MOD take a step towards outsourcing Defence Procurement & Supply Chain activities

Philip Hammond, the UK's Defence Minister, made a statement yesterday in which he confirmed that the preferred option for the Defence Equipment and Support organisation, which includes a large proportion of military  "procurement" activities, is a GoCo organisation (government owned, contractor operated).

Earlier this year, I therefore asked my officials to focus their efforts on considering the comparative benefits which could be derived from changing DE&S into either an Executive Non-Departmental Public Body with a Strategic Partner from the private sector (ENDPB/SP), or a Government Owned, Contractor Operated (GOCO) entity. The work done to date, suggests that the strategic case for the GOCO option is stronger than the ENDPB option. Further value for money work is under way to confirm this assessment. In the meantime, as resources and commercial appetite constrain our ability to pursue these two options simultaneously to the next stage, I have decided that MOD should focus its effort on developing and testing the GOCO option further.

Further work will be done to decide whether to proceed, with an investment appraisal, and a competition to find the private sector contractor could start later this year, although my suspicion is it could be a little later.

Lots of implications around this obviously; for a start, if you're applying for the jobs we featured earlier today, there's now a fair probability you'll end up in the private sector. As we said, that's not necessarily a negative.

And over the next weeks we'll be looking at what a GoCo means, how it might work, the positives and the issues of concern with this route. Interesting times though for one of the very largest procurement organisations in the world ...

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Voices (7)

  1. Sam Unkim:

    Hi Planbee
    You want short termism, look to the Governments cancelling of “Black Arrow” the British satellite carrier rocket, built from recycled parts and running on Paraffin.
    As of 2012, the United Kingdom is still the only country to have successfully developed and then abandoned a satellite launch capability

    My carpenter grandad, had a hammer all his life.
    He had to change the handle six times & the head twice though.

    By the end of WWII the Spitfire was a vastly different beast ( Griffin engine, 70% heavier, Cannon, contra-prop,even a laminar wing) to the one which first entered service… Driven by direct competition with german products.

  2. Sam Unkim:

    Blenheim Bomber
    In 1934, Lord Rothermere, owner of the Daily Mail newspaper, challenged to the British aviation industry to build a high-speed aircraft capable of carrying six passengers and two crew members.
    It proved to be faster than any fighter in service with the Royal Air Force at the time

    Perhaps with the Americans playing oakey-cokey with the F35-B(orC) Joint Strike Fighter
    , its time for a similar challenge.
    Harrier VB anyone ? Graphene Composite Airframe, Supersonic etc.(would BAe count as an SME)

    1. PlanBee:

      Thanks for that Sam, gave me cause to look up the good old Bristol Blenheim on Wikipedia

      Here is a theoretical arguement, as its a Friday. Whilst it was the fastest UK plane of its time it was out of date before the war started, arguably by 1937. Whereas its near contemparies, the Hurricane and Spitfire, were in service throughout the war and in the latters case far beyond.

      Perhaps a good example of the Private Sector’s short termism 🙂

  3. David Orr:

    Q1. Is the Options Appraisal running to the Treasury Five Case Model or not?

    NOTE for Peter: Will Spend Matters FOI the MoD to ask if the Treasury Five Case Model is being used in full?

    Q2. Is Philip Hammond indicating the small “p” politically preferred option BEFORE a Full Business Case (FBC) has been developed (under a recognised model such as the Treasury Five Case model) – The requirements within the FBC should then used to test each Option BEFORE settling on the best one i.e. method, process & evidence should drive the options appraisal and NOT small “p” and big “P” politics.

    Q3. How will defence procurement and manufacture be shared with key Nato & EU allies e.g. US & France? Airbus as a commercial example.

    In the latest Private Eye (1318 – Boris & Dave on the front) there is a piece where the latest Type 45 ship was a joint design with France. The French were said to have built their ship with greater capability for less than £500m per ship, whereas BAe had built the UK version for just over £1bn per ship.

    Why does this Government focus on structures for doing things, rather than the professional procurement issues arising from lessons learnt?

    It is about how you do things NOT the structure you do things from!

    Lobbyist on behalf of large defence contractors: Answers on a postcard to Private Eye please!

  4. Dan:

    “Government owned” means that it’ll still be covered by the Procurement Regs, albeit with the proviso that some defence spending is exempt. I wouldn’t really differentiate between the private sector and public sector in this case.

    1. bitter and twisted:

      Positives? What hallucinogenics will you be experimenting with, Pete?

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