On 10 December 2013, Official Report, column 146, the Secretary of State for Defence announced his intention to establish the Defence Equipment and Support (DE&S) organisation as a bespoke trading entity, from April this year.
Since that announcement, having agreed the principle that DE&S should be provided with the necessary freedoms to allow it to operate along more commercial lines, within an agreed operating cost budget, we have worked with HM Treasury and the Cabinet Office, to agree the governance and accountability structure within which the new DE&S will operate.
I can confirm that, on 1 April 2014, DE&S was launched in its new form and is now an arm’s length body to the rest of the Ministry of Defence. The DE&S has been provided with the unparalleled freedom to manage its own business, outputs and work force within an operating cost envelope set to drive significant efficiencies.
Ministerial oversight of the new DE&S is being provided through an owner’s council chaired by me. As the first chief executive of the organisation, Bernard Gray, as Chief of Defence Matériel, has become an additional accounting officer, directly responsible to Parliament for the resources and performance of DE&S. The permanent secretary, as principal accounting officer, remains accountable to Parliament for the Department as a whole.
To assist the programme of delivery and transformation, the DE&S will introduce private sector skills through a number of contracts for managed service providers (MSPs). DE&S will remain responsible for its outputs, with the MSPs providing high-quality support and expertise in the key areas of project delivery, human resources and management information, finance and information technology. The contract notice for the first MSP, project delivery, was issued on 14 April and invitations to negotiate were issued to eight companies on 12 May. The contract notice for the second MSP, human resources, was also issued on 12 May. We expect to have the contracts in place later this year.
The launch of the new DE&S provides an unprecedented opportunity to transform the process of defence acquisition and support for our armed forces, while improving value for money. The changes we are introducing will result in a higher performing delivery organisation, which is better able to deliver vital equipment and support to the front line, on time and at the agreed price. In doing so, we remain consistent with the report on defence acquisition from 2009 and the Levene recommendations from 2011. We are also thinking further ahead, to ensure that by the middle of the next Parliament, DE&S is a genuinely customer-facing, match-fit organisation, providing a robust public sector comparator should a future Government decide to re-examine the potential for a GoCo model. This is the beginning of the transformation process. We are empowering the DE&S to meet head on the challenges of delivering a most complex and demanding portfolio of work to meet its customers’ needs.
Full details of the DE&S governance structure, function, policies, and strategic objectives are contained in a new framework document and corporate plan. I have placed copies of both documents in the Library of the House.