MOD close to contract award for DE&S support – Bechtel, CH2MHill and PWC looking good

Good grief, that was quick! It was only in April that the UK’s Ministry of Defence MOD started the process to let six contracts for “managed service providers” to support its Defence Equipment and Support (DE&S) operations, following the collapse of the original process to appoint a single partner to run the “GoCo” entity (Government owned, contractor operated). Here’s what MOD said then.

“The MSPs will be a key provider of the services / requirements driving the DE&S Materiel Strategy change programme. They will drive a step-change improvement of project delivery across DE&S, be it procuring new military equipment, commodities and services, supporting in-service equipment through-life or managing global logistic operations. The MSPs will design, build, implement, help operate and embed a system of project management techniques and project controls across DE&S that will improve effectiveness and efficiency of its output delivery”.

With impressive (or worrying) speed, apparently MOD has already reached preferred bidder status on the contracts. The Independent newspaper reported at the weekend that Bechtel will look after the navy and RAF, while CH2M Hill will work with DE&S on army and joint-command projects. Detailed negotiations start next week and these talks will be important as the roles are widely considered to be vaguely defined.

Separately, the reforms also involve the private sector playing a key support role for human resources. It is understood that all of the Big  Four accountancy firms bid for this role and that PwC has landed the contract. The final package advertised was for Finance and IT support. This is not mentioned in the newspaper report – we don’t know if that means a decision has not yet been made, or just the Independent hasn’t got hold of that piece of information.

The Independent reported:

An MoD spokesperson said: “Negotiations to bring in managed service providers are still under way in order to secure the best value for the taxpayer. It would be inappropriate to comment further at this point. We plan to award contracts next month.”

There are a number of concerns here. For instance, Bechtel is a tough firm in every way. If there was an adversarial negotiation between Bechtel and MOD, I know which side my money would be on. However, we might turn that around and ask whether perhaps we need a Bechtel or a CH2MHill to hold the defence suppler community to account – the likes of BAE Systems, Lockheed Martin and Thales are not exactly pussy cats themselves.

The other major issue will be whether this initiative leads to even more inter-service rivalry. Will Bechtel and CH2MHill be pushing the case for “their” service(s) to get more resource and focus? Remember, one of the main concerns for Bernard Gray (now DE&S Chief), going right back to his original report, was to reduce this sort of squabbling. Amongst other problems, it led to the situation where the services had a vested interest in under-estimating the cost of their own projects in order to get funding! Might that be exacerbated with the private firms now also having a vested interest in getting resources for "their" services?

There are also potential conflict of interest issues which are worth exploring another day. But there’s no doubt if this does go ahead that we’re going to see a lot of media coverage around how much money these firms are making, how much individuals are being paid and so on. Unfortunately, that will get the focus, rather than a sensible assessment of how well they’re performing. We’ll do our best here to provide some of that balanced view, assuming this does gets underway.


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