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Defence Equipment and Support

Volume 567: debated on Monday 2 September 2013

7. What progress his Department has made in the assessment phase for reform of Defence Equipment and Support. (900046)

The Department continues to make good progress in the assessment phase for the reform of Defence Equipment and Support. As the hon. Gentleman is aware, we are testing a GoCo—Government owned, contractor operated—model in the market. Separately, we are working up the best public sector option we can, which we are referring to as DE&S-plus. The commercial competition for a GoCo provider is well under way and I am pleased to confirm that two consortia are participating in this work. The invitation to negotiate was issued to each on 24 July and officials have commenced negotiations to develop the GoCo option in more detail.

Under the current plans, the MOD would be liable for claims against the contractor should a GoCo model be chosen, meaning that the taxpayer takes a large amount of risk. Would the MOD consider making the contractor liable for all claims instead?

The MOD is in the early stages of negotiations on the contract for a GoCo and, as I have said, is at the same time working up a DE&S-plus option. We will not make a decision until we have received bids from the consortia, which we expect to conclude in the spring of next year, and we will compare that against the DE&S-plus option. Only at that point will it be appropriate to consider the question that the hon. Gentleman asks.

I appreciate that for sound commercial reasons the Minister will not want to share with the House the details of the value-for-money assessment of DE&S-plus and the GoCo. Is he able to tell the House whether that process has been completed and, if it has, what the broad conclusion is?

As I have just said to the hon. Member for Coventry South (Mr Cunningham), until we receive the bids for the GoCo option we will not know either the costs of implementing that option or the benefits the MOD will receive. The final value-for-money case can be completed only once that information is available to us.

Proposals for DE&S include greater involvement of the private sector, as we know. We also know that a very large number of private companies already contribute significantly to MOD projects. However, in the light of the very recent public failures and the fact that the GoCo tender process is under way, will the Minister tell the House what discussions there have been across Government and with the Justice Secretary specifically about companies that have been found to overcharge, or worse, and their ability to do business with the Government and MOD in the future?

I can confirm to the hon. Lady that a review across Government is being undertaken into the competition currently being managed by the MOD. We expect it to report relatively soon. On the question of the company that she did not mention specifically but referred to as having difficulties with the Ministry of Justice, we are aware of those discussions. The company is a member of one of the consortia and it will be up to the consortium to decide whether it is appropriate, in the light of the outcome of the review, for that company to remain in it or not. It will be up to the consortium to replace it, if it wishes, with another.

Ministers will have to make a decision about whether to consolidate DE&S at Donnington or at Bicester. Unless and until they make that decision, it will not be easy to persuade the private sector to invest in much-needed new logistics equipment and 21st-century warehousing at either location.

I am grateful to my hon. Friend for pressing the case for his constituency interest in one of the most significant logistics sites the MOD operates. It is our view that it is not appropriate to prejudge the outcome of the Defence Infrastructure Organisation, the logistic commodities and services transformation exercise, the DE&S-plus exercise or the Defence Support Group exercise, all of which have an involvement in both Donnington and Bicester. Once we are clear which entity we are working with on each exercise, we will be best placed to judge where the locations should be consolidated.