Defence Reform - Better(?) Defence Acquisition

Discussion in 'House of Commons' started by Bad CO, Aug 13, 2013.

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  1. Bad CO

    Bad CO LE Admin Reviews Editor Gallery Guru

    As promised, a thread to put together thoughts on the DE&S privatisation outlined in the Defence Reform Bill 2013/14. To date there have been a few threads (here, here and here) on the site about this which I've raided to get the following thoughts:

    • [OldSnowy] How will a privatised company have the right culture/take direction to support military priorities?
    • [Without Commitment] Surely the extra management staff will increase costs?
    • [BrunoNoMedals] How broken is the current system? Is it just an issue with big/high profile projects?

    Feel free to add to the list!
  2. Goatman

    Goatman LE Book Reviewer

    I was interested to read in today's i that it seems that Kellogg-Brown-Root(KBR) have pulled out of the competition.

    US giants pull out of bid to run MoD buyer - Business News - Business - The Independent

    HMG is now running a competition between two US-majority owned bid teams for its indigenous Defence R&D and arms procurement , one of which includes a former No10 adviser Richard Frere who joined Bechtel in July last year.

    There is no mention of the higher price ticket items in the Indy article - but I doubt if just the procurement of 'tanks and missiles' is the limit of the scoping document. And the involvement of Qinetiq - the commercialised Defence Research Agency - would indicate that all long-term R&D projects are in scope?

    So, Trident replacement then, a snip at an estimated £25Bn (LINK)....all new British Army small arms, post L85A2 then.....Joint Strike Fighter then (LINK)...

    If I've got this wrong please illuminate my darkness...

    At what point in this depressing exercise will the NAO mutter that British national interest has been poorly served?

    Presumably once the privatisation has gone through?

    Don Cabra
  3. Bad CO

    Bad CO LE Admin Reviews Editor Gallery Guru

    Personally I don't think there can be much debate that any procurement organisation (privatised or not) must follow the direction given to it by the Government/MoD. If it doesn't then you've created some sort of bizarre monstrosity that only exists to follow its own priorities.

    The argument you are making about whether current priorities are allowed to override future ones is always difficult especially when you are fighting wars of choice whilst a black hole exists in the future equipment programme. I'd hope that a fully privatised DE&S would at least be better at keeping tabs on this than currently appears to be the case. Perhaps a full understanding of the financial impact of decisions being made would force hard choices to be made in a way that rarely seems to happen at the moment.

    Of course what would be really useful is a clear statement of the strategic position for UK defence, i.e what are our priorities, etc. Unless I've missed something then the last time I've seen anything like this was SDR in 1997?
  4. With regards to the private company thing and at risk of being off topic, (and before anyone starts yes I'm a know-nothing never-served no-mark civvy scum), I always heard that Black Water didn't have the best of reputations, should that have a bearing on the admittance of private companies to the Forces?
  5. Given that the Defence Equipment budget is finite;then surely any profit margins, etc for the privatised company whoever it may be, will have to be taken out of the budget which means in turn, that there will be less money to spend on the actual equipment.
  6. Goatman

    Goatman LE Book Reviewer

    Well muddied that know-nothing never-served no-mark civvy scum,

    Conflating the old issue of outsourcing military ops to contractors such as
    >Executive Outcomes
    >Armor Group
    >Olive etc *

    with the scrapping of what we Jurassic sorts called the MoD Procurement Executive is a diversion.

    A fine rabbit-hole but , I submit my Lords, at best tangential to the Main Effort under consideration.

    Don Cabra

    * Some of us have longer memories than is often convenient . For those with an interest in PSC's this is a jolly interesting document ....two years ago the US DoD was paying 28,000 private security contractors in Iraq and AFG.

    • Like Like x 1
  7. meridian

    meridian LE Good Egg (charities)

    Sorry to drag this one back on subject!

    A couple of things spring to mind.

    It seems some of the thinking behind this is counter the fact that the civil service can't match the wages of the private sector and therefore by freeing the new organisation from the shackles of a rigid payscale and complex allowance system will enable them to avoid offering peanuts and getting monkeys. I don't actually buy into the underlying argument but in this model, how will the MoD police the no doubt numerous KPI's and contract conditions. If you still pay monkeys and are now faced by an organisation whose single obligation is to its shareholders aren't those monkeys going to be even more outclassed than they are now.

    (apologies for the use of the term monkeys to characterise civil servants but it gets the message across!)

    Second, just how are you going to control and manage intellectual property if the winning organisation has similar interests to those bidding for future MoD contracts. We saw how there were problems with the SAR PFI, it is so easy for a small part of the machine to be corrupted but even the merest whiff of it will bring the whole house of cards down

    What then

    So, two main issues, how can the MoD manage performance and maintain effective governance of IP
  8. meridian

    meridian LE Good Egg (charities)

    I would also add that some of the high profile defence procurement cock ups were directly caused by either the MoD and/or the wider government.

    How would this organisation counter, for example, the finance led decision to slow CVF and thus add a couple of billion, the political decision to insist on a new build engine for the A400 and thus add delay/cost and the military indecision on an epic scale that is FRES?
  9. No, the concept of privatisation is that the fiscal discipline, innovation and efficiency of industry will save significantly more than the profit. We are only taking here about creating a profit margin from the management of equipment programme projects (the bit carried out in house by DE&S), not from the equipment itself, since industry already makes a profit there. A 10% efficiency saving in the cost of running Abbey Wood would create a profit.

    DE&S business structure already creates significant profit for industry from its internal activities through the use of consultants to support every decision. This is an area that should significantly be reduced by privatisation.
  10. Hopefully we will end up with a contract where risk ownership, costs and management are well defined and understood. Political decisions and military indecision are "client risks", clearly owned by the MoD. I would expect an industry project manager to be rather more brutal with exposing the true costs of this kind of thing, hopefully leading to a reduction.
  11. Bad CO

    Bad CO LE Admin Reviews Editor Gallery Guru

    I don't think there is much doubt that we'll be held firmly to account for poor MoD decision making and made to pay the full costs. You'd hope that this would lead to much better behaviour amongst whoever will be setting requirements, etc.

    Unfortunately in my experience the military 2-3 posting cycle combined with the length of time any procurement takes means that it is rare that individuals who make the bad decisions get to feel the consequences.
  12. The corollary to that view is that any longer than 3 years in a procurement posting is too long away from the coalface. You need people with recent practical experience to inform the process. The Civil Servants should be providing the continuity.

    Looking wider, what is a bad decision? Many of our procurement "failures" occur because of a lack of decision making, not because of bad decisions. Managers can only make a decision based on the facts available at the time. The MoD way is to delay the decision until more facts are known, or to change the decision once they are known. Neither can happen without affecting the project in terms of time, cost and quality. A timely decision that is 80% right is far better than a late one which is 100% right.

    Anther angle on the debate; with KBR out of the competition, is this a procurement going wrong? Surely it is not in the MoD's interests to be down to two bidders at this stage. Neither of the players have much of a track record of delivering UK defence projects or of major TUPE transitions. Where are the big British players in the engineering services sector (Babcock, Interserve etc etc)? Why did KBR pull out? They have been lobbying for this for a long time, have a globally renowned partnering culture and are one of the best (if not the best) performing defence contractors. If they can't make a case for bidding this, can anyone make it work?
  13. meridian

    meridian LE Good Egg (charities)

    When a large organisation pulls out of a major bid it is usually a sign that the contract risk people had have a good look in a mid bid review and said, 'don't think so chaps'

    Which is a very very bad sign because if all you are left with is the last chicken in the shop, as bob says, those without the experience, what do we expect to get

    Am surprised more people aren't getting the pucker at the bidders being necked down so early
    • Like Like x 1
  14. I offer the reprinted rant below to illustrate why I think current arrangements are broken, but without an intelligent customer, swapping out the workforce won't change anything. I'd stick a modest wager on that being one factor behind firms withdrawing bids. Indeed, that's a good sign the thing is doomed.

    It's easy to have a pop at BAE, but have you ever considered why they get away with it ? However poor they may be, they keep getting paid. Having worked for them in defence a few times, I'll tell you why; because the MoD are even worse.

    No matter how badly we screwed the pooch, we always had a list of fuckups from their side we could trade off against. When we delivered what they asked for they'd look dazed and mumble, "err, we actually wanted ..." Which, all too often was what we suggested they might like a decade ago, only to be told by some arrogant, ignorant tool that we knew nothing.

    The civilian staff earn far less than we do for the equivalent job and their quality reflects that. We wouldn't touch most of them with a bargepole. And that's before they get moved just as they get used to the job into a post they are not qualified or experienced for.

    But for the gold standard in inexperienced, unqualified staff parachuted into posts they know nothing about you have to look at the uniformed staff. Keen, punchy, on a mission to get that OJAR nailed by doing something, anything to look good. The few that do care invariably disappear just as they understand how to do their job properly.

    And the culture is toxic, irredeemably so in my view. Results do not matter, delivery does not matter, all that does is process. Tick the boxes and your career is assured. Mistakes will never follow you, so move often and you will shine.

    Want to emulate the Japanese ? Look very, very carefully at their procurement process and personnel.

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    • Like Like x 3
  15. The option of changing out the workforce doesn't exist; they will all have protected rights under TUPE. The reality is that the incoming contractor will inherit the workforce and have to change the culture, otherwise they will fail. Of course there will be redundancies, but, beyond the initial costs of restructuring, the costs for these will fall on the contractor. To me, the management of this change will be the biggest risk and challenge on this contract and it is one that neither remaining bidder has much (or any) experience) of managing.

    I suspect the bid list is short because winning this contract may actually cost business. BAe and the other OEMs won't have looked at this because it isn't what the do; this contract is about managing procurement, not making things and BAe Systems make things. For an OEM, this contract would cost them a lot of business because they would not be allowed to compete for the programmes that they manage. Maybe that is why Bechtel, URS, Atkins and CH2M Hill are there; they have little or no current defence business that will be affected.

    As for your rant, the one place I would disagree is the issue of money. Jobs in engineering procurement do not pay well anywhere; level the package of a C2 at Abbey Wood with an equivalent in industry and the money won't be a huge amount different. At the more senior levels, yes, there is a big gap, but down amongst the workers, civil service packages are competitive.