Ministry of Defence steps up search for private sector partner

The Ministry of Defence’s estate arm is pressing ahead with plans to put in place a private sector strategic partner to run its maintenance and building programmes, with a tender expected to be issued as early as next month.

In January the Defence Infrastructure Organisation (DIO) issued a formal call for expressions of interest in managing the defence estate, worth nearly £20bn and including about 4,000 sites, as part of a “soft market test”.

As Building reported last month, the DIO was “besieged” with responses from firms, including Serco, Capita Symonds, Babcock and CH2M Hill.

Building understands about 12 firms were invited to proceed to an interview stage, with a source close the process saying the firms represented “a range of companies”.

“They wanted to hear as many different views as possible,” the source said

Today the DIO published a summary of those interviews, saying they had talked to a “cross section” of the industry, with “strong interest” shown in taking on the role of the DIO’s strategic partner.

In a statement the DIO said: “Industry’s preference is for DIO to transfer all of its operational activities to a partner, rather than the partial transfer option.

“Industry would also prefer to see a contractual term long enough to allow them to fully transform the business and deliver long-term benefits.”

The summary said industry favoured five or ten year contracts, with the feedback that a “term shorter than this would be insufficient to allow industry to fully transform the business and transform the business and transform the size and shape of the estate”.

It added that industry was prepared to work to a “predominantly incentivised fee basis”.

Although, the DIO said that “soft market test” was not “a commitment to enter into any formal procurement”, Building understands that the DIO is pressing ahead with the procurement and the expectation among the firms involved in the soft market test is the DIO will now issue an OJEU notice for the contract as early as next month.

The procurement set to last up to a year with an appointment expected before April 2013.

However, there is still uncertainty about what impact the procurement will have on the timetable for the tender of the around £5bn worth of defence estates contracts.

Although procurement is continuing on the raft of contracts, none are expected to be let this year, including the £1.5bn prime housing contract, which has a shortlist of three bidders.

Industry figures now fear the timetable for the award of the contracts could slip further.

Paul Sheffield, chief executive of Kier, which has been shortlisted for the housing contract, said he had been assured it would be awarded by April 2013, but hit out at the “very long procurement”, which he said could be “halved”.

He said: “I think it’s incredibly wasteful. I can’t understand why it can’t be halved. They’ve got to do the right thing for the public purse and they’ve got to go through a robust and professional procurement process but I can’t for the life of me understand why it has to take so long.”

“Dates rarely accelerate and if one is to slip it would seem perfectly logical that the prime [housing contract] is awarded after the strategic partner,” he said.