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Delays to £5bn MoD contract awards

The £5 billion of Next Generation contracts for work on the defence estate will be awarded late, increasing fears of a worsening public sector construction squeeze in 2012/13.

The recently formed Defence Infrastructure Organisation, which is managing the procurement process, told Construction News it had revised its programme for awarding the contracts after it missed its own deadline to shortlist contractors for the Regional Capital Works Framework for East Midlands and Eastern England.

The DIO had been due to shortlist for the framework on 22 July but wrote to contractors on 26 July to inform them there would be a two-month delay.

A DIO spokesman said the anticipated dates for the capital frameworks had been revised, “reflecting the increased complexity and workload of evaluating a very high number of PQQs from potential bidders”.

He confirmed the DIO has since “increased its staff in a number of areas” to deal with the high demand.

But plans to procure in three batches the remaining capital works frameworks - five English regions, Scotland and National - have now been abandoned, meaning procurement timelines are likely to see substantial delays.

The spokesman said: “Due to the very high volume of interest received, we have subsequently decided to run procurement for these frameworks in a consecutive fashion.

“We will therefore proceed with holding an industry day for the National Capital Works Frameworks in early September, and this will be followed by similar events for each of Scotland and the South-east, at dates yet to be confirmed.”

The National Capital Works Framework was originally scheduled to be advertised on 26 May. Release has now been put back to later in August.

The DIO will announce its shortlisted bidders for the Regional Capital Works Framework for East Midlands and Eastern England by the end of September, around two months late.

But it gave no indication of when revised timelines for the other frameworks would be made available, simply stating they would come “in due course”.

DIO also confirmed the delay in issuing PQQs and shortlists will mean the final date at which contracts are let will be affected.

But it would not comment on whether the level of work procured through the frameworks would be any lower.

The move comes after last month’s announcement by the Ministry of Defence that a further 7,000 jobs would be cut as a result of a substantial budget deficit at the department.

Contractors fear the cuts will have further effects on the procurement timeline and the level of work procured.

One contractor involved in the bidding process, who did not wish to be identified for risk of losing work, said the delay had prompted fears over where public sector work would come from in future years.

He said: “It’s pretty hard to know where we will find that work because the public sector as a whole is looking pretty grim.

“We put quite a lot of financial resource into the East region and we are now wondering how we should allocate our resources if this sort of substantial effort isn’t going to reap any reward.”

He predicted the level of work likely to flow through the frameworks would be substantially less than originally advertised.

“If you look at how much they have cut from defence training - from £2.5 billion to £900 million - that is more than a 60 per cent cut.

“So if they have had to be that vicious on one of the more innovative streams of MoD expenditure, then I think that means other areas are going to come in for some pretty brutal hacking as well.”

Another bidder said the delay was doubly frustrating after similar setbacks to academies and other major public frameworks had affected business planning.

“I find it interesting they say they have had a very high level response because it just doesn’t ring true.

“There are a lot of companies in the bidders’ directory but when you whittle it down to those that are serious bidders there really aren’t that many.”

Another contractor said he expected work would now be delayed “well into 2013”.

He said: “That plays in very nicely with government’s desire to cut spending.

“They don’t have to say they are cutting anything, they are just not doing anything, so it’s perfect for them politically but it is a nightmare for contractors.”

 

Shortlists already announced

The Defence Infrastructure Organisation has named Kier & Turner Facilities Management, Carillion & Enterprise Managed Services and Babcock as the three shortlisted bidders for the £1.5 billion national housing prime contract.

The contract, due to start in 2013, will see the successful bidder provide repairs and maintenance to more than 49,000 UK military homes, grounds maintenance and housing construction projects with an individual value of up to £3.93 million.

The announcement followed that of the shortlisted bidders on the facilities management oriented regional prime contract for Scotland and Northern Ireland, revealed by the DIO in June.

Carillion, Interserve, Babcock Support Services and TurnerHenry will fight it out for the £500 million contract to provide hard facilities management services to the defence estate in the regions.

 

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