Defence Matériel Strategy

Thursday 25th April 2013 Written Statements

[The Secretary of State for Defence (Mr Philip Hammond)]

For decades, there has been an acknowledgement that defence acquisition in this country can, and should, be done better. Despite almost countless reviews and reorganisations, successive Governments have failed to embed the radical changes necessary to provide our armed forces with the equipment they need in the most effective and efficient way possible.

In 2011, my predecessor established the materiel strategy programme to consider what changes would be required to the defence equipment and support organisation (DE&S) to resolve this problem.

In July last year, I announced to the House that, after a rigorous examination of all the possible options open to us, our preferred model for the future operation of DE&S was a Government-owned, contractor-operated entity, a “GOCO”. Since then, we have conducted more analysis that has confirmed our thinking in this regard, and today I am pleased to be able to announce the next steps in taking this work forward.

This final assessment phase, which we expect to last approximately 12 months, will allow us to make a true comparison between two options. These are a public sector comparator which is known as “DE&S +”; and a GOCO, implemented in two stages.

I would like to put on record my appreciation of the excellent staff at DE&S and the work they do. This programme is about giving them access to the necessary skills, processes and resources to enable them to do their job better, ensuring that the armed forces are provided with battle-winning equipment on time and to budget.

During this assessment phase, we will work with HMT and the Cabinet Office on the “DE&S+” option to explore the extent of change that could be delivered while keeping the organisation fully within the boundaries of the public sector.

In parallel, a commercial competition will be launched that will enable us to determine with potential private partners how a GOCO would work in practice, and what the costs and benefits would be. By the end of the assessment phase, we would expect to have proposals in a form capable of being contracted, if we decide to proceed with the GOCO model.

We have made no secret of our expectation that the GOCO option is likely to prove better value for money, but we need to test this assumption with the market, to see what can be delivered and at what cost. No decisions have yet been made. At the end of this 12 month assessment phase we will have a comprehensive set of qualitative and quantitative data for both possible operating models which will enable us critically to evaluate the two options and make a final decision about the future of DE&S.

I expect to publish a White Paper later in the spring setting out further details of our analysis of the problems in defence acquisition, of the options for potential solutions and the reasoning behind our focus on the GOCO as the preferred solution.