One of the UK's new aircraft carriers. © Press Association Images
One of the UK's new aircraft carriers. © Press Association Images

Procurement saves £139m on UK's new aircraft carriers

22 February 2016

The Aircraft Carrier Alliance (ACA) has saved £139m on the construction of the UK’s two new aircraft carriers thanks to a highly successful procurement strategy.

ACA, a consortium of BAE Systems, Babcock International, Thales and the Ministry of Defence, was originally tasked with saving £86m from an addressable spend of £800m, as well as transferring savings skills to the core team.

Last March ACA said it had saved £119m. At a CIPS Supply Management Best in Procurement conference in Manchester the organisation revealed savings were now £139m. There are still three years to go on the project.

ACA won Best Procurement Consultancy Project of the Year at the 2015 CIPS Supply Management Awards for its aircraft carrier project, which involved experts from PwC who were brought in to support a savings delivery team including procurement specialists and contract managers.

The approach was based on PwC’s procurement cost savings methodology, which involved a five-week assessment phase that identified 200 opportunities and an off-site workshop that prioritised these and determined the savings targets to be met.

Each opportunity had to pass through four “maturity gates” to ensure they were realised. There was also a significant governance structure, including a weekly “savings surgery” to offer guidance and advice.

The savings came from 67 different activities, the largest of which was the renegotiation of contracts, which has saved £42m to date. Some £34m has come from escalation savings and £30m through the identification of operational changes.

Speaking at the conference Ross Elliott, director at PwC, said: “Savings of £116m were made during 2014, and the original target was £86m. So far, the project has advanced £139m of savings.

"We had a very robust process, but you have got to take your shareholders with you. As a result [of this project], we have got an organisation that looks for savings and is more cost aware.” 

The 2016 CIPS Supply Management Awards will be announced soon.

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