Tendersinfo keep you informed about the latest events in the national and international Procurement Industry. Procurement News provides in-depth coverage of the procurement industry, including contract awards, contract additions, new contract wins, mergers and acquisitions. Tendersinfo through its tender news section provides an update on all domestic and global tendering opportunities, invitation to bid & trade leads.
United Kingdom : Defence companies and MODs procurement agency failing contract regulations
Publish Date : 18-Jul-2016
The Single Source Regulations Office has challenged 61 million of potentially non-allowable costs, whereby contractors charge unnecessarily for goods or services that could result in savings to the taxpayer. The independent regulator has examined a number of single source contracts, where the MOD chooses to work exclusively with a company.
In one instance the SSRO found a defence contractor had charged the MOD 32,500 for a charitable donation. In other cases a company charged 34,000 for staff welfare, that included a Christmas party and another billed 10,000 for entertaining costs. The suppliers then get profit on top of these amounts.
In its first opinion, the SSRO challenged charges of labour inflation at 6 million and learning curve of 12.9 million.
Other non-allowable costs, such as charging to remedy faulty workmanship and bills for hotels and exhibitions have all been met by the taxpayer.
Clive Tucker, the SSROs chairman, said: For too long single source defence procurement went without effective scrutiny, and this is precisely the sort of inappropriate expenditure that the Defence Reform Act was enacted to kill off. Through the single source regime we want to encourage improvements from both industry and the MOD resulting in better value for money for the taxpayer. The findings on military equipment in Sir John Chilcots report are a timely reminder of the importance of efficient and effective defence procurement and strong contract management and oversight to ensure equipment reaches the frontline commands on time and on budget.
The SSRO has already saved the MOD and the taxpayer 9.9 million by reducing the baseline profit rate on contracts signed in 2015/16 from 10.7 per cent to 10.6 per cent, and 3.5 million based on the first four contracts weve had in using the 2016/17 rate of 8.95 per cent.
We currently have a further 61 million of potentially non-allowable costs charged by contractors which we have challenged, Mr Tucker said.
This amount of money could pay the salaries of over 2,000 corporals and sergeants or fund nearly 4,000 service personnel to buy a home through the Forces Help to Buy Scheme.
The SSROs Interim Compliance Statement, published today (14 July), found that contractors conformity to the regulations has been poor.
Using a traffic light system of Red Amber Green, the SSRO found that six out of eight indicators flashed up Red. One indicator reports that only 9 per cent of MOD contractors reports provided the required information.
The quality of information submitted remains a serious concern with incomplete calculations, facts and information.
