Buying Defence on Radio 4 – balanced and interesting view of MOD procurement

“Buying Defence” on BBC Radio 4 last night with Francis Tusa was balanced and interesting – I thought the politicians got off a bit lightly, and Tusa twice stated that “Bernard Gray’s reforms are having an effect” without giving us any evidence of that. But in general, if you didn’t hear it first time round it is worth listening here.  Here are “live” notes made in real time while listening followed by our summary.

Tusa describes six attempts to buy new armoured vehicles – still using Scimitars, a 40 year old design -  Future Rapid Effect System (FRES) has spent £100s of millions, yet to deliver one.

“Lots going in, little coming out. £38B black hole.  Whitehall’s most profligate Department”.

Margaret Hodge, Chair Public accounts Committee -  £3.5B for 2 aircraft carriers. Now £6B for 1. Delay of 9 years.  MOD slows down progress because there isn’t enough in the budget. Hutton (Labour Defence Minister) says he delayed the programme, wasn’t an easy choice. He had no choice. WHOSE FAULT WAS IT THEN??  Hutton passes the blame.  Who agreed it in the first place?

Lord West – ex Head of Navy - initial Carrier costs all wrong. He says that once got reasonable estimates it went quite well! So Tusa asks whose fault was it that we had such crap estimates? West pretty much admits that the initial costs were made artificially low to get them approved!  The “conspiracy of optimism”. (I thought that was one of the most shocking things in the whole programme). Inter-service feuds and fighting for money. And once a programme gets into the budget it is rarely cancelled.

There’s also a skills gap inside MOD. A supplier says: “It’s asymmetric warfare. Industry have professional contract negotiators. MOD don’t have procurement execs, they have gifted high quality engineers, plus consultants, etc, who dilute the MOD accountability”.

Keeping on the accountability topic, a quite funny clip of Margaret Hodge in PAC having a bit of a barny with Ursula Brennan (Perm Sec at MOD).  “Nobody is accountable” says Hodge, “the people responsible may have since joined the defence industry”.  (Revolving doors – a big problem, not fully covered here).

MOD goes for the very best – gold plating. Can we afford it? Driven by inter-force rivalry. “On the battlefield, people from different services die for each other – in MOD main building, they would kill each other”!

Then interview with Bernard Gray, Chief of Defence Materiel. (He comes over well).

“I need more management freedom to hire, promote, move people around. We must have significant cultural and managerial skills injection from the outside. We could partner with private sector organisations - example is the ODA partnership with CH2MHill.” (Actually the partner was CLM, with CH2Hill one of the 3 players within CLM).

More Gray - weakness in PPM, engineering as well as procurement. Need skills, tools etc. Can’t do it one person at a time, need 100s of people. Variety of private sector organisations could provide those skills.

Peter Luff , Minster for Defence Procurement, backing Gray.  Greater involvement of private sector likely. Status Quo not an option, full scale privatisation unlikely, 3 options in middle, looking at those in detail. (As we predicted..)

Is Gray “the best hope I decades”? Hodge is cautious - “people coming in from outside are very threatening, civil service marginalises outsiders. Gray is confident and clear, but the jury is out. “

Gray reforms “have started to deliver” says Tusa (but no examples given).

Then we have a brief comment from John Dowdy, head of McKinsey defence (he’s been around for years, and they’ve done loads of work for MOD - it might be interesting to examine whether McKinsey have been part of the problem or part of the solution?)

Every country struggles. Buy off the shelf to reduce cost overruns. “Bar-code procurement” (as Liam Fox defines it). Dowdy argues in favour of bespoke work and outlines the issues with off the shelf.  Then a defence contractor argues that “secret stuff” should be bought in the UK. And loads of British jobs at risk of course... does lobbying go too far? Hodge thinks so, CEO of BAE “threatened “ her in terms of moving jobs when she was in Government.

Industry needs clarity (fair enough). But “we are trying to do too much in defence for the resource that we as a nation are prepared to put into defence”. That’s Andrew Tyler, ex COO at DE&S. “And the wish-list grows”. Spot on. “Be more focused and be good at fewer things”.

Spending has fallen faster than ambitions.. mismatch getting worse in recession. The country will have to make a decision about defence and what it wants to pay - there are big strategic choices to be made.

So.. our conclusion, and that of the programme really, is that while there have been procurement issues, they are symptomatic of much deeper issues.  There are strategic questions to be addressed about the level of MOD funding, aspirations and budgets,  services rivalry, the UK’s role in the world and local jobs versus off the shelf buying. These are more fundamental than anything we would recognise as “technical” procurement failings.

If that is true, then Gray’s initiatives to involve the private sector more in the acquisition process are probably necessary but are certainly not sufficient conditions for success. And of course they will bring new challenges in themselves, as we’ve commented before – are MOD capable of being an “intelligent customer” of a CLM type organisation for instance?

But anyway, Gray, Tyler, Luff and Hodge all came over well, and a good programme generally.

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Voices (3)

  1. 5th Columnist:

    “I’m looking at how do I get a significant skills injection from the outside,” Mr Gray said.

    Sorry Bernard, that won’t work. The problem lies at a Senior level not with the poor Sappers in the trenches. Chains of Command demand to be obeyed so an influx of Private Sector experts telling us how to win wars won’t be welcomed. Delegate responsibility to the mid ranking Civil servants and let them do their jobs. The only ones who suceed are those who poach our best people, double their rate and charge it back, and those who have Wimbledon tickets. We’ll move to a Navy/Army/Air Force full of whatever the Defence industry wants to sell rather than the stuff we wanted to buy.

  2. bitter and twisted:

    What procurement ‘skills’ can ever overcome the fundamental ‘Too Big To Fail’ Problem ?

  3. David Orr:

    Peter – There seems to be an assumption that only involvement from the very companies that profit from MOD contracts can remedy a perceived skills gap in successfully letting & managing complex contracts.

    What about the MOD developing and training its own staff to level the playing field in negotiations?

    We seem to have lost sight of “investing in people” and then fall prey to the aswer being to outsource or contract in all expertise.

    These skills are strategic. They need to be invested in people whose loyalties and aims are yours!

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