The Ministry of Defence must do more to address the commercial skills gap in its procurement arm, Defence Equipment and Security, the Public Accounts Committee has said.
In its latest report, the committee criticises Defence Equipment and Support’s over-reliance on contractors and calls for a detailed plan on how the body intends to improve in-house skills.
PAC chair Margaret Hodge said: “Failure to improve the skills of Defence Equipment and Support, which buys and maintains military equipment, will undermine the department’s efforts to improve control over its finances.”
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Following a failed attempt to privatise MoD procurement through the creation of an autonomous Government-Owned, Contractor-Operated body (GoCo) in 2013, the department last year turned DE&S into an arm’s-length civil service body with greater flexibility over staff salary to help attract those in the private sector.
However, the report says that despite changes, DE&S still lacks the necessary commercial skills and has yet to set out how it plans to use the new pay freedoms to attract the right expertise.
“DE&S should set out as a matter of urgency how it plans to use the pay freedoms and flexibilities it has negotiated with the Treasury to improve its skills,” the report recommends.
While the MPs say the department has made progress in “getting to grips with its budget and military equipment costs”, PAC also expresses concern over the MoD’s ability to deliver efficiency savings, saying £800m of savings in the support budget have yet to be identified.
The report also says that although the department is confident it can deliver £1bn savings from the submarine budget, it is not certain about delivering £1bn savings required from complex weapons budgets.
Responding to the report, defence secretary Michael Fallon said he welcomed PAC’s acknowledgement of progress made in improving the management of the equipment budget.
But he added: “The Committee’s concerns on costs are overstated – our major project costs were reduced by £400 million last year and we are confident of delivering the further savings.
“For the third consecutive year we have a realistic and affordable equipment plan with substantial contingency funding. The greater freedoms afforded to Defence Equipment & Support are already allowing us to recruit and retain people with the right skills to manage major procurement projects and ensure good value for the taxpayer.”
Speaking to CSW before publication of the committee's findings, MoD permanent secretary Jon Thompson said he believed the new model for DE&S had bolstered its ability to recruit “very specialist people to do a very complicated job”.
Click here for the full interview with Thompson