The data visualised in Figure 3 tends to mirror the net costings picture. As the income data is thus far exclusively negative. infrastructure. he purpose of this article is to take advantage of the information being created through the application of Resource Accounting and Budgeting to consider one element of the data arising from the MoD annual report and accounts – the costing of maritime force elements – and to compare it with the research conducted into output costing by David Greenwood.e. it acts to reduce the overall net costs of a particular force element. personnel and training). the amount of money available) is obviously a positive step in enhancing the ability of the Department to understand. T Figure 2: Net costing of Royal Navy Force Elements (2001/02 to 2003/04) 3 Figure 1: Net expenditure allocation by service on Force Elements (2001/02 and 2003/04)2 Force elements in the MoD accounts are groupings. by armed service. At the macro level.1 The shift in accounting practices towards focusing on outputs (i. The data available on force elements in the annual report and accounts includes information regarding ‘income’ by force element. The data visualisation above highlights two issues of net costs on first examination. cost of delivering a military capability) rather than traditional inputs (i. The analysis will now move to look in greater detail at costing of specific Royal Navy force elements. 2002/03 and 2003/04.N AVA L P RO C U R E M E N T A N D D I S P O S A L Braving the Elements: Analysing Maritime Force Elements and Capabilities by Dr Jeffrey Bradford Jeffrey Bradford is Group Business Development Manager at Babcock International Group PLC and was formerly a consultant with Arthur D. but also nuclear decommissioning costs. The Royal Navy has grouped its force elements into ten distinct categories. Whilst at first glance somewhat nonsensical. According to the notes within the annual report. the additional cost of naval aircraft increases them to an order of magnitude quite similar to the frigate and destroyer capability costs. Figure 2 shows the change in net costing for the years 2001/02. In this article he examines the cost of the major force elements of the UK’s Royal Navy. of types of capabilities. the submarine element includes not only operating costs and support of nuclear propulsion and weapons. Across the entire period. Firstly. The three largest efforts in obtaining income have AU T U M N 2 0 0 5 RU S I D E F E N C E S Y S T E M S 9 9 . to a lesser extent Royal Air Force. whilst aircraft carrier costings are quite modest. Figure 3 illustrates the level of income (efficiencies) achieved in delivering force elements since the introduction of this method of accounting. Secondly.e. it shows the high cost of the nuclear submarine force relative to the other force elements (the black line on the graph). income has had the effect of reducing net costings by approximately 2%. manage and control expenditure in a manner that is beneficial to the military capability outputs for pursuing national political objectives. comparing the 2001/02 and 2003/04 figures shows the following split in terms of output-based resource allocation. these costs can be seen as efficiencies achieved within the constituent components of a particular force element (support. Little specialising in corporate strategy within the aerospace and defence sector. Figure 1 illustrates the shrinkage in Army and. costs and the increase in Royal Navy costs over the period.

One tool from the commercial environment that assists in achieving a more granular view of income generated by force elements is the Compound Annual Growth Rate (CAGR). section 2. 6. However. In other areas. Ministry of Defence Annual Report and Accounts 2003 – 2004. Extending this analysis further would enable consideration of the financial costs associated with achieving readiness levels to perform operations. the introduction of new vessels would reduce the level of income that could be squeezed from the asset. Figure 4: CAGR Rates for Income Attributed to Royal Navy Force Elements (2001/02 to 2003/04) 1 0 0 RU S I D E F E N C E S Y S T E M S AU T U M N 2 0 0 5 .4 Examining Figure 4 yields a more detailed understanding of the shift in income patterns across force elements. The Stationery Office. as well as the financial sensitivity and risk management planning around force structures available for deployment by the front line commands to the Chief of Joint Operations organisation. Principle data sources are Ministry of Defence Annual Report and Accounts 2002 – 2003. Driving the Successful Delivery of Major Defence Projects: Effective Project Control is a Key Factor in Successful Projects. 3. National Audit Office. London. The Stationery Office. CAGR is an ideal formula for identifying a smoothed rate of return through time when annual values fluctuate continually. For example.com. RUSI. 2. the heavy employment of equipment and personnel on operations would be likely to reduce the level of income that could be achieved. page 131. HC 1125. National Audit Office. London. London. London. 5. This assessment could be seen as being corroborated by the recent National Audit Office report into best practice in defence acquisition which regarded the refit of HMS Illustrious as an example. David Greenwood. 5 Whilst the level of income or savings achieved by the remaining force elements has slowed across the period. The Stationery Office. The Stationery Office. HC1080. Figure 3: Income by Royal Navy Force Element (2001/02 to 2003/04 in £k) To conclude. London. frigates and destroyers. whilst a good illustration of absolute income generation. Ministry of Defence. 1972. HC30 2005/06 session. For more details see www. 20 May 2005. Especially the statistical appendices. Source: ibid. manage and control resources associated with specific military capabilities.6 Testing income against commercial measures such as CAGR offers further insight and ways of thinking about how MoD is investing in the various force elements through time. For a discussion of the issues around readiness see Assessing and Reporting Military Readiness. 4. HC1125. HC72 2005-2006 session. London.investopaedia. some mitigating circumstances can be envisaged. Notes 1. The Stationery Office. Positive figures refer to cases where the level of income (or savings in the delivery of a particular force element) has increased – in this case the delivery of naval aircraft from carriers.N AVA L P RO C U R E M E N T A N D D I S P O S A L occurred in submarines. Budgeting for Defence. the identification of costings for force elements under the resource accounting regime provides a major evolution in the ability of the defence management establishment to plan. the table does not show the rate of change across the period. and naval aircraft.