Summary: The MOD expects to save £200m a year under new contract rules that are designed to allow for greater competition and transparency in defence procurement.
Defence Secretary Philip Hammond recently set out plans to establish a new independent body to oversee contracts that need to be awarded without competition due to the sensitive nature of the requirements in a White Paper entitled Better Defence Acquisition – Improving how we procure and support Defence equipment.
Almost half of the money spent on defence equipment every year is awarded through single source procurement. Everything from Type 45 destroyers to submarines, aircraft carriers and fast jets had been procured this way, meaning that open competition and transparency in procurement was often impossible.
However, the new Single Source Regulations Office (SSRO) will now independently oversee a system designed to lead to fairer profits, greater transparency and save the MOD £200m a year.
According to the White Paper, the MOD’s preferred approach to procurement is through open competition in the domestic and global market. By its nature, however, defence equipment often requires advanced and specialist technology, and the MOD is often limited to a single supplier to preserve industrial and technological capabilities in the UK for strategic reasons.
By introducing the independent body, it is thought that hundreds of potential defence suppliers will be able to enter the procurement process and compete for previously unavailable contracts.
Mr Hammond said: “For decades, the MOD has been at a disadvantage in commercial negotiations and reforming single source procurement will radically change how the 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.”
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 the taxpayer real value for money. When the public finances are so tight, ministers must improve efficiency.
“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.”
The full White Paper can be read via GOV.UK
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