MoD puts £5bn worth of construction work on hold

The Ministry of Defence (MoD) has placed its £5bn construction and facilities management programme under review and has said no contracts will be let this year as initially planned.

A spokesperson for the MoD’s real estate arm the Defence Infrastructure Organisation [DIO] told Building the procurement programme for a suite of contracts worth £500-600m each year and around £5bn over 10 years was now “under review” with no contracts to be let in 2012 as originally scheduled.

The construction sector had previously looked to the MoD as one of the few public sector clients with a significant book of work.

The spokesperson confirmed the review was across the suite of Next Generation Estates Contracts [NGEC] - both construction and facilities management - including contracts that already have shortlisted bidders.

He said: “The contract award for the first tranche will be no earlier than 2013. Since the NGEC timetable was published in August 2010 there have been a number of emerging factors that have subsequently impacted on the procurement schedule.”

That means the £1.5bn National Housing Prime contract to provide repairs and maintenance to the more than 49,000 UK military homes will not now be let this year as planned, raising doubts over whether it will be in place for the deadline of April 2013.

The MoD invited bids for the contract in February 2011 and in August announced three bidders had been shortlisted: Kier and Turners Facilities Management; Carillion and Enterprise Managed Services; and Babcock.

A Kier spokesperson told Building the contractor was aware the NGEC programme had “suffered significant delays” and was expecting further information from government.

The review of the NGEC comes after delays to individual contracts last year.

The DIO spokesperson cited new government procurement policies and the defence review, as well as the creation of the DIO itself, which replaced Defence Estates last year, as reasons for the delay.

Last year the DIO repeatedly assured the sector that its creation would not impact on the NGEC.

One bidder, who did not want to be named, told Building that these were “just excuses for the mismanagement” of the programme and that the real cause of the delays is a “lack of resource and expertise” within the DIO after it was required to save £1.2bn across its operations and forced to reduce headcount from 7,000 down to 2,000.

“It’s sheer stupidity to engage in such severe reductions while at the same time launching a procurement exercise of such magnitude,” the bidder said.