10 Dec 2013

UK defence privatisation plans ‘axed’

Summary: Plans by Defence Secretary Philip Hammond to transform the Government’s defence procurement arm into a Government Owned, Contractor Operated (GOCO) concern have been scrapped after two of the three bidders withdrew from the procurement process.

Procurement process difficulties

Mr Hammond said that the plans had been abandoned as there was ‘no competitive process’ after only one bidder was left in the procurement process.

The Defence Equipment and Support (DE&S) agency has an annual budget of £14bn to buy equipment, including ships, aircraft and weapons for the armed forces. The original plans called for 16,500 DE&S workers to be transferred to the private sector, transforming the group into a part-privatised Government body.

Defence privatisation criticism

The plans had come under criticism from some sectors of the defence community. Labour politicians claimed that the move would seriously jeopardise the military, with job cuts, conflicts of interest between efficiency and capability stemming from private control, and concerns around continued capability.

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 was concerns around the original contract winner effectively ‘holding the MOD to ransom’ in order to secure a re-tender, since it would make more sense to keep military secrets and sensitive information contained to as few organisations as possible.

To replace the GOCO model, Mr Hammond told MPs he was creating a new arms-length government trading entity to buy equipment and supplies, which would be able to recruit and manage staff “along commercial lines”.

Defence contractor opportunities

This means that private sector organisations will be hired to buy military equipment, ensuring new business opportunities for defence contractors.

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