What’s going on in MOD procurement? Some big ideas are brewing…

The resignation of Dr Liam Fox, the UK’s Minister of Defence, has already slipped out of the political headlines. But it will have an effect on plans for the re-shaping of procurement activities within the MOD.

You may remember, Bernard Gray was appointed Chief of Defence Materiel earlier this year, putting him in charge of the MOD’s entire logistics and procurement organisation (DE&S), as well as a range of other activities which fall under that banner.  Gray wrote a report that was very critical of MOD “acquisition” strategy and performance before he took on that role, and we’ve been wondering when some of the ideas he outlines in that report might come to fruition.

We now understand (from our MOD sources) that Gray has started exposing more of his thinking, including at a recent internal MOD conference.  Politically, it would be quite hard to follow a “do nothing” strategy I suspect,  given all the criticism MOD acquisition has received from many quarters - including Ministers and Gray himself. So in terms of the future for DE&S, there are apparently three ideas under consideration. They all play to one of the key thoughts in his report – that the acquisition organisation needs a clearer separation from the military who are the budget holders.

So, idea 1 is for DE&S to become a Trading Fund – which means it could at least operate its own P & L,  start earning revenue and somewhat separate itself from its “clients”.  (Buying Solutions was a Trading Fund, probably the best known example in the public procurement world). But in my personal view, a Trading Fund probably doesn’t achieve enough real change and may just lead to some more complexity around charging and relationships.

The second option is for DE&S to become a more independent  “non-departmental public body “ or similar. Amongst other potential benefits, this would make it easier for them to engage the private sector in some more integrated manner – the way CLM contributed hugely to the Olympic programme, as partners to the ODA,  seems to be an interesting precedent.

Option 3 – which was Gray’s preferred recommendation originally– is (as he put it in that report )  “the migration of the slimmed down DE&S entity into a Government Owned – Contractor Operated (“Go-Co”) entity”.   We understand this is still being considered as an option; it would be presented by the media of course as “privatisation” of MOD acquisition, even if the Government still techniccally "owned" the organistaion, which could be controversial.

It does have attractions though – as the report said, as well as bringing in private sector expertise, it would “also clarify the interfaces between DE&S, industry, the Requirements community and the Front Line Command military users. This arrangement would force each of the participants to formalise and cost significant changes to requirements or timescale.”

The big operational danger with such a radical option may be that handing over so much power to private sector organisations requires a retained and highly skilled MOD “intelligent client” organisation, in order to manage the Go-Co(s) effectively.  Is MOD up to that? It would also I guess be the most complex in terms of issues around staff, TUPE and so on. However, it might deliver the most benefit – so it is perhaps the high risk, high return option.

Personally, I’m quite attracted to the idea of the private sector getting into the frame in some way, given the scale of the change I believe is wanted (and probably needed). So option 2 certainly brings that possibility without the risk of option 3. But I’m not close enough really to give a fully informed view.

How does all this relate to Dr Fox? I’m sure all of this thinking would have been discussed with him at length, and he may well have got close to decision point. But now, officials will have to go through all the arguments again, from scratch, with Philip Hammond.  He’s a sensible, managerial, non-dogmatic politician, so I’m sure he will approach these decisions very rationally. But simply the change of Minister may delay anything actually happening by weeks or even months.

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Voices (4)

  1. Norman Housden:

    This is all very interesting especially with last weeks publication of Lord Curries report on Single Source MOD Procurement, commisioned by Peter Luff Minister for Defence Equipment, Support and Technology. This calls for a greater transparency between MOD and industry, but how will this play out if DE&S become psuedo Industry? See http://www.optimatrix.co.uk/200m-potential-savings-if-recommendations-from-the-single-source-military-equipment-contracts-report-are-implemented/
    The other question is which minister is responsible?

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