BAE refuses to back down on prime contractor demand

17 July 2002
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18 July 2002 | David Arminas

Britain's largest defence contractor, BAE Systems, is sticking to its guns over demands that the government appoint it as prime contractor for all major defence projects.

A BAE spokesman said the appointment would strengthen Britain's defence manufacturing base, allowing it to compete better in countries whose governments favour their national manufacturers.

He told SM: "What we want is a level playing field, because the market is protected in countries such as the US and France. In Britain, if we are guaranteed the main contract, then we will put the subcontracts out to tender."

Earlier this month, Mike Turner, BAE's chief executive, called for the government to break with its smart acquisition initiative of competitive tendering for major contracts such as for submarines and ships.

Turner also wants BAE to be allowed better profit margins.

But Lord Bach, defence procurement minister, rejected Turner's proposals, saying they were anti-competitive.

Retired Brigadier Bill Kincaid, who spent 18 years in MoD procurement, said prime contractor status would bring back the days of a "cosy relationship" between the MoD and defence manufacturing companies.

"I'm not sure it's a starter for BAE to say 'make us your partner for all contracts and we'll deliver'," he said.

"Even if BAE have delivered well in the past, it is no guarantee they will in the future."

But Kincaid said the government should reconsider how it uses the competitive process.

"The problem is it is being applied far too much, too dogmatically and for too long during the procurement cycle. Less time is spent on forming partnerships. What is needed are fewer, shorter competitions so companies can get on with sorting out supply chain relations."

Keith Hayward, head of economic and political affairs at the Society of British Aerospace Companies, said that industry wanted smart acquisition to be fine tuned.

"There is no going back on smart acquisition. But the MoD should indicate more strongly to UK companies earlier where they need to research to make them more competitive."

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