whose letter of appointment is in the public domain. If a change is of particular significance to defence, but not necessarily to government, the SRO may be required to report as part of the Defence Major Programmes Portfolio (DMPP) managed by a central function within MOD Head Office. The introduction of a portfolio management approach across Government and within MOD has therefore resulted in greater transparency and better understanding of strategic intent, and the size, scale and shape of investments that MOD needs to make in the form of projects and programmes to support that intent.
In managing their sub-portfolios (and not surprisingly given the differences that exist in that nature of each command’s business) the commands have adopted different governance structures but with a number of common features. For example, each has a portfolio direction group (PDG), a portfolio progress group (PPG) and a portfolio office function (PfO) with programme boards, sponsoring groups and SROs. Some of these features are new, whilst others are adaptations of prior existing structures taking on board specific P3M requirements.
For example, the Executive Committee of the Army Board (ECAB) now also acts as the Army PDG supported by a newly formed Army PfO and employing a recently implemented Portfolio Decision Support System. Similarly, in Air Command, the Air Force Capability Group provides direction, with a supporting PPG and a newly formed Programme Management Support Function using the MOD’s Portfolio Management Report System (PMRS).
One excellent example of how portfolio management principles have been applied in the wider context of defence business is that of Complex Weapons. Here a Portfolio Management Agreement (PMA) has been implemented that delivers proven value for money for the MOD (as the Customer) whilst providing stability and continuity for MBDA (the Contractor). Principles of commonality, modularity and re-use can only be applied in the context of a portfolio approach and portfolio level requirements are therefore used to inform programme and project level solutions that previously would have been practically impossible to deliver within the budgets available.
It goes without saying that the adoption and adaptation of P3M within defence has inevitably resulted in a significant upskilling requirement. In addition to the considerable investment in APM and AXELOS qualifications, P3M topics are now an integral part of military education and training . This is reflected in the range of master’s programmes and short courses available at the Defence Academy, ranging from acquisition training for Army Major (and other Command equivalents) to executive courses for 2* SROs. Since 2015, these topics have also formed part of the international Advanced Command and Staff Course delivered at the Joint Services Command and Staff College, and serving 1*, 2* and even 3* officers  now regularly undertake training aimed at equipping them with an understanding of project, programme and portfolio management principles, processes, standards and structures. Some of this work is supported by Cranfield University, the ‘academic provider’ at the Defence Academy, but others including Kings College, SAID Business School and Civil Service Learning are also heavily involved. The Major Projects Leadership Academy (MPLA) delivered by SAID is aimed specifically at SROs responsible for GMPP projects and programmes.
These changes have resulted in greater demands on an already pressured organisation. Not surprisingly, therefore, despite the progress made, challenges remain, a number of which have been alluded to here. The nature of these challenges, and actions required to address them is a theme we will return to in Part 3: looking to the future.
This is the second of three papers (the first was published in Issue 17.2) that traces the journey of defence reform in the UK, one that has involved fundamental changes to how the MOD is structured and operates and drawing on project, programme and portfolio management principles in delivering the defence contribution to national security.
 The MOD currently has six Top Level Budget holders: Army, Navy, Air and Joint Force Commands, Head Office & Corporate Services and Defence Infrastructure Organisation.
 APM Body of Knowledge, 6th edition (2012).
 The use of the word ‘project’ in government typically includes both projects and programmes.
 The MOD has adopted the APM Competence Framework 2nd edition to shape its future training and development requirements.
 The * or ‘star’ system is used to denote military rank: 1* at Brigadier, 2* at Maj. General and 3* at Lt. General and their equivalent ranks in other services.