NAO publishes defence acquisition recommendations

EurofightersSummary: The National Audit Office (NAO) has published a new report which contains a number of recommendations which will aim to improve the procurement and acquisition of defence equipment and support for the MOD.

The report, entitled Reforming Defence Acquisition, looks primarily at Defence Equipment & Support (DE&S), the branch of the MOD which deals with defence procurement. The Department had a spend of £13.9bn in 2013-14 and is a critical driver of planned UK defence efficiency and success.

Reforming DE&S is a key component in the MOD’s 10-year Equipment Plan, valued at £162.9bn over the next ten years, which outlines how the MOD will procure equipment for the UK Armed Forces.

Defence Equipment Plan affordability

It is hoped that, by reforming DE&S, making it more cost effective and streamlined, the overall affordability of the Equipment Plan will be achieved within the set timescales.

Previous attempts to reform DE&S, most notably by transforming it into a Government owned, Contractor operated entity (GoCO) – which was expected to provide stability and cost-effectiveness through direct privatisation – was proved to be unworkable and was halted, costing the MOD £33m.

Instead, the decision has been taken to transform DE&S into a bespoke trading entity, remaining in the public sector with a board structure, while private sector Managed Service Providers will be engaged at key areas to perform services including Human Resources and managing Information Systems.

The NAO report found that, despite the failure of the GoCo approach, a number of lessons have been learned and the Equipment Plan continues to be affordable as a result.

In particular, the Department has made progress in stabilising the Equipment Plan and in clarifying the roles of Head Office, DE&S and the Commands. There is now a clearer separation of responsibilities between the Commands which request equipment and DE&S as the organisation responsible for delivering the equipment.

NAO recommendations

To make this new strategy effective, the NAO has published three key recommendations:

  • The MOD must outline how weaknesses already identified will be tackled
  • The MOD should set realistic performance measures to ensure that DE&S makes genuine progress
  • Ensure that the outsourced Managed Service Providers are held appropriately accountable and linked to milestones and metrics at all times

In 2013-14, DE&S employed 16,000 permanent members of staff, 3400 contractors and had running costs of £1.3bn. It is therefore crucial that the branch is run effectively in order to deliver the opportunities presented by the Equipment Plan.

Responding to the report, Defence Minister Philip Dunne said: “This report acknowledges the real progress that has already been made in reforming defence acquisition, including stabilising and improving the affordability of the equipment plan. We are not only improving performance through project delivery, but also transforming the way we undertake defence acquisition.

Of the £33 million which the NAO identifies [as the cost of the failed GoCo reform], £25.4 million was money well spent on informing the establishment of DE&S as a bespoke trading entity. The £7.4 million spent on the GOCO option represents 0.6 per cent of the annual cost of running defence procurement.”

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