Defence Online

Procuring sustainable defence disposals

November 8, 2016

What happens to defence vehicles at the end of their service? It’s something you might not have considered, unless you work at GovPlanet. A spin-off from sister company IronPlanet, this new branch resells surplus defence materiel to generate procurement efficiencies. Here, GovPlanet UK and Europe Managing Director David Shouesmith tells MOD DCB Features Editor Julie Shennan how defence materiel end of lifecycle management is set to change in the UK.

GovPlanet offers a place for local and central government agencies, including the military, to sell surplus equipment. In the US GovPlanet has an agreement with the Defense Logistics Agency (DLA) to dispose of Department of Defense (DoD) rolling stock – anything with wheels or tracks – including items such as military vehicles, trucks, fire engines, aircraft support equipment and aircraft.

David Shouesmith, GovPlanet UK and Europe Managing Director, explained:

We have done a fair amount of disposals work for defence organisations such as the DoD, through the DLA, and the US Marine Corps and this work has significantly increased the revenue returned back to the US military.”

In the first year of its contract with the DLA Mr Shouesmith said GovPlanet grew the value of military resales from $60 million to $83 million. It then flipped the old procurement business model, giving 75 per cent of profits back to the DLA and keeping only 25 per cent.

Mr Shouesmith said this model has brought savings to the authority by moving the reselling model online – cutting the expense of auction houses. Further savings are generated, he explained, by reselling defence materiel from the site where it ended its service, removing storage costs. Finally, the materiel is resold to an international client base, with over 34,000 buyers participating in one of GovPlanet’s latest online auctions.

While this international client base brings great reselling power, it also brings great responsibility.

Mr Shouesmith commented: “The international rules on defence exporting are very strict. Some items can’t be resold – they must be crushed; other things can be resold, but only to clients that have a weapons or ITAR broker licence.”

After considering the client’s licence capability, defence brokers must understand the export licensing regime; ensuring they are not selling goods from one country on to an enemy or trade-embargoed state.

“No government wants to be subject to a news report that suggests its equipment has ended up with an undesirable client; even if the equipment has had a re-spray it will be recognised, and no one wants to be exposed to that reputational risk,” he added.

On the other hand, good end of lifecycle procurement can boost the reputation of governments by saving taxpayers’ money.

Mr Shouesmith explained: “Government requirements do change; fleet sizes expand and contract – it is the nature of the military marketplace. While buyers usually get excited about buying a new product or fleet, they tend to not put much energy and thought into the back end or disposal of it.

It is worth putting some time and effort into understanding end of life procurement, because the value that can be realised on a lot of the equipment is material in boosting the next year’s defence budget.”

Mr Shouesmith recommended procurement officials look ahead to six to eighteen months before a product’s end of lifecycle and estimate the cost savings that could be generated by decommissioning and reselling it early.

He said: “My suggestion to equipment and vehicle fleet managers is to remain industry-flexible; sometimes it might be in your best interest to dispose of equipment early, or dispose of big numbers of equipment at the same time, or to hold on to certain types of equipment.

“When it comes to end of lifecycle management there is no one-size-fits-all solution, but it is good to have the disposal conversations early and to plan disposal into the procurement from the start.”

Changing defence procurement strategy also requires a change of attitude, as Mr Shouesmith outlined.

“Encouraging the Ministry of Defence and other government departments to look at their disposals and resells in a different way can be challenging. People tend to stick with what they know and what they are used to so it is up to us to demonstrate how our disruptive approach benefits them in cash savings,” he said.

However, disruptive procurement approaches have already started penetrating the defence marketplace.

Mr Shouesmith explained: “We have seen real maturation in the Armed Forces’ engagement with industry; especially in UK Army projects. A few years ago Army personnel were more reticent for fear of compromising commercial processes – even when there was nothing to compromise.

However, now Army personnel have more control over their own budgets and it is in their interests to understand what industry can offer – so they need to have these dialogues well in advance of any official tender process.”

Collaboration between government and industry is, Mr Shouesmith reckons, a trend set to continue in defence procurement.

He concluded: “I foresee defence procurement continuing on the all-Forces approach; increasing communications between buyers and suppliers and further collaboration in harnessing the joint expertise of industry and government.”

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Post written by: Julie Shennan

Features Editor of MOD DCB Magazine and MOD DSS Yearbook. Content Marketing Executive at BiP Solutions (Defence Online's sister company). Editor and founder of Artsnfaffs Online Magazine.