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A review team has been set up to investigate the terms under which the MoD agrees contracts where only one supplier is invited to tender, it has been announced.
Over 40 per cent of the Ministry of Defence's contracts, totalling £9bn a year, are procured through the non-competitive process. The contracts are not put out to tender for national security reasons.
Lord Currie of Marylebone, former chairman of communications watchdog OFCOM, will chair an 18-month review of the existing framework for 'Yellow Book' single source procurement. He will be supported by a team from the Ministry of Defence working with the Confederation of British Industry.
The 1968 Yellow Book arrangements, which are still in use today, set the profits and costs of contracts in advance, but also see the MoD subsidise some suppliers' running costs, pensions and redundancy costs.
While some aspects of the yellow book, the short name for the Government Profit Formula and Associated Arrangements (GPFAA), have been altered since it was first agreed by The Treasury and Confederation of British Industry, the underlying principles are said to remain the same.
Speaking at the Tory Party conference last October, Defence Equipment, Support and Technology Minister Peter Luff said: "It's a cosy relationship that's 42 years out of date and ripe for reform. It should have been reviewed much sooner."
The review will look to cut costs and increase efficiency while simplifying the process to help small and medium-sized enterprises get involved.
Announcing the review in Parliament, Luff said: "The defence landscape has changed substantially since the Yellow Book was originally agreed in 1968 so it is time for a root and branch review of this process, given the current fiscal climate.
"Getting single source pricing right is of great significance, not least to the taxpayer over 40 per cent of our procurement is subject to these regulations. We must ensure that the MoD is efficient, effective and fiscally responsible. This review will ensure single source procurement is delivering greater value for money."
"The Defence sector has evolved beyond recognition since the inception of the 1968 Agreement.
"At that time, labour constituted over three-quarters of costs within the Defence sector. Now it is less than one quarter. The government owned many more of the assets than we do now. Furthermore, the sector is facing an era of consolidation and restructuring."
Rees Ward, Chief Executive of defence industry body ADS said:"ADS looks forward to taking part in the review on behalf of all of its defence sector members and welcomes the opportunity to continue to deliver value for money to the taxpayer as well as to simplify the defence procurement process to ensure that small and medium sized enterprises can play their full part in it.
"We will work alongside the CBI to ensure that the voice of the defence industry worth over £35 billion per year is heard during the discussions."
Lord Currie is to deliver initial recommendations to Luff by July 2011, with a report on an implementation plan due after further consultation.
I've had it up to here with all the shite about "MOD incompetence" over the Carriers. It takes two to tango - or in this case, it took three - BAES, the RN, and Labour. For all three, the Carriers were a Good Thing - for BAES they meant profits, for the RN they meant a future, and for Labour they meant Scottish votes taken from the SNP. The MOD were, frankly, hardly involved.
As for the Yellow Book - there are, or were, many reasons for it (see above). Why was it not changed until now? Well it has been, it has been reviewed every couple of years since 1968, and bears little resemblance to the original item. Is it still needed? Yes, we need something to make it easy to work out the profit, etc., on a single tender contract - and, no matter what happens, lots (by value) MOD contracts will ALWAYS be single tender. As an example, for BAES, they are the only ones (in the UK) we can go to for Carriers and Subs - but on the other hand, MOD is the only people who will buy them - so it works both ways, and any agreement must be fair (hence it is agreed between Govt and the CBI, not the MOD and BAES). This is a fantastically complex area, it's being looked at after over a decade of neglect, so give the people a chance to sort it out, please.
Absolute madness! i despair at the sheer incompetance being shown by the "brass" in all departments of what we call a government at the moment, never thought i would say it but i am seriously thinking of relocating to the US sit on my sisters deck, and get away from this lunacy that is making us a laughing stock, both militarily and more damaging inho diplomatically.