Key Recommendations
Key Recommendation 8:
Single source contracts in excess of £5m in value but less than £50m should be exempt from a number of SSPR reporting requirements, for example, Quarterly Contract Reports. Below £5m, no specific SSPR reporting should be required, minimising the administrative burden for SMEs.
→ Read moreKey Recommendation 9:
Contractors with single source contracts totalling above £100m in value should produce an annual statement on their contracting with SMEs. It should explain how relationships with SMEs are managed and the processes that the prime contractors have in place to support and foster SMEs in their role as subcontractors.
→ Read moreAncillary Recommendation 10:
The current adjustment to the profit allowance for intercompany trading should be removed, and contractors should be required to record costs charged to the MOD at their original cost to the group.
→ Read moreAncillary Recommendation 11:
The GACs should include the general provision that costs charged to the MOD should be both necessary and reasonable. This should be included in the contractors’ annual board certification (key recommendation 2).
→ Read moreAncillary Recommendation 12:
There are clear situations where certain constructs are not appropriate. There is limited guidance on this in MOD commercial policy. We recommend that the MOD should establish clear rules on the permitted commercial constructs in various situations, and that for large contracts the chosen model should be independently reviewed prior to contract signing.
→ Read moreAncillary Recommendation 13:
TCIF should be fixed to a 50/50 share between the MOD and contractors, mitigating the misuse of TCIF to meet unrealistic budgetary constraints, and balancing the incentivisation of efficiency with the benefit of value for money for the taxpayer.
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Review of the commercial construct, and the quantification of the risk that the MOD takes on, should be included in the independent commercial due diligence.
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In the specific area of concept, assessment, and design contracts, the MOD should reconsider its policy on not using cost-plus contracts. Use of cost-plus should be coupled with strong MOD oversight, supported by the contract, to ensure quality and mitigate the risk of waste.
→ Read moreAncillary Recommendation 16:
Long term capacity and capability contracts should be used sparingly and be under particularly close scrutiny. They should only be entered into if a strong case can be made that the strategic capability requirement will remain under all likely future scenarios for the full duration of the arrangement.
→ Read moreAncillary Recommendation 17:
The open book and Equality of Information provisions recommended in Part 1 should extend to rates agreements.
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