New plans for Defence Equipment and Support – but will Bernard Gray be around to implement them?

According to reports, the UK’s Ministry of Defence is about to issue details of the revised Defence Equipment and Support (DE&S) programme for greater private sector involvement in weapons procurement. This follows the collapse of the plan to appoint a single partner consortium to form a “GoCo” – the mythical “government-owned, contractor operator” entity. That initiative fell apart when only one consortium was left in the bidding process.

The new plan is to split the requirement into several ‘lots’.  There will be one each for supporting army, navy, air force and joint command projects covering procurement and development of new equipment. There may also be separate private sector ’partners’ in areas such as HR support, according to some reports.

The Financial Times ran an article suggesting that industry didn’t think this was a terribly good idea. As they said:

One executive involved said: “There are big questions about how all the companies would work together. All in all, it’s a bit of a mess and unlikely to give great value for the taxpayer.”

The FT also reported that even some officials in MOD don’t like the idea – what if a project cuts across the different sectors? And apparently Treasury is not keen to allow MOD to give staff huge pay rises to retain its best negotiators, something they’ve been lobbying for some time.  But as we’ve pointed out, this would open the door to all sorts of other claims of special treatment needed for commercial and other staff, in other departments and even in other parts of MOD. Nuclear submarine engineers for instance are rare and valuable beasts – why not increase their reward?

Anyway, if we go right back to the Bernard Gray report on defence acquisition, originally suppressed but issued eventually in 2009, he identified that one of the fundamental problems was competition between the different military services and interest groups for investment, leading to costs being under-estimated deliberately to make pet projects look more attractive. Gray of course went on to become Chief of Defence Materiel and now runs DE&S, but he has not really re-structured to break down those issues as much as might have been expected – and clearly, there are always going to be different streams of activity in something as huge as MOD.

But this structuring of the private sector involvement and split of contracts would seem to make any chance of minimising silo behaviour unlikely. The ’partners’ will all have a vested interested in arguing for ‘their’ service and more income for themselves. And what happens when suddenly MOD has to find the odd billion in savings?

There is also the question of market interest. The previous contract was arguably too large for many potential suppliers, but do they now need to bid for four separate contracts with the subsequent cost and resource implications? Consortia will probably still be needed to be credible, so that complexity remains. And how will the retained element of DE&S – the residual public sector element – manage four ‘strategic partners’?  There are many questions here still to be answered.

There’s another complication to this too. We understand that Bernard Gray is on a three year fixed term contract, which runs out at the end of 2014, so it is quite possible that his role will have to be publicly advertised in the summer. Will he apply, and run the risk, theoretical at least, that he doesn’t get it?

However, would anyone else apply? On the plus side, pretty well paid, high profile, knighthood when you retire. But honestly - talk about a poisoned chalice.  A very difficult commercial challenge ahead, intense cost pressures, all the aspects around the political dimension of defence acquisition as well, the media on your back all the time... It does feel like there must be easier ways of making a living if you are of the calibre to even consider a role like this!

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Voices (4)

  1. Dan:

    This is starting to look as if someone said “Right chaps. We all know that the private sector is better than the public sector. No, I don’t have any evidence of that, but we all know its true. The Daily Mail said so. Don’t give me that look. Anyways, we need to get the private sector involved. I’ve spoken to some, and they’ve promised to improve things. Charming chaps, we worked it all out on a beer mat down at the club. I know that the GoCo thingy didn’t work out, but I’m sure we can get it done some other way. By hook or by crook. I’m sure we all agree on that? Excellent. get it done”.

  2. Davy Boy:

    Yet again DE&S totally missing the point. The huge unspoken conspiracy between the Armed Services and defence industry to keep estimates low to get projects approved and then reveal the true cost when it’s too expensive to cancel, plus MoD’s inability to write down a set of technical requirements and stick to them are the true problems. It’s got nothing to do with retaining the best negotiators – the damage has been done before the commercial/procurement staff get anywhere near it.. I’ve worked in defence industry for 25 years – it’s never got over those basic problems.

    1. bitter and twisted:

      But behind that is the fact that no politican will grasp the nettle and say: No, we can’t afford a modern nuclear deterrent and a blue water navy and a state of the art fighter and heavy tanks and an intervention force and a subsidized domestic/EU arms industry. I’m sure I’ve missed out many other ands.

      Look at the carrier debacle. The true choice was: proper nuclear carriers that could carry a range of conventional planes, or, don’t bother. Cur down carriers for a plane that didn’t yet exist was moronic.

  3. b+t:

    Wow. All the problems of the original Bad Idea with a whole heap o’shite chucked on top.

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