Private Finance Initiative Programmes & Defence - Rationalisation or Privatisation?

PFI is a bad thing, right? "The next Platoon Attack is brought to you by Smith Kline Beecham," manufacturers' logos plastered all over fighting equipment, troops replaced by mercenaries and all that stuff. And, to be honest, various elements of all of the uniformed branches are fighting tooth and nail to stop industry getting its paws on their slices of cake.

"It's mine, and I'm keeping it," is too often the order of the day. But actually no one minds that much that the catering for RAF North Nowhere was privatised, nor that transport requirements for some minor Royal Navy shore establishment was put out to tender – but what about the sexy stuff, like running simulators, or EW training? Well, practically all of that went to commercial tender long ago. So what are the real problems here?

Well why not? Has anyone actually crunched the figures and written the contract? After all, it is all about price and contract – and those officers with little commercial experience might be staggered to see what actually can be put in a contract. Can you train military pilots using a commercial company? Yes, you can. Many companies have been doing it for years. Is it cheaper? Depends on what the contract says!

The main industry complaint, that the customer does not have sufficient staff skills to come up with the right requirement does appear to be borne out. Certainly, the recent Treasury report on PFI highlights the fact that unless a clear concept and definition of the output of a contract can be established, then there is a possibility that PFI might be the wrong way of doing business.

GET BACK TO THE KISS PRINCIPLE

But this may be too elementary when one looks at the complexity of the customers. Surely the road to redemption lies in the rationalisation and simplification of complex requirements? If privatisation or PFI has one promise that may be of instant use, it is that you may have to simplify what is being contracted out.

Warship maintenance is now done to commercial contract – how that one was originally fought! – and aircraft "I" level maintenance looks to be something only the OEM can do, with the emerging complexity of certain systems. What hard-bitten opponents of PFI and contractorisation have possibly ignored, for aircraft and air systems for sure, is that through-life support and maintenance contracts are now part of up-front procurement . This was done to save early procurement costs by promising the OEM a slightly better return over a longer period – almost precisely the point of PFI in the first place!

But back on the topic of contract specification, and the problems that this can bring, is a programme such as Military Flying Training System (MFTS) just too complex to be satisfied by a commercial contract? But bearing in mind quite how desperately the RAF fought MFTS – perversely, the award of the Advanced Jet Trainer contract to BAES was good news for the RAF as it starts to unbundle MFTS – does the service as the ultimate customer actually have an interest in rationalising the project's requirement in order to enable effective contractorisation? The answer appears to be "no", unless it is something so "un-sexy" that it has no attendant glory.

Thus, Defence Analysis would opine, the whole PFI debate suffers from the asking of the wrong questions. It is not, "can we get PFI to do X." It should be "If we rationalised X, who could do it best? Industry or MOD?" Can the All Arms Drill Centre be taken over by the Royal Ballet? [Would you notice the difference? At least the output would be able to dance better: Ed.]

The real problem lies in the arrogance of the customers, that they know the best way to do things. "Subject matter expert" is often a self appointed title. The recent example of the Army Air Corps going to Silverstone, to see how F1 pit crews operate and thus shave 50% of FARP procedure for Apache, [Sounds more like a Hoon-type jolly to me: Dep. Ed.] is an excellent example of brains and humility, sadly not reflected across a wider range of projects.

Looking at the recent Treasury report on PFI, as well as recent speeches by Secretary of State for Defence Geoff Hoon and other defence ministers, the pressures on the budget are such that there will have to be substantial "thinking out of the box". And if PFI can provide solutions then in many areas where it has, to date, been rejected, it may have to be considered seriously.

If you can seriously consider undertaking a PFI contract for in-flight refuelling – and these are systems that tend to go towards harm's way – if you can PFI Ro-Ro ships that also can sail towards danger, and if you can consider PFI elements for support helicopters, then it is time to really originate some innovative solutions to the provision of capability.

• Advanced Jet Trainer Contract Award - IF THIS IS HOW THEY TREAT DEFENCE COSTS, IMAGINE HOW THEY RUN THE ECONOMY!
• UK MoD Iraq Lessons Learned - SO FAR, SO GOOD
• European Naval Market Rationalisation - FASTER THAN YOU'D THINK
• UK MoD NITEworks Battle Lab - ANOMALOUS POSITION?
• Private Finance Initiative/Contractorisation - WHERE'S THE BALANCE
• European Defence Electronics Market - AS FAR AS IT GOES?
• BAES and Alvis Vickers Relations - ONE FROM LEFT FIELD!
• Future Naval Concepts - FUTURE PROOFING?
• Inter-service Rivalry - FIGHT FOR THE CASH
• Future Artillery Systems - THE AGONY OF CHOICE(S)
• DEFENCE INDUSTRY NEWS
• DEFENCE DIVERSITY

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