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U.K. PRIME CONTRACTING POLICY UP FOR REVIEW?

25 Nov 02. The U.K. MoD is believed to be reviewing it’s prime contracting policies with industry following complaints by industry of a combination of complaints of ridiculously low margins allowed on Prime Contract work from the Prime to a high degree of risk from sub-contractors with little up-front money coming form the prime.

Sources close to BATTLESPACE suggest that the MoD is benefiting from as a little as 10% of the contract value under existing contract policies. BAE SYSTEMS, already stung by the £350+ Nimrod debacle is also believed to be struggling with the Royal navy Astute programme which is running late and over-budget on a fix-priced bid. One source told BATTLESPACE that, “The fifth submarine could be priced in free under the current contract conditions.” BAE’s balance sheet could not suffer another Nimrod-like blow and is believed to have raised concerns with the Government last week stating that if the company were to continue trading at its current level, the huge Pension Fund would be oput at risk.

BAE has also believed, in the light of this, to have changed its stance on the acrrier project, accepting increased work in exchange for the Thales team priming the contract. For the FRES programme the company also appears quite content with becoming the Network Centric systems LSI on FRES allowing Alvis PLc to prime this huge £4.7bn programme.

The departure of CDP supremo Sir Robert Walmsley in March may herald the start of a review of Procurement policy with a new system based on the U.S. pattern emerging under the new CDP who, it is believed, will be selected from outside the current DPA structure.

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