Inside Knowledge: Defence
Roll call: who you need to know n Andrew Manley, chief executive of Defence Infrastructure Organisation Andrew Manley joined the Ministry of Defence in February 2010. He started as director-general – commercial, and in August 2010 he took on the additional role of chief executive of Defence Estates and oversaw the Strategic Defence and Security Review of estates which resulted in the creation of the Defence Infrastructure Organisation (DIO) on the 1 April 2011.
n David Olney, chief operating officer of Defence Infrastructure Organisation David Olney is an electrical engineer by profession and worked in the power cable industry prior to joining the MOD in 1980. In April 2004 he was promoted to chief operating officer, and in May 2010, following the departure of DE chief executive vice admiral Tim Laurence, Mr Olney acted as chief executive, delivering proposals on the management of the estate as part of the Strategic Defence and Security Review.
n Air Commodore Alan Opie, head of DIO operations accommodation Air commodore Alan Opie joined the RAF in 1980. He was appointed head of operations international for Defence Estates in 2008, responsible for the maintenance of the MOD estate overseas. In September 2010, he was appointed head of operations housing for Defence Estates, overseeing the management and maintenance of service families accommodation in the UK. He assumed control of the US Forces Division in April 2011.
n Steve Rice, programme director of NGEC Steve Rice is a chartered surveyor and is the head of profession for MOD construction professionals. He previously led the DE northern region, with responsibility for new projects, land management services and maintenance in northern England, Scotland, Northern Ireland and Wales.
58 | 21 July 2011
MoD shake-up to add value john mckenna
There will now only be four prime regional contracts, each focused almost exclusively on FM
Following the Strategic Defence Review, the Defence Infrastructure Organisation was created in April charged with trimming £1.2 billion from the MoD’s construction and facilities management budgets over the next four years. While a sizeable cut, spending on defence estates totals £500m to £600m every year. However, with pressures such as 20,000 troops returning home from Germany over the next eight years, the DIO’s mission cannot be simply a case of dumping projects such the Next Generation Estates Contracts (NGEC) programme, aimed at regenerating accommodation for the armed services. Instead, it is looking to drive greater competition through its supply chain by ending programmes such as its five Regional Prime Contracts, which awarded seven-year contracts to
single companies or JVs for both facilities management and capital works up to £20 million. Under DIO’s revised NGEC programme, there will now only be four prime regional contracts, each focused almost exclusively on facilities management. There will also be six regional capital works frameworks for schemes up to £12m, with up to five firms on each framework, plus one national framework for capital works between £12m and £50m in value, again with five contractors in place. Everything over £50m will go out to the market via competitive tender. ISG Pearce executive manager for Defence Ian Farrell says the changes represent the MoD acknowledging that its old procurement system often failed to accrue the benefits of any value
Changes to FM setup look to reap benefits of value engineering defence
engineering on schemes. “Previously with the prime contractors, a many of them were facilities management companies, and whenever they had a sizeable capital works scheme they would subcontract to a construction firm like ourselves,” says Mr Farrell. “Any margin or profit would go back to the prime contractor, not the MoD. The value engineering benefit would only go to the prime. That will now change, as any firm working on capital projects will be contracted directly to the MoD via the DIO.” To help further drive efficiency the DIO is also considering bringing in a private sector strategic partner, one which DIO insists would be unable to compete for any of the NGEC capital or FM work and as a role is more likely to suit programme management specialists than main contractors. “We will make a decision in October whether we will then go on alone or whether we will engage with a strategic partner to help us invest expertise and potentially money in the things that we need to do,” says DIO chief executive Andrew Manley.
Competition through the ranks Interview: brian talbot
Through its PriDE joint venture with SSE Contracting, Interserve runs the Defence Infrastructure Organisation’s (DIO) South East Regional Prime Contract, providing Facilities Management and small to medium capital works to 106 MoD sites covering 6,000 buildings and facilities. In April it won a £108 million, two-year extension to the contract. However, the firm faces the reality that beyond 2014 the current prime model will cease to exist, replaced by a combination of smaller prime contracts and capital works frameworks (see above). Interserve managing director for Defence Brian Talbot says that
“We have created a database of subbies in areas local to the MoD sites” although the new framework model for capital works is aimed at introducing greater competition, Interserve has been encouraging competition at local level for the six years PriDE has been running the South East Prime contract. “For minor works between £50,000 and £1m we have been running mini-competitions for
medium-sized suppliers, and have created a database of hundreds of subcontractors in areas local to the MoD sites,” says Mr Talbot. “We are now looking at making that more widely available, and hope to develop something within the next two years.” To get on PriDE’s database, firms have to pre-qualify on both commercial and geographic terms. Mr Talbot says that pre-qualified local firms are typically only invited to mini-competitions for relatively small-scale jobs, with PriDE using its established supply chain for large capital works schemes. How this might be replicated on a larger scale across the regions has yet to be decided. www.cnplus.co.uk