A solution that was recommended as part of Smart Acquisition was to see the Procurement Executive move to a Trading Fund. It would be possible, at least in principle, to establish DE&S as a trading fund that performs the same functions as at present. The Fund would then have to establish a formal customer supplier relationship with the MoD, and DE&S would charge the MoD for the project management services it provides.
The Chief Executive of the Trading Fund, potentially CDM in the case of DE&S, is accountable for the day to day management of the Trading Fund and its financial performance. The fund would be required to produce an annual report and accounts as agreed with the Treasury.
The 2003 Review of Trading Fund Policy115 identified a number of benefits from operating as a Trading Fund that would be attractive to DE&S:
• improved focus on outputs and performance;
• a change in culture within the organisation towards being value-driven; and
• increased commercial thinking, cost cutting and more efficient ways of operating.
These benefits are similar to those anticipated from running DE&S as a Go-Co. However, the major drawback of a Trading Fund structure is its lack of private sector involvement. Although it does encourage commercial thinking, it will not result in the introduction of best practice skills and techniques from industry. Its employees remain civil servants with resulting issues around pay and external hiring. The rate of change that is likely to materialise is therefore likely to be slower than would be the case as a Go-Co.
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115 Review of Trading Fund Policy, Her Majesty's Treasury (Oct 03)