The Ministry of Defence is considering dramatically expanding the support work it outsources to private companies.
The news comes only weeks after an independent report cited the trend towards contracting-out as a key factor in the 2006 Nimrod reconnaissance aircraft explosion in which 14 servicemen were killed.
Ministers and senior MoD staff are evaluating the findings of a preliminary internal review into logistics and equipment support that recommends passing more responsibility to industry and setting stringent efficiency targets.
The Defence Support Review (DSR), a copy of which has been obtained by the Financial Times, notes that “past efficiencies have . . . been derived from a range of increasingly innovative arrangements with industry”. It says these should be adopted more broadly across the services.
“The cost base has, and will continue to, migrate to industry,” it adds.
The DSR says its recommendations could save about £474m in the first four years of the plan and up to £2.4bn over the subsequent six, with only a modest £5m outlay in year one.
But the conclusions of the review stand in stark contrast to the message of last month’s Haddon-Cave report into the Nimrod disaster, which the government has pledged to implement.
That report was highly critical of the “corrosive” habit of outsourcing. Transferring increasing amounts of work to contractors, it said, had undermined the MoD’s ability to act as an “intelligent customer” and manage safety issues, while setting cash savings targets had distracted the department from other goals.
It was also highly critical of two leading contractors, BAE Systems and Qinetiq, accusing them of “lamentable” failures in their review of the Nimrod’s safety completed before the fatal accident in Afghanistan.
The DSR warns that the armed services have sometimes negative views of the abilities of their prime contractors, while the department currently lacks the controls for implementing and monitoring efficiency gains.
A spokesman for the MoD said: “Any future plans on defence support arrangements will be considered in the context of how we take forward the recommendations of the Haddon-Cave review. We will continue to explore how the department can become more costefficient, but safety must come first.”
The findings of the review have nonetheless raised serious questions among serving support staff – whose numbers have been whittled down by previous rounds of outsourcing – and the unions that represent them.
“[The union] Prospect is concerned that the DSR is premature and will damage further the MoD’s ability to support the front line,” said Steve Jary, national secretary of the union, which represents 10,000 MoD civil servants, in a letter to ministers last week.
Mr Jary advised the ministry to pause while it digested a series of recent reviews into defence procurement, and urged it to halt the implementation of the DSR “while the landscape is shifting beneath its feet”.
But with the defence budget already exceeding its spending limits for the current year, and significant cuts looming in the near future, the MoD is under considerable pressure to find further savings.
The Gray review into defence acquisition said outsourcing could reduce costs substantially . For example, it pointed to work by the National Audit Office suggesting a Tornado support contract run by BAE had delivered savings of £1.3bn.
The MoD spent about £10.1bn on buying services from the private sector in 2007-08, according to a 2008 report on the public services industry, commissioned by the government.
The DSR, which was commissioned by Sir Kevin O’Donoghue, chief of defence material, was asked to look for rapid “short and long-term savings recommendations . . . [and identify] areas for further, more detailed work”.
Specific proposals include increased co-operation with international partners to support joint projects, and developing bigger contracts with single suppliers, which could see companies such as Rolls-Royce given responsibility for maintaining engines across a range of different aircraft.
While the five-week review is considered by senior politicians, the MoD has sanctioned a more detailed two-year investigation to be conducted by six full-time staff, which will feed into the strategic defence review planned for next year.
Source: http://www.ft.com/cms/s/0/eb308626-d3e2-11de-8caf-00144feabdc0.html
