April 25, 2013 11:10 pm

MoD procurement reform plan gets cool industry response

An armed British soldier stands guard as a British military helicopter prepares to land in Nasiriyah©Reuters

A Ministry of Defence plan to outsource procurement of the UK’s military equipment to a private contractor has received a wary response from the industry, analysts and former defence officials.

Philip Hammond, defence secretary, is considering shifting responsibility for the UK’s £14bn annual procurement programme from MoD arm Defence Equipment and Support in an attempt to end longstanding financial problems. The new organisation, which would be government-owned but contractor-operated, would be known by its acronym Goco.

Howard Wheeldon, a veteran industry analyst, said on Thursday: “I have not heard of anybody who is in favour . . . I have not heard of one [defence] company that has put its hat in the ring.

“It still must be proven beyond all reasonable doubt that this is going to provide value for money for the taxpayer and to the armed forces and some benefit for those companies the MoD procures equipment from,” he added.

Sir Brian Burridge, vice-president of ADS, the industry trade group, said: “There needs to be a proper dialogue, a proper recognition of the legitimacy of the industry’s concerns and a proper resolution of those concerns.”

These include commercial confidentiality and intellectual property issues, especially if the job of running the Goco is given to a competitor.

But industry was “not in opposition mode” and was pleased the MoD had acknowledged its problems and was doing something about them, he said.

In a statement, BAE Systems said: “BAE Systems supports the Ministry of Defence’s proposed approach to Goco and subject to the conclusions of the assessment phase believes it has the potential to benefit all in the defence industry.”

However, the Royal United Services Institute, one of the UK’s most influential military think-tanks, expressed stronger doubts. “We cannot easily see how the . . . Goco would even work in practice, let alone why it would be a less expensive and better alternative to what is in place today,” it said, adding that history was littered with failed outsourcing deals.

The idea is the brainchild of Bernard Gray, a former businessman, whose withering independent 2009 report on the state of the MoD’s equipment programme noted that the problems and sums of money involved were so endemic that they had lost the power to shock. Lawmakers from both big parties broadly embraced his recommendations and Mr Gray was made head of DE&S in 2011.

However, his outsourcing defence procurement – the first time any country with a substantial military would do so – has always faced opposition.

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