Questions to answer over the GoCo model- Alison Seabeck MP

Article by Alison Seabeck MP, Shadow Minister for Defence Equipment, Support and Technology, in a article in Defence Management Journal, said:

In April, Defence Minister, Philip Dunne, pushed out a long awaited statement on the Defence Procurement. Sadly, at a time when industry is crying out for some certainty, it begs more questions than it answers.

The Defence industry is perfectly within their rights to be asking government the question ‘What have you been doing for the last three years?’

There is consensus across the political divide that successive administrations did not sufficiently reform defence procurement and as a result elements of the equipment programme were ‘over-heated’ while the MOD was underpowered.

Chief of Defence Materiel, Bernard Gray, brought in by the last Labour Government to examine the issue, has persuaded ministers that a GoCo (Government-owned, Contractor-Operated) model should be the preferred model for future management of Defence Equipment and Support. Ministers have now announced a year-long consultation to make the idea stack up.

Unfortunately, the non-engagement to date of outside parties, whether political or industrial, has made it harder for those of us with a clear interest in making this work to have confidence in the process.

There are a myriad questions which remain unanswered. Primarily we must know where the financial risk lies? No government has previously set up a private body responsible for managing multiple programmes of such complexity and value. The US Government looked at clustering projects but has now backed away from this model. Everyone in the UK will want to know whether shareholders will be willing to shoulder the financial risk which derives from the potential for delay, over-run or scope development, or whether they will be expecting the government to continue to underwrite the GoCo’s decisions. If the case is the latter, many would view this as rather defeating the object. Warning bells are already ringing around Westminster about the management of risk within the MoD and we already know from successive Public Accounts Committee (PAC) and National Audit Office (NAO) reports that the MoD struggles when it comes to assessing risk. Many will be asking, who is responsible for ‘pricing in’ risk and, indeed, whether existing contracts will be renegotiated by the GoCo? If so, the Core Equipment Programme could be thrown into jeopardy and any increase in individual programmes’ forecast costs could eat up financial contingency.

Furthermore, it is unclear where accountability will sit for the outcomes of decisions taken by the GoCo, the scope of their decision-making power and the oversight provided by ministers. There will be concern if Parliamentary oversight, in particular that provided by the PAC, were to be weakened. They must be able to access the decision-makers within the GoCo.

We will also clearly need to be told what the role of the Investment Approvals Committee will be should a GoCo be introduced. It will also be important to understand how a GoCo would sit alongside the Levene proposals to give Service Chiefs greater responsibility and flexibilities within their budgets, and whether this sensible reform is undermined by the transfer of power to a GoCo.

Many in industry have raised concerns about the length of the contract for any consortium running the GoCo, the likelihood of this being shorter than contracts for individual programmes and the instability to programmes arising from retendering.

Additionally, across the workforce many want reassurances that staff will be transferred under the TUPE arrangements.

These are all issues which the Opposition Front Bench has been waiting to ask, but has not been given access to do so.

Understandably industry is asking to be part of the debate which has to be undertaken on this dramatic change to the way in which the Government does business. It is important that the government draws on views from within the MoD and from outside, and from the people they expect and want to do business with in the future. It is essential that industry’s voice is heard: we have to nurture a level of trust and confidence between government and our industry partners which has been sadly lacking of late.

Just setting up a body which drives down cost and increases efficiency might satisfy an accountant, but it will not sustain our defence manufacturing sector or the employment and exports which benefit the UK. Labour recognises the need for procurement reform and supports radicalism in the area, but reform must deliver our strategic objectives of sustaining our defence industrial sector, retaining and growing skills for the benefit of the wider economy, as well as providing world class equipment for our men and women on the frontline. The GoCo mustn’t be set up as a ‘one trick pony’. This is about the right reforms, and the onus is on Government to make the case for a GoCo.

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