Defence U-turn costs taxpayer £7.5 million

Philip Hammond says the move wont harm Clyde frigate building. Picture: Getty

Defence secretary Philip Hammond was yesterday forced to make a statement to the Commons to confirm Government-Owned, Contractor-Operated (GoCo), the proposed private sector body which would have run buying for the MoD, would no longer be set up because two of the three consortiums bidding for it had pulled out.

Instead he told MPs he was creating a new government trading entity to buy equipment and supplies. The arms-length body will recruit and manage staff “along commercial lines”.

Mr Hammond insisted there was no danger to the £159 billion equipment programme over the next decade, which includes building new Type 26 frigates on the Clyde.

He said the new body’s chief executive will be Bernard Gray, who had already been working to reduce the “business skills gap” in military procurement. It will also have a new chairman and report to Parliament.

Crucially, he told MPs, it will be able to hire staff and reward them as a private company would. Mr Hammond said he wanted to improve the way the MoD buys its supplies and equipment as it seeks to balance the department’s books and reduce a black hole of £38bn.

He had planned to compare potential changes to the MoD’s buying section – Defence Equipment and Support (DE&S) – with the cost of giving the work to a private, GoCo-style firm.

But Labour’s shadow defence secretary Vernon Coaker said: “Millions of pounds of taxpayers’ money have been squandered at a time when hundreds of serving soldiers are facing redundancy. While Philip Hammond presses ahead with cuts to military personnel, this sort of waste at the MoD won’t be lost on our armed forces and their families.”

There was anger from the Tory backbenches over the £7.5m loss. MP John Baron, who has fought cuts to military personnel, said: “This is money which could have saved a number of jobs from frontline services in the army – let’s hope there is no more waste.”

Labour’s John Woodcock accused Mr Hammond of trying to rig the process in favour of a GoCo, but failing.

He said: “There was surely no reason why you had to wait until the GoCo option had collapsed before coming forward with these amended DE&S proposals. Doesn’t that show you were never truly neutral about the choice between an in-house option and a GoCo?”

Mr Hammond said: “I just remind you that your frontbench spokesman welcomed the competition, said that we needed to test the GoCo proposition against the DE&S plus proposition.”

In the Lords, there was criticism over the appointment of Mr Gray to head up the new purchasing body in a debate on the defence bill before peers.

Lord Levene of Portsoken, a former head of defence procurement who has written reports for the current Government on defence reform, criticised the decision “not to open up the job to competition”.

And the former head of the Royal Navy, Lord West of Spithead, said that it was not “appropriate” for Mr Gray to take on the job after he had pushed for defence procurement to be outsourced to a GoCo initiative.

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