Assessment Phase begins: GOCO or DE&S+

The Secretary of State for Defence, Rt Hon Phillip Hammond MPIn 2011, the Materiel Strategy programme was established to consider what changes were required to be made to the Defence Equipment & Support organisation (DE&S) to provide the Armed Forces with the equipment they need in the most efficient and effective way possible.

Defence Minister Philip Hammond has announced the next stage in the move to transform the Ministry of Defence’s DE&S procurement organisation into a more effective and efficient business unit.

Two options remain under consideration: a private sector led Government Owned, Contractor Operated ‘GOCO’ model; and a fully funded, restructured version of the current organisation, staying within the public sector, known as ‘DE&S+’.

In July 2012, after an examination of all available options, the GOCO model was provisionally announced as the preferred route to DE&S transformation. The next steps are now being taken to take this work forward. The final Assessment Phase, expected to last around 12 months, will now definitively choose between the GOCO and DE&S+ options.

During the Assessment Phase, work will be carried out with HM Treasury and the Cabinet Office to explore the potential outcomes of a changeover which retained the organisation within the public sector. Parallel to this, a commercial competition will be launched to evaluate how a GOCO would work in practice.

Making the announcement, the Defence Minister said: “For decades, there has been an acknowledgement that defence acquisition in this country can, and should, be done better. Despite almost countless reviews and reorganisations, successive Governments have failed to embed the radical changes necessary to provide our Armed Forces with the equipment they need in the most effective and efficient way possible.”

Mr Hammond reckons the GOCO model is most likely to prove better value for money, but believes a market testing exercise must be carried out to establish the cost of GOCO delivery.

He stressed: “No decisions have yet been made. At the end of this 12-month Assessment Phase we will have a comprehensive set of qualitative and quantitative data for both possible operating models which will enable us critically to evaluate the two options and make a final decision about the future of DE&S.”

At present, DE&S is responsible for:

  • the procurement and support of ships, aircraft, submarines, weapons, vehicles, satellite communications, information systems and supporting services;
  • the British Forces Post Office;
  • the Joint Support Chain;
  • HM Naval Bases;
  • general requirements including clothing, food, medical supplies and temporary accommodation;
  • the Submarine Dismantling Project; and
  • all commercial activities within the MOD.

In 2013, DE&S priorities have included acting as an objective adviser and decision maker on the acquisition of equipment and services and progressing defence transformation projects.

The potential move from the current DE&S operating model to a GOCO alternative has been debated over the past few years. According to feedback received by defence experts from the RUSI Acquisition Focus Group in July 2012, there are several areas which cannot operate as part of a GOCO model, such as the Atomic Weapons Establishment (AWE) where industry works under close supervision on a limited range of tasks.

As the Focus Group noted: “The DE&S acquisition and management function in defence is much more diverse and complex than the development, production and support of nuclear weapons.”

The Group also argues that the GOCO proposal contains an intrinsic flaw: “The GOCO proposal suffers from an inherent weakness, since it appears to rest 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 an even bigger contract with a private sector entity to undertake the entire task on its behalf. Persuasive arguments against this logic need to be marshalled.”

The Group envisages that moving to the GOCO model will be one of the most complex and fraught transformations attempted by defence: “An important factor of military acquisition, frequently ignored, is that DE&S is but one aspect of the mix. Any real improvement must consider the entire process and the array of those with a part to play throughout MOD and the remainder of Government, all of which have the power to negate decisions made in Abbey Wood.

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

Despite the cautionary conclusions reached by the RUSI Acquisition Focus Group study, the Defence Secretary remains keen to move to a GOCO model. In the course of making an announcement to Parliament regarding the Defence Materiel Strategy, he said that he expects the GOCO option to be not only more beneficial but also better value for money.

Mr Hammond said: “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.”

The Assessment Phase is just beginning, and more analysis will be undertaken to ensure the best model is selected.

Mr Hammond concluded: “I expect to publish a White Paper later in the spring setting out further details of our analysis of the problems in defence acquisition, of the options for potential solutions and the reasoning behind our focus on the GOCO as the preferred solution.”

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