Chapter 8 identified a number of problems relating to the way in which the DE&S manages the process by which it acquires military equipment. A relatively long list of actions was provided which, if implemented, would make DE&S more focused and skilled around its core activity of delivering a portfolio of complex equipment and support contracts.
A few of the changes recommended are amplifications of initiatives that are already in progress, or relate to issues long recognised in the Department. Most, however, reflect fundamental gaps or shortcomings in the DE&S operating framework. At a high level these issues arise, in the view of the Review team, from DE&S operating with an organisational construct skill set and business model that would struggle to perform at levels typically expected of private sector providers of similar project delivery services.
It is the Review team's view that the imperatives for change in the DE&S operating model identified in Chapter 8, i.e.,
• greater independence;
• better skills;
• financial discipline; and
• improved accountability,
could be better addressed - individually and in a mutually reinforcing way -by business separation of the core DE&S project delivery activity and by injection of substantial commercial know-how.
In this chapter, a number of alternative options for the way in which DE&S could be managed are considered, including changes to the scope of DE&S operations and approaches which involve wholesale "commercialisation" and "contractorisation". The potential benefits and drawbacks of alternative structural or organisational frameworks are analysed and recommendations are made as to the future option that is most likely to deliver the required improvements.
Fundamental reappraisals of the arrangements under which the organisation operates have been undertaken before.
One of the key recommendations of Smart Acquisition was to ensure there was a clear customer-supplier relationship between the Equipment Capability function at MoD centre as customer and the Procurement Executive as supplier. This was to be fostered initially through a redesign of processes and organisational roles and interfaces. When that process was completed effectively, a further step was envisaged, which would have seen
the Procurement Executive move from an agency of government to a Trading Fund109, providing even greater autonomy and accountability. In the end, this step was never implemented, and with the merger of the DPA and DLO into DE&S, the agency status of the DPA was removed.
In 2006, the EAC programme considered the possibility of changing the scope of DE&S's work by moving activities relating to the management of the supply chain and naval bases into a separate organisation. It also considered privatisation of procurement and support activities, but recommended against this option. It did however recognise the potential benefits of private sector involvement in bringing appropriate skills to support DE&S core project management activities:
"We recommend merging the Defence Procurement Agency and Defence Logistics Organisation to create an integrated procurement and support organisation, whose core function would be delivery of equipment and support for operations to the Front Line. It should be a centre for excellence in portfolio and project management, drawing on the private sector where relevant skills cannot be cost effectively maintained in-house. "110
Given the constraints of time, the Team's work in this area does not provide a comprehensive assessment of, nor detailed evaluations of, implementation issues for preferred options. It does, however, explore in outline some plausible ways forward.
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109 Transforming the UK's Defence Procurement System, MoD (Feb 1998)
110 Enabling Acquisition Change, Enabling Acquisition Change Team Leader (Jun 2006)