Procurement and service delivery policy development for the UK Ministry of Defence
Research at the University of Liverpool Management School is expected to lead to significant efficiency gains as a direct consequence of the design and implementation of changes to the procurement and service delivery policies of the UK Ministry of Defence (MoD). Their adoption and exploitation via changes to the MoD's key service delivery framework is resulting in the improved understanding and mitigation of product and service acquisition risk, and significantly reducing short and long-term procurement and contract management costs through a combination of new, innovative ideas, and increased efficiency, increased contract effectiveness and tighter project management control.
Original research undertaken between 2010 and 2018 by Professor Andrew Lyons and Dr Rick Forster has provided significant new thinking concerning procurement policy and practice, and the design and management of B2C and B2B interactions and relationships in the partner and supply chain networks of private and public sector organizations.
The study concerns the examination of the acquisition lifecycle practices of public and private sector organizations involved in the procurement, commissioning, delivery and ongoing management of complex product-systems (CoPS). The research has involved a systematic, multiple-case study approach, focusing on public and private sector procurers of CoPS, including high-profile, public organizations operating in the Defence, Nuclear, Local Government and Health sectors, identifying the strategic positioning and procedural effectiveness of different approaches to acquisition lifecycle design and management, and the strategic and tactical positions taken towards effectively procuring complex products or services.
The research has proven to be of direct practical benefit to procurers within different sectors, policy makers as well to researchers and theorists seeking to broaden understanding of CoPs procurement and through-life management. The research is having a direct impact on UK MoD policy through five initiatives directly based on research conducted by ULMS academics:
First, value transition points (VTP) are a means to facilitate an improvement in both MoD and contractors’ abilities to assess project management risk and add value at the most appropriate points in an acquisition and delivery lifecycle through a structured and dynamic coordination of activities. Initial assessment suggests that successful adoption of the practice could lead to a 25% reduction in project delays and up to a potential three-month reduction in the duration of a typical 18-month project.
Second, a ‘learning from experience knowledge management platform’ containing the codification and storage of procurement and vendor knowledge is to be explored via a feasibility study into the design and introduction a knowledge management system focusing on experiential learning associated with procurement of works, suppliers, services, acquisition performance, category management, candidate selection, insurance, incentives, pre-market engagement and supplier audit.
Third, collaborative financing within the value chain provides a process of ‘prudential borrowing’ to negotiate favourable contract rates. Implementing collaborative financing initiatives appropriately will immediately reduce outsourcing costs with new procurements, and provide MoD with tighter control of supply chain partners.
Fourth, contract incentivsation models produce a better fit between contract type and incentivisation models and have been shown to create better contracting outcomes. The following new contract types are being explored by the MoD: commissioning for quality and innovation, guaranteed maximum price, fixed price, target cost, target cost incentive fee, measured work and cost reimbursement contracts.
Finally, a dynamic procurement system (DPS) will allow the MoD to mitigate a series of ‘lock-in’ risks. These relate to emergent innovation –incentivising firms in the framework to remain competitive within the context of the wider market; to capacity supplemented supply chains through wider market engagement; and to legislative change – where a change in legislation compels the creation of alternative frameworks, without having the legal capability to close the pre-existing frameworks
Preliminary assessments indicated a potential 8% reduction on long-term framework expenditure through the reduction of the aforementioned lock-in risks.
Professor Lyons and colleagues continue to implement and analyse these changes.