Defence outsourcing plan is ‘inherently weak’

30 July 2012

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30 July 2012 | Adam Leach

The government’s plan to outsource defence procurement is undermined by its weakness in commercial negotiation.

A briefing paper published by the Royal United Services Institute, has strongly criticised the proposal to outsource purchasing, which this month defence secretary Philip Hammond announced would be the government's preferred model for reform.

In its report, the RUSI Acquisition Focus Group – which includes former chief of defence materiel Sir Kevin O’Donoghue and John Weston, chairman of BAE Systems - said: “The GOCO [government-owned, contractor-operated] proposal suffers from an inherent weakness since it seemingly rests on an argument that, because the government is not very good at negotiating and managing contracts with the private sector, it is going to negotiate a contract with a private sector entity to undertake the task on its behalf.”

The paper raised concerns about how the GOCO model would be established. It called for clarification on what legal status the entity would have and whether its or the Ministry of Defence’s name would be on the signed contracts. And if the former, it asked, how might the US feel about dealing with a private company?

It also raised questions about the length of the outsourcing contract. With large-scale MoD projects running for a number of years – more than a decade in some cases - the company appointed would need to be signed up for a substantial time in order to have an impact.

In what it described as “dubious positives”, the report suggested the scheme might benefit from the company being outside the scope of public-sector pay constraints, enabling it to attract a higher level of expertise. It proposed special dispensations allowing the MoD to appoint a small number of senior, well-paid staff as a more effective and transparent option. It also said those working for GOCO may be more resistant to the buying requests from DE&S [Defence Equipment & Support], which would enable costs to be controlled more tightly.

“The bottom line is that, as practitioners and observers of defence acquisition in the UK and elsewhere, at present we cannot easily see how DE&S as a GOCO would work in practice, let alone why it would be a less expensive and better alternative to what is in place today.”

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