US-led bids vie to take over buying MoD’s kit

 

Associate Business Editor

A trio of US-led consortiums have formed to bid on the Ministry of Defence’s hugely controversial quasi-privatisation of the £14bn agency that buys the armed forces’ submarines, tanks and air-to-air missiles.

The Independent can reveal that San Francisco’s Bechtel and Colorado-based CH2M Hill are fronting two of the groupings that want to run Bristol-based Defence Equipment & Support (DE&S). Both are big in the UK, with Bechtel working on Europe’s biggest construction contract, Crossrail, while CH2M Hill helped oversee the building of the London 2012 Olympic Park.

The latter has teamed up with Serco, the FTSE 100 company currently at the centre of the scandal that has seen taxpayers overcharged by £50m for monitoring non-existent electronic tags, such as those recorded on offenders who have died. Atkins, which is working for the MoD on helping Lynx Wildcat helicopter pilots test navigation and control software, is also part of this group.

Bechtel has teamed-up with the Big Four accountant PricewaterhouseCoopers, PA Consulting, and Qinetiq, the defence technology group that itself was formerly part of the MoD.

A third consortium is understood to comprise URS and KBR, two US engineering giants that were expected to bid separately.

The bid teams were expected to be announced on Tuesday, when the Defence Secretary, Philip Hammond, launched the second reading of the Defence Reform Bill. However, the Coalition’s in-fighting over the Liberal Democrat-prompted review of alternatives to the Trident nuclear deterrent appears to have side-lined that news. However, Mr Hammond did outline the MoD’s preference to turn DE&S into a “Government-owned, contractor-operated” organisation – or, in industry lingo, a “GoCo”.  Critics say this in effect privatises the agency.

The Government believes that only by being overseen by a commercial partner can DE&S develop the business nous to buy its weapons  and vehicles at a fair price for the public purse at a time of severe spending cuts.

Mr Hammond told the House of Commons that the GoCo itself would be registered as a British company, regardless of the international firms within a winning consortium. He added that the final decision on whether to go ahead with this model would be taken next spring, with an operator to be selected by early 2015.

The Defence Secretary said: “We believe that this model is the one most likely to embed and sustain the significant behavioural change required…

“The GoCo’s customers will be the front-line commands and the MoD itself; it will work to their agenda and their priorities.”

In the running: Serco

Despite the electronic tagging scandal, Serco is still allowed to bid for government contracts.

However, the Government is reviewing all ongoing contracts with a company that looks after everything from the country’s nuclear warhead stockpile to Ofsted inspectors in certain parts of England.

Until this review is completed, Serco cannot be awarded any other government contracts, though long-term bids like DE&S should ultimately be unaffected. The situation is the same for G4S, the other FTSE 100 empire at the heart of the suspected tagging fraud. The group is best known to the public for failing to supply enough guards at last year’s Olympics.

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