Monday, 16 December 2013

It’s a ‘no go’ for ‘Go-Co’ – Thoughts on the DE&S Situation

Last week it was confirmed that the MOD would not proceed with the privatisation of the DE&S, following the competition reducing to just one bidder. Instead the organisation will be moved into an ‘arms length’ organisation working for the MOD, but with significant autonomy to set pay and conditions to attract and retain the best employees, and be able to deliver effective procurement on time.

Humphrey has long felt that the DE&S gets an extremely undeserved reputation, which it frankly doesn’t deserve. Defence procurement is long, complicated and at its most complex involves trying to acquire the latest in cutting edge technology, integrating multiple different technologies together and then making it work in pretty much every type of warfighting condition imaginable from peacekeeping to a CBRN environment, and it has to do this and maintain its qualitative edge for 30-40 years.

This is not to deny that there haven’t been problems – there have. The problems of recent years when looked at in depth owe much to issues on cost growth, technological issues, integrating technology, and trying to deliver a project at the same time as people are trying to slash budgets. One only has to look at the way that the recent spending rounds have effectively created a situation where equipment is being procured while at the same time there is significant uncertainty about how much money exists to actually buy it. Arbitrary demands for a 5% in year cut here, or a 12% reduction in year four of the spending profile there, and it all quickly adds up to a challenging situation. By being part of the system, and not at arm’s length from it, DE&S not only had to buy and support the equipment, but be subject to the same spending constraints as others.

The SDSR set out that the DE&S should be looked at for privatisation, essentially being an authority working under contract to the MOD, and not as part of the MOD. At its most simple the concept was that the MOD would set the requirements, the solution and the budget to meet it, and the new DE&S would act as managers of the process. They would be contractually obligated to deliver to time for a specific capability. Spending reductions or changes to the specification would have to be managed formally through contract amends to the DE&S, thus preventing random money saving targets in year, or a newly promoted SO2 keen to make his mark adding in a spurious requirement late in the day which added significantly to cost and time. In other words, the vision was of an organisation with sufficient independence as to meet the procurement needs of the military, without undue interference.  The theory was sound, but in practise it was infinitely more complicated than this, and for many reasons the project didn't continue. Now the DE&S looks to the future as still being part of Government, but instead at arm’s length from the rest of the MOD to be able to try and have the autonomy to deliver as expected.

DE&S struggled in part due to the challenges of being part of the system, but also due to the challenges of not being able to recruit and retain the very best skilled workforce. One only has to talk to friends who work in the DE&S to pick up  the sense that people there feel frustrated at the system. Many friends of the author took personally the media criticism that they were failing to deliver equipment on time to support TELIC or HERRICK, despite the delays owing far more to wider problems than failings in DE&S. Others feel browbeaten into submission, fed up of the constant sniping over their very existence by the media, the public and sadly some military personnel.

One of the real problems has been being able to pay a skilled workforce a reasonable salary and offer it career development opportunities. It is difficult to retain highly skilled project managers, or technical persons when the best the Civil Service can do is offer a package of £28K per year, with no real career progression possible unless you step away from what you excel at. A friend of the authors realised the game was up when he encountered a private sector project manager on over three times his annual salary for doing the same job when they worked alongside each other. For years there has been a steady drip feed of people into the local industry around Bristol, as the Defence Industry is able to offer much better salaries for doing fundamentally the same job. The opportunity of the new structure is that it may be able to make a much better offer to the skilled workforce, and possibly offer promotion and career development opportunities which have long been dormant since it became essential to be a ‘generalist’ to secure promotion in the wider civil service.

One hopes too that the new structure will hopefully end the merry go round of service personnel coming in for an obligatory ‘two year tour’ prior to returning to what they would regard as ‘proper soldiering’ (or service equivalent). Part of the challenge in handling procurement is the near constant churn of military personnel who are being pushed through the DE&S system in order to gain experience at lower levels prior to moving up the chain. This means that over time it is very hard to find much continuity on a project beyond the civilian element (who often feel dis empowered when handling new and extremely confident SO2s who emphatically KNOW that they are right), and as such the wheel is regularly reinvented.

A cursory glance on ARRSE would suggest that there is a well-worn path of people arriving and knowing that in order to be promoted, they have to change something – no one gets promoted for ‘steady as she goes’. This is perhaps part of the problem – a culture of ‘something needs to change’ rather than ‘something doesn't need to change’. One would hope that the new organisation is able to embed experts for longer, and that future procurement tours are seen as much as about delivering a previously agreed capability and not tinkering for the sake of it.

It is important though that we take stock of what DE&S does and look on it compared to the rest of the world. Arguably in DE&S the UK has acquired one of the finest and most responsive defence procurement systems out there, despite the criticism heaped on it from less informed commentators. When you consider the very challenging requirements of UK defence-  namely to acquire capabilities across a wide range of areas, using the most cutting edge of equipment and then being able to support it in service for decades, DE&S does well. Generally speaking equipment enters service broadly on time (or at least in the same range of overruns as would be realistic in most other industries). They are able to run a fair and open competition, which isn’t always taken for granted in some countries, and generally speaking people bidding have a genuine shot at winning a contract, and not being part of a political stitch up (as again happens in some countries). Incidences of corrupt practise are mercifully exceptionally rare, and a sign of a balanced system.

The DE&S have been able to respond effectively to the dynamic and changing nature of operations, such as TELIC and HERRICK – one only has to look at the way that over the last 10 years or so the British Army has been able to re-equip itself with an entirely new range of capabilities, many of which didn't exist even 5 years ago. There has been sufficient agility in the process to ensure that new equipment can enter service quickly, and due to the evolution of the UOR process, it can now be supported on a campaign basis and not just for the short term. In other words, there is an incredibly agile and flexible procurement and support system looking after the needs of troops on HERRICK, and the way that so many different areas have been re-equipped often several times over is testament to the ability of DE&S to work with industry to deliver quickly. The challenge now is to learn from what works well on UORS, and apply them to mainstream procurement where things are often more complex and with much more challenging and diverse user requirements to boot.

As with many things in the MOD, the UK perhaps doesn't realise how good a service it gets from them, and while it is very easy to knock the DE&S, it is worth taking a moment to think about what its workforce has done in the last 10 years or so. Compared to almost any other nations procurement system (let alone nations deployed on wartime operations), you then realise that despite huge media complaints, the DE&S is a rather fine organisation indeed. One hopes that the future structures proposed for it help make it even better still, and if the new system enables it to deliver at arms length to avoid planning round challenges, and enables it to recruit and retain high quality people for the long term then that is to be strongly encouraged. 


  1. " Arguably in DE&S the UK has acquired one of the finest and most responsive defence procurement systems out there"

    if its that good why get rid of it ????

  2. I heard that DE&S has performed as well as the top 25% of industry equivalents on major projects in terms of delivery to time and cost. That sounds like something worth celebrating.

    I don't think higher salaries are the answer though. You can attract and retain the best people if you give them an interesting and rewarding job and the freedom to deliver. The lesson for me from your friend's experience is MOD is wasting money paying contractors 3 times as much as its own staff to manage projects.

    1. The problem with "interesting work" instead of "high salary" comes when you try to pay the deposit on a house with "my job was interesting today". Unfortunately the banks only take money... and at that point, typically at mid-career when staff are beginning to be experienced and useful, they find they need increasingly urgently to look elsewhere for a (possibly, but not certainly) less interesting job that'll allow them to support a family.

      Nobody sensible is proposing putting civil servants on rockstar wages, but is it unreasonable for a forty-something specialist with postgrad qualifications and professional standing (for example) to be able to afford to buy their house?

  3. Of course if you put it like that it's not unreasonable. We'd all like higher salaries, but then there would only be enough money to pay for fewer people (unless you're suggesting we should pay more for DE&S now?). I'm just saying that many good people keep working for the Government despite the wages if they like the work. Money is not the only motivator and maybe the forthcoming changes in DE&S will be able to improve some of the other ones?

    1. I'm fairly sure the DE&S wage bill is much, much smaller than the equipment budget. If you want to reduce costs substantially, you need to reduce big line items rather than small ones.

    2. Rob,

      Many of the "good people who keep working for MoD", are the fifty-something cohort who bought houses in the 1980s (or earlier) and who can therefore afford to stay, and are reluctant for a range of reasons to move unless they must.

      Retention in the younger groups, and for anyone having to pay current property prices, is very poor; unfortunately, that's where the experts and specialists we'll be relying on in ten years time should come from when the old'n'bold retire. Unfortunately, we are not training up their replacements, partly due to pressure of work and partly because they have a habit of bailing out once they've got upskilled. (And then sometimes we're having to buy them back in at contract rates... yes, that's cost-effective!)

      Look at some of the commercial howlers we let ourselves in for, look at the mistakes we keep repeating, because we don't have the corporate knowledge to avoid them: why not? Because so many staff come in, work hard for a while, then bail out to somewhere that pays them a decent salary and recognises that they might want to progress, rather than keeping that experience and knowledge for the next project.

      Is the current model *really* working so well that it can't be challenged?

    3. Very good point. Retention is a big issue - I saw a PPPA study on the internet from a couple of years ago highlighting then that 60% of the MOD workforce is over 40, but 80% of leavers were under 30. This mismatch would cause long term stability problems for the demographics of the workforce.

    4. Rob, please don't trivialise the matter of salaries, hardly generous to begin with, that have been falling for three years and counting: this is something that cannot be brushed aside with a comment such as 'we'd all like higher salaries'. People need to be able to pay their transport costs, their mortgage (and in the case of some caught in the trap of the work/affordable homes divide, weekday rent as well), pay for heat and light and food and decent clothing to wear to work. Just being able to do this on a single salary that's been gouged, raided and stolen, and after cutting things to the bone - the cheapest trains, supermarket clothes, one or two rooms heated - and there's nothing left over. There are no more economies left to make. We need to be paid more now: this can't go on. You may be feeling a bit pinched but generally OK youself: don't imagine that your colleagues are in a similarly comfortable position.

  4. Rob
    Do you have a link to the top 25% claim please?

    1. Ant,

      It's referred to here on page 1.

    2. (Belatedly) Thank you!

  5. Humphrey, a nicely balanced article. However, my experience of London is that it is usually the SO1s who are anti what DE&S is trying to achieve. SO2s usually have so little experience they wouldn't know where to start!

    I particularly liked the way you worded this paragraph;

    "They are able to run a fair and open competition, which isn’t always taken for granted in some countries, and generally speaking people bidding have a genuine shot at winning a contract, and not being part of a political stitch up (as again happens in some countries). Incidences of corrupt practise are mercifully exceptionally rare, and a sign of a balanced system."

    1. They are "able to" run fair and open competitions, but commercial don't if they're told not to. This often causes clashes with DE&S's technical officers, who tend to try to ignore illegal orders. This cultural clash stems, especially, from the actions of an old Director/Commercial.

    2. There are very many examples of people not having a "genuine shot" at winning contracts. They may "win" the bid, but the contract will be awarded to a favorite contractor or one whose reps are former senior officers. Very often it is political interference, a result of lobbying from marginal constituencies. Similarly, often it is simply a Government minister ensuring the contract doesn't go to an opposition constituency. DE&S has no control over this at all but have to manage the fall out, which often involves the company being paid in full without delivering, forcing DE&S to find money to pay someone else a second time. For some unknown reason, these cases are never publicised.

    3. Instances of corrupt practice are indeed mercifully rare, but it is still tolerated and many lives have been lost because of it.

    Would GOCO have fixed all this? I don't know, but an article on why the GOCO contract was so poorly run would be appreciated.

    A revealing read, as always. Merry Xmas.

    1. Wearing a big "modesty" badge, I'd say I have quite a breadth and depth of experience in directly managing or working on a range of MOD projects.

      I simply do not recognize your assertion at para 2 and 3 let alone the statement regarding "illegal" orders (very sloppy language). I think you have to provide some evidence for this type of statement. It's just too glib.

      There will obviously be an element of (understandable?) political posturing for some of the larger Cat A projects, but that will be at the DIRECTION of the politician, not the ex-Commander "rep/lobbyist" and certainly not DE&S project staff.

      Sir Humphrey is very correct in implying fair contract award. OJEU and the associated procedures is at the heart of Cat B to D sized project procurement strategies.

      And even though,as an engineer, I'd love to have "preferred suppliers" list (as industry does) to keep the inventory levels and support solution simplified, we simply don't.