Defence Reform Bill

Written evidence from the Army Rumour Service website (DR 07)

Better Defence Acquisition Cm8626, Defence Reform Bill 2013/14

Executive Summary

1. This document covers discussions that have taken place on the Army Rumour Service website regarding the proposed improvements to Defence Acquisition in the 2013/14 Defence Reform Bill.

2. The major concerns and issues that have been raised by our users can be summarised

as follows:

a. A concern that the national interest will suffer.

b. Scepticism that a private company will be able to reduce costs given the

requirement to make a profit.

c. A belief that a decision has already been made to choose the GOCO model.

d. The suggestion that the DE&S performance is caused by issues within the Department

National Interest

3. There is widespread concern that both the presented options and the current list of bidders will not support the UK national interest. It would appear that both the remaining bidders are US owned companies without a track record in this area. There are also question marks over ownership of intellectual property and possible conflicts of interest

4. Typical quotes include:

User: Goatman

HMG is now running a competition between two US-majority owned bid teams for its indigenous Defence R&D and arms procurement. At what point in this depressing exercise will the NAO mutter that British national interest has been poorly served?

User: meridian

How are you going to control and manage intellectual property if the winning organisation has similar interests to those bidding for future MoD contracts. We saw how there were problems with the SAR PFI, it is so easy for a small part of the machine to be corrupted but even the merest whiff of it will bring the whole house of cards down

User: Without Commitment

Finally with the withdrawal of KBR this will only leave 2 consortia, both American led I believe, bidding for DE&S. Is it REALLY such a good idea to leave the equipping and support of the Armed Forces in the hands of a foreign nation? How many existing Contracts with DE&S do these Consortia members have and are they not then excluding themselves from bidding?

User: bobthebuilder

Another angle on the debate; with KBR out of the competition, is this a procurement going wrong? Surely it is not in the MoD's interests to be down to two bidders at this stage. Neither of the players have much of a track record of delivering UK defence projects or of major TUPE transitions. Where are the big British players in the engineering services sector (Babcock, Interserve etc etc)? Why did KBR pull out? They have been lobbying for this for a long time, have a globally renowned partnering culture and are one of the best (if not the best) performing defence contractors. If they can't make a case for bidding this, can anyone make it work?

Profit & Costs

5. Any commercial organisation will need to make a profit from the funding lines that are currently used to buy military equipment. It is widely believed that DE&S is already poor at achieving value for money contracts and many users highlighted that the GOCO option may just replicate this in the procurement organisation.

User: Fatcivvy

Given that the Defence Equipment budget is finite; then surely any profit margins, etc for the privatised company whoever it may be, will have to be taken out of the budget which means in turn, that there will be less money to spend on the actual equipment.

User: Without Commitment

And finally, how can it possibly be cheaper to employ another 300 'Management Staff ' for the Co that's going to run DE&S and then get the Government to pay a 20-25% Overhead and profit charge on top of all the costs? I make that a massive increase in running costs. The Civil servants/military don't charge overheads or profit on their costs currently.

User: bobthebuilder

My issue with a GOCO is that it won't be subject to market discipline; it won't have to deliver a dividend to shareholders and it won't have a share price to maintain or push up. It won't, therefore, deliver the best of industry.

User: AlMiles

the very first thing that will happen is that the Contractor Operator will bring in its very best commercial staff and whole fleets of lawyers to stitch up the MOD something rotten, and ensure it gets absolutely minted whatever happens. There'll be no alternative, no true competition, unless MOD is going to set up a rival procurement agency with another contractor or piggy-back on another country's

Decision Already Made

6. It is widely believed that the GOCO option has already been chosen and the DE&S+ option is not being seriously examined.

User: Without Commitment

Regarding the "privatisation" of the part of part of the MoD responsible for purchasing items for the Armed Forces, the DE&S, it will be catastrophic. Bernard 'GOCO' Grey is widely regarded as already having made his mind up, but is still trying to formulate the right question to justify the unjustifiable

User: OldSnowy

I would guess that we'll find the "DE&S+" ption being used purely as a benchmark against which to 'aim' the GOCO version. In other words, there is a presumption (and that certainly seems true for the Top Men involved) that GOCO is happening, and that's that. I would bet my house, family and car on GOCO being the preferred option. That's not to say it's a bad thing – there are problems in the procurement system, of that there's no doubt, but to say that this will be a fair test of two options is, I fear, just not going to be true.

DE&S Performance

7. Many users questioned whether DE&S performance was actually as poor as people thought. Especially when considered within the context of the existing regime that included political interference, military tour lengths bringing disruption and the lack of decision making authority at appropriate levels.

User: Without Commitment

The suggestion that "privatisation" will remove constraints, said constraints having been put upon the DE&S by the politicians themselves leads to another question "why not simply remove our own constraints rather than privatise?"

User: dcpw

Keep politicians out of the final decision loop, there is nothing more demoralising than producing a technically superior offer and seeing it put into 2nd place because one of the other bidders will build a factory in a deprived area that has a dearth of technically minded people to work in it.

User: HE117

When will people realise that procurement is not a game for amateurs that you post about every three years..

User: jim30

the Military manning system sees tours at Abbey Wood as being something to be endured for 2 years and then avoided like the plague. People do not, in the main, join HM Forces to do requirements management or procurement. The culture of revolving doors, where new people have to reinvent the wheel for the OJAR tick in the box doesn’t help either. While you replace your workforce on a regular basis, wiping out uniformed corporate memory of a project and watch as different people in different layers react in different ways, things will go wrong.

User: bobthebuilder

The lack of accountability is staggering; those SO1 grade CS you refer to have virtually no executive authority; decisions are raised upwards and subject to endless review by board who have little competency on the project. The whole thing is sclerotic, decisions are taken too high and too late.

User: BrunoNoMedals

I can point to some genuinely outstanding staff members in my own team, balanced out by one bloke for whom Restoring Efficiency wouldn't even come close. From the GOCO perspective I can see why there would be benefit in thinning out the chaff, but it does feel like a bit of a cop out when the government suggests it can't manage to arrange its personnel management that effectively.

About The Army Rumour Service

8. The Army Rumour Service website (arrse.co.uk) was founded in early 2002 and is the United Kingdom’s most popular military community website. It has 85,000 registered users and is routinely visited by in excess of 500,000 unique visitors per month

Prepared 9th October 2013