Department puts £5bn of construction contracts on hold because it wants partner to manage estate

The Ministry of Defence’s move to bring on board a private sector partner to manage its estate is the “key reason” for placing the procurement of up to £5bn worth of construction contracts on hold, Building understands.

As revealed in Building last week, the MoD’s property arm, the Defence Infrastructure Organisation (DIO), has placed its entire New Generation Estate Contract (NGEC) procurement “under review”, meaning no contracts will be let this year.

They want the strategic partner in place before going forward with procurement

Source close to MoD

An industry insider close to the DIO said the move had been prompted by the organisation’s decision to bring a private sector partner in to manage the defence estate, worth nearly £20bn and including about 4,000 sites.

“They want to get the strategic partner in place before going forward with the procurement, so they’ve stopped the bus,” the source said.

Earlier this month the DIO issued a formal call for private sector partners to register an interest in managing the estate.

The deadline for initial expressions of interest passed on 16 January and Building has been told the DIO has been “besieged” with responses.

A senior figure at one firm who has expressed an interest said, “big names” such as Serco, Capita Symonds, Babcock and Sodexo had all responded to the DIO’s invitation. Other firms said to be interested include Telereal Trillium, Interserve, Carillion, Land Securities, and GVA Grimley.

The private sector partner is not expected to be appointed until at least the end of the year, meaning procurement on the NGEC is likely to be delayed well into 2013.
The DIO has now extended all its capital works contracts by one to two years in order to accommodate the delay.