Prime contract key items not negotiable

by Kathy Watson



The row over the Ministry of Defence's new prime contract took another twist last week when Ian Andrews, chief executive of Defence Estates - the MoD's procurement arm, insisted there will be no chance to strip out contentious clauses once a contract is let.

But Andrews conceded that he expected some contractors would charge a little extra to compensate them for paying their supply chain before they were reimbursed by the MoD.

The comments follow last week's revelation in Contract Journal in which Army chief, Lieutenant Colonel John Thorn voiced his concern about the cost of implementing the new contract and his fear that it would not achieve value for money objectives. Thorn's concerns spurred him to introduce changes in the current bidding round for the Carver Barracks prime contract in Wimbush, Essex that would allow for renegotiation of key clauses.

Andrews responded by saying that the key principles of the prime contract were not up for renegotiation.

"We are determined to contract with a supply chain that works," he said. "Where people know they are going to be paid for what they have done when they have done it."

He added: "We are very clear and others will be very clear now about what we will get out of this process. A lot of subcontractors think it is wonderful." But he acknowledged that he was asking contractors to do something very different to the past.

"The principles we would not renegotiate are to do with placing some of the risk with industry, ensuring there is an excellent supply chain, and to ensure subcontractors are paid for the work they do on time and the way they will be paid. One thing we will insist on is evidence that the supply chain has been paid before we pay the prime contractor."

In a concession to industry concerns, he said: "There may be costs that the prime contractor may seek to recover in the contract. It is worth paying a small premium."

Andrews stressed that some contractors have found solutions to the problem without passing on any extra cost. "I know a lot of people are concerned about this. I know it is difficult and it is counter-cultural. But all change that is worth doing is difficult," Andrews said.

The prime contract will get its first outing with the newly let Faslane project and three others, which will follow shortly. It is expected to become the standard procurement contract across all government departments.

(see feature pages 20/21)