Sunday, 22 July 2012

Fifty Shades of Gray? The future of the DE&S…

One announcement that slipped out under the ‘end of term’ radar last week in Parliament was the decision that the DE&S, which handles procurement and support for the MOD is likely to become a Government Owned, Commercially Operated organisation (GOCO).

This decision should not in itself come as a surprise to many. For some time rumours have circulated that the MOD was seeking to divest itself of the DE&S, and put procurement at arms length. This was in part seemingly driven by the review into defence procurement driven by Bernard Gray (the current Chief of Defence Materiel). While it will take some time for the work to be completed, it appears that in future all MOD procurement will be run by the private sector on behalf of the MOD.

This is not in itself bad news – one can look at the way in which SERCO has successfully taken on the requirements to deliver RN marine services from the old Royal Maritime Auxiliary Service (RMAS) as an example of where a good ‘GOCO’ can work well and deliver a positive effect.

Bernard Gray,with former SofS Liam Fox (Copyright MOD)

What does this all mean?

For many years the media have been advocating the privatisation of the DE&S, believing that the organisation at Abbey Wood is incompetent, unable to deliver and that an injection of private sector ethos and mentality is going to suddenly make things much better for equipment provision.

The truth is perhaps more complicated. Whoever takes on the role of running the DE&S for HMG is going to find themselves in a role which makes being head of security at G4S look like a sensible post right now. There will be an immense set of expectations from Ministers, the media and concerned members of the public that the new organisation will suddenly deliver far more effectively and efficiently, and that many of our perceived procurement woes will vanish.

The challenge is going to be doing this in the near term. Whoever takes over will inherit a workforce that is incredibly demoralised at present. Speaking to acquaintances from DE&S, one is left with the impression that many feel they are being blamed for the failings of other parts of Government. Some see the problems that procurement has as being rooted in the Planning Round culture in London – they are merely required to implement delays or seemingly incoherent decisions on the guidance and advice of other areas. They feel that they are about to lose their careers in order to protect others.

In the short term there is likely to be an outflow of staff as DE&S officials who don’t want to be part of the brave new world seek to get out – either to other MOD or Civil Service posts, or to the private sector, where salary packages for reasonably skilled staff seem far more generous than the MOD at present. Talent retention is likely to become the buzzword of the day – how does Bernard Gray and his team convince the staff at Abbey Wood and elsewhere to stay, and convince them that being stripped of their civil servant status doesn’t mean that they don’t have a career anymore. Getting through to vesting day is going to be a challenge as people seek to get out.

This could impact on the wider MOD in a couple of ways – firstly it will become harder to find good quality staff to put into high profile projects. For the last few years the main effort has been supporting operations in Afghanistan. This will remain a challenge until the withdrawal, but needs to be done with potentially less staff available – filling vacancies will become ever more difficult as fewer staff seek to move into an organisation which has no civil service future.

There will be a challenge to ensure that normal projects are pushed through as planned – it will require an incredible motivational effort given that there is no overtime, limited promotion prospects, and no real short term career prospects. Why make the effort for an organisation that has no future?

Finally managing to keep skills in service, both now and for the post GOCO future will be critical. There is always a shortage of good project managers and engineers. Many of those in the DE&S have stayed put partly because they like working for the civil service. Will they still feel the same about the new operator, or will they see this as the chance to go elsewhere. There is no guarantee that whoever takes over will actually have a workforce that is fit for purpose.

DES&S Abbey Wood - Soon to be privatised (taken from defence industry daily website)

The GOCO world is going to be challenging – This is probably going to be one of the most high profile defence ‘privatisations’ seen over the next few years. There will be immense expectations of delivery from the outset, and the pressure to succeed will be enormous.

While the media will have you believe that privatisation will bring about major changes to delivery, whoever takes on the DE&S will at first still have the same workforce. This will not change cultures overnight, and it may take some years for the private sector mentality to sink in and new practises and better ways of working to become more prevalent.

The new operator will need to restore staff morale, and work out whether they will continue to pay civil service wages, or offer wages commensurate to talent. The latter may increase skills, but will cost significantly more – there appears to be a significant cost difference between the public and private sector, particularly as the MOD makes no special payments for staff holding project management qualifications.

Over time retaining an understanding about defence will be critical. One of the challenges will be to prevent a situation emerging where a privatised DE&S no longer really ‘gets’ defence, and instead recruits anyone who can handle project management. There will need to be strident efforts made to ensure that the DE&S teams remain integrated into the wider defence community. Additionally there will probably need to be renewed emphasis on ensuring that the Requirements Teams who handle procurement have stronger training and better understanding of their role, to ensure that they are not handed a solution by the DE&S which does not fully meet MOD requirements. This may well require a wider culture shift beyond just DE&S and one which impacts on defence as a whole.

So it looks like interesting times ahead – there are many questions that need to be answered, and its not just a case of saying ‘privatise defence procurement and all will be well’. It will be a long term project, that is likely to take over a decade to do properly, and which will have major ramifications for the future shape of UK defence, and the equipment it operates. Done well, and it will retain promote and recruit high calibre staff who can bring projects into service better, faster and more cheaply than before. Done badly, and the implications for UK defence as a whole could be almost too worrying to contemplate.


  1. Or put it another way, it's a flipping great leap in the dark, however good the due dilgence over the next year or so. Good leadership and effective management - not always our strongest points - will be crucial, since this is going to proling the uncertainty among staff who have in many ways been in a state of supended animation since the original 2009 Gray report. But it's certainly not going to be boring.

    1. From 1971 defence procurement review referenced in October Blog.

      Problems which are for one reason or another largely or wholly insoluble
      8. A defence procurement organisation inevitably has to live with problems
      which prevent it from operating on fully commercial principles. It is not its
      own master and must not become so since it only exists to meet user needs.
      Nothing that it can do will eliminate the risks inherent in developing and
      producing the advanced systems which the Services wish to have, nor can it
      escape from changes in Government policy affecting the Armed Forces and
      their tasks within the long development/production cycle of individual weapons
      systems or from changes in strategic thinking and planning. Collaborative
      projects with other countries, which are increasingly characteristic of the
      defence equipment programme, call for complex administrative machinery and
      involve delays and frustrations which would be quite unacceptable in pursuit
      of normal commercial procurement.
      9. The existing procurement organisations have suffered severely from these
      problems and from the fact that the roles of the British Services have called
      for advanced equipment across a range wider than it has been possible to
      provide efficiently within the resources available. N o successor system is likely
      to be wholly free of these difficulties. What should be possible though, with
      an integrated system responsible for the whole procurement process, is to focus
      more sharply for the decision-makers outside the procurement system the
      issues which they have to face and the likely consequences of the policies which
      they wish to pursue.

  2. Hmm... I don't know if you have had the pleasure of working with Bernard Gray (I have) but he is probably the most ignorant, arrogant, and self-centred person I have ever met. The only reason that he is pushing this so hard is to position himself for a QinetiQ style executive payout as part of the deal. Actually solving the problems of DE&S are not high on the list of priorities - he doesn't have a clue on how to do this and is just looking for a quick fix to move the problem to someone else and cash-out into the bargain.

    Disillusioned of Abbeywood

    1. I wholeheartedly agree. I am just glad I took EVRS Dec 12. The only thing I miss about DE&S are the people I worked with both military and civilian.

  3. At the moment much of the hierarchy is military, with some teams having AD level, 1, 2, 3 star staff all from the services. Then top of shop is Bernard. A chance to change to a professional organisation can only be a help.

  4. As Sir Humphrey alludes to, the problems are not exclusively in ABW. The planning round culture that emanates from MB is at least as damaging as any inefficiency in DE&S.

    I vividly recall congratulating one IPTL on actually getting the project through Initial Gate (nowhere near the wide low hurdle it was supposed to be) only to be told that thanks to a Savings Measure, there was now no money to execute the Assessment Phase. The funding had been moved right because it didn't fit the RDEL silt chart in Excel. Moved in town with little or no discussion of impact at the ABW end. Result : nugatory work and a team of very disillusioned people.

  5. SERCO doesn't do well in the NHS sphere, or it seems in the Olympics fiasco.
    So I won't hold my breath for any good further expansion.

  6. SERCO doesn't do well in the NHS sphere, or it seems in the Olympics fiasco.
    So I won't hold my breath for any good further expansion.

  7. I think the point that is disillusioning most staff at Abbey Wood (apart from the pay freeze, pension, media bashing etc.) is the feeling of being rail roaded. The decision that had to be made between GOCO, Trading fund and DE&S plus just seems to have been made at the very beginning of the process and it feels like we are just going through the motions.

    Currently I am just annoyed that I didn't get pulled across to the newly formed DSEA.

  8. Well disillusioned of Abbeywood gets a supportive vote from me. Having worked with the gentleman in question very closely I'm not a fan, not surprised by the decision and amazed the powers that be can't see through the whole Booze and Co charade. The decision was made before he landed the post, he was a political appointee and he's chosen the solution he can implement the quickest and have completed before the next Government is in place.

    If Mr Gray was so keen on making Abbeywood more effective he'd follow up on his observations and recommendations for upskilling its staff - quite odd that one of the first wave of cuts were the teams (such as the Project Management team) doing that very work. That tells you all you need to know....

  9. I might be cynical, but all I can see is looming disaster as we completely reorganise DE&S and MoD MB at the same time. Splitting the CAPs up back into service commands seems to have the makings of a massive cockup, and at the same time we're completely changing the way that procurement is run.

    The only people this is going to be good for is the contract lawyers. By the time it's gone through their mill, any monetary efficiency savings have disappeared and it's incorporated a 3-6month (at least) delay into the work starting. As a result nothing gets done.

  10. Who is Bernard Gray?

    His wiki bio does not identify any great successes.

    His last job was running a business with less than 300 employees and a turnover of less than £70M. And this qualifies him to lead a business which is orders of magnitude larger and upon which the nation depends for the capability to defend itself?

    I know Sir Humphrey is a fan of political appointees who are Captains of industry.

    But I have to make the point, it seems he is more an Army Captain than a Naval one!

  11. Anonymous @2152 - I'd love to know how you 'know' I am a fan of political appointees - I'd like to think that I've given no such indication of that nature at all!

    1. Your blog on 19 Feb actually: " It is not unrealistic then to assume that CDM is on this package, which was designed to try and tempt a captain of industry into the organisation.

      While some may be outraged at this, personally this author sees it as vindication of the argument that if you want to bring talent into reform defence, you have to be prepared to pay market rates. Let’s be really clear here –you can try to tempt captains of industry to join the department, but how many really successful captains of industry are going to leave well-paid jobs, which come with stock options, sane travel budgets permitting travel without seeking CDS approval or flying in the back of a sub Easy jet style flight, and which pay far more money than the MOD can provide? The answer is very few – particularly not for the likely £100K per year salary (EDIT - further research has shown he is on around £200K per year plus bonus reportedly) that would have been on offer. Humphrey has many friends in the private sector in a range of jobs, many of whom would love to come across to the public sector and help reform it, but who make clear that they cannot afford the permanent loss of income that such a move would have on their lifestyle."

      Perhaps you have reconsidered when it is laid before you that his last job was with 300 people and a turnover of £70M.

      I find it hard to comprehend that this has not been seized on by Mr Murphy, but alas, he was of course a Labour SPAD when they were busy effing everything up in 97/8 with their attempt at a Strategic review.

      He has done square root of worth mentioning and has a reputation amongst people with day to day dealings.

  12. Sir Humphrey - I thought I would drop you a line that Mr Gray has actually concealed some key risks to his Material Strategy to the Defence Board to make sure it gets through. A good example is the international dimension to DE&S business as there is no guarantee countries such as the US will deal with a GOCO.

    To put some icing on the cake, having just got rid of a load of people on VERS, Gray is now about to recruit 600, probably from industry. A very expensive bill for the taxpayer methinks...

    1. I bet he won't get many takers!

  13. Just to add a late entry to this discussion, see the paper from RUSI:

  14. And another very late entry. I have just been told by a senior MOD acquaintance that Bernard Gray has now applied for the post of Permanent Under Secretary at MOD to replace Ursula Brennan. Perhaps he will then seek to privatise the whole organisation in accordance with his ideological preferences.

  15. Late entry, one has to question the judgement of anyone who requires the use super injuctions

  16. Why is Abbey Wood recruiting engineers when there is likely privatisation.

  17. too many well educated uninspiring leaders and not enough effective managers that understand the requirements with procurement and SUPPORT of military equipment in order to drive value for defence/money......


    Civil servant/reservist

  18. I am awaiting for the releasing of Anastasia Steele.
    Anastasia Steele

  19. I've been involved with GoCo in a far far smaller department. It took nearly 5 years to settle down. can you imagine how long it will take for the Tsunami to die down with DE&S becoming a GoCo. Whoever thinks it will only take 3 years is in cloud cuckoo land! I wish all those remaining in DE&S all the best. I got out under EVRS Dec 12 the best thing I ever did!

  20. It is a well known fact that everyone is getting fed up with the constant organisational and procedural changes that have emanated from on high. This ultimately results in demoralisation of those on the shop floor. It is about time those on high properly listened to those on the shop floor! I once had a Line Manager who always presented himself as being someone who was willing to take on new ideas etc - his door was always open. Yes, physically his office door was open but his listening mode was always off unless it was what he wanted to hear. So I don't rate the Town Hall sessions dreamt up by those on high!

  21. I retired early last year and my last place of work was Abbey wood.
    Reading this article made me go cold.
    I fear that letting "Industry" control procurement is going to sever that vital link between the supplier and the "soldier on the ground".
    There are countless" justifications" for the change but none will make up for the fact that we prided ourselves on knowing our subject and our users and if that bond is thrown away or broken the whole reason for procuring and supporting is a waste of time.

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