Repatriation and burial of war casualties and notification of next of kin are to be run by the private sector with the Ministry of Defence set to invite bids next month for a contract to run the services.
Defence Business Services was established in 2011 to run human resources, payroll and vetting, and was merged with the Service Personnel and Veterans Agency in 2014.
The division also provides welfare services to 900,000 veterans and their dependants. It issues 130,000 medals a year and manages the payroll and pensions for the MoD’s 50,000 civilian staff and 200,000 military personnel.
A smaller contract to manage the organisation was held by Serco and Accenture until April. But the outsourcing deal is much larger and incorporates more MoD divisions, such as casualty services, which were not previously included, according to a pre-tender notice in the Official Journal of the EU.
The deal is expected to include MoD staff in the division for the first time, with some of its 2,500 personnel expected to be transferred to the winning private company. The £36m four-year contract is expected to be awarded next year.
It is the latest in a run of MoD outsourcing deals implemented as the UK’s defence budget has been cut by 8 per cent in real terms since 2010.
Although defence spending is due to rise by about 5 per cent by 2020-21, the money will be soaked up by higher costs for existing programmes and new investments, such as the construction of four Trident missile-carrying submarines.
Mark Serwotka, general secretary of the PCS union, said its members were opposed to the DBS privatisation because of the “incredibly sensitive and important” nature of its remit.
“We believe our armed forces and their families will be shocked and sickened to think this work — which is currently carried out compassionately and thoughtfully — could be handed to a private company to profit from.”
The MoD said no final decisions had been made “so any detail of any potential future contract is speculation”.
Other MoD services seeking private management for the first time include fire and rescue services for UK military at bases and airfields at home and overseas.
A contract to run the Defence Fire Risk Management Organisation, which employs 2,200 staff at 78 defence fire stations worldwide, is due to be awarded in September, with a private company such as Serco or Babcock taking over operations next year.
The MoD has become the biggest user of the private sector in central government, with £19.95bn of services out to tender, according to a 2013 National Audit Office report.
This is well ahead of the next two biggest outsourcers — the Department for Work and Pensions at £3.45bn and the Ministry of Justice at £2.85bn — and will have increased substantially since the report after large-scale transfers in the past three years.
Various models have been used to involve the private sector. In 2014 the department sold the Defence Support Group, which employs 2,800 engineers responsible for maintaining the army’s vehicles, to Babcock for an upfront sum of £140m.
In a more traditional outsourcing deal, 1,200-plus defence ministry employees were transferred to the US contractor Leidos last August, when the government handed responsibility for buying and distributing non-military essentials such as bandages and coffee in a 13-year deal.
Not all the MoD’s attempts to privatise services have been successful. In 2014 it pulled out of a deal to part-privatise military procurement after one of the two bidders withdrew and there were protests from the US government.
The MoD did not respond to a request for comment.
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