Defence procurement privatisation 'dead in the water', says peer

The Defence Equipment and Support agency buys aircraft and other weaponry for British forces

Plans to privatise the UK government's defence procurement arm are "dead in the water", a former defence minister has claimed.

Lord Lee of Trafford told peers there were now too few private firms bidding to take over the organisation which employs 21,000 people across the UK.

He strongly criticised the MoD's oversight of the project.

Government minister Lord Astor accepted the situation was "challenging" but insisted a deal was still possible.

The Defence Equipment and Support (DE&S) agency, which is based in Bristol, has an annual budget of £14bn to buy equipment, including ships, aircraft, vehicles and weapons, for Britain's armed forces.

The Ministry of Defence has been considering whether it would be best run as a quango in partnership with a private contractor or as a "government-owned, contractor-operated" (GoCo) body.

The plan involved inviting private firms to bid for the GoCo contract. Initially three consortia demonstrated an interest.

But Defence Secretary Philip Hammond revealed in a written statement on Tuesday that just one bidding consortium remained.

'Bone-headed'

The government was now considering "whether it is in the public interest to proceed with only a single commercial bidder and an internal option, or whether alternative approaches should be considered and a further statement will be made once this process is complete", he said.

Lord Lee, who served as a Conservative defence procurement minister in the mid-1980s, urged ministers to reach a decision more swiftly.

"My Lords, is the reality not that the GoCo competition concept is now totally dead in the water?" he asked.

"The very fact that this one bidder, the Bechtel consortium, has a bid in of 1,200 pages surely draws attention to the manifest absurdity and complexity of the bid process."

The project had been "driven through" by Chief of Defence Materiel Bernard Gray "with very little support in MoD and the services", the peer said.

"Should not he now, in the circumstances, given that it has collapsed, consider his own position and consider resigning?"

The peer also condemned the Treasury's "bone-headed" oversight of recruitment to defence procurement roles, which he claimed had prevented the MoD from bringing in valuable private-sector experience.

Defence minister Lord Astor of Hever conceded: "We have always known that running a defence acquisition would be challenging."

'Big Dig'

But he said the status quo was "simply not acceptable".

The government was "convinced that we absolutely must change our process to deliver the best value for money for the taxpayer and enable the right equipment and support to be delivered on time for our armed forces", he continued.

"The very fact that one commercial bid team has submitted a bid shows that they believe there is a potential deal and they can deliver against requirement," he argued.

Labour's Lord Touhig, also a former defence minister, cast doubt on Bechtel's suitability for the task.

"In Boston [Massachusetts], for instance, they were responsible for the Big Dig - a tunnel construction project that went a billion pounds over budget and two-thirds of the problem was down to their mistakes.

"Given their mismanagement of the Big Dig, if Bechtel gain control of our defence procurement will not Britain's defences end up in a big hole?" he asked.

The "Big Dig" project cost Boston about $20bn (£12.5bn), rerouting the city's main highway into a 3.5 mile (5.6km) tunnel.

Lord Astor dismissed this prediction, and said the consortium consisted of "world-class private sector businesses" including PWC and PA Consulting.