A review of single-source military equipment contracts has found that the UK Government could potentially save hundreds of millions of pounds by introducing new rules for industry the UK Ministry of Defence (MOD) announced last week.
Lord (David) Currie of Marylebone chaired the review of single-source procurement, which is currently subject to ‘Yellow Book’ rules – where only one defence supplier is invited to tender.
Single-source contracts currently account for 40 per cent of all MOD procurement and in-service support of equipment.
Lord Currie’s recommendations focus on achieving greater transparency of costs and strengthening industry’s incentives to be efficient.
The benefits that could potentially be gained from implementing the report include:
- a more open relationship between MOD and the defence industry;
- ensuring standardised cost data is provided by contractors to the MOD – helping to provide greater transparency of costs which would improve the MOD’s ability to negotiate realistic prices;
- incentivising industry to be more efficient and tackling the cost-base while allowing industry to make reasonable profits – companies will become more competitive on the international market; and
- Small and Medium Enterprises (SMEs) will provide fewer data-reporting requirements and there will be a simplified profit rate process.
Larger contractors will provide an annual statement on how they have engaged SMEs in their supply chain.