Matériel Strategy (Upgrade)

Lord Hammond of Runnymede Excerpts

Tuesday 19th November 2013 Written Statements

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

On 10 June 2013, I published a White Paper on the strategy for reform of the acquisition and support of our armed forces’ equipment. The strategy plans to explore the potential for involvement of the private sector under a Government owned and contractor operated (GoCo) model by means of a commercial competition which is under way, and to compare this option with an internal approach which would deliver an improved solution within the public sector (DE&S+). I want to update the House on progress of the commercial competition.

When the invitation to negotiate (ITN) was released on 25 July there were three prospective bidding consortia but this reduced to two shortly thereafter. While we believed that two bidders were sufficient for an effective competition, alongside the internal DE&S+ option, I asked that a review of the process be undertaken jointly between the Cabinet Office and the Ministry of Defence (MOD). This has recently been completed, and a copy of the report has been laid in the Library of the House today.

The review concluded that a viable competition remained, albeit with some risk attached, but that any further reduction in the number of bidders should stimulate a formal reconsideration and decision on whether to proceed further with the GoCo option. Bids were required from the two commercial consortia in three phases and the second of those was due to be received on Friday 15 November. The MOD has received a bid from one of the consortia but the second (Portfield, comprising CH2MHill, Serco and Atkins) has decided to withdraw from the competition. This is regrettable and the reduction in competitive tension will make it more challenging for the Department to conclude an acceptable deal with the remaining bidder, notwithstanding the competition from the DE&S+ bid, which will be received shortly.

The Department, with the Cabinet Office and HM Treasury, will now study the detailed proposal received from Matériel Acquisition Partners (led by Bechtel with PA and PwC in support), which is substantial at over 1,200 pages. In parallel, the DE&S+ team will continue to refine and enhance their proposition. This analysis will inform a decision on 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.