Outsourcing within the MoDCharlie SouthgateSupply Chain Management27/11/12

Definition of Outsourcing

• Outsourcing : the ability to obtain the supply of a product external to the organisation that has strategic significance

• Zineldin & Bredenlöw (2003) suggested that the failure rate with outsourcing projects may be 70%.

• The dangers of outsourcing the wrong items or outsourcing too much is that the firm enters a spiral of decline

What do the MoD outsource?• IT repairs – HP. £17m over 5 years.• Defence Information Infrastructure Programme – Atlas

Consortium. £7bn over 10 years.• Estate Management- Out to tender now. £400m over 10

years.• Procurement – Out to tender now. £14bn a year.• Pay and Pensions – CSC. £303m over 7 years.

History

• Began in 1983

• “Competing for Quality” programme

• Cost yardsticks for assessment purposes

• Hard budget constraints

Defence Information Infrastructure Programme• Replace legacy computer systems • Save 20% off existing IT expenditure

• 150’000 computer terminals over 2000 sites

• It will also be able to handle Restricted and Top Secret material.

• Originally put to tender in 2004, the MoD reported cost projections to the government at £2.3bn

DII Issues• Failed to meet delivery targets • Hardware• Software

• “Unacceptably high” number of defects within designs

• ATLAS was unable to deliver a system capable of handling Secret data for over two years.

Cause of issues

• The Public Accounts Select Committee investigated the programme in 2009 and found:

• “severe underperformance”

• ATLAS failed to understand the condition of the buildings

• An unsuitable, rigid implementation methodology was selected

• Contract Negotiations overran• Cancelled trial period

• Serious underestimation of the complexity of the programme

Camp Bastion – Bid Process

• Home to 28’000 British military personnel • Airport busier than Stansted. • Maintenance and development is outsourced to a private

sector ‘infrastructure support provider’.• Different tender process• Soft Issues Assessment Centre process

Procurement• Should the MoD be

looking to outsource procurement?

• Not just an issue of bottom-line

• Front Line operations, and even lives at stake

Improvements to the MoD outsourcing process• Learn lessons for the tendering process• SAIC assessments• Better definition of project needs/specifications

• Competitive tendering against in-house operations runs the risk of losing the department

• Outsourcing of defence contracts only saves money when the contract is a success. • Procurement!

References• http://

www.employabilitycoaching.co.uk/uploads/files/afghan-articlepdf.pdf

• http://www.b2bppm.com/our-services/partner-evaluation-and-procurement/soft-issues-assessment-centre

• http://www.nao.org.uk/publications/0708/the_defence_information_infras.aspx

• http://www.mindtools.com/pages/article/newSTR_45.htm

Thanks for listening• Any Questions?