LONDON — The U.K. defense ministry has abandoned a plan to outsource its defense procurement to the private sector after just one bidder was left in the running.
One of the two consortiums abandoned its bid in late November to run the Defense Equipment & Support agency, the U.K. defense ministry’s procurement agency responsible for the purchase and support of defense equipment under a Government-owned, Contractor-operated (GoCo) basis. With one bid left, from Bechtel-led Materiel Acquisition Partners, ministers have decided to scrap the plan.
The move comes after ministry officials revealed a plan in the summer to use the private sector as a middle man between the armed forces and the defense industry to cut out what it called “frictional waste,” which it claimed was unnecessarily increasing procurement costs between £1.3-2.2 billion ($2.4-3.6 billion).
Announcing the end of the initiative, Defense Secretary Philip Hammond told members of Parliament: “With only one bidder remaining in the competition at this stage, I have had to make a judgment about whether the public sector comparator alone would generate sufficient competitive tension to ensure an effective outcome for the armed forces and value for money for the taxpayer.
“Materiel Acquisition Partners has engaged effectively with the very challenging brief we set out,” Hammond said. “It has presented us with a credible and detailed bid, but we do not have a competitive process. I have therefore concluded that the risks of proceeding with a single bidder are too great to be acceptable.”
Hammond said officials would now examine an alternative option called DE&S+. But they have not ruled out reconsidering GoCo, saying more work needs to be done on financial control and additional management information must be gathered before the ministry could contract out the procurement process.
He said DE&S+ would be “supported by the injection of additional private sector resource,” thus ensuring that the organization would be “match-fit as the public sector comparator for a future market testing of the GoCo proposition.”
Starting in April 2014, DE&S through the DE&S+ plan would become an “arm’s length” offshoot of the defense ministry, with what Hammond describes as a “separate governance and oversight structure” featuring a board under an independent chairman, and a chief executive who would be accountable to Parliament for the organization’s performance.