Defence: Procurement

Lord Touhig Excerpts

Monday 18th March 2013 Grand Committee

[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.