MoD in new retreat over bid to enrol big business

 

Attempts by the Defence Secretary Philip Hammond to reform the Ministry of Defence by enlisting big businesses for their commercial skills have again been struck by a lack of private sector interest.

The Independent can reveal that the Ministry of Defence only attracted two teams to bid for a crucial 13-year deal called Logistics Commodities Services Transformation (LCST).

The contract would see the private sector make sure that the MoD gets value for money on a £1bn-a-year spending programme for everyday non-military essentials, from food and medical supplies to nuts and bolts.

Typically, three or more bidders would fight it out for such an important contract to ensure that there was suitable competition to bring down their fees and force them to find savings.

But only the US defence group Leidos and a combination of FTSE 100 government contractor Babcock International and the logistics group DHL have been asked to put forward formal tenders after a third party pulled out. An industry source said that this was the latest example of "bungled MoD outsourcing", while a senior Conservative MP declared Mr Hammond's much-trumpeted reforms to be a "mess".

Although two bidders is a sufficient number to press ahead with the tender process, this does leave the MoD in a precarious position. If one of the parties felt it cannot make enough money on the contract and pulled out of the race, the programme would almost certainly be scrapped.

Before Christmas, Mr Hammond's totemic reform – the semi-privatisation of the Defence Equipment & Support (DE&S) agency that buys guns, tanks, helicopters and submarines – collapsed after only one bid team, led by the US engineer Bechtel, decided it wanted the contract.

Mr Hammond desperately tried to continue negotiations with just that one consortium, which also included the Big Four accountant PricewaterhouseCoopers, after a rival bidder pulled out. But he was forced into an embarrassing surrender when it became inevitable there was insufficient competitive tension to justify the reform, though he has vowed to revive what is known as the GoCo – government-owned, company-operated – model in the future.

This process and analysis of a more limited overhaul of DE&S, which is now going ahead instead, cost the MoD nearly £18m. Bidders are estimated to have wasted £40m.

Sources said a major problem for the LCST deal is that many companies that might have been interested had instead been focusing on the DE&S contract through most of 2012 and 2013. When that failed, they did not have enough time to look at the less meaty logistics work, which also includes revamping storage facilities and inventory management techniques that date back to the 1940s.

The lack of competition is excellent news for Babcock, which was never interested in the DE&S bidding since it is also a MoD supplier.

Start your day with The Independent, sign up for daily news emails
Voices
voices
News
general electionThis quiz matches undecided voters with the best party for them
Life and Style
Men with beards rejoice: Your beard probably doesn't harbour faeces-like bacteria
health
Arts and Entertainment
Keira Knightley and Matthew Macfadyen starred in the big screen adaptation of Austen's novel in 2005
tvStar says studios are forcing actors to get buff for period roles
ebooks
ebooksA celebration of British elections
  • Get to the point
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

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before