The challenges of single source procurement

Michael Fallon

UK Defence Secretary Michael Fallon is looking for a relationship built on trust with the MoD's defence industrial partners, but will be checking their homework all the same. Credit: Crown copyright

Single-source procurement in the UK defence sector has "long been recognised as an area of weakness" that suppliers have "exploited" by charging "too high a price", UK secretary of state for defence Michael Fallon has said in an article written for IHS Jane's Defence Weekly .

Fallon claimed that a "lack of commercial leverage" and "information" led defence contractors to claim for costs including croquet, horse racing trips, motoring fines, and "close-up magicians". He stated that there were expenses that the "taxpayer had no business paying".

In the article published on 25 March, Fallon - in his current role since July 2014 - expanded on reforms to single-source procurement that were enshrined in the Defence Reform Act of May 2014.

On the reforms, Fallon said that "the bottom line is that we [UK MoD] spend around GBP6 billion [USD8.9 billion] a year on single-source contracts - nearly 50% of our procurement budget".

The measures outlined in the Defence Reform Act include a single-source pricing framework for non-competitive procurements valued at GBP5 million or more; the establishment of a Single Source Regulations Office to ensure value for money and the payment of what was described as a "fair and reasonable" price to contractors; and the requirement for contractors to disclose costs through a standard reports. The latter measure gives the MoD "full open-book rights" according to Fallon.

Fallon said "the measures… represent a huge change in our approach to single-source procurement", but added that "this is not about attacking profits".

This op ed is taken from IHS Jane’s Defence Industry & Markets Intelligence Centre, which provides world-leading analysis of commercial, industrial and technological defence developments, budget and programme forecasts, and insight into new and emerging defence markets around the world.