To
The Editor,
Financial Times

Sir,

Thanks for your insightful editorial in today's FT on the procurement practices in the defence industry in UK. In the last paragraph you object to one of the major recommendation by Mr. Grey not being followed by the govt. i.e., outsourcing the buying because it will bring in the efficiency and improve the project management.

What is appalling is that even after burning the fingers after privatizing the major utilities in UK (via one of the highest rates for consumers in Europe is paid by UK consumers) including transportation - you still recommend the privatization option. When it comes to utilities and defence, it should be a part of the government because of its utility function which cannot be reconciled with just the profit motive of private industry especially when the regulators are not just toothless but who have no clue on how to regulate at all. We have seen the latest example of the disasters which it brings when a utility like bank is in private hands.

What you should be recommending is - why can't the project management skills be taught to the existing department? What is needed is some cultural change initiatives, investment in good/fresh leadership and training. Is that too much to ask for?

But the problem is any sensible debate is squashed in the name of 'free enterprise spirit' of the West Vs the old communist practices of the past USSR. Well the fact is in any society, the utilities have to be run as a co-operative movement for the good of all. The utilities includes not just the transport department but also the water/electricity suppliers, banks, defence etc.,

What is needed is not more of 'free enterprise' but more training/leadership/management practices. If the private industry can follow that why can't the co-operatives and the government departments?

That is the real point to ponder !!!

Regards,

Pradeep Kabra

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Affordable defence
Britain must heed the lessons from procurement inquest
Governments across the western world are under huge pressure to slash spending programmes as a result of the global financial crisis and its impact on national budgets. In many states, few areas of expenditure are being scrutinised as closely as defence. In the US, Bob Gates, the defence secretary, has already signalled that he wants to overhaul his department’s spending priorities, cutting back on programmes such as the F22 fighter jet deemed surplus to requirements. Now it is the turn of the UK to take a long hard look at the ministry of defence’s equipment budget, long seen as bloated and inefficient. Yesterday, the MoD published a report by Bernard Gray, a former departmental adviser, into its procurement record. His is a damning indictment. Mr Gray finds that annual expenditure on equipment – from aircraft carriers to fast jets – is well beyond what the MoD can possibly afford. Its project management record is also abysmal. The average equipment programme overruns by five years. The average increase in cost of those programmes – over initial budget – is £300m. All told, the MoD spends up to £2.2bn every year just on the cost of managing delays and overruns. The reasons for this sorry state of affairs are well analysed by Mr Gray. Britain’s service chiefs compete in a scramble for scarce resources, demanding ever-increasing amounts of kit. Once contracts are approved, ministers are too embarrassed to admit they can no longer afford – or even need – what they once approved. Mr Gray has come up with a list of reforms that the government will now rightly implement. There must be a Strategic Defence Review in the first year of every parliament. There must be 10-year budgets in keeping with the longterm nature of defence projects. There must be an annual audit to regularly ensure the equipment programme is still affordable. However, the government has made a serious mistake in ruling out one of Mr Gray’s core recommendations. He says Defence Equipment & Support, the organisation that buys and supports military equipment, should be outsourced to the private sector to improve project management and delivery. This would be a radical step with big security implications and needs thinking through. But Britain does not have the luxury of eliminating the idea now. A government that fails to undertake this initiative is not challenging vested interests in either the MoD or the defence industry.

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