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2013 Preview: Defence

The Ministry of Defence Estate was set to be a goldmine for industry in 2013, with the first set of major frameworks and capital programmes coming to market since 2005.

The Next Generation Estate Contracts will open up billions of pounds worth of work as the Defence Infrastructure Organisation’s current maintenance and development contracts expire.

But the champagne remains firmly on ice, as a vast batch of contracts has been delayed to early 2014, including the Scottish and Northern Irish Regional Prime framework and the Housing and Training Estate Prime frameworks.

The Regional Prime frameworks for the South-east, South-west and Central regions were also delayed by half a year and are now due to be awarded in early 2014, with the total value of the delayed awards running as high as £4.35bn. Big names in the running include Balfour Beatty, Carillion and Interserve.

The FM contracts in particular promise rich rewards for SMEs, with many optimistic about the level of government engagement with smaller firms, who are being encouraged to contact the shortlisted bidders.

Overwhelming interest from construction firms eager for the lucrative contracts was the official reason for the delays, as well as programme reviews following on from the Strategic Defence and Security Review, which is set to have an impact on the MoD’s capital budget.

The DIO says it is focused on reducing costs, increasing surplus land and building sales and rolling out a more effective business model.

But it isn’t all about belt-tightening: the government says its pipeline of work for the MoD is set to double in 2012/13 to £732m, and smaller contractors are optimistic about opportunities in areas such as coastal erosion and fire safety.

Opportunity also knocks with regard to the cost-cutting itself. The DIO has laid down the gauntlet for three consortia – including a Mace, Telereal Trillium and KPMG team - to compete for the role of strategic business partner to help it make savings.

Serco, DTZ and Bechtel are also in the running, as are Capita, URS and PA Consulting.

CN revealed in August that this contract could exceed its £400m estimated value, with the winning consortium developing and implementing a strategic asset management plan, as well as managing staff, suppliers and driving efficiency savings. 

Two big contracts that are set to come to market in 2013 are the National Capital and East Midlands/East of England regional frameworks.

The National Capital framework award was pulled forward to 2013, with 10 firms shortlisted for the four-year initial contract covering the design and build of projects worth up to £50m. Up to five winners will be chosen for the contract, with tenders due in mid-February.

The Eastern Framework meanwhile is worth an estimated £250m, with 10 firms shortlisted and an award scheduled for August.

Other schemes contractors will be watching closely this year are a 360-home development in Beacon Barracks worth £65m, as well as a £130m redevelopment on the site, with a final investment decision regarding the latter to be made in summer.

Property agent GVA is also on the hunt for a contractor to manage the relocation of the Deepcut Barracks in Surrey to Worthy Down in Hampshire, as well as the redevelopment of the Deepcut site with 1,200 homes, in a contract worth £200m-£300m.

GVA is also looking for a development manager for a 2,000-home project on the Arborfield Garrison, with an award expected in March, with planning permissions submitted for a further 1,500 dwellings.

Bids for the £230m redevelopment of RAF Lyneham are also closing on the 7 January, with work including demolition of the current facility and construction of a new training college.

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