Defence: Procurement

Thursday 21st November 2013 Lords Chamber

Question

11:30

Asked by

[Lord Lee of Trafford]

To ask Her Majesty’s Government, in the light of the withdrawal of a private-sector bidder from plans to manage defence procurement through a government-owned, contractor-operated organisation, whether they have any plans to close off that option.

[The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Astor of Hever) (Con)]

My Lords, a review is under way to assess two options—a government-owned, contractor-operated entity and a transformed DE&S+, remaining in the public sector. We remain 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. The status quo is simply not acceptable.

[Lord Lee of Trafford (LD)]

My Lords, is the reality not that the GOCO competition concept is now totally dead in the water? It is quite impossible to run a competition with just one bidder. 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.

This concept has been driven through by Bernard Gray with very little support in MoD and the services; should not he now, in the circumstances, given that it has collapsed, consider his own position and consider resigning? But is not the real culprit the Treasury, whose bone-headed attitude over the years has restricted the MoD in employing the quality of people from the private sector, bringing in private sector disciplines, to handle and manage our £14 billion procurement budget properly? So is not DE&S+ the answer, as supported by many noble Lords, including the noble Lords, Lord Levene and Lord West, who sadly cannot be here today?

[Lord Astor of Hever]

My Lords, on my noble friend’s first point, the very fact that one commercial bid team has submitted a bid shows that it believes that there is a potential deal and it can deliver against requirement. We have always known that running a defence acquisition would be challenging, which is one reason for testing through the assessment phase whether it can be done. As for my noble friend’s second point, he is right to recognise the specific needs of defence acquisition and support personnel to match the professionally motivated defence industry. That is why we are very clear that, whatever option we choose, we will need to work with colleagues across relevant departments to put in place the necessary freedoms of operation to provide our Armed Forces with the right kit at the right time and deliver the best value for money for the taxpayer.

[Lord Touhig (Lab)]

The only outside bidder left in this process is a consortium led by Bechtel, a company with a litany of mismanagement of public service contracts, from Iraq to Romania to the United States. In Boston, for instance, it was responsible for the Big Dig, a tunnel construction project that went $1 billion over budget—and two-thirds of the problem was down to its mistakes. Given its mismanagement of the Big Dig, if Bechtel gains control of our defence procurement, will not Britain’s defences end up in a big hole?

[Lord Astor of Hever]

My Lords, the answer is no. The materiel acquisition partner’s team comprises Bechtel, as the noble Lord says, PricewaterhouseCoopers and PA Consulting, a consortium of world-class private sector businesses. The team has extensive experience of complex programme management; between them, they have delivered programmes to the United Kingdom, the United States and to 140 other countries around the world. Bechtel has ranked as the largest programme-managing engineering and construction company in the United States for the past 14 years. Specifically, MAP members have been involved in the Crossrail and High Speed 1 rail projects, as well as the Jubilee line, and in transforming major businesses in both public and private sectors.

[Lord Stirrup (CB)]

My Lords, it has been suggested that the consortium that withdrew did so because it did not trust the MoD’s numbers and there was far too great a risk of it being held to account on meeting targets based on erroneous assumptions. Could the Minister comment on that criticism and its accuracy?

[Lord Astor of Hever]

My Lords, I cannot comment on the Ministry of Defence’s accounting procedures, but I have full confidence in them.

[Lord King of Bridgwater (Con)]

My Lords, my noble friend the Minister said that the status quo is not an option, and certainly there needs to be a massive improvement in the procurement capabilities and efficiency of the Ministry of Defence; it is a long-standing problem. However, when my noble friend Lord Lee says that you cannot have a competition with only one entrant, is it not true that the competition now is between an outside contractor—Bechtel and its consortium—and an in-house resolution? If we do that, will he ensure, because it is essential, that there is more continuity and expertise, as has been referred to, in the procurement section of the MoD?

[Lord Astor of Hever]

My Lords, I can give my noble friend that assurance. Two processes are happening—one as a result of the single GOCO bidder and, as yesterday’s Written Ministerial Statement made clear, that requires a further review across government of the validity of the competition. Secondly, the MoD will be assessing the bid that we have on the table for a GOCO, along with a DE&S-plus proposal, when we have it, to see which will provide the best solution.

[Lord Tunnicliffe (Lab)]

My Lords, on 19 November, a Written Ministerial Statement on the GOCO competition included a vague reference to a review by the Cabinet Office and the Ministry of Defence. This review, which I could not find on the MoD website, expressed grave reservations about a competition with two private sector bidders. A copy of the review is available only from the Library. Given the importance of this issue, and the Prime Minister’s commitment to have the most open and transparent Government ever, will the Minister commit to publishing the review in full on the MoD website? Further, if the Government are minded—it seems that the Minister is implying this—to continue the GOCO competition with only one private sector bidder, will he commit to a further joint review by the MoD and Cabinet Office on how such a competition is viable, and publish that review on the MoD website?

[Lord Astor of Hever]

My Lords, as a Government we want to be open. I am sure that the review will be put on the website. Clearly, the contract is commercially confidential, so we would not put that on the website—certainly until the position is very much clearer. As far as a further review is concerned, we hope to make a decision on the validity of the competition very soon, and a final decision on the whole process by the Summer Recess. I am sure that the whole House will agree that it is important that we take a considered view before making any decision.