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[casi] Privatization aka Third Way Socialism in the UK

The Observer   Sunday March 2, 2003

The first privatised war

Private contractors are carving up defence procurement. Nick Mathiason
reports on a military coup

More than 40,000 British troops are bracing themselves for action in the
Gulf. 'Our Boys' are backed by hundreds of tanks, fighter jets and warships
in what is the UK's biggest military build-up since the Falklands conflict.

But any imminent action against Iraq will be historic for another reason.
This could be the last war fought by British armed forces predominantly in
the public sector. The Ministry of Defence is poised to enter into a welter
of partnerships with business, ushering in the most fundamental shake-up of
the military for more than 100 years.

Entire training, logistics and supply operations are set to be hived off to
big business in the most far-reaching intrusion of the private sector into
what was considered the state's preserve. More than 900 procedural reviews
by MoD officials and consultants are coming to a head. There are strong
indications from within the ministry and unions that a shift is under way
from the armed forces' procurement body being a 'decider and provider' of
logistic support to an 'intelligent decider' that may contract out most

The Defence Logistics Organisation (DLO), which costs 6 billion a year - a
quarter of the MoD's budget - is responsible for providing supplies such as
arms, food and aircraft. It is the prime candidate for a radical shift away
from traditional procurement.

Advised by McKinsey since last summer, a recently published DLO strategic
plan said that to achieve its vision would require it to 'leverage
industrial capacity and shape our relationship with industry'.

The shift will be welcomed by companies such as Compass and Sodexho, which
provide food services, and a host of defence contractors.

Training of troops is the other main area of focus. BAE Systems and VT
Group, the shipbuilder and defence PFI specialist, along with Thales and a
number of building firms, are set to benefit hugely from lucrative new
contracts. Training schools for the Army, Royal Navy and Royal Air Force are
now separate, but they are set to amalgamate in what could be a property

Most controversially, perhaps, management of the armed forces' secret files
- which cover Northern Ireland, the Gulf war and a host of sensitive and
historic areas - is set to be handed over to a private contractor. Two
private firms are vying to take on the contract, move staff from west London
to the North and computerise the records.

Alarm bells are ringing about Britain's fighting capability being fatally
compromised by wide-ranging privatisation. Critics point to recent MoD
procurement from the private sector as the shape of things to come, and list
a number of botched or delayed key projects :

 Most glaring is the scandal over the multi-million-pound upgrade of RAF
Nimrod aircraft, which suffered a setback because the wings built by BAE
were the wrong size. Nimrods are used for reconnaissance and submarine
hunting and have been deployed in every significant British military
operation in the past 30 years. Not this one, though.

 New Apache helicopters, costing 27m each, are being mothballed at a cost
of 6m. The National Audit Office (NAO) last November found pilot training
was messed up because of an attempt to introduce competition into the
regime, which cost an extra 34m. The helicopters are absent from the Gulf

 The SA80 rifle, once feted as the ultimate assault weapon, was the target
of widespread complaints by soldiers. Made by BAE, it could not be fired in
the left-handed position because ejected rounds hit the firer in the face,
it was difficult to maintain in bad weather and the magazine fell out when
carried against the body. The faults have since been corrected, according to
the MoD.

 Halliburton, the oil and defence combine that US vice-president Dick
Cheney worked for, was contracted to rebuild Devonport dockyard in Plymouth.
Last December, an NAO report said the price had escalated from 505m to
933m and could be a lot more.

 Britain's Gulf build-up has already been dogged by supply shortages and
equipment failures. Ten days ago it emerged that troops in Kuwait are so
short of rations they are being sent food parcels by their families. Basics
such as desert boots are unavailable. There are even reports of shortages of
toilet paper.

'It was horrific logistical debacles during the Crimean War in 1854 and the
Boer War in the early 1900s which forced government to take overall
responsibility for procuring supplies and co-ordinating military training,'
said Dean Rogers, negotiations officer at the Public and Commercial Services
Union, which represents thousands of civil servants currently working in the
armed services. 'Now there is a serious risk that this is all being unwound
and the implications are truly frightening.'

Senior officers have voiced doubts in private about the imminent shift. They
are training a searchlight at beleaguered Defence Secretary Geoff Hoon, and
asking if he is aware of the magnitude of the reviews undertaken by his

One prominent officer who contacted The Observer despaired at the prospect
of a carve-up. 'The Army spent 3bn on Apache fighter helicopters. Training
the pilots was a contract given to the private sector. The helicopters are
ready but there are no pilots. They haven't been trained and I don't think
they'll be ready for at least three years. This is a shambles. And yet the
indications are the ministry is proceeding with wholesale privatisation.'

Last week six trade unions issued a joint statement responding to what they
see as a 'revolution'. They concluded: 'Despite the assurance that the
McKinsey report is not itself the basis for an implementation strategy, we
can hardly ignore the view it expressed that DLO could reduce staff by 20-40
per cent... The supply chain has been rationalised and it seems those
savings now merely form the baseline against which further private-sector
involvement will deliver.'

In addition, unions responsible for Britain's 90,000-strong fighting force
say the criteria for offering vast tranches of work in contracts worth
billions of pounds are skewed in favour of business at the expense of
in-house alternatives.

The MoD has been one of privatisation's standard bearers following the sale
of Royal Ordnance in the early 1980s. It is now set to go into uncharted
territory with everything bar its core competence up for grabs. A ministry
spokesman said it had a duty to ensure value for money. It was not
predisposed to privatisation but reform was necessary. 'We certainly don't
accept our policies are daft, damaging and demoralising,' a spokesman said.

Hoon may be used to being vilified following flak over his decision to take
a half-term family skiiing holiday as troops were being deployed to the
Gulf. But as the MoD quick-steps into a new era, a new front against Hoon
could be opening up among his own staff.

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