December 16, 2010 11:29 pm

MoD critic to lead defence procurement

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Bernard Gray, author of a hard-hitting report on the way the ministry of defence acquires military equipment, was appointed the MoD’s chief of defence materiel on Thursday, in a move that signals a radical overhaul of the way the department operates.

In a decision that will have surprised many in the defence establishment, Mr Gray was appointed to a post in which he takes charge of the government’s multibillion-pound programme for the acquisition of military equipment.

Mr Gray, a former special adviser at the MoD, was the author of a widely praised report commissioned by the Labour government last year, which warned that the MoD was running a “substantially overheated equipment programme with too many types of equipment ordered for too large a range of tasks”.

His report has been hailed as a detailed assessment of how the MoD ended up this year with a £37bn “black hole” in which it is committed to buying military equipment for which no money has been set aside in its budget.

However, Mr Gray’s appointment to one of the most important posts in Whitehall was on Thursday raising questions about how the government intends to handle vital aspects of defence procurement policy.

One of the most sensitive issues will be the future of Defence Equipment & Support, the MoD body with an annual £14bn budget to buy and maintain all armed forces equipment. Mr Gray’s report suggested outsourcing the operations, creating a “government owned, contractor operated” entity, or “GoCo”, modelled on the Atomic Weapons Agency.

However, the recommendation was fiercely resisted by many in the MoD and by senior figures in the defence industry. Although Liam Fox, defence secretary, did not back the proposals in opposition, the option may come under renewed scrutiny within the MoD.

“The government does now need to clarify where it stands on any reform of DE&S,” said Malcolm Chalmers of the Royal United Services Institute, a think-tank. “It will be surprising if Gray took this job only to reject one of his main recommendations.”

Mr Gray, a former Financial Times journalist, starts his new job in early January. Within the next few months he must lead negotiations on cancelling or scaling back hundreds of contracts, design a programme to shed 25,000 civilian staff and close a tough annual budgeting round.

David Cameron, prime minister, and Mr Fox see the appointment as a strong statement of radical intent. Downing Street said: “There’s a big problem which we need to sort out and that’s why he has been brought in.”

Liam Fox, defence secretary, was forced on Thursday night to cancel plans for a private visit to Sri Lanka this weekend following objections from William Hague, foreign secretary.

In a move that appeared aimed at putting an end to differences between the two men over the visit, Mr Fox said in a statement he would pay an official visit to Sri Lanka next year.

The Sri Lankan government is facing allegations of war crimes during its final assault on the Tamil Tigers last year. There was widespread anger outside government that Mr Fox risked giving comfort to the regime when it was flouting United Nations demands for an independent investigation into the allegations.

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