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The starting gun has been fired on a potential privatisation of the Ministry of Defence's procurement arm as the government seeks to rein in spending, the Sunday Times reports without citing sources.
Philip Hammond, the defence secretary, has invited about 15 companies - including arms manufacturers, accountants and outsourcers - to take part in a consultation that is expected to lead to a radical shake-up, the paper says.
The Bristol-based organisation employs 20,000 people and has an annual budget of GBP14 billion. It orders military kit, such as fighter jets, armoured vehicles, weapons and satellite communications, but has been accused of wasteful spending.
Hammond will canvas opinion over the next few months on three options he is considering to restructure the Defence Equipment and Support arm. The options being considered include selling the procurement arm completely to a private owner, setting up a joint venture to run the business with an outside partner or leaving it as it is with minor changes to the way it is run, the paper says.
It says Hammond has asked engineering outsourcers such as Serco Group PLC (SRP.LN) and Babcock International Group (BAB.LN), as well as Deloitte and KPMG, U.S. Bechtel Group and Fluor Corp. (FLR), the American project management giants, and BAE Systems PLC (BAESY) to take part in the consultation.
The government hopes to start the bid process to find a partner in the summer, and to have a preferred bidder in place by the autumn, it adds.
A spokesman for the British Ministry of Defence couldn't be immediately reached for comment.
Newspaper Web site: http://www.timesonline.co.uk
-London Bureau, Dow Jones Newswires; +44 (0)20 7842 9320