There is no doubt that procurement in the government defence sector has a number of real challenges. The amounts of money spent are large – many billions of Euros a year in the biggest countries. Projects to build ships, planes and similar run over many years, using the most advanced technology. The markets involved often have few suppliers, and there are complex issues around national capability and preference to handle. When things go wrong, the results are often very obvious and public.
But does that mean the most senior defence procurement executives should be paid a lot more than other senior procurement people in the public sector – and indeed a lot more than their comparable military colleagues in other areas of the defence ministry or armed forces?
They are the questions raised by the decision of the UK government to offer a hgue salary to the next CEO of the defence procurement organisation. As the Independent newspaper reports:
“The Government will pay the next chief executive of Defence Equipment & Support (DE&S), the £14bn-budget agency that buys the UK’s military kit, a £250,000 salary plus a bonus of up to a further £250,000, according to the recruitment advertisement”.
So that could be £500,000 (some 600,000 Euros) a year, making this individual the highest paid government employee in the UK and one of the highest paid “procurement” roles in public or private sector (although arguably it is more than just a procurement role).
You will need, amongst other things, a “proven track track record in driving successful transformation of a complex, commercially-focused delivery organisation, achieving significant improvements in efficiency, effectiveness and customer service”. And if you are interested, you can find out more from the Heidrick & Struggles website here.
However, there is little point in applying for the job, I’m afraid. Bernard Gray is the incumbent and seems firmly in place. The role must be advertised as Gray was on a three year fixed term contract, which comes to an end soon. But it is hard to see that anyone other than Gray, the architect of all the changes going on in DE&S, could lose out to anyone else.
But despite the salary, is it really any more difficult a job than contracting for long-term capital equipment or construction projects in other sectors? Are the markets significantly more challenging than for instance pharmaceuticals or complex IT services? Is the value to the country of defence equipment so much more than the value of health and social care services? Note that Gray has also gained agreement that certain other senior roles in DE&S can be paid outside the standard public sector pay scales.
To be fair, this is really a CEO role, with some 12,000 staff reporting into it, covering logistics and operational activities as well as procurement and programme management of major equipment acquisition. So actually, yes, it probably is a bigger job than those other examples. But is it so much bigger that it deserves a salary that is, for example, potentially three or four times greater than a procurement director in another government department? Or indeed, several times the salary of other CEOs in government agencies?
It is those comparators which may be more of an issue rather than the absolute amount. I know an individual well who has worked for many years in what we might call the frontline of the military. He has a very senior role now, in grading terms similar to the position being advertised. Yet even including a small bonus, he is paid around half of the basic salary offered here. How do you think he and many of his colleagues at the top level – on similar salaries – are going to feel about this role and the job-holder? Do you think the person appointed is going to get full co-operation from colleagues, or might a certain amount of bad feeling creep in?
We also predict that as soon as there is some problem over defence procurement (which is certain to happen given the challenges of this world), we will see lots of media attention on the salary paid to this individual and indeed to others in the MOD.
We don’t have a problem with the best procurement and supply chain managers, or CEOs, being well paid in the public sector – this is my profession and I want it to be well-rewarded. But this does throw up real issues of comparability, which may lead to problems for the future. And will it have any consequences in other European countries? Might other governments decide that they need to reward defence procurement people better? I doubt it, to be honest, but if you are a senior defence procurement person, you might just want to send the link to this article to your boss!