UK Ministry of Defence: Helping negotiate £250m in…

The UK Ministry of Defence (MOD) is under constant pressure to reduce its budget while continuing to protect the nation’s security, independence and interests. For the Royal Navy, this means delivering the same military capability but with a smaller budget and a reduced fleet – from 70 frigates and destroyers in the 1970s to fewer than 20 today.

As half of the UK’s total naval budget is spent on maritime support, the MOD wanted to make significant savings when existing contracts came up for expiry. For one of these contracts – which grouped together under the Maritime Support Delivery Framework – the MOD wanted to save an additional £250 million. It had, however, already entered into a partnership with one supplier that would save over £1 billion over 15 years, giving it little room to negotiate.

To help the MOD agree additional savings with the supplier, and ensure these savings were delivered as expected over the contract lifetime, we provided expert support on several fronts.

PA worked as a joint team to manage the MOD’s approach to negotiations to identify strategic concerns for the MOD and its stakeholders, prioritising them by value. This put the MOD in a strong position when going to the supplier. At the same time, the team developed a clear understanding of where savings would fall, to help the MOD track them and ensure they were ‘cashed’, and drove negotiations to ensure contracts were agreed on time. Finally, we advised on how to set up a contract management team to make sure that changes to the contract after its award would not diminish the expected savings.

As a result, the new £2.6 billion contract started on 1 October 2014 and will deliver at least £250 million in savings over five and a half years.