After Enron, McKinsey gets call from the MoD

The Ministry of Defence has employed McKinsey, the management consultant that counts Enron, Global Crossing and Railtrack as former clients, to revitalise the organisation.

McKinsey has been drafted in to improve performance at the Defence Logistics Organisation (DLO) and the MoD's IT facilities. The DLO, which requires about £6bn a year in funding, a quarter of the MoD's budget, is responsible for providing military supplies such as arms, food and fighter aircraft. McKinsey has a long history of working with UK governments and several former employees have moved into politics, including William Hague and Archie Norman.

But some clients have not had such success. McKinsey worked with Enron for over a decade, earning fees of at least $100m (£65m). Jeffrey Skilling, the Enron director behind many of its controversial financial dealings, was once a partner at McKin- sey. The consultancy has also advised Kmart, Swissair and Global Crossing, which all entered bankruptcy proceedings.

An MoD spokesperson said the consul- tants were hired in May. "McKinsey were brought in to deliver savings and provide private sector expertise and ideas," he said. He would not comment on the fees paid to McKinsey for "commercial reasons".

Last year, however, it was revealed that McKinsey had received £1.35m for a previous contract to improve procurement at the department.

The DLO was recently embroiled in controversy because its report into the reasons for the failure of the SA80-A2 guns, which have repeatedly jammed, said the Royal Marines were not cleaning them properly. It has a target to reduce its costs by 20 per cent in 2005. McKinsey will produce a report on this division in the early autumn.