British watchdog cool on plans to outsource defence procurement

LONDON Tue Feb 5, 2013 1:53am GMT

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LONDON (Reuters) - The British parliament's defence watchdog on Tuesday poured cold water on plans that would allow firms to bid to manage multi-billion dollar government defence equipment contracts.

Stung by years of accusations of mismanagement, cost inflation and delays, the Ministry of Defence (MoD) is said to be close to outsourcing responsibility for the purchase and maintenance of defence equipment to a private company.

Such an arrangement could be a boon for outsourcing firms like Britain's Serco, which would be entrusted with managing a large chunk of the MoD's defence budget, totalling 34.4 billion pounds this year.

Last week the MoD outlined a 10-year 159 billion pound defence equipment spending plan.

In a new report, parliament's defence select committee, which scrutinises the MoD, said outsourcing defence procurement was not necessarily the "best way forward" and questioned how the MoD would maintain responsibility for acquisitions.

Committee chief James Arbuthnot demanded more detail before any decisions are taken.

The focus on cutting inefficiency at the MoD has grown in recent years as Britain slashes spending to rein in a big budget deficit. Defence cuts have been among the most controversial given British military engagements in Afghanistan and elsewhere.

Highlighting project management failures, the committee said a costly government U-turn last year on the type of fighter jet to be flown off planned new aircraft carriers was one of the "most spectacular examples" of procurement gone wrong.

The committee also urged caution in implementing government plans to buy more equipment abroad to cut costs, rather than from domestic suppliers such as BAE Systems, which has long handled most of Britain's biggest defence projects.

"If it transpires that others (countries) are not prepared to give to UK industry the opportunities the UK gives to theirs, it might become necessary for the government to reduce its open procurement," the committee said in its report.

(Reporting by Mohammed Abbas; Editing by Angus MacSwan)

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