Here is an interesting parliamentary question and answer from the last few days
Question
Madeleine Moon (Bridgend, Labour)
To ask the Secretary of State for Defence pursuant to the answer of 19 January 2012, Official Report, column 940W, on Harrier aircraft,
(1) what monetary value was given to the associated support equipment included in the sale of the Harrier aircraft;
(2) what the original cost was of the associated support equipment included in the sale of the Harrier aircraft to the US; and if he will make a statement;
(3) which company or companies invoiced his Department for (a) £0.7 million and (b) £0.4 million for consultancy services associated with the sale of Harrier aircraft to the US; what the consultancy services provided were; and how many hours of work, by how many consultants, these payments were for.
Answer
Peter Luff (Parliamentary Under Secretary of State (Defence Equipment, Support and Technology), Defence; Mid Worcestershire, Conservative)
The sale value of 72 Harrier airframes spares and associated support equipment to the US Government was negotiated and agreed as a consolidated package.
The majority of support equipment used to support the former Harrier fleet has been acquired since 1996 but information on the original purchase cost is no longer held. At the time of the sale to the US Government the value of support equipment recorded on the Ministry of Defence Supply Central Computer System (SCCS) was approximately £15 million. However, not all equipment used to support the Harrier is registered on the SCCS.
External assistance to both the termination of the Harrier contracts (£0.7 million) and the disposal of the aircraft (£0.4 million) was obtained through an existing contract with AlixPartners. The support provided covered the provision of specialist negotiation assistance in the closure of the Harrier airframe and engine contracts, and negotiation advice and assistance in the preparation for, and conduct of, sale negotiations with the US. This was provided by a core of three consultants, with occasional additional support from two senior partners and represented a total of 206 man-days.
Three consultants from Alix Partners, supported on occasion by a couple of others, charged the MoD £1.1 million for 206 chargeable days.
That works out at an average of £5,339 and 81 pence per day, unless of course there was a shed load of travel and subsistence claims in there as well.
Without knowing what they actually did it is difficult to argue whether 206 man days of work is actually a realistic number for drafting a contract agreement to cover selling a handful of second hand jets plus bits and pieces to an ally but it would be interesting to see what the US Department of Defence paid for their contract due diligence work.
However, sidestepping the shock horror at the amount or days, this is exactly what happens when you get rid of ‘pen pushers’ or highly qualified commercial contract lawyers depending on your perspective. The costs don’t go away, the work needed doesn’t go away, it just gets outsourced or contractorised and with little expertise in house the degree of checking on the checkers is of course limited.
Most large organisations employ their own legal and contract expertise but the MoD it seems, does not have the resources to arrange the disposal of assets to a key partner.
The Government and MoD should be rightly pilloried for this, £1.1 million in professional services might seem like a drop in the ocean, but it is real money.
They should however, not be condemned for having to use outside resource but for the fact that they have pandered to the ill informed and shrill voices in the media and parliament and not made a sufficiently robust case for the value and value for money of the MoD Civil Servant.
I’d express shock and disbelief, but it’s just not there. I’m honestly no longer surprised when I read things like this.
There will be a lot of “hidden costs” like airfare and accomodation to the US. And multi million dollar contracts are hardly done in a day, 6 or 7 months of bargaining is probably about right. They want to buy cheap, you want to sell expensive. What did you expect, a 5 min handshake deal?
“They should however, not be condemned for having to use outside resource but for the fact that they have pandered to the ill informed and shrill voices in the media and parliament and not made a sufficiently robust case for the value and value for money of the MoD Civil Servant. ” – TD, you raise a very important point; everyone goes on about combine arms” etc, but forgets that in the big picture the civil backbone of the armed forces count as much as the “teeth”.
“Most large organisations employ their own legal and contract expertise but the MoD it seems, does not have the resources to arrange the disposal of assets to a key partner.”
Do they?
In my knowledge its quite rare for in house teams to deal with big “out of the ordinary” deals, they simply lack the resources.
A number of big US law firms exist solely to deal with outsourced M/A work. Off the top of my head I’m not even sure if mega banks like Goldmans rely on their own legal teams.
One wonders what the billables for Al-Yamah were.
A quick play aboput on excel to account for VAT, payroll costs and assuming a 30% company profit puts the staff on £800,000 per year.
High, but not exactly rock star wages.
Quite why it needed more than an inventory list and a service history, I dont know, but, thats government for you.
It depends how often this experise is actually needed or used.
IF we don’t use this capability (for selling used equipement) again for 5 years, then £1.1m equates to £220K p/a. With that you could have had 2-3 higher grade civil sertvants kicking their heals for 4 years and then whent the next job comes along being overworked and not doing a great job becasue they are not specialised and out of practice.
Obviously IF we keep hiring these consultants on £1.1m EVERY year its just as crazy as it looks and we should go in house…
Peter
Consultants get a bad press. But at the end of the day we live in a society where people have managed to convince the rest of us that they are worth this much money; this in turn means that people with certain skill-sets are just not economically viable to keep on the payroll if you don’t make constant use of their services. If we used the services these guys provided just once every 3 years say then it would be a criminal waste to have kept them on the payroll, not least because they would demand a massive wage or else they would go and do consultancy. It’s a self-fulfilling prophecy.
Once you convince people you are worth it, most companies can’t keep you on anymore.
As long as these geezers were value for money then the costs spent are irrelevant. If those Harriers were essentially unsaleable without their assistance then spending £1.1 million made us what, £72 million odd? Back of the fag packet calculations but you get my point.
What is galling is when consultants are used almost constantly and they have convinced their users they are indispensable. Well the worlds graveyards are full of indispensable people and I am sure there are plenty of people cutting their teeth willing to do the job for less money to get ahead.
As long as we are canny, and ruthless, and squeeze every drop from them then there’s nothing wrong with spending the money on them.