Defence procurement outsourcing needs more examination

26 April 2013

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26 April 2013 | Adam Leach

The Ministry of Defence (MoD) is to carry out a year-long assessment phase before eventually deciding whether to outsource defence procurement to the private sector.

In a statement to Parliament yesterday defence secretary Philip Hammond revealed the government will invite proposals from the private sector that will detail the provider’s capability and how they would operate a ‘government-owned, contractor-operated’ (GoCo) entity.

In parallel, it will assess a public sector comparator, described as ‘Defence Equipment & Support plus’ to decide which option provides greater value for money.

In his statement, Hammond made clear he believes the GoCo option will prove preferable. “We have made no secret of our expectation that the GoCo option is likely to prove better value for money, but we need to test this assumption with the market, to see what can be delivered and at what cost.”

Once the assessment phase has been completed, the government will decide whether to contract one of the bidding parties or to keep the purchase of military supplies - from helmets to helicopters - within the public sector.

The GoCo has already received the backing of the CBI. Jim Bligh, head of public services reform at the employers organisation, said: "It is right that government injects new commercial skills and expertise into the management of major defence projects with a private sector-led approach. This could help to eradicate delays and deliver better value for money.”

But the proposal was criticised by MPs on the House of Commons Defence Committee in February. Conservative MP and chair of the committee, James Arbuthnot, said: “It is clear that a GoCo is not universally accepted as the best way forward,” adding there were “particular concerns about how the MoD’s overall responsibility for acquisition could be maintained within a GoCo”.

The idea to create a GoCo to manage procurement was made in November 2011 in a strategy paper by Bernard Gray, chief of defence materiel at the MoD.

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