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Reforming defence acquisition

Progress has been made in improving the affordability of the Ministry of Defence’s equipment plan. However, improving the performance of Defence Equipment and Support (DE&S) remains the most challenging element in the Department’s strategy for reforming defence acquisition, according to the National Audit Office.

The spending watchdog examined the Department’s progress in tackling the accepted weaknesses within DE&S, the progress in implementing the change needed within the organisation, and the challenges that remain within DE&S. The Department’s objectives in its reform of DE&S include improving the capabilities and skills of DE&S staff, the systems and tools available within the organisation and the way DE&S interacts with the Royal Navy, the Army, the Royal Air Force, and Joint Forces (known as the Commands).

Today’s report found that the Department has made progress in stabilising the equipment plan, and in clarifying the roles of Head Office, DE&S and the Commands. There is now a clearer separation of responsibilities between the Commands, which request equipment, and DE&S as the organisation responsible for delivering the equipment.

The Department’s preferred option for securing change in DE&S was through a Government-owned, Contractor-operated (GoCo) model – a company where the government controls the assets, but that would be operated on a for-profit basis by a private company. However, this model proved undeliverable, and was halted in 2013, by which point the Department had spent £33 million and two and a half years trying to implement reform at DE&S. Despite this, according to the NAO, the Department has gained a better insight into its business needs, for example, where key skills are needed and how staff spend their time.

In April 2014 the Department changed DE&S into a bespoke trading entity. Under this concept, DE&S remains in the public sector but with freedoms from and flexibilities over civil service pay rules. The bespoke trading entity allows the Department to retain greater control over DE&S, but the Department needs to ensure it can track benefits to establish whether the bespoke trading entity is delivering acquisition reform, and if not, take action.

To assess whether the structure improves DE&S’s performance, the Department will need to set robust measures of success. Being able to track the benefits of investing over a quarter of a billion pounds with private sector companies over the next 3-4 years will be essential to allow the Department to take any additional measures to improve performance, should it be necessary.

“Halting the GoCo competition and shelving of that option has cost acquisition reform two and a half years of work and £33 million, but has yielded some useful learning. DE&S now needs to demonstrate how, as a bespoke trading entity, it will address systemic weaknesses in defence acquisition to ensure the Ministry of Defence can deliver an affordable equipment programme and sustain this over the longer term.”

Amyas Morse, head of the National Audit Office

Notes for Editors

£13.9bn

Defence Equipment and Support (DE&S) (part of the Ministry of Defence) spend on buying and supporting military equipment, 2013-14.

£1.3bn

DE&S's forecast operating costs in 2013-14 to achieve the Department's plan for buying and supporting military equipment (known as the Equipment Plan).

£33m

Cost of the Materiel Strategy, until the government-owned, contractor-operated (GoCo) halted.

£162.9 billion

Value of the 10-year Plan for buying and supporting military equipment

May 2011

Department launches the Materiel Strategy, a programme to improve DE&S's skills and capabilities

December 2013

Department's preferred organisational structure to meet the Materiel Strategy's aims (the GoCo) is halted; and a decision taken to change DE&S into a bespoke trading entity instead

April 2014

DE&S set up as a bespoke trading entity

April 2017

Department's target date for DE&S becoming the leading defence acquisition organisation

1. Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained by using the relevant links on our website.

2. The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Amyas Morse, is an Officer of the House of Commons and leads the NAO, which employs some 820 employees. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of £1.1 billion in 2013.

PN: 14/15