FT says MOD GoCo dead, what about paying staff more?

We expect to hear soon whether the MOD Defence Equipment and Support (DE&S) government-owned, contractor operated (GoCo) initiative will go ahead. We have doubted it for some time, and the FT reported on Friday that it wasn’t going to happen, given the lack of competitive tension with only one potential supplier left in the frame. So we might imagine that the “DE&S+” option will be favoured.

That involves giving DE&S more autonomy and flexibility, and perhaps getting agreement that key commercial staff can be paid outside the normal civil service pay scales. According to the FT and other sources, Bernard Gray, head of the organisation, has been lobbying for that freedom. It’s a fascinating argument – so I decided to hold the argument with myself over a glass of wine last night. This is how it went.

Peter Positive: Well, it’s a no brainer really. These defence contracts are just the biggest and most complex of all the public sector contracts. We need to pay more to get the best people working on them to get value for the taxpayer.

Cynical Smith: Yeah, right. MOD’s senior people would say that, of course, wouldn’t they, to get more money for themselves. Are the contracts really that complex? More so than DWP Universal Credit IT? Or Rail franchises? Or even a complex waste disposal PFI in local government?

Peter: Yes, I think they are. An aircraft carrier with all the implications around security, technology, size and scale is about as big as any contract gets.

Smith: Big, but not necessarily complex. It’s a load of iron with some computers grafted onto it.

Peter: And the MOD staff are facing off against supplier sales staff who are paid many times more than they are. We need to level the negotiation playing field.

Smith: Ah, the old parity with the private sector argument. In that case, the buyers who negotiate with the top consulting firms deserve a fortune! If I’m up against a McKinsey partner I obviously need a good half million, maybe more. I doubt the sales team from BAE Systems are paid a million a year – the top consultants would be. I don’t see that the differential is any greater really in defence compared to many other spend areas.

Peter: And when you think about it, a lot of the other really complex contracting that is fundamentally “public sector” is done by organisations who have the freedom to pay commercially competitive salaries. Look at Crossrail, with staff on £ hundreds of thousands, or the nuclear decommissioning organisations. Even the BBC can pay its procurement people better than MOD can.

Smith: So maybe they shouldn’t be allowed to pay these huge salaries either – that’s not a reason for allowing MOD to do it.

But look, let’s try and get to some common ground. When it comes down to it, I’m not going to argue that the best MOD commercial staff shouldn’t get more. But... can you really identify the best, those who truly deserve it? That worries me. And if it works for MOD, I do think we might make the same argument for a whole load of other commercial/ procurement staff around the public sector.

Peter: Perhaps you’re right... but MOD must be the priority, purely because of the size of the spend and the implications if we get it wrong.

A debate that may run for some time. We'll see.

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Voices (2)

  1. Ian Heptinstall:

    This argument also presupposes that the root cause of poor procurement is the quality of the people. Where’s the evidence? Maybe the system and process is the problem. In which case, paying sky-high salaries will make little difference.

    Defence procurement is intimately entangled with project and programme management, an area where most organisations use approaches that almost guarantee unreliable due date performance and longer-than-necessary durations. Stir a few poor selections and inappropriate use of adversarial fixed price contracts, and very few could succeed. No matter how much you pay them

  2. public sector refugee:

    Its a perfectly good argument that when the public sector is competing directly with the private sector in areas like that of programme management, then it ought to be flexible enough to offer competitive salaries, though many of the people who advocate this also scream blue murder when those salaries and the bonuses that go with them are puiblished. Remember the “principle” established by this government that no-one should be paid more than the Prime Minister. But it is a long stretch to claim this is the answer to delivering more programmes on time and cost. First, the history of people brought into government on high salaries is distinctly variable. Some have been successes; other have made little impact. Second, the argument ignores all those programme managers in the defence sector who bear equal responsiblity for cost and time over runs: for the most part, they are already on significantly higher incentive schemes. Simply paying programme managers in DE&S more will not make them work harder; nor will it address the real causes of delay and cost over run: the sheer complexity of the projects themselves and the constant changes in budgets iimposed by the Department and in requirements demanded by the customer. And dramatically increasing incentive payments will ensure that the Department will never be told the truth when projects get into trouble!

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