Why the MOD DE&S GoCo probably won’t happen

We featured the potential “GoCo” (government owned, contractor operated) solution  for the Defence Equipment and Support organisation (DE&S)  earlier this week after the UK government announced the next phase of the work towards this possible end for the Ministry of Defence's procurement and logistics organization.

“Throughout the next 12 months, MOD will continue to work with the Treasury and the Cabinet Office on the ‘DE&S+’ option to explore the extent of change that could be delivered whilst keeping the organisation fully within the boundaries of the public sector. In parallel, a commercial process will be launched today that will enable the department to start discussions with potential industry partners about how a GOCO organisation would work in practice.

So there are two parallel strands of work running, and it looks finely balanced in terms of whether the GoCo will actually happen. Personally, I have mixed feelings about whether this is a good and viable idea, but if I had to go either way, I would bet that the GoCO will not happen – at least before the next election in 2015. Here are five reasons why it could fail to happen.  Speaking as a mathematician, none of them are "likely" but if you sum their probabilities, I suspect you get something over 50%.

  1. Given a  whole year to come up with a decent “DE&S+”  plan, MOD and Treasury conclude that there is a way of improving civil service skills (drafting in a few “Crown Commercial Representative” type big hitters is one of the initiatives, and making Spend Matters compulsory reading for procurement staff another) without going down the full and high risk  GoCo route.
  2. The proposals that come back from the bidding consortia are way more expensive than expected, and contain so many caveats, uncertainties, and risks, around TUPE, change management, property issues and other charges, that the naturally risk-averse Phil Hammond (the Defence Secretary) decides the “game isn’t worth the candle” and settles for the less risky option.
  3. UKIP build on their success in the council elections of May 2013, and as we move into 2014 and European elections in May they are running at 25% in the opinion polls, with the prospect of being the biggest English party in the European parliament. They make the preservation of the UK’s defence capabilities a key pillar of their manifesto.  Their presentation of “selling Britain’s Armed Forces off to the foreigners” (Bechtel, Halliburton and other non UK firms being amongst the bidders of course) starts getting a lot of coverage. In a panic, the Coalition pull the whole GoCo idea three weeks before the European election.
  4. After some disastrous economic news in late 2013, a Work Programme IT fiasco, and declining ratings in the polls, the Prime Minister decides a new approach at the Treasury and DWP is needed. George Osborne is moved to DWP.  “I’m delighted to be taking on the greatest challenge this country faces” he says, whilst Philip Hammond becomes the new Chancellor, with Francis Maude getting a well-deserved promotion to become Defence Minister.  His suspicion of large suppliers who have been “ripping off government for years” immediately leads him to halt the GoCo programme, whilst he looks at the options for a staff-led social enterprise to take over the organisation instead.
  5. After the year of review, a pilot goes ahead with a partial GoCo put in place, covering the RAF (Air Force) part of the organisation’s responsibilities. It quickly proves to be a disaster, as the consortium realise the complexity of what they have taken on, the TUPE commitments and costs associated with that, and quickly fall out between themselves. Costs start to overrun estimates almost immediately and a scandal involving the award of contract to a firm in which the consortium chairman holds shares is the final straw..

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