Report flags Ministry of Defence's 24% vacancy rate for commercial roles

Written by Jim Dunton on 26 October 2017 in News

National Audit Office warns shortage of key commercial and cost assurance experts could jeopardise £1.7bn savings target from non-competitive contracts

The Ministry of Defence could struggle to make the most of procurement rule changes designed to help it achieve better value for money from non-competitive contracts because of a lack of key staff, the National Audit Office has said.

In an update on the MoD’s progress with obtaining better value through 2014’s Single Source Contract Regulations, the public finance watchdog said a 24% vacancy rate among staff with the necessary skills to exercise the powers risked undermining potential savings.

The MoD has non-competitive contracts worth £23.9bn agreed under the regulations – which cover situations where competition is either not possible because there is only one supplier of a single good or service, or where it is undesirable for reasons of national security.


The regulations give MoD project teams and other commercial staff greater access to supplier information, allowing them to challenge costings and secure agreement from contractors to amend costs in conjunction with executive agency the Single Source Regulations Office.

While the MoD estimates the regulations have secured contract-price reductions of £313m since they have been in place, the NAO questioned the department’s ability to reach its 10-year target of saving £1.7bn from existing Equipment Plan projects.

It said the realisation of potential savings identified from application of the regulations would “depend on good contract management” and added that the department “currently lacks good quality data on its portfolio of non-competitive contracts”.

The watchdog said that the MoD only had two-thirds of its non-competitive contracts under management as of the end of August, and added that the department could not show that it was taking a systematic approach to its commitment to using competition “wherever possible”.

On staffing, the report said the department and its arm's-length trading organisation Defence Equipment and Support were 386 commercial posts short of their “ideal complement”, a 24% vacancy rate. 

“The effectiveness of the regulations could be undermined by gaps among key commercial and cost assurance staff,” it said.

“It is essential that the department has sufficient appropriately skilled staff in key areas to achieve value for money given the large amounts of money at stake and the lack of competition.”

The report said the department had plans to only “partly address” the shortages, which it noted would come against the backdrop of the 2015 Strategic Defence and Security Review, which commits the MoD to reducing the civilian workforce by 30% by 2020.

NAO head Amyas Morse said the MoD’s ability to realise savings from the Single Source Contract Regulations was directly linked to enacting the entitlements they contained.

“The regulations regime has the potential to deliver significant cost reductions but the department must increase its ability to negotiate contracts and scrutinise costs to secure better value for money,” he said.

“To achieve this, the department needs to eliminate disagreements between key stakeholders and win the co-operation of all suppliers. 

“And it needs to maintain credible pressure for competition whenever possible, and be able to measure and demonstrate the effectiveness of the regime in securing savings.”

The report had flagged disagreements between the SSRO and the MoD about the categorisation of acceptable costs on the part of suppliers. 

The MoD said the single source regulations had been a major reform that replaced a framework in place for more than 45 years, and that “challenges” were an expected part of such an overhaul.

As spokesman said getting value for money when buying the best equipment for the armed services was a priority.

“We work closely with the SSRO to help get the best deal in procurement and, as this report notes, our new rules have already helped reduce the cost of contracts by over £300m and strengthened our hand in negotiations,” he said.

Earlier this week SSRO chief executive Marcine Waterman stepped down after three years in post. Chief operating officer Neil Swift is acting as interim chief exec.

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Submitted on 27 October, 2017 - 07:36
It has long been established as a fact that the lack of commercial skills in the Civil Service is hampering attempts to make central Government procurement more efficient. With respect to the Ministry of Defence, one must add the woefully inadequate Project Management skills of its acquisition officials at MoD Abbey Wood, Bristol as a serious obstacle to value for money procurement. Because, instead of requiring Defence Contractors to scope a fully costed and priced Programme of Work in Microsoft Project to advance the developmental status of their starting-points for their Technical Solutions from their existing condition, to a point where they will satisfy the qualitative and quantitative requirements expressed in the technical specification, MoD is persisting with the tried-and-failed practice of asking for a plethora of Management Plans as a response to the invitation to tender – which has given Contractors a chance to stuff these plans full of: (a) Pretty pictures and diagrams. (b) Grossly exaggerated claims regarding the maturity of the starting-point for the Technical Solution. (c) Warm soothing words, false promises and hollow statements of intent skilfully crafted in such a way as to allow Contractors to rescind on work commitments later on, during the Contract performance phase. (d) Organisational charts with names of self-important people on overheads who will not be getting hands-on with the work to be done in the next phase. (e) An asking price quoted in the ITT response which bears no correlation to the work intended to be performed by the Contractor during the follow-on phase. (f) A non-existent or useless schedule. In addition, the widespread practice of digging out old ITTs from the archives, dusting them off, searching & replacing the project name and despatching them off to Contractors has resulted in the Principles of Natural Justice being routinely violated, because selection criteria essential to inform the decision on down-selection, phase-by-phase is omitted – leaving Bidders in the dark as to what evaluation criteria they will be measured against. Such is the stupid folly of the moment that this is what passes for best practice in Project Management in the 21st century, as practiced by MoD civil servants and Defence Contractors! It’s not so much a lack of skills in Civil Service that is the problem, but a surplus of people with the wrong skills. @JagPatel3

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