Defence buyers ‘do not need private sector help’

Reforms to introduce greater private sector oversight of the £14bn Ministry on Defence arm that buys military kit have been called into question after a huge reduction in the number of contracts it lets.

The MoD tried to semi-privatise the Bristol-based Defence Equipment & Support last year. Philip Hammond, then Defence Secretary, believed that the agency could get more higher quality missiles and tanks for its money through private-sector managers who had greater commercial nous than career civil servants. The change failed due to a lack of private sector interest – only the US engineer Bechtel was willing to enter the final stages of the bid process.

The MoD then decided on a lighter set of reforms in which two “managed service providers”, Bechtel and US rival CH2M Hill, will help with some major acquisition programmes. But critics argue that DE&S is not overburdened with work and therefore doesn’t require private-sector help. The MoD issued only 2,264 new contracts last year, well down on the height of the Afghanistan conflict. For example, in 2005-06 the MoD placed 10,391 new contracts. Both figures are believed to be largely comprised of DE&S deals.

Kevan Jones, the shadow Defence minister, said: “These figures call into question the need to bring in outside contractors to manage defence procurement – and also raises serious questions as to why DE&S’ next chief executive needs to be paid half a million quid.”

Bernard Grey, chief executive and architect of the reforms, has reached the end of his contract and will have to reapply for the job. Whoever gets the role could end up being Britain’s best-paid civil servant, on a £250,000 salary plus up to £250,000 in bonuses.

Mr Grey has struggled to meet his own timetable on the lighter reforms. Bechtel and CH2M Hill were supposed to have taken up contracts by now, but lengthy negotiations mean that they might not start until the new year.