Dead in the water: MoD shake-up plans ditched

The Government's project to 'privatise' the £15bn defence agency that buys the armed forces' tanks and submarines is shelved

U-turns don't get any bigger than this. Philip Hammond, the Defence Secretary, wanted to hand the private sector £15bn a year to buy the armed forces' guns, tanks and submarines. He argued that introducing this commercial nous would give the Ministry of Defence more things that go "bang" for its buck, theoretically eliminating around £2bn a year in bureaucratic waste.

Mr Hammond faced down unions that feared thousands of job cuts, and Pentagon officials who thought officials had taken leave of their senses.

But his dream of semi-privatising the Bristol-based Defence Equipment and Support (DE&S) gradually fell apart. Yesterday, he admitted there was no commercial sense in pursuing what is known as the "GoCo" – government-owned, contractor-operated – model after only one consortium, led by the US giant Bechtel, remained interested in running the programme. A team led by Bechtel's rival CH2M Hill pulled out last month, removing any competition in the bidding process.

The embarrassing climb-down followed a series of articles in The Independent and its sister papers that revealed deep potential conflicts of interest among the companies that considered bids to run the GoCo body and highlighted the risk that commercial gain could have overridden national interest.

The companies running DE&S would have had the power to hand contracts to defence groups that were their clients in other sectors or areas of work. For example, the second member of Bechtel's team, PricewaterhouseCoopers, audits the accounts of companies such as Cobham, which makes helicopter antennas and counter-explosive devices, and would also have been able to award them lucrative contracts. The final company in that consortium, PA Consulting, has worked for BAE Systems, the MoD's biggest supplier.

Questions were also raised over what would happen if a company that ran DE&S also had dealings with a country with which the UK was at war. Insiders at the agency wrote to this newspaper condemning the "despicable plans to pimp out defence procurement".

Facing Vernon Coaker, the bulldog of a shadow Defence Secretary, in the House of Commons, Mr Hammond conceded defeat yesterday, adding that the whole fiasco had cost the taxpayer £7.4m. Thus a plan to save billions had actually cost millions with no end result bar an alternative proposal that Mr Coaker argued could "make things even worse" than a GoCo.

DE&S-Plus, as it is known, will be a "bespoke central government trading entity from April 2014". This means the agency will have greater independence from the MoD, with freedoms to recruit who it wants and to decide how much it can pay them.

Remarkably, the GoCo's grand architect, the former defence journalist and magazine publisher Bernard Gray, will become the first chief executive at DE&S-Plus.

Industry sources had felt sure that Mr Gray was either for the chop or would resign after the GoCo's failure. Instead, he will run an organisation with a budget "bigger than many FTSE 100s", as an industry source puts it.

The insider warns that DE&S-Plus could even turn out to be a "bigger reform than GoCo [as the] CEO has more power". That is because the companies running a GoCo would have been subject to more checks and balances, and faced greater media scrutiny, than a handful of increasingly powerful servants of the crown. That said, the structure of the revamped organisation is not yet clear. And Mr Gray will still be answerable to Parliament and work under what Mr Hammond calls an "independent chairman".

But however DE&S-Plus is eventually structured, the fact that it will remain in the hands of the state is an overwhelming defeat for Mr Hammond. Only this summer an official close to the process said that it was "hard to see" how internal improvements could "compete" with the benefits a GoCo could provide.

Mr Coaker's taunt of the minister says it all: "Not so much GoCo or DE&S plus as NoGo and D minus for you."

PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
Britons buy more than 30 million handsets each year, keeping them for an average of 18 months
tech
Arts and Entertainment
Alloysious Massaquoi, 'G' Hastings and Kayus Bankole of Young Fathers are the surprise winners of this year's Mercury Music Prize
musicThe surprise winners of the Mercury Prize – and a very brief acceptance speech
Arts and Entertainment
TV Presenters Ant McPartlin and Dec Donnelly. Winners of the 'Entertainment Programme' award for 'Ant and Dec's Saturday Night Takeaway'
musicAnt and Dec confirmed as hosts of next year's Brit Awards
Arts and Entertainment
Orson Welles made Citizen Kane at 25, and battled with Hollywood film studios thereafter
film
News
video
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Finance Assistant - Part time - 9 month FTC

£20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...

Marketing Manager

£40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...

Market Risk Manager - Investment Banking - Mandarin Speaker

£45,000 - £65,000: Saxton Leigh: Our client is a well-known APAC Corporate and...

Compensation and Benefits Manager - Brentwood - Circa £60,000

£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

Day In a Page

Isis in Syria: A general reveals the lack of communication with the US - and his country's awkward relationship with their allies-by-default

A Syrian general speaks

A senior officer of Bashar al-Assad’s regime talks to Robert Fisk about his army’s brutal struggle with Isis, in a dirty war whose challenges include widespread atrocities
‘A bit of a shock...’ Cambridge economist with Glasgow roots becomes Zambia’s acting President

‘A bit of a shock...’ Economist with Glasgow roots becomes Zambia’s acting President

Guy Scott's predecessor, Michael Sata, died in a London hospital this week after a lengthy illness
Fall of the Berlin Wall: History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War

Fall of the Berlin Wall

History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War
How to turn your mobile phone into easy money

Turn your mobile phone into easy money

There are 90 million unused mobiles in the UK, which would be worth £7bn if we cashed them in, says David Crookes
Independent writers remember their Saturday jobs:

Independent writers remember their Saturday jobs

"I have never regarded anything I have done in "the media" as a proper job"
Lyricist Richard Thomas shares his 11-step recipe for creating a hit West End musical

11-step recipe for creating a West End hit

Richard Thomas, the lyricist behind the Jerry Springer and Anna Nicole Smith operas, explains how Bob Dylan, 'Breaking Bad' and even Noam Chomsky inspired his songbook for the new musical 'Made in Dagenham'
Tonke Dragt's The Letter for the King has finally been translated into English ... 50 years on

Buried treasure: The Letter for the King

The coming-of-age tale about a boy and his mission to save a mythical kingdom has sold a million copies since it was written by an eccentric Dutchwoman in 1962. Yet until last year, no one had read it in English
Can instilling a sense of entrepreneurship in pupils have a positive effect on their learning?

The school that means business

Richard Garner heads to Lancashire, where developing the 'dragons' of the future is also helping one community academy to achieve its educational goals
10 best tablets

The world in your pocket: 10 best tablets

They’re thin, they’re light, you can use them for work on the move or keeping entertained
Lutz Pfannenstiel: The goalkeeper who gave up Bayern Munich for the Crazy Gang, Bradford and a whirlwind trawl across continents

Lutz Pfannenstiel interview

The goalkeeper who gave up Bayern Munich for the Crazy Gang, Bradford and a whirlwind trawl across continents
Pete Jenson: Popular Jürgen Klopp can reignite Borussia Dortmund’s season with visit to Bayern Munich

Pete Jenson's a Different League

Popular Klopp can reignite Dortmund’s season with visit to Bayern
John Cantlie video proves that Isis expects victory in Kobani

Cantlie video proves that Isis expects victory in Kobani

The use of the British hostage demonstrates once again the militants' skill and originality in conducting a propaganda war, says Patrick Cockburn
The killer instinct: The man who helps students spot potential murderers

The killer instinct

Phil Chalmers travels the US warning students how to spot possible future murderers, but can his contentious methods really stop the bloodshed?
Clothing the gap: A new exhibition celebrates women who stood apart from the fashion herd

Clothing the gap

A new exhibition celebrates women who stood apart from the fashion herd
Fall of the Berlin Wall: Goodbye to all that - the lost world beyond the Iron Curtain

The Fall of the Berlin Wall

Goodbye to all that - the lost world beyond the Iron Curtain