Member Article

Defence procurement reforms aired

The Defence Secretary has set out proposals which could change the way the Ministry of Defence awards contracts, and potentially save £200m a year.

Philip Hammond addressed single source procurement regulations, and laid out plans to establish an independent body which would oversee contracts awarded without competition, due to specialist Armed Forces requirements or national security reasons.

Around half of defence spending is awarded through single source procurement, under a system largely unchanged since 1968.

The Government argues that such current restrictions make it difficult to achieve value for money, and has one occasion lead to “unreasonable profits” for suppliers.

A Single Source Regulations Office would independently oversee a system to provide fair profit for companies alongside incentives to bear down on costs.

Mr Hammond said: “For decades, MOD has been at a disadvantage in commercial negotiations and reforming single source procurement will radically change how MOD conducts a high proportion of its business. The new independent body will deliver a more effective and efficient way of providing the specialist capabilities our Armed Forces need to keep the United Kingdom secure, and at the right price.

“This white paper represents another significant step in tackling the problems underlying defence procurement. I remain committed to driving structural and cultural change at DE&S to ensure that projects are delivered on time and on budget.

This week’s white paper, ‘Better Defence Acquisition,’ also contains details of the MOD’s plans to reform its procurement organisation, Defence Equipment and Support (DE&S). The changes could result in a government-owned, contractor-operated body.

Matthew Fell, CBI director for competitive markets, said: “Defence procurement must give the Armed Forces the equipment, support and technology they need, at a price that gives real value for money to the taxpayer. When the public finances are so tight, ministers must improve efficiency.

“The GoCo procurement model is a bold, new approach but the Government must engage widely with the defence industry to build confidence in its ability to deliver.

“The Government needs to strike the right balance with the new Single Source Regulations Office (SSRO) so that it drives competitive pricing on the one hand, whilst maintaining the incentives for continued investment in the UK’s world class defence industry.”

This was posted in Bdaily's Members' News section by Tom Keighley .