Defence chiefs face Commons inquiry over ‘wasted’ money

Parliament’s most powerful cross-party committee of MPs is set to launch an inquiry into the Government’s “wasted expenditure and failure” to reform a £14bn-budget Ministry of Defence agency, according to Whitehall sources.

The chairman of the Public Accounts Committee, Margaret Hodge, is to run an investigation after the publication of what is expected to be a highly critical National Audit Office (NAO) report on the MoD’s attempt to semi-privatise the Bristol-based Defence Equipment and Support (DE&S). This is the agency that buys and looks after military kit, including tanks, missiles, surveillance systems and drones.

The Defence Secretary, Philip Hammond, and one of his top civil servants, the former businessman Bernard Gray, had hoped to hand over the running of DE&S to a private sector consortium. They believed that this model, GoCo (government-owned, company-operated), would provide the negotiating skills to obtain better value for money in deals with defence suppliers.

However, their plans ended up in tatters late last year when only one consortium, led by the US contractor Bechtel, proved interested, resulting in the GoCo being scrapped for lack of competitive tension. The MoD is attempting more limited reforms under “DE&S Plus”, but has been criticised for spending almost £1m a month on consultants between 2011 and 2013 to look at various options – only to see the GoCo model collapse.

The NAO quietly started its own inquiry last month into the way that process was managed. The findings will be published in the autumn. Mr Gray is overseeing the agency’s transition to DE&S Plus, under which the private sector will still be asked to take over some areas, including IT and human resources.

Ms Hodge and Mr Gray have already clashed this week at a hearing of a separate inquiry, into the MoD’s broader equipment spending plans. She reprimanded him for not looking at her when answering a question.