Prime contracting initiative to trigger repeat work for small and medium-sized contractors.
Ministry of Defence officials are planning to hand out many more small and medium-sized contracts than initially expected under its new procurement strategy.

The MOD, which lets £1.7bn of construction work a year, had been expected to let 15 orders, each worth £100-250m, under its "prime contracting" strategy. This will involve contractors bidding for repeat work, having assembled teams from the whole supply chain to increase efficiency and savings on projects.

The strategy had caused concern among small and medium-sized contractors, which feared being squeezed out. Top 10 firms, such as Laing and Amec, are expected to snap up the prime contracts. But Construction Confederation chairman Alan Crane, who met defence minister John Spellar last Wednesday to discuss the prime contracting strategy, was told this was not the case. He believes there could be at least 40 contracts let.

Crane said: "I am reassured. There will actually be dozens of contracts. I've got big members but also medium-sized and some small contracting firms who all want to win work under prime contracting.

"There will be some large packages worth several hundred million, but there will also be some smaller bundles worth a few million that smaller firms could carry out.

"The packages could involve doing all the MOD's housing, utilities or M&E work in a region, or they could just be for two or three dozen accommodation blocks across several bases.

"It's not the size of the packages, but the fact that it is repeat work where benefits can be gained from using the supply chain that is the key for us." Crane also said he was reassured during the hour-long meeting last Wednesday to hear that only contractors fully committed to working with the whole supply chain could win prime contracts.

He said: "I had been concerned that firms would be able to win work just by making all the right noises when they bid, but this is not the case. They will have to prove their suppliers are in place to win work." The prime contracting work will be advertised from April. It will take more than two years to let all the MOD's work in this way.

Workshops for industry chief executives and project managers will be held to ease the introduction of the initiative.

  • A government spending watchdog has demanded that the MOD make better use of the £1bn it spends on its property portfolio. In a report on the MOD's £1.2bn worth of property, the National Audit Office recommends that it take a close look at its property needs. The auditors concluded that the department could save at least £20m a year by increasing occupancy rates per staff member from 19 m2 to 14 m2.