Independent Review of Single Source Pricing Regulations

Monday 10th October 2011 Written Statements

[The Parliamentary Under-Secretary of State for Defence (Peter Luff)]

On 26 January 2011, Official Report, columns 10-11WS, I announced that Lord Currie of Marylebone would chair an independent review of the regulations used by the Ministry of Defence (MOD) in single source, non-competitive, procurement, the so-called Yellow Book. Lord Currie has now submitted his independent report, a copy of which has been placed in the Library of the House. I would like to thank Lord Currie and his team for the report. The MOD and other interested parties will now consider his recommendations.

The Government welcome Lord Currie’s recommendations. In broad terms his report focuses on achieving a more open relationship between MOD and defence industry, ensuring standardised high-quality cost data are provided by contractors to the MOD. This will help ensure greater transparency of costs and should improve the MOD’s ability to negotiate realistic prices. Industry will be incentivised to deliver efficiency by the opportunity to make greater returns should they deliver cost savings for the MOD. Making industry more efficient should not only achieve value for money to the taxpayer, but also lead to a more competitive role for the UK defence industry in the export market.

Small and medium enterprises (SMEs) will be offered fewer data reporting requirements and a simplified profit rate process. Larger contractors will provide an annual statement on how they have engaged SMEs in their supply chain.

Lord Currie recommends these arrangements are overseen by an independent Single Source Regulations Office (SSRO) which would replace the existing review board to provide stronger oversight over both MOD and industry.

The Department will now consider the report’s recommendations as part of the next stage of consultation, which will run until 6 January 2012. Responses to all aspects of the report are welcome, but the Government particularly seek views on the merits of the establishment of the SSRO or possible alternatives such as the strengthening of the existing cost assurance and analysis service. A final report will then be produced which we intend to publish in early 2012 when I shall report back to the House.