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Defence chief sets out building plans

The first contracts to go out as part of the MoD’s new suite of work will be in OJEU by the end of the year, procurement chief Steve Rice has said.

The Scotland and Northern Ireland maintenance framework will be placed into OJEU before Christmas. Shortlisted firms will receive tender documents next summer, with a winning firm appointed mid-2012 ready to take over the work when the existing contract expires in 2013.

The capital projects frameworks and the housing and training contracts will also go to market this year.

The remaining three regional deals - covering South-east England, South-west England and the rest of England and Wales - will happen a year later.

In an interview with CN, the Next Generation Estate Contracts programme manager said the work could benefit both large and small UK contractors.

“We are not precluding anyone. Anyone who has an interest, we are willing to talk to them.”

With the £55bn secondary school renewal programme axed, hospital and social housing funding cut and the £1.8bn prisons building programme hanging in the balance, defence offers a rare glimmer of sustained public sector work over the next few years.

A series of long-term contracts are coming to an end and Defence Estates will go to the market with several new deals before the end of this year.

Although the exact level of spending will not be known until the Strategic Defence and Security Review is completed this autumn, the work is estimated to be worth at least £500 million per year.

“There is a reasonably healthy programme as far as we can see for both new-build and refurbishment.

“There will be buildings that will need to be replaced, buildings we will have new requirements for. Logically there will be a need for a considerable amount of work.”

The defence estate is valued at more than £15bn; it spans 240,000 hectares and 45,000 buildings.

The next generation of work will be divided into four regional maintenance contracts, a training estate management contract and a housing maintenance contract.

For the first time, there will also be an as-yet undefined number of core works frameworks to cover refurbishment and new-build jobs.

Defence Estates is working with industry representatives to decide how the core works will be divided.

“Any capital works - anything we don’t consider maintenance -will go through the frameworks.

“We are looking at how many frameworks we should have, and we have had discussions with industry about that.

“We want to have a good mix of small, medium-sized and national contractors. Some companies with just half a dozen employees have come along to industry days - it has been the whole range.”

There will be a smaller number of maintenance contracts in the next generation of deals, and Mr Rice warned incumbent contractors they would be under pressure to reduce costs to win work.

“Obviously with the current fiscal situation we are very keen on getting value for money and improving value for money through these contracts.

“Even sitting contractors are going to be in competition with others. There is a lot of interest in these contracts and I suspect they are going to have to sharpen their pencil.”

The new agreements represent the fine tuning of the system that has been in place for up to seven years and was the first attempt at rationalising work on the estate.

“We went from about 300 contracts throughout the UK to these five main contracts so we now have a much better understanding of our estate.

“This means we have much better information to give to our contractors for tendering purposes this time around.”

The contracts will be structured to encourage cost and carbon savings.

“If contractors come up with smart ways of doing things to save money, they will share the benefits of that.

“On carbon, it could be that we have an agreement that any savings we make on energy we share those savings.”

A wide range of work is covered by the capital works frameworks, from civils projects such as airfield pavements and sea walls to buildings works such as offices, garages, messes and specialist training facilities.

Mr Rice said bids from joint ventures able to handle this variety of work were welcome.

He also promised to use project bank accounts for all next generation contracts in a bid to increase prompt payment of the supply chain and keep down costs.

Defence Estates is holding a further industry day in October where it will set out more details of its future contracts and encourage potential main contractors to form relationships with suppliers.