MoD prime contracts: room for improvement

The jury is still out on whether prime contracting delivers value for money, according to David Olney, director general of Defence Estates.

Speaking at a conference for suppliers this week, Olney listed a catalogue of improvements needed to deliver the benefits of supply chains. They included soft skills like communication, working together and availability of management information. But he also complained that minor new-works delivery was ‘pretty appalling’ in places.

He said there had been stoppages and cost increases on some core works and that there were recruitment difficulties because of a lack of people with ‘deep management skills’.

He was non-committal about the information-sharing basis of prime contracting, warning “it is too early to say what the open-book approach is doing”.

Despite this, he was upbeat about the benefits of prime contracting, which is the collaboration intended to deliver the Ministry of Defence’s building and maintenance programme.

Olney pointed out that before the initiative got underway they were having to deal with 800 contracts, significant levels of fraud, management information that was ‘at best incomplete and at worse appalling’ and the belief that the construction industry was wasteful, adversarial and did not employ the best management techniques.

Now the benefits include regional prime contracts being rolled out to programme, better focus on whole-life costs and best value, and building long-term relationships with industry.

Planned and reactive maintenance was 85% to 95% on target, condition surveys were on programme, and better relationships had developed via prime contractors and supply chains.

The 250-strong audience at the prime contracting supplier association meeting were told by Kevin Thomas, group business director at Babcock Infrastructure Services, which won the £700m Prime Contract East, that they should be building supply chains and avoiding apathy, cynicism and being distracted by other priorities.

Defence Estates is spending up to £750m a year, including overseas work, using a programme of incentives. Thomas said the prime contract initiative gives suppliers certainty of workload and very high-value work.

He urged more companies to get involved, pointing out that: “If people deliver more efficiencies, they get the benefit as well as their original profit, but if it costs more than expected then they have to bear their share of the pain.

“The door is not closed to firms wanting to join the initiative,” he said. “If you have a real desire to sign up to continuous improvement and something more to offer, come and talk to us.”

[Contract Journal, 1 November 2006, p1]