More on MOD and AlixPartners; we get a copy of the contract

In case you’re wondering – we haven’t dropped the whole issue around the Ministry of Defence consulting contract with AlixPartners. As regular readers will know, this consulting firm have been engaged, at vast expense and without an advertised competition, to provide support to the MOD’s programme of re-negotiation with top suppliers.

We’ve got a copy of the contract now via Freedom of Information (see below) and we’re pursuing further investigations – what was the role of the Shareholder Executive in all this? Is it reasonable that MOD refused to provide us with the day rates for AlixPartners?

And let’s get back to basics here; the MOD is overpaying (in our opinion) for a contract awarded in a manner that, also in our opinion, breaks EU Procurement Regulations.  That still seems fundamentally wrong to us.  Anyway, what did we find out from the contract?

- The day rate was redacted (they won’t tell us what it is – no-one however has denied what we understand is rates of £3-5,000 a day) on the basis it's 'commercial in confidence'.  We disagree and think under FOI we should be told.

- The contract has a maximum value of £12,087,790.

- The consultants can also claim 25p mile for car travel, £90 a night for accommodation and £10 for lunch (you would think they would throw in lunch along with the £3K+ a day, wouldn’t you)?

- Alix can increase day rates by 2% on 1.4.11 and 3% on 1.4.12. (You can see why MOD need negotiation support can’t you – do we really think Alix would have even blinked if MOD had said, “no inflation increase through the term of the contract”)?

- There is a success fee of 30% of the day rate based on success (I believe that is on top of the £12,087,790). Just in case that wasn’t enough to motivate them.

- The bonus is payable on delivery of KPIs which are (in summary):

  • Baseline the key contracts
  • Prepare for the re-negotiations
  • Conduct supplier re-negotiations. Achieve an agreed outcome.
  • Work with DGDC to make sure contracts implemented

More to follow when we have it I’m sure...



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Voices (7)

  1. Final Furlong:

    If they broadly fail to perform, they lose their lunch allowance for a day

    If they seriously miss a target*, they have to downgrade to a 4 star hotel

    *assuming they have targets

  2. eSourcingSensei:

    Ummmmm……WOW….very very nearly stunned into silence on this one. But then that would not quite be me now would it Peter.
    Well lets hope and pray someone from the MoD reads Spend Matters.
    Lets hope and pray for our country and our pockets that someone at the MoD gets a brain!!!
    £12 million!! What are they playing at!! 30% Success bonus – £12 million is not enough!!!!
    And what is the 30% bonus based on – the value of the contract – well thats £3.6 million – or the value of the spend they re-negotiate or the savings they achieve after the re-negotiation – well that could be – anything……….
    And a little ambiguous – “Achieve an agreed outcome” – Oh come on and be serious the people in charge of awarding this contract need shooting.

    So I do not know or know of AlixPartners – clearly they saw the MoD coming and have taken them for a ride on this one. These cannot be considered KPI’s they are more like KP Nuts!!

    Whilst assesing a supply base where any government body is concerned and segmenting that base to ascertain where and how the spend is shaped, would be a huge job, there are tools available that the MoD have access to that can do that for them (maybe just needing to hire some data uploaders for a while).

    Then preparing for re-negotiation once the supply base is segmented and prioritised is fairly basic in all honesty.

    The re-negotiation process – well what are AlixPartners bringing to the table on this – months of telephone calls – or the swift use of advanced Sourcing technology – I doubt it is the latter because if MoD were to effectively use the systems they have access to they would not be contracting with AlixPartners in the first place.

    And as for achieveing an “agreed outcome” – well again if I were setting the baseline low enough (and it appears AlixPartners will be writing where that baseline is) then I can make my achievement target to be whatever I wanted and still better it.

    This really makes me angry – seeing my income tax being totally wasted on such an adventure.

    Frankly MoD you should know better, and I hope that someone with the authority to do so does review the award of this particular agreement and investigates and informs us, the tax payers, of exactly what we are getting for our money!

    I wonder if AlixPartners would be willing to carry out this contract for a percentage of the savings they achieve for the MoD and no consultancy fees recoverable except straight expenses (hotel, travel, food) – I tell you something – with the right Sourcing tool in place thats a challenge a competant eSourcing specialist may relish – then the tax payer would get some real value for money!!

    Must go and make a coffee and calm doan!!!

  3. Ian Heptinstall:

    Thanks for the update Peter.

    Wow if they are the KPI’s to acheive a 30% bonus, how low was the bar set for the base specification?

    What do they have to do to get their base rates….just turn up?

    Also if there was an upside of 130% base rates, was there a down-side? Was there a specification of performance which would have attracted 70% (.. a paltry £2,100-£2,450/day).

    After-all isnt that how risk/reward is meant to work……..

  4. Peter Smith:

    Answer to Final Furlong – no. Looks fairly standard re-negotiation programme. Some stuff about skills transfer but not very explicit. Frankly I would have fancied Procurement Excellence’s chances (given the capability of our amazing team of Associates) in a bidding situation… we might just have pipped them on price as well, only by a few grand a day…

  5. Final Furlong:

    They must good – clearly AlixPartners negotiated those KPIs.

    From the contract, is it possible to determine, in relation to the requirement, why AlixPartners are so uniquely positioned within the global consulting marketplace that the MOD had no option but to approach them and none of the usual suspects? Taking aside the notion that they should have run a formal competition of course…

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