Hundreds of millions could be saved by the U.K. Ministry of Defense by changing the rules of sole source procurement, officials said Monday.
The proposals were offered by Defense Secretary Philip Hammond, part of the government’s Better Defense Acquisition White Paper, published by the MoD.
After a system review, recommendations and consultation with industry begun in 2011, MoD decided to move ahead with recommendations and create a Single Source Regulations Office. It would independently oversee a system to provide a fair profit for companies along with incentives to reduce costs. It is estimated this new framework could save MoD as much as $310.6 million a year.
Hammond said, “For decades, MoD has been at a disadvantage in commercial negotiations and reforming single source procurement will radically change how 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.”
Almost half the money spent on defense equipment every year is awarded through sole source procurement under a system largely unchanged since 1968, MoD said in a statement.
The white paper states: “There are round 100 existing single-source contracts, above ($77.6 million) in value, which account for over 9 percent of the of the value, and most of these are with our top ten single-source suppliers.”
For example, Astute and Successor submarines, Type 45 destroyers and the Queen Elizabeth-class carriers, and Typhoon jet engines are just some of the equipment bought and maintained this way.
The white paper also reveals more details of the MoD’s plans to reform its procurement organization, Defense Equipment and Support (DE&S).
MoD is currently assessing whether a government-owned, contractor-operated (GOCO) body or a reformed public entity, known as DE&S+, is the better option. The Defense Secretary has today outlined the main legislative changes needed to establish a GOCO organization, should the decision be to follow this route.
“This white paper represents another significant step in tackling the problems underlying defence procurement.,” Hammond said. “I remain committed to driving structural and cultural change at DE&S to ensure that projects are delivered on time and on budget.”
Chief of Defense Materiel Bernard Gray said, “starting the legislative process now means we will be able to implement the chosen model as quickly as possible once a decision has been made about the future of DE&S.