MoD looks to SMEs for outsourcing to protect it from Carillion-style collapse

The Ministry of Defence is opening up its infrastructure contracts to try to get more small suppliers involved in its £3bn-a-year spending programme
The Ministry of Defence is opening up its infrastructure contracts to try to get more small suppliers involved in its £3bn-a-year spending programme Credit:  Tim Ireland/PA

The Ministry of Defence is opening up its infrastructure projects to try to get more small suppliers involved in its £3bn-a-year spending programme and reduce its vulnerability to a Carillion-style collapse.

For the first time military chiefs are setting out the next five years of major contracts, including the construction and refurbishment of buildings and bases, as well as facilities agreements such as catering and cleaning.

The Defence Infrastructure Organisation (DIO) says it wants to attract more smaller companies to do business with it in order to diversify its supplier base.

It said that by offering work to small and medium-sized companies it will “build resilience into projects” - understood to be a reference to insulating itself from the calamitous knock-on effects seen when Carillion imploded almost a year ago.

`RAF Lossiemouth
One of the contracts being opened up is the £149m development of RAF Lossiemouth Credit: Getty

There are concerns that the wider outsourcing sector could see further troubles due to some companies failing to manage risk appropriately.

A Parliamentary hearing in the wake of Carillion’s failure heard Rupert Soames, chief executive of outsourcing giant Serco, warn MPs there was “an urgent need to rethink the relationship between the UK Government and its suppliers”.

The DIO said that by providing longer lead times on major projects as well as offering help to potential bidders for contracts, smaller companies would be more likely to secure work.

It added that smaller businesses may have been put off bidding on MoD work in the past because they did not have experience of working on defence contracts.

“We recognise that our current and future suppliers are key to our success,” said Jacqui Rock, DIO commercial director.

“By being as transparent as possible in our procurement ... we are encouraging new entrants.”

Soldiers from the 1st Battalion First Fusiliers kick a football around as they relax after time spent inside their Scimitar tanks as the 3rd (UK) Division takes part in Exercise TRACTABLE 2016 on Salisbury Plain, Wiltshire, 
The MoD is selling of parts of its estate to reflect the shrinking size of the UK military Credit: PA

Major projects covered in the plan include the £4bn programme to reduce the MoD’s property portfolioby almost a third. The MoD's property portfolio covers about 1.8pc of the UK landmass.

The reduction was first set out in 2016 and reflects the shrinking size of the military, but also aims to get rid of old and expensive-to-run buildings.

Projects included in the plan are nuclear base maintenance deals, which are worth more than £1bn in total. Other projects include resurfacing RAF airbase runways, the construction of a submarine training centre for the Navy and support for the Army's new Ajax armoured vehicles.

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