Who moves the army?

An army marches on its stomach, goes the old saying. Nowadays civilians supply the victuals.

Is this the way it is supposed to be under a government that clings to the notion that only the state can run hospitals and schools? How come a British-based company can make a profit out of peacekeeping?

Serco specialises in outsourcing task management, engineering systems and infrastructure investment. In February 1998, in a joint venture with an Australian engineering firm, William Adams, it took over the army’s logistics — from “factory to foxhole”.

It repairs the guns, vehicles, field kitchens, electronics and other equipment. It makes up the ration packs. It runs the stores, packs the first-aid kits, issues the clothing, maintains the buildings.

Since July last year it has also run the Waiouru camp: accommodation, catering, transportation, maintenance of buildings, facilities and equipment, firing range management, reprographics, laundry and the library. That used to be done by the now disbanded 4th logistics battalion.

The army couldn’t move without Serco Project Engineering (SPEL), as the joint venture is known. It was not army mechanics who got the personnel carriers ready in 1999 for the East Timor peacekeeping. It was SPEL’s.

And now it runs the police’s warehousing and overhauls fire appliances. Next on the list: ambulances. Overall, an initial $3.5 million business in 1998 is now around $14 million and the “third-party” work helps smoothe out the “surges” in army work.

The savings to the army, says SPEL general manager Mike Johnston, once an army lieutenant-colonel, ranged from 23 per cent to 37 per cent by August 2000, according to an independent study by the Australian Graduate School of Management University of New South Wales. Staff numbers have been halved.

Army business development manager Lieutenant-colonel Peter Cunningham, who monitored the project until recently, says three audits, two of them external, have confirmed the expected savings have been realised and sustained — and additional savings achieved. Has it been value for money? “Very much so,” he says.

Part of the savings comes from modernising warehousing equipment and IT management. The cash-strapped army, struggling to equip its troops in the field adequately in the 1990s, was loath to spend anything on non-operational equipment to make its logistics more efficient.

Soldiers now stick to soldiering. Some 160 uniformed personnel used to run logistics at the sprawling Trentham camp, with civilian staff as well. The extra manpower is desperately needed on the operations side, with East Timor consuming a whole battalion and action in 13 other countries — and maybe more to come, according to Prime Minister Helen Clark in New York.

But this is not just outsourcing, a contract to do specified things — as, for example, the contracting out of hospital cleaning. Johnston terms the army arrangement “collaborative contracting”, a long-term partnership of 10 years, with reviews at six and eight years. That allows investment in equipment and time for a payback period on the investment.

“We are the army’s base logistic organisation,” says Mr Johnston, “an integral part, not an outside contract. We are quite critical to deployment planning.” Colonel Cunningham agrees: “We treat them as part of our organisation. They assist us in our development.” He describes the deal as having “migrated” from simple output delivery to a combination of that and close liaison, a partnership.

This creates incentives for inventive solutions. SPEL is fixing the recuperators of the 105mm field guns [subs: see pic] it is reconditioning on site at Trentham . The foreign makers take up to a year to recondition the guns and don’t attempt to repair the recuperators, which cost around $120,000 to replace.

Field kitchen pressure vessels which used to be thrown away and replaced at $17,000 are now refurbished at a cost of a few hundred dollars and technical problems with the wiring loop and heat distribution have been remedied. “The cooks are absolutely delighted with the result,” says Lieutenant-colonel Cunningham.

Oversight is by agreed key performance indicators of quantity, quality, time and cost, monitored by a civilian contract manager and a small group of army technical experts from an office next door to SPEL’s office at the sprawling Trentham camp. Johnston contrasts that with the armies of administrators hospitals use to write and manage their outsourcing contracts.

That chimes with Social Services Minister Steve Maharey’s drive to shift the government’s dealings with voluntary social agencies from stifling, paperwork-heavy contracts to generalised agreements to pursue outcomes.

But hospitals and schools remain no-go areas. Mr Johnston reckons Serco could do much the same for the non-clinical functions in hospitals as for the army and save on contract administrators. But Prime Minister Helen Clark has given a firm no to that.

It is OK to make a profit out of the army apparently. But not out of hospitals.