It is probably a good thing that the UK government’s plans to privatize defence procurement (part of what is euphemistically called the “Defence Reform Bill”) have been dropped, at least for now.
The idea had been to replace the Defence Equipment and Support Agency with a “government owned, contractor-operated” body.
There is no question that the UK Ministry of Defence is very, very bad at procurement. Almost every major contract it issues turns out to be both a financial and military disaster. Invariably the ships, planes and weapons systems it orders are delivered late and over budget, with the taxpayer rather than the supplier paying the penalty.
All too often these products – whether they be destroyers, early warning aircraft, naval helicopters or rifles turn out to be inferior to as well as more expensive than off the peg equipment that could have been bought from the USA.
And if that weren’t bad enough the MoD is apparently incapable of managing the purchase of basic supplies without wasting hundreds of millions of pounds.
On the other hand, the last great MOD privatization was something of a disaster from the point of view of British national security and the armed forces, though the officials who arranged the deal made spectacular fortunes.
That was QinetiQ – a private company formed out of three quarters of the staff and facilities of the UK’s Defence Evaluation Research Agency (DERA). (The latter was an amalgamation of organizations like the Royal Armament Research and Development Establishment, the Royal Signals and Radar Establishment and the Defence Test and Evaluation Organization which over the decades had been responsible for developing some extraordinary, often secret, military and espionage technology.) The government kept control of nuclear biological and chemical facilities but all the rest was sold off at a knock down price. To the surprise of the naive senior civil servants who approved the deal (described in a subsequent report as “an innocent at table of card sharps“) , the top managers of the spun-off company became multimillionaires. As the chairman of the House of Commons Public Accounts Committee put it it: “The senior public servants sold the idea to the Mo of privatizing the business without explaining to benefit, a serious conflict of interest.”
Although the sleaziness of those public servants, in particular the chairman Sir John Chisholm and CEO Graham Love, was remarkable even by the low standards of the day, the real lesson of that story is the financial incompetence of the MoD’s top bosses and their political masters.
(It’s also worth noting that, as Lewis Page has pointed out, some of Qinetiq’s immense profitability was thanks to secret know-how it had been supplied by the MOD’s US government partners. Suddenly stealth and telecommunications technology shared only to America’s closest ally was now for sale by Qinetiq to the highest bidder.)
As this piece in Standpoint magazine explained, the Ministry of Defence is unfit for purpose on many ways, partly because it attracts the least competent and enthusiastic civil servants in the entire system.
But it is hard to believe that a quick and careless semi-privatization of the kind the government proposed would result in a better procurement process of the armed forces.