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.

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.