U.K. to consult Industry on Procurement Restructure

The U.K. Ministry of Defence will consult with industry on two options being considered as part of a shake up to the procurement organization.
The MoD notified defense contractors late last week that they are to canvas industry views over the next month on two of the three options being considered to radically restructure the way the Defence Equipment & Support organization (DE&S) manages its 13 billion pound ($20.4 billion) annual procurement operation. The move comes nearly three months after the recommendations landed on the desk of Defence Secretary Philip Hammond.
The consultation, what the MoD calls “soft market testing,” will focus on the two options that include private sector involvement, leaving out a third option that would keep DE&S within the department without the private sector being involved .
DE&S boss Bernard Gray has been leading work on the program, known as the Defence Materiel Strategy, since mid-2011 as part of a wide-ranging restructuring of the MoD. The materiel strategy is aimed at achieving value for money in an organization that has previously been heavily criticized, most notably by Gray himself, for overseeing MoD procurement programs that are often late and over budget.

Known as Planning Round 2012, or PR12, the announcement is likely to entail further cuts and delays to equipment programs and capabilities in the face of continuing efforts to match spending with reduced British budget resources.
Gray presented the defense materiel options to Hammond just before Christmas and a decision from ministers on the way forward for the reorganization had been expected imminently, but now it looks as though it will be put off until at least mid-year.

Industry executives here said Hammond’s decision to go for industry consultation likely reflects the defense secretary’s reluctance to go ahead with a preferred option without further supporting evidence.

A notice published by an EU publication said industry consultation is intended to “test the thesis that improved DE&S performance and therefore best value for money could be achieved through greater private sector involvement in DE&S.”
Hammond is fast acquiring the nickname of “forensic Phil” or sometimes “spreadsheet Phil” among some in industry due to his ability to focus on and understand the financial implications of decision making at the MoD.

Speaking in the DE&S house newspaper last Feb, Gray said the options had been presented to Hammond and it is “now up to the Secretary of State to decide what to do. It will be a significant prize for the country and defense if we get this right.”

Late last year DE&S said it had narrowed its choice of potential management change options down to three contenders.

  1. A government-owned contractor operated setup managed by a private-sector company with private sector employees.
  2. An executive non-departmental public body remaining in the public sector but at arms-length to the government and with a strategic partner.
  3. A trading fund where DE&S continue to be part of the MoD and staffed with civil servants but with more freedom to manage than the current set-up.

Industry speculation in recent weeks has pointed to the executive non-departmental public body as being the most likely vehicle for reorganizing DE&S.
Gray, though, favored the Go-Co approach when he undertook an independent review of the DE&S operation for the previous Labour Government in 2009.
That view was rejected by Labour at the time. One current government minister late last year said the GoCo scheme had only been added to the materiel strategy review to make the process intellectually sound.
His stinging review of DE&S capabilities led to his appointment as chief of Defence Materiel a year later by the then-new Conservative-led coalition administration.

from Defence News By ANDREW CHUTER


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