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01Aug2013

Defence Material Strategy – The House

  • By Paul Beaver
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Everyone agrees that defence acquisition needs to change – but by how much and how soon? Four years ago, only keen readers of the Financial Times or those in the Whitehall village had heard of Bernard Gray. Today, the architect of commercially-led acquisition change is the sought-after dinner guest in every major defence boardroom.

Mr Gray is keen to take defence acquisition in the form of the Defence Equipment & Support (organisation – but one mustn’t use the acronym) into the post-modern world with a radical approach to acquiring and supporting equipment and services.

Government-Owned, Contractor-Operated (GOCO) is the preferred solution to one of the longest ‘assessment phases’ ever in the MoD, but it is clear that something radical must happen.

Why? Every year, Defence ‘loses’ £1.5bn in cancellations, delays and overruns, the cause of which can be landed equally in the manufactures’ boardroom and on the desks at Abbey Wood, Bristol, the headquarters of DE&S.

The reasons given are variously known as ‘conspiracy of optimism’, ‘skills shortage’ or ‘lethargy’. But when has an army not complained about the Quartermasters’ department?

The truth will lie somewhere between the boardroom, factory floor and civil servant’s desk –changing with the stage of a project. Defence’s Permanent Secretary, Jon Thompson, speaks eloquently about the need for the department to concentrate on its core skills – military capability is foremost in his mind. So radical change is very much needed. This is refreshingly new for a department’s top civil servant to advocate.

If the solution needs to be radical, the question is: just how radical? At one extreme, GOCO offers the opportunity to bring in a major player from North America which is used to delivering complex projects without fear or favour. It would mean changing the status of DE&S civil servants to public sector workers and, hopefully, creating a culture of doing rather than just being. GOCO’s key advantage is
transformation which would incentivise the workforce and thereby drive commercial behaviour.

 

But which major player does Mr Hammond choose? One without any defence contracts? Then, the field is limited, and probably American. Other limitations with GOCO are what our partners in acquisition perceive to be happening and where the major defence contractors sit. None will be eligible for GOCO because of a conflict of interest and that might limit candidates.

At the other end of the spectrum is the plan for a ‘DE&S plus’, which is more politically acceptable to the civil service unions because it keeps much of the status quo and perks of civil servants but injects the much needed skills.

These skills include commercial expertise, because the civil service training does not equip an administrator with the skills to negotiate, on equal terms, with defence industry specialists.

The DE&S civil service has more than enough ‘HR professionals’ and ‘health & safety experts’. What it lacks are real world
skills. But does it have a useful framework on which commercial realities can be built? That’s what the Assessment Phase is supposed to test.

With the Queen’s Speech indicating that a Defence Reform Bill will be tabled this session, a contract notice to private industry to register an interest and an Invitation to Negotiate to be issued this ‘summer’ – in civil service speak that’s a tight definition! My view? It will be fudge. Perhaps, it might be called DE&S Plus Plus. It seems unlikely that the bold step to full GOCO will be taken, despite the logic.

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