MOD opens up to Spend Matters on procurement of consultants

We had a full response from MOD on Friday afternoon to my questions (see here) around the £12M consultancy contract they recently awarded to AlixPartners. (MOD have been thoroughly professional and courteous throughout our dealings with them).

So I'm very happy to make a couple of clarifications and corrections based on this new information.  Firstly, it wasn't technically a single-tender, MOD tell us. (I should say that their previous response to me suggested very strongly that it was).  It was awarded without open advertising, under the "negotiated procedure without prior publication of a contract notice"  but 3 potential providers were interviewed before choosing Alix.

The procurement strategy was determined with the full knowledge and support of a cross Whitehall committee, and the decision to employ Alix Partners was taken with the full knowledge of the Minister of Defence Equipment Support and Technology.... Three consultancies were approached by the Shareholder Executive and interviewed by them and the MOD.

That also means that it wasn't driven by a single senior executive in MOD, which was what we had been hearing. Clearly, one man signed the contract, but there were many others involved in the process by the sound of it (as above).

Andrew Manley signed the contract as MOD’s Director General Defence Commercial, but the ongoing day-to-day working relationship with Alix Partners is managed by MOD’s Director Corporate Commercial Programmes.

Manley's previous role as Commercial Director has been abolished and rolled into Bernard Gray's position as Chief of Defence Materiel; Manley is now running the Defence Infrastructure Organisation.

MOD also tell me that the 'previous colleagues' connection between an MOD executive and a AlixPartners senior guy that we previously referred to is pure coincidence - we have no reason to disbelieve that, as they both worked at a huge global firm.

So that all makes the action sound less 'dodgy' than was first suggested to us; but it does raise new interesting questions, notably what on earth the Shareholder Executive are doing getting involved in this? And how did they determine the three consultancies who were approached?  The Executive is part of BIS (Business Department), and their main task is managing the Government's stakes in organisations such as the Royal Mail and the bailed-out banks. But I do notice that their home page says (my highlighting):

...we provide corporate finance advice on major initiatives to a range of departmental clients across government in the following areas: Financial Interventions; Launch Investment; Rescue and Restructuring Aid; Grant for Business Investment; and commercial advice on key third party relationships

So are they making a power grab for some of the work that previously would have sat firmly in Treasury with OGC; maybe Cabinet Office hasn't quite picked up on some of this? Or perhaps this is all very much with the blessing of Francis Maude? Anyway, we must look into the Shareholder Executive more closely if they're now driving some key procurement activities.

While MOD were very helpful in answering most of my quetsions, they would not comment on the day-rates or the bonus issue - our information being that Alix are charging £3-5000 a day plus bonus. 'Commercially confidential' was the response.  But:

Since Alix Partners have commenced work, the MOD have negotiated savings from industry of over twenty times the value of the fees to be paid to Alix Partners. Further savings will be made as a consequence of Alix Partners’ involvement.

And MOD also point out that the £12M contract value quoted was "a maximum".

It should be noted that the contract was based on call-off contract for Alix Partners to provide support; up to a maximum of £12m over a maximum period of 18 months. Actual sums spent are substantially below this maximum amount.

So, I would still argue that MOD broke procurement regulations.  And those of us - including my consulting firm - that jump through all sorts of hoops to get on Government framework contracts for consultancy might wonder what on earth is the point, when a major contract comes up and is handled in this opaque manner.

I'm pretty clear now there is nothing corrupt going on here. But there is still a matter of principle around how major contracts are awarded; fairness, openness and transparency. I still think this contract should be suspended, and we'll ask a few more questions about the Shareholder Executive involvement. And I'm still hoping - and this is looking promising - to get an interview with a senior MOD person to discuss these issues with them directly.

Voices (2)

  1. Paul Gascoigne:

    3-5K per day, how can ‘anyone’ think that offers value for money, surely it would be better value for money at 1K per day, or 5K per week, or 20K per month for a consultant. FFS – no wonder we’re skint.

  2. Final Furlong:

    A few ideas on the involvement of Shareholder Executive (SE):

    – Gov owns the Royal Mail – perhaps the MOD has been shooting itself in the foot by posting too many parcels to itself.

    or…

    – the SE is government’s lead on property efficiency and perhaps this is the area in which Alix and chums are advising

    or…

    – the MOD is thinking of buying into a significant supplier (doubtful) or selling (they don’t own anything significant aside from property – so they could be selling a large part of their estate – see first point)

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