MoD revamp slashes contractors by 90%

Exclusive by David Nunn



The Ministry of Defence is to undertake a massive overhaul of its procurement methods that will place its £1.7 billion construction programme with a handful of companies within three years.

The move is part of an ambitious aim to make the MoD the "leading driver" in reforming construction, taking over the mantle from the likes of BAA. It follows a review of MoD procurement by the new chief executive of the Defence Estate Organisation, Ian Andrews.

Under Secretary of State for Defence John Spellar will unveil the policy in a hard hitting speech at next Tuesday's Defence Estate Organisation Conference for Industry

"It is likely to be a pretty hair-raising event for the industry. We have decided to tell it like it is," said Clive Cain, director of defence works at MoD.

At the heart of initiative is a move to slash the number of contracts the MoD lets from the present level of 800 per annum and establish single point responsibility from cradle to grave.

The ministry will switch to a system of prime contracting where work will be parcelled up into large chunks and let to a single organisation that takes responsibility for procuring it to the MoD's specification. The move is likely to downgrade the position of consultants and architects.

Work will be bundled up into parcels in the region of £250 million. By giving out such sizeable packages the ministry believes it is giving the industry a real chance to partner with suppliers and subcontractors. "There are two tiers to partnering. We have to enter into partnering agreements with the industry, and then the industry has to partner with the supply chain. This will allow both to happen."

The MoD hopes that by concentrating purchasing power among a few prime contractors it will be able to bring about a 30 per cent reduction in costs, saving £500 million per annum.

The ministry expects to see standardisation emerging in different facilities built by the same prime contractor. This would apply to things like wet central heating, pitched roofing, steel frames, windows and electric lighting.

Cain said there would be competition in the new regime. "But it will be between a few companies. There might only be eight companies capable of doing this sort of work, but that's the industry's problem - not ours.

"We are fed up dealing with the whole industry. Why should we have to?"

The MoD is reorganising its business units over the next six months in readiness for the new procurement regime, which will cover all activities, not only construction.

The new procurement policy will take effect from 1 April next year. "Over a three-year period we would like to turn our entire programme over to prime contracting," said Cain.

Over £1 million has been spent researching the changes, which follows Building Down Barriers, in which MoD trialled partnering on two projects with Amec and Laing.