Defence Secretary Philip Hammond renews drive to enlist private sector in MoD procurement of food, vehicles and weapons

Defence chief undeterred by collapse of plans effectively to privatise agency

Philip Hammond, the Defence Secretary, has privately started his latest attempt to reform the agency that buys the armed forces’ food, vehicles and weapons just weeks after his most radical proposals collapsed.

Some of the Government’s biggest suppliers have been asked to talk to top civil servants about how they would manage Defence Equipment & Support’s (DE&S) IT systems, human resources and other specific projects.

Mr Hammond and Bernard Gray – who will become the revamped agency’s first chief executive when it is relaunched in April – believe that the only way to get more and better kit for DE&S’s £15bn budget is to exploit the private sector’s greater commercial skills.

However, their efforts to effectively privatise DE&S came to nothing when one of the two consortiums interested in running the agency pulled its bid in November. Mr Hammond concluded that he could not proceed with just one bidder due to a lack of competitive tension.

The cost of running that process and looking at more limited reforms was £17.8m, while private-sector bidders are believed to have wasted as much as £40m. Unions and DE&S staff were furious that the Government was willing to waste so much money on a globally unique plan to hand over such a sensitive chunk of national security to big business.

Mr Hammond has since vowed to look at giving DE&S greater operational freedom from the strict, bureaucratic rules of the Civil Service, such as being allowed to pay the better salaries needed to attract highly skilled senior staff.

Rather than run the whole agency, government contractors will instead oversee certain aspects of DE&S. Mr Gray specifically mentioned the need for an “HR business partner organisation” during a grilling by the Defence Select Committee last month.

The likes of Serco – which was involved in a number of scandals involving government contracts last year – and the FTSE 100 company Capita are thought to have been invited to what is known as an “industry day” on what work will be available as part of the reforms.

A spokeswoman for the MoD said: “The new DE&S is an arm’s-length body working within specially agreed freedoms that will allow DE&S to operate differently to the rest of the Civil Service. It is an innovative structure that will bring the change needed to make sure every pound spent on defence provides value for money.”