Hammond reconfirms commitment to defence privatisation

Secretary of State for Defence The Rt Hon Philip Hammond MPSummary: Defence Secretary Philip Hammond has renewed his plans to part-privatise the way the Government procures food and weaponry for the MOD just weeks after the bidding process for the contract was abandoned.

Last month, Mr Hammond announced that the contract to transform Defence Equipment and Support (DE&S) into a Government-owned, contractor-operated enterprise had to be called off due to a lack of competition after one of only two bidders pulled out.

Failed tendering procedure

The failed tendering procedure is rumoured to have cost the Government £17.8m. Despite criticisms that the plan wasted money and would have caused serious privacy concerns regarding the passing of sensitive military information into private ownership, Mr Hammond has now announced new measures to partly renew the privatisation process.

DE&S is now set to receive greater operational freedom and less red tape, including the ability to increase salaries in order to attract highly skilled senior staff.

Procurement of defence equipment

Private contractors will only oversee certain aspects of DE&S instead of the previous plans to have the successful bidder operate all aspects of the procurement of defence equipment, weapons and food.

A spokeswoman for the MOD said: “The new DE&S is an arm’s-length body working within specially agreed freedoms that will allow DE&S to operate differently to the rest of the Civil Service. It is an innovative structure that will bring the change needed to make sure every pound spent on defence provides value for money.”

Mr Hammond has appointed Bernard Gray as the first Chief Executive of DE&S-Plus, the newly revamped agency. DE&S-Plus will have an annual spend budget of £15bn from April.

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Labour to question defence procurement reforms

Defence Secretary Philip HammondSummary: Labour politicians have recently spoken out against the Defence Reform Bill, which outlines a planned part-privatisation of Defence Equipments and Support (DE&S). With recent reports of the privatisation of the Royal Mail hitting most major headlines and causing great controversy across the UK, more Government plans for privatisation look set to be unpopular.


Defence procurement reform

Defence Secretary Philip Hammond recently unveiled the Defence Reform Bill, which lays out plans to part-privatise DE&S, the Government body responsible for buying everything from missiles and ammunition to communications equipment for the British military.

The plans call for 16,500 workers to be transferred to the private sector, transforming it into a government-owned, contractor-operated concern (GoCo).

However, Labour politicians have since claimed that doing so would seriously jeopardise the military, with job cuts, conflicts of interest between efficiency and capability stemming from private control, and concerns around continued capability. With the Conservatives already coming under fire over plans to privatise the Royal Mail, they will have a very tough sell to convince the general public that privatising the military, even in part, is a smart move.

Defence tender concerns

More recent concerns have surrounded the re-tender of work after the initial contract period. With the original successful private organisation gaining unprecedented access to military records, finances and plans, there is a real danger of the original contract winner effectively ‘holding the MOD to ransom’ in order to secure a re-tender. After all, no one would argue that top secret military information should pass to new hands every time the contract is due for renegotiation.

Dougie Brownlie, a Public and Commercial Services Union defence sector officer, commented on the dangers of the contract being awarded to a non-UK firm or a firm with a current dispute with the UK: “What would happen if one of the contractors also worked for a country we were in dispute with? Wouldn’t that be a conflict of interest? If it also worked for the Argentinians, who would that contractor supply, us or them?”

MOD contractors to benefit?

However, for private firms in the UK, the privatisation model could actually be a real bonus and, if it goes ahead, could prove vital to help the economy. Under public control, DE&S has been criticised for allowing expensive projects to run way over budget, partly because of too much meddling from outside forces and stakeholders within the MOD.

On a clearly highly divisive issue, ministers on both sides will have a fight on their hands in order to either protect the public interest of the MOD, or else deliver value for the economy and the private sector.

Is this another example of a Conservative government too keen to sell off public assets, or could this be another shot in the arm the economy badly needs?