Defence: Procurement
(11 years, 8 months ago)
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Baroness Dean of Thornton-le-Fylde
To ask Her Majesty’s Government what are their policies towards and priorities for defence procurement.
Baroness Dean of Thornton-le-Fylde
My Lords, this Question for Short Debate covers a huge area and we are not going to be able to cover it all in one hour, so maybe we need to come back to this issue at a future date. My work for today has been substantially assisted by the helpful report by the House of Commons Defence Select Committee dated 5 February.
Defence procurement has dogged Governments from all sides of the House for many years because of delay, cost overruns and changing capability. Taken together, all of these have often had an impact on the capability of our Armed Forces. Despite many reports from the House of Commons Select Committee, the National Audit Office and others, the problem appears to be intractable and one that Governments somehow cannot get to grips with. In 1997 the incoming new Labour Government were faced with cost overruns and delay on the Eurofighter, Merlin and Tornado programmes, to name a few. So the statement after the 2010 election about the budget deficit being so big and it being down to the previous Government entirely is not quite the full picture; it is an issue that has faced many Governments, including this one. As the Select Committee report says in paragraph 15, “The decision in 2010”— after the coalition Government were elected—
“to change to the carrier variant of the Joint Strike Fighter was … rushed and based upon incomplete and inaccurate policy development. It … led to increased costs to the carrier strike programme and a delay in the in-service date of the carrier”,
as well as,
“the early decommissioning of the Harrier”.
The decommissioning of the Harrier has, of course, attracted an awful lot of attention and, certainly, critical comment from many people who know a lot more about this issue than I do. There has been regret in the services about the early demise of the Harrier jump jet.
However, Ministers in the MoD have been extremely active. We have a report from Bernard Gray, commissioned in 2009 by the previous Government, and the Levene report, to name just two major pieces of work, as well as the National Security Through Technology White Paper. Through those, together with the Defence Committee report, I have been able to gather together information for our debate today. It is impossible to cover all the issues, as I said, but I would like to cover the transition of security and the UK-based skills requirement that it brings with it; the defence procurement structure itself; research; and the defence budget.
On transition, we are witnessing a Government who have moved from a defined list of sovereign capabilities, which we had under the previous defence industrial strategy, to the current approach in the defence and security White Paper—it appears to be reflected in government documents—for off-the-shelf acquisition where that is possible, with a less defined list of sovereign capabilities. That leads me to my first question for the Minister. What are the Government’s plans to ensure that the need for skills and for an affordable programme is met? In industry, transitional periods are always more expensive than a flat state. New skills will be required for this different type of procurement. What are the Government’s plans on that?
For instance, there is a need to ensure that decisions are made about the long-term sustainability of the complex warship build programme and the transition from the Type 45 to the Type 26 programme, which will require key skills, some of which are not there today. That brings with it questions of related affordability and how that impacts on the MoD budget. Decisions are also required on the capability of Typhoon, particularly if we want to maximise our potential for export markets in that area. Another area is the topic of unmanned systems. We are good at this in Britain—we have extremely good skills—but what is government policy in this area?
Those are merely three areas of capability, but all are resource-demanding. What priorities have the Government set across the general board of procurement? Decisions such as these have a profound impact on the defence industry and on provision, so that industry can plan and have the confidence to invest in its workforce rather than making people redundant, providing the right skills to make sure that we can manufacture defence here in the UK. It is an issue to which the Defence Committee report refers as important in its last recommendation, number 198, about the skills base.
The structure of defence procurement is a wide area. The Bernard Gray report talks about changing it. There were two possible models of procurement: an executive non-departmental public body or a government-owned contractor-operated organisation, commonly called a GOCO. At a conference in March 2011, the author of the report, Bernard Gray, said that it,
“seems extremely unlikely this idea, GOCO, will be pursued given the lack of support it received”.
Yet the Government appear to have stopped all work on any other model and are concentrating on GOCO. I thank the Minister for the briefing that we had on that at the MoD. I now ask him where government thinking is on this. What hurdles do the Government anticipate, and how do they intend to overcome them when we are talking about our international allies? How will our allies react to that change to a government-owned but contractor-operated system? Defence procurement is an expensive business, and getting more expensive. It is highly unlikely that any one nation will be able to fund its own defence in future. In fact that is already not the case today; we have to work in concert with our allies.
We have a good research base in the UK. It has worked well for SMEs, academia, the MoD itself and the defence industry. Paragraph 114 of the Select Committee report asks the Government to target 2% of the MoD budget to be spent here in the UK on UK-based research and development. What is the Government’s response to that? Do the Government agree that we should be aiming for that target?
In the Statement on 14 May 2012, the Secretary of State announced that the budget had been brought into financial balance. He also announced that, for planning purposes, it had been agreed with the Treasury that a 1% per annum real increase in the equipment and support budget would apply from 2015. Can the Minister confirm that this additional 1% in real terms for the defence budget will be new money, not money that the MoD has to find from its overall budget? Obviously, a large part of the rest of the budget is personnel spend. Will that increase apply from 2015? In conclusion on the defence budget, it seems odd logic that, whereas all our non-allies—China, North Korea and other countries—are increasing their defence spend, we in the western world are reducing ours, and doing so to an extremely concerning point.
I said that I could not cover all the points in this short debate; I hope that we can return to this topic. It would be helpful if the Minister could answer those questions. On the key issue of GOCO, will the Minister confirm that no final decisions have been taken? I look forward to his reply, and to hearing what the small number of colleagues taking part in the debate have to say.
Lord Palmer of Childs Hill
My Lords, I thank the noble Baroness, Lady Dean, for instigating the debate. We are obviously not the popular debate in this and the other House today. I thank in advance my noble friend the Minister who, as the noble Baroness has said, gives us such good briefings. I am also grateful for the briefings that we get when we have such eminent speakers, which have always been incredibly useful.
The noble Baroness, Lady Dean, has covered a wide area in her 10 minutes. I will try to add a few things, having made notes as I have listened. The sad fact is that defence procurement has for far too long been a drag on our forces’ expenditure and national expenditure. Purchases have proved sluggish and inflexible, delivering equipment and resources late and over budget. That is not only the case now; it has been in the past as well. That is why the coalition Government have been right to challenge the way in which defence procurement has operated. As the noble Baroness has just said, the Government have a full battery of reviews to consider. She mentioned a couple: the Levene review, Bernard Gray’s materiel strategy work and the procurement review of the noble Lord, Lord Currie.
The Government have also had the benefit of what is described as the,
“large number of responses with a wide variety of views”,
to their own Green Paper, Equipment, Support, and Technology. As has been mentioned, there comes a point when decisions must be made, improvements found and efficiencies delivered. One example is the question of the future of defence equipment and security examined in detail by Bernard Gray, as the noble Baroness has just said. His proposals for government-owned contractor- operated procurement created wide ripples, and the Government need to be clear, as the noble Baroness, Lady Dean, said, how they intend to take that forward. That is obviously very important.
How will the Government respond to the broader concerns about the skills required to reform our process of defence procurement: finance, engineering and project management? Above all, the skills of estimating cost, both on expenditure and available resources, must be strengthened. We are pretty weak in estimating the cost of the final bill. Overall, procurement for our forces must meet our responsibilities both to our service personnel under the Armed Forces covenant and to the British taxpayer in securing value for money. The coalition Government have much overdue work to do on both fronts.
How much value, or cost, do we have in store on the shelves, and how often are these stores called upon? Does the MoD just order from suppliers rather than look around the shelves on some stock control system to see what we have? Very often it is easier to ring up your supplier rather than take it off the shelf. What of value do we have on our shelves and would we be wise to seek a buyer, or buyers, for this equipment if it is not moved or even required for a long time?
I thought hard about an example, which came to me because I was talking to some United States Air Force colonels who came to this House a few days ago. I talked to them for 30 minutes. They use Harriers. Do we have spare parts for Harriers? The noble Baroness, Lady Dean, mentioned them when she spoke. If we have spare parts for Harriers, perhaps we should sell them off to the United States Air Force. When we spoke about parts, it said, “We need Harrier parts”. I did not initiate that; it is what it said.
Before the Government go on even a moderate ordering or buying spree, all in the correct defence of the realm, what work is done on estimating what conflicts are likely? Procurement cannot be taken in isolation; it is about estimating what is going to happen. I could give many examples but I do not think you can divorce the discussion on procurement from what is going to happen with Trident, which is a very expensive weapon. I know that a review is being undertaken, supervised by Danny Alexander MP, but the actual cost of Trident is going to weigh down on a lot of our procurement strategy, whether we have it or not and whether we have like-for-like renewal.
Do we want armoured vehicles for hot or cold climates? Should they be for coping with roadside explosive devices? The old vehicles used to get blown up because they could not cope with that. Can we think what conflicts are going to happen and where those vehicles will be needed?
The noble Baroness, Lady Dean, talked about the Armed Forces covenant. Uniforms and other personal equipment are also part of our procurement strategy. Do we need uniforms for the Arctic—there was a piece on television recently showing our forces training in Arctic circumstances—or will they be needed in the desert? We may have the horrible feeling that they are training in the Arctic, as I saw on television, but the next conflict may be on sandy terrain. Perhaps we need to know what equipment and uniforms they will need when a large proportion of them will be based on Salisbury Plain. Salisbury Plain, the Arctic, the desert—we have to make a good guess at where the conflict will be.
The noble Baroness, Lady Dean, mentioned carriers and various other warships. It is no good harking back to the past, but we have two carriers. The expenditure on them gave lots of good employment—but did we need them and do we need them? We do not have the right aircraft to fly off them at this time. Our estimation of what we need is easily exemplified by the fact that the previous Government made a decision to build carriers when we did not have the need for them, the facilities to build them or the aircraft to fly off them. The defence picture facing the United Kingdom is changing rapidly.
Lord Davies of Stamford
I am sorry to interrupt but I cannot let that remark go unchallenged. The previous Government indeed committed themselves to buying two new carriers. We would have continued to have the aircraft to fly off them—the Harriers—and we ordered the F 35s to replace them. It was an entirely coherent, responsible and balanced decision.
Lord Palmer of Childs Hill
I thank the noble Lord for his intervention, but the fact is that we have two carriers that are not well used at the moment, and there is also a story that one of them will be sold off or mothballed. That is the situation now, but I take the point that the decision on aircraft was changed. That had an effect, and the Minister may wish to reply on that point.
To conclude—which is what I was about to do when I took the intervention—the defence picture facing the United Kingdom is changing rapidly, and our Armed Forces demand and deserve equipment that is up to date and responds to the risks and challenges that they face on our behalf. Nothing is more important than working out what conflicts there might be, where we estimate that they will be, what equipment will be needed for them, whether we should buy off-the-shelf equipment manufactured in this country or use the goods we have in store, and whether we should realise the money invested in the goods in store if we are not using them.
Lord Touhig
My Lords, last July the Minister repeated a Statement in your Lordships’ House in which the Government acknowledged the MoD’s historical budgeting woes. By now, most who are familiar with defence procurement agree that the Government underbudgeted and overassigned, that the Civil Service was challenged to manage such complex programmes because of its lack of expertise and skills, and that the policies of procurement unfairly burdened taxpayers. Clearly the Government now want to correct these failings, and it would appear that their preferred option is a privatised, government-owned contractor-operated partnership, about which we have already heard.
When one remembers the G4S security contract awarded for the 2012 London Olympic Games, it would seem that the Government’s record on privatised partnerships leaves much to be desired. I wonder also whether the Olympics security project suggests that even stable private partners struggle with assignments of unpredictable scale. The history of defence procurement over recent years certainly shows that scale is unpredictable. In an interview with the Defence Management Journal on 28 January, ADS chief executive Rees Ward warned that no country, and especially no military superpower, had adopted a government-owned contractor-operated scheme for procurement. In February this year, the Defence Select Committee in the other place expressed worries about GOCO and stated that it was vital that we consult our allies to ensure that there will be no adverse impact on co-operation. This point was made by my noble friend Lady Dean. Indeed, the chairman of that committee, Mr James Arbuthnot, said:
“We expect to be given more detail about the GoCo proposals”.
If the Government pursue this private partnership, that will require aligning with a company or companies that can manage a diverse programme of responsibilities and needs including armaments, supplies, training and the welfare of our nation’s Armed Forces. The partnership will certainly require invalidating or restructuring existing contracts, negotiating new business procedures, determining the Government’s ownership stake and rethinking the role of the Civil Service.
However, the GOCO strategy raises a series of questions that few in government appear to have considered. For instance, do the Government expect to find a private partner of equally diversified expertise in infrastructure—one that can manage acquisitions for Britain’s defence system? Can one partner reasonably manage an entire nation’s defence or will the partnership mean multiple private partners? Restructuring and managing Britain’s defence procurement operations is a project of paramount scale and importance. Considering the G4S summer Olympics embarrassment and the very costly outcome it had for G4S, is defence partnership attractive to the private sector or is the task simply too risky for investment? What happens if the private partner falls short of its commitment, as G4S fell short in 2012 at the Olympics? What happens if needs outgrow the resources of the business partner or, worse, if the partner goes bankrupt? Poorly thought out schemes are risky and the Government have exposed themselves to scrutiny without supportive answers to encourage taxpayers or potential investors.
I have three questions for the Minister. Will the Government consider wealth creation and job opportunities in awarding the defence partnership? Will they maintain a golden share of ownership in any or all of the companies included in the contract to operate the partnership? Will they share a company’s financial burden in partnership, and how will they scrutinise the spending of millions of pounds of taxpayers’ money? The need to ask these questions reflects the Government’s overall indecision and unpreparedness on this matter. Until the Government prepare a more detailed position on procurement, we are simply left with many daunting and outstanding questions.
Lord Rosser
My Lords, I add my thanks to my noble friend Lady Dean of Thornton-le-Fylde for securing this debate on the important issue of defence procurement, on which there are areas of concern and uncertainty, a number of which my noble friend raised. The Government claim to have a balanced budget for defence, but it applies only to the equipment budget, which represents 40% of total Ministry of Defence annual expenditure. The recent National Audit Office report did not even cover that 40% as it did not look at equipment support costs, which make up just over half the total equipment plan cost. The report stated that,
“there is systemic over-optimism inherent in the Department’s assumptions around the costing of risk”,
and that,
“the cost of … procurement projects in the Equipment Procurement Plan has been understated by £12.5 billion”.
The National Audit Office also said:
“Achieving affordability is … contingent on savings being achieved elsewhere in the budget”,
which can only mean the non-equipment budget comprising welfare, housing and manpower.
One of the major outstanding procurement matters, as has already been said, is a decision on the future of Defence Equipment and Support, on which there appears to be some delay. The Government favour moving to a government-owned, contractor-operated organisation, but have not answered many of the points of concern that have been raised, including those raised by the Defence Select Committee in the other place. The opposition position is that private expertise should be integrated in policy-making, since a partnership delivers positive policy outcomes. We have, however, practical reservations about the GOCO model for reform of Defence Equipment and Support. Accountability to Parliament must be retained, and the reasons for outsourcing a £160 billion equipment programme must be much more explicit than is the case at present.
It is not clear with a GOCO what risk is being transferred from the public sector to the private sector. The risk lies with the body or organisation that pays the cost in either financial or reputational terms if equipment is not delivered to specification, to time and within budget. Where that risk currently lies with the Ministry of Defence in the public sector it is not going to be transferred to the contractor-operated but government-owned organisation, not least because no contractor would be prepared to take on such a risk. It is difficult to see what risk at all would be taken on by the contractor. Should the full burden of risk continue to be with the Ministry of Defence, the benefits of the GOCO model and the outsourcing of procurement decision-making become harder to see.
In order to gain or retain an advantage over potential aggressors and enemies, new defence equipment, by definition, will be at the leading edge of technology. That can increase the likelihood of overruns, since new ground is being broken, and, with it, the uncertainties that have to be addressed and the unexpected that may well occur. In that situation the risk has to be borne by the public sector since no company would be prepared to take on such a risk that could well jeopardise their very existence if it materialised.
A private contractor operating a GOCO is presumably going to achieve its return through equipment that is procured rather than through equipment that is not, even though in some cases dropping, or making significant changes to, a project would appear the better option than continuing with it. Under the GOCO proposal with the private contractor, how would the contract incentivise or reward a project manager to meet the time and cost targets of a project if it had become clear either that the costs would be well in excess of what had been estimated or, alternatively, that the specification could no longer be met within the timescale—or, indeed, adequately met at all? We need a broader new culture, with the Government being prepared to return a project to the main gate stage when forecast cost or timescales exceed set targets. Changing specifications and an acceptance of missed targets should not be the norm.
Presumably, under the GOCO, many of the same people as now would continue to be involved in defence procurement, as the TUPE arrangements would apply, with those currently involved being transferred over to the new organisation. If the argument is that a private contractor will somehow be better able to buy in and bring in talented people, then why can the Ministry of Defence not do this? We have a model of private sector management operating an activity in the defence field at Aldermaston. What exactly does the Ministry of Defence feel has been achieved from this that has been beneficial in terms of cost and performance? What experience do other countries have of outsourcing responsibility for defence acquisition? Under the government-owned, contractor-operated scheme, how would the Ministry of Defence retain overall responsibility for UK defence acquisition? Would such a development in this highly sensitive security field have an adverse impact on levels of co-operation with allies?
The greater the extent to which responsibility for UK defence acquisition is outsourced to the private sector then the less knowledge on this vital and security-sensitive area of activity is retained within the military and the Ministry of Defence. There must surely be an argument for nurturing and developing these skills within the Ministry of Defence and providing opportunities for worthwhile and satisfying careers within defence acquisition, rather than seeing defence acquisition as a step on the ladder to another career within the military field. This would help to ensure that the expertise and knowledge are acquired to work with maximum effectiveness with both manufacturers and suppliers, as well as within the Ministry of Defence and the military. We need to be able to offer a permanent professional career choice in procurement, ending two-year stints.
This is surely an area of activity where the Ministry of Defence must retain real knowledge and expertise, bearing in mind the sensitive security nature of defence acquisition, the sums of money involved and the need for a defence industrial strategy which supports appropriate national sovereignty. The House of Commons Defence Select Committee stated in its recent report that,
“the absence of a defence industrial strategy which supports appropriate national sovereignty puts the UK at a disadvantage against competitor countries”.
Procurement power should be used to provide certainty, support supply chains, increase transparency and establish an active industrial strategy in partnership with business. Since the Government seem to regard buying off the shelf as their default position, it is increasingly important to give industry greater certainty—and that means being explicit in the capabilities the Government intend to purchase off the shelf and those they regard as sovereign.
When an effective market exists, competition is the best procurement policy. The reality, though, is that there is seldom a viable market for major defence projects. There must be a case for considering how certain value-for-money tests might be taken into account, including wider employment, industrial or economic factors. Given the social and economic impact of defence procurement, it should be looked at on a cross-departmental basis. Defence decision-making could be made more transparent through the MoD publishing the cost-benefit analysis that provided the basis for awarding contracts, while respecting commercial sensitivities and any classified security issues. This would also add greater accountability, something that was exposed as necessary during the Department for Transport’s west coast main line franchising debacle.
I hope that the Minister will be in a position to provide more information on the Government’s intentions and reasoning on future defence procurement. Defence procurement is technical, and reform to Ministry of Defence internal structures is necessary, but we should surely always remember that the goal and objective for procurement is about delivering equipment when and where it is needed on the front line in order that battles can be won, lives can be saved and operations brought to a successful conclusion.
The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Astor of Hever)
My Lords, I thank the noble Baroness, Lady Dean, for securing this debate to discuss the important issue of defence procurement. It is a privilege to wind up in such an informed debate, and I am very sorry that the noble Lord, Lord Davies of Stamford, was not able to speak, because I always enjoy hearing his contributions.
Lord Davies of Stamford
The Minister is very kind. I was not intending to intervene in his speech, but I take this opportunity to apologise to the Committee for having got the timing so badly wrong and arriving late for this debate, which I thought was going to start a little later than it did.
Lord Astor of Hever
The noble Baroness suggested that we should have another debate on this issue, and I would very much welcome that. A lot of noble Lords have mentioned the GOCO issue in particular. When the situation is clear on that, maybe we could return to it in a more detailed debate.
Today’s debate provides me with an opportunity to explain our policies and priorities for defence procurement and to set them in the wider context of our ongoing defence transformation programme. The noble Baroness has spoken many times in support of our Armed Forces and demonstrated her steadfast concern for the welfare of our service men and women and their families. I know that those concerns are also shared by other noble Lords here today, so I start by paying tribute to the men and women who serve in Her Majesty’s Armed Forces, who provide the ultimate guarantee of our security and independence. That is also why defence procurement, particularly defence equipment acquisition and support, is vital. We need to be able to adapt and configure our capabilities to address tomorrow’s threats and to build more agile forces for the future. Support operations will always be our first priority.
Our approach to defence acquisition is a key element in delivering military capability and ensuring future operational success. The Government’s strategic priority remains to bring the national deficit under control. In defence, we must play our part in meeting that objective. However, we must also meet the commitment in the 2010 strategic defence security review to deliver well resourced and well equipped Armed Forces. To achieve that, the Ministry of Defence is in the process of delivering its largest and most far-reaching transformation programme. We are reforming defence procurement to ensure that we do it better in future and derive better value for money from the defence budget in so doing. We continue to contribute to the goal of reducing the deficit by looking for ways to conduct our business more efficiently, and expect to make £13.5 billion of efficiency savings over 10 years.
As announced in May last year, we have addressed the black hole in the defence budget. Through implementing changes flowing from the SDSR, we have brought the budget into balance. That means that, for the first time in a generation, our programme is affordable within the resources that we expect to have available to us. It provides a necessary foundation for our future approach to defence procurement and the implementation of the reforms recommended by the noble Lord, Lord Levene.
Having established a core equipment programme last year, we are now concentrating on its delivery. We will spend around £160 billion on equipment over the next 10 years, covering our current commitments, the major equipment programmes announced in the SDSR, and deterrent and equipment support costs. In January this year, we published for the first time a detailed summary of our equipment plan, setting out priorities and budgets for equipment procurement and support over the next 10 years. This was accompanied by a National Audit Office assessment of its affordability, and we are delighted that, in its report, the NAO recognised the progress that we had made in putting in place the changes needed to achieve and maintain affordability.
The core programme delivers the major force element set out in the SDSR. This, with the headroom and contingency provision that we have built in to protect the programme from emerging risks, will provide us with the flexibility to determine our procurement priorities in accordance with operational priorities and not simply on the basis of immediate affordability. It will also provide the defence industry with greater clarity on which to plan for the future.
Through the equipment plan we will deliver significant enhancements to our fighting capabilities, including completion of the two Queen Elizabeth class aircraft carriers, significant investment in the Lightning II aircraft—which together will provide a high-end power projection capability for decades to come—completion of the Astute class attack submarine programme, an upgrade to our fleet of Warrior infantry fighting vehicles, continued development of the Scout and significant enhancements to air transport through the new A400M aircraft.
Our first priority for defence procurement has therefore been to establish a solid foundation from which we can deliver the necessary capabilities for our Armed Forces to do their job. We have made good progress in this and, as an ongoing priority, will continue to apply rigorous management to ensure that the budget remains in balance in the years to come.
I would highlight that the latest NAO Major Projects Report, published in January this year, stated that annual cost increases for our 16 biggest programmes in the financial year 2011-12 were only one-seventh of what was in the comparable report two years earlier. Although we have much more to do, we are moving in the right direction.
We have also sought to reform our approach to how we conduct procurement. In February last year, the Government published their White Paper, National Security Through Technology. This provides a framework for equipping our Armed Forces with the best possible capabilities that we can afford through the equipment plan and, in so doing, for achieving the best possible value for money.
We will seek to fulfil the UK’s defence and security requirements through open competition in the domestic and global market and buy off the shelf, where appropriate, to take full advantage of the competitive international market. However, where capabilities are essential to our national security, such as nuclear submarines and complex weapons, we will seek to protect our operational advantage and freedom of action. We will also maintain our investment in science and technology. In taking this approach, we recognise the important part played by the UK defence industry. Our policy, through the White Paper, is designed to provide the catalyst for making UK industry competitive and therefore able to win a large proportion of additional orders within the global market through successful exports. A healthy and competitive defence industry in the UK is able to sustain many UK jobs and thus make a vital contribution to growth and a rebalanced economy. We are also opening up opportunities for small and medium-sized enterprises. In the last financial year, some 40% of contracts by volume were awarded to small and medium-sized enterprises, and there is scope for this to increase still further.
Looking to the future, reforming the acquisition system is a key priority and a core element of our work to transform defence. We will take a major step forward in April, when the new defence operating model goes live and the newly empowered service and joint forces commands assume responsibility for setting equipment and support requirements. This is an important part of our work to implement the recommendations of the defence reform report of the noble Lord, Lord Levene.
Major structural reform of defence equipment and support organisation is also central to this process. It will ensure that we have the structures, management and skills necessary to deliver the right equipment to our Armed Forces at the right time and at the right cost. Preliminary work undertaken to date has identified a government-owned, contractor-operated entity known as GOCO as the preferred future operating model for defence equipment support. This needs to be tested further before any final decisions are made. A decision will be made shortly on whether to move into an assessment phase. If agreed, this would see the GOCO model tested against a robust public sector comparator. This would work towards producing a final business case that will recommend a future operating model for defence equipment and support. We would expect a decision to be made in 2014.
A lot of very important questions were asked. I will do my best to answer them, but I am conscious that I may not be able fully to answer all of them, so in some cases I will write to noble Lords in more detail. The noble Baroness and other noble Lords asked about GOCO and whether a compelling case had been made for reform. Proposals for an assessment phase are currently being considered. If approved, the assessment phase will involve developing GOCO options through negotiations with potential private sector partners. A robust public sector comparator will be developed in parallel. As I said, a decision will be made shortly.
The noble Baroness asked whether a final decision on GOCO had been made. The answer is no. We are currently considering whether to move into an assessment phase that will allow us to make a comparison between GOCO and an in-house comparator. It will look at how far defence equipment and support can be improved in the public sector. The noble Baroness also asked about our allies’ views on GOCO. We are working closely with our international partners to assess the impact of any potential changes and will continue to do so.
The noble Lord, Lord Touhig, asked whether one partner could cope. We envisage that there is likely to be a consortium to cover a diverse range of activities. He asked whether there was an appetite in the private sector. We have engaged with potential partners throughout, and they seem keen. He asked about bankruptcy and falling short. We will ensure that procurement activity does not collapse.
The noble Baroness asked whether there was a government plan to ensure both skills and an affordable programme, and what new skills would be required. The noble Lord, Lord Rosser, also asked about skills and apprenticeships. For defence equipment and support, we are ensuring that we have the necessary skills to ensure that safety is not compromised. We place the highest priority on filling safety-critical posts with suitably qualified people. We continue to recruit apprentices, for example in the field of engineering, to continually refresh our skills base and ensure that we will have the right skills in future to support our Armed Forces.
The noble Baroness asked about the 1% rise from 2015. This applies to the equipment part of the budget, which is 40% of the overall defence budget. It is not a 1% year-on-year increase from 2015. We have taken what we thought was adequate for the equipment budget and increased it by 1% from 2015. The equipment programme is now affordable within available resources.
Finally, the noble Baroness asked about science and technology. A White Paper, National Security Through Technology, recognises the importance of science and technology. The Government are committed to sustaining investment in science and technology at a minimum of 1.2% of the defence budget. The publication of our 10-year equipment plan will enable industry to plan future investment with greater confidence.
I have run out of time. I am aware that I have not been able to answer every question, but I will write to noble Lords.