MOD outsource – will Serco get pushed out of the bidding?

Serco are still reeling from the suggestion of criminal activity in terms of their contract for prisoner transport with the Ministry of Justice, hot on the heel of the tagging contract problems.  Now there are suggestions that this might make it difficult for them to play a role in the controversial Ministry of Defence “GoCo” outsourcing of Defence Equipment and Support organisation.

The firm is bidding for the contract as part of a consortium with the US engineering firm CH2M Hill and WS Atkins, but there is mounting pressure to see Serco removed.  Ministers are saying that it is up to the consortium to decide its own composition, but put it like this – if you are CH2M Hill, it is hard to see that having Serco on-board is helping your chances!

The Independent on Sunday also reported that the opposition Labour party is “planning to ambush a parliamentary Bill that threatens to semi-privatise the defence organisation Defence Equipment and Support”.

Labour will table amendments to the Defence Reform Bill, focusing on issues of conflict of interest and concerns about foreign control of DE&S. And there certainly are conflicts of interest. They range from PWC, in a consortium with Bechtel (the favourites in my book), who could be involved in awarding contracts to firms they audit or work for as major consultancy clients. Then there is QinetiQ, in another consortium, who are major suppliers to the MOD in their own right.  (I now understand QinetiQ have pulled out,  for that very reason). 

I’ve always believed that Bernard Gray’s main reason for pushing the GoCo is to “contractualise” the relationship between the commissioners of military equipment (politicians, service chiefs etc) and those who buy it and manage the programmes. That would stop – or at least accurately cost – the constant changes of specification that have bedeviled past equipment programmes. There’s also the benefit of a GoCo being able to pay market salaries to procurement and project management experts.

Are these good enough reasons to move to a GoCo, with all the inherent risks? I’m not sure – it is a finely balanced argument for me. But every time we hear of another supplier failure or scandal, it does perhaps tip the balance further away from the GoCo.  

Voices (7)

  1. bitter and twisted:

    Will the Special Forces be forced to use the Goco or will they continue to do their own thing?

  2. Dave Orr:

    Will the GoCo have the same level of governance and accountability as we have now:

    1. Open to FOI requests with papers and minutes open to public scrutiny?

    2. Have to appear before Select Committees?

    3. Have to answer questions from MPs and Opposition parties?

    4. Have employees whose terms & conditions for their contracts of employment place them under Civil Service rules regarding behaviours, conflicts of interest etc?

    5, How will “whistle blowers” be protected?

    6. “Revolving doors” re formers Minsters and MPs becoming Directors or Consultants?

    Has anyone done serious work on governance and accountability?

  3. Julian Quail:

    If the Serco consortium is asked or forced to pull out there will only be one consortium. Given there is no competition and GOCO is the preferred option, how much pressure will be placed on the VFM benchmark!

  4. carlton:

    Hang on a minute was it not PWC that investigated Serco for the MOJ, the same PWC that was auditor for numerous banks and give them a clean bill of health and will no doubt be auditors for some of the MOD suppliers. So much for conflicts of interest.

    1. John Diffenthal:

      I’m shocked! Don’t you believe in Chinese Walls?

  5. Dan:

    They won’t be excluded, at least by the MOD. They can’t, not without some criminal conviction for fraud. Instead, they’ll be quietly encouraged to voluntarilty withdraw from the bidding.

  6. Bill Atthetill:

    An interesting one which, at this time, will surely bump into EU Procurement Law. I’m aware that Serco has invested in a Procurement BPO-type team including a CPO-level individual to lead it. And this (GoCo), presumably, is a £15bn per annum contract, say, over 10 years (so, circa £150bn, taking aside the depreciating budget a more efficient approach will bring)? And they will say “sorry, but you’re out” without first concluding their investigations and generating the ‘proof’ that allows them to do so under EU law? Can’t wait to see which senior civil servant will pen the ‘Dear John’ letter on this one….

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