MoD under fire over £18m bill for abandoned sell-off

The Defence secretary Philip Hammond is under Opposition fire for wasting tens of millions of pounds on the failed semi-privatisation of a weapons-buying agency only to “adopt” Labour’s proposed reforms from 2011.

The shadow defence team claims that incoming changes to the way the £14bn-budget Defence Equipment and Support is run, to be known as DE&S-Plus, closely mirror Labour’s earlier ideas. These include demonstrating greater accountability to Parliament.

Mr Hammond had already spent nearly £18m looking to hand over control of Bristol-based DE&S to the private sector only for there to be a lack of corporate interest. Some of that money was also used to look at the alternative DE&S-Plus option, while those parties that were involved in bids, such as US engineers Bechtel and CH2M Hill, are believed to have spent around £40m.

There are concerns that the agency fails to secure enough missiles, helicopters and submarines for its money. Mr Hammond believed that bringing in private sector management under a “GoCo” (Government-owned, company-operated) model would introduce better negotiating skills.

Critics were furious that such a sensitive part of national security would be entrusted to the private sector.

Mr Hammond has instead adopted more limited reforms, which will include outsourcing parts of the agency, such as human resources, to reduce running costs.

DE&S-Plus will start in April. Alison Seabeck, a shadow defence minister, told The Independent: “GoCo has been a very costly process. We are obviously pleased that proposals put forward in 2011 have been acted upon but it’s nearly three years too late.”

Government contractors are looking at how they could team up to bid for three outsourcing deals that DE&S-Plus will involve.

An industry source added: “GoCo was always a step too far and the zealot-like focus on it has wasted years of reform and taxpayers’ money.”

The Defence minister Philip Dunne said: “We’ll take no lessons from Labour over reforming defence procurement after 13 years of massive cost over-runs and delays to new equipment.”