The National Audit Office has found that unsuccessful acquisition reform cost the department £33m over two and a half years, but has “yielded some useful learning”.
The spending regulator also concluded that whilst the affordability of the department’s equipment plan has improved it is still a challenging element of defence acquisition.
Central to the issue is the performance of Defence Equipment and Support (DE&S), an arm’s length trading entity that buys and supports all the equipment and services used by the British armed forces.
The spending watchdog examined the MoD’s progress in tackling the accepted weaknesses of the organisation as well as what changes had been successfully implemented and future challenges that it faced.
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, the 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.
Head of the National Audit Office, Amyas Morse, said:
“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.”
The Department’s objectives in its reform of DE&S include improving the capabilities and skills of staff, systems and tools available and the way it interacts with the Royal Navy, the Army, the Royal Air Force, and Joint Forces (known as the Commands).
The 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.
Going forward the NAO recommends that the MoD sets robust measures of success, as in April 2014 the DE&S will become a bespoke trading entity, meaning it will remain in the public sector but with freedoms from and flexibilities over civil service pay rules.
“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,” Mr Morse said.