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Consultants paid £29m in abortive shake-up at MoD

The accountancy firm KPMG and the US construction group Jacobs were among six consultants that shared a £28.9m taxpayer payout to prepare and assess reforms for a single Ministry of Defence agency.

The consultants' bonanza will add to the chorus of criticisms over the Government's attempts to bring greater commercial nous to Bristol-based Defence Equipment & Support, which employs 16,500. The figure is also £11m more than the MoD has previously revealed, though it covers a wider scope of work.

DE&S buys the armed forces' kit, from binoculars to Apache attack helicopters. Ministers believe the agency wastes some of its £15bn budget by not possessing the negotiating skills necessary to drive down suppliers' prices.

The Defence Secretary, Philip Hammond, wanted to in effect privatise DE&S by letting a consortium of big corporates manage it, but that proposal embarrassingly collapsed due to lack of interest.

This was known as a GoCo (Government-owned, contractor-operated). The plan angered unions and defence experts as the model had never before been imposed on something so sensitive to national security.

Instead, the agency is going to be given certain freedoms from strict Civil Service codes. For example, DE&S will be able to break the rigid pay structure of the Civil Service to attract expert staff in areas like aerospace engineering, while companies have been invited to run IT systems and human resources.

These more limited reforms, branded as DE&S-Plus, will start to take effect from April before the new entity is formally launched next year.

But to reach even this stage the Government spent nearly £1m a month on half-a-dozen consultants examining and assessing GoCo, DE&S-Plus, and other potential reforms between 2011 and 2013. A parliamentary answer to a question from the shadow Armed Forces minister, Kevan Jones, revealed that the other consultants were LEK, Booz, CVA and HSF, though KPMG pocketed the most with £8.3m.

Mr Jones said: "The cost of this fiasco just keeps growing and it's clear the Government's incompetence and mismanagement is wasting millions of pounds of taxpayers' money... it seems the Defence Secretary just can't get his sums right."

Yesterday the head of DE&S-Plus, the MoD official Bernard Gray, faced the Commons Defence Select Committee to explain how the agency will now work. The Conservative MP James Gray warned that DE&S-Plus was "incredibly Byzantine, Schleswig-Holstein incomprehensible".