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PFI IN THE UK DEFENCE SECTOR 2002
Buy a copy of the PFI in the Defence Sector report from AMA Research
Introduction/Overview Summary Of Contents List of Contents & Tables  
       

CONTENTS and LIST OF TABLES & CHARTS 

1.

INTRODUCTION

5
1.1 DEVELOPMENT OF PRIVATE FUNDING FOR PUBLIC SERVICES - INITIAL STAGES 7
1.2 THE NEW LABOUR GOVERNMENT IN 1997 9
1.3 THE MAY 2001 ELECTION AND THE LABOUR PARTY MANIFESTO 9
1.4 MOD AND PFI 10
2. EXECUTIVE SUMMARY 11
3. ECONOMIC BACKGROUND 14
3.1 GDP 14
3.2 INFLATION & INTEREST RATES 15
3.3 UNEMPLOYMENT & CONSUMER SPENDING 16
3.4 CONSTRUCTION 18
3.5 STERLING 18
3.6 CONCLUSIONS 18
4. UK DEFENCE SPENDING AND MAIN DRIVING FACTORS 19
4.1 DEFENCE BUDGETS 19
4.2 STRATEGIC DEFENCE REVIEW 21
4.3 ACQUISITION AND PROCUREMENT 21
4.4 PUBLIC PRIVATE PARTNERSHIP 24
4.5 KEY COMPONENTS OF DEFENCE ACQUISITION 25
5. USE OF PFI IN MOD 28
5.1 THE PHASES OF MOD PFI PROJECTS 28
5.1.1 Feasibility 29
5.1.2 Procurement 30
5.1.3 Contract Management 31
5.2 BENEFITS OF PFI TO MOD 33
5.3 MOD SIGNED PFI CONTRACTS 34
5.3.1 Signed PFI Contracts 1995 to 1997 34
5.3.2 Signed PFI Contracts 1997 to 1999 36
5.3.3 Signed PFI Contracts 1999 to 2001 39
5.3.4 Signed PFI Contracts 2001/02 40
5.4 MOD PFI CONTRACTS IN PROCESS OF NEGOTIATION 41
5.4.1 Preferred Bidder 41
5.4.2 PFI Contracts at ISOP/Convergence Stage 43
5.4.3 PFI Contracts Currently Under Negotiation 45
5.5 CONTRACTS WITH POTENTIAL FOR PFI SOLUTION 46
5.6 PFI PROJECTS CURRENTLY ON HOLD 49
5.7 PRIVATE SECTOR INVESTMENT IN DEFENCE 50
6. MAJOR ISSUES 52
6.1 DEFENCE EVALUATION RESEARCH AGENCY 52
6.1.1 Areas of Operation 54
6.1.2 Issues Concerning the Privatisation of DERA 55
6.1.3 Strategic Defence Review 57
6.1.4 Public Private Partnership 58
6.1.5 Major Issues 59
6.2 POTENTIAL FOR FRAUD 60
6.3 ENSURING BEST VALUE FOR TAXPAYERS MONEY 61
6.3.1 The Public Sector Comparator 62
6.4 FAIR COMPETITION 63
7. CASE STUDIES 64
7.1 THE PROCUREMENT OF NON-COMBAT VEHICLES FOR THE RAF 64
7.1.1 Contract 65
7.1.2 Key Issues Raised 65
7.1.3 Benefits and Lessons Learned 66
7.2 DEFENCE FIXED TELECOMMUNICATIONS SYSTEM 68
7.2.1 Contract 68
7.2.2 Key Issues Raised 68
7.2.3 Benefits and Lessons Learnt 70
7.3 TRAINING ADMINISTRATION AND FINANCIAL MANAGEMENT INFORMATION SYSTEM (TAFMIS) 72
7.3.1 Contract 72
7.3.2 Key Issues Raised 73
7.3.3 Benefits and Lessons Learnt 73
7.4 MEDIUM SUPPORT HELICOPTER AIRCREW TRAINING FACILITY (MSHATF) 74
7.4.1 Contract 74
7.4.2 Key Issues Raised 75
7.4.3 Benefits and Lessons Learnt 76
8. KEY SUPPLIERS 79
8.1 COMPANIES 79
8.1.1 AMS - Alenia Marconi Systems 79
8.1.2 CAE Systems 80
8.1.3 Flagship Training 81
8.1.4 Integris 82
8.1.5 Reflectone 82
8.1.6 EDS 82
8.1.7 Aviation Training International 83
8.1.8 FBS Ltd 83
8.1.9 Bombadier Services 84
8.1.10 Amey plc 84
8.1.11 Kvaerner A.S.A 84
8.1.12 Morrison Construction 85
8.1.13 Barlow Handling 85
8.2 FINANCIAL INSTITUTIONS 85
8.2.1 Bank of Scotland 86
8.2.2 Dai-Ichi Kangyo Bank, DKB 86
8.2.3 Hypo-Vereinsbank, HVB 87
8.2.4 Barclays Plc 87
8.2.5 The Royal Bank of Scotland, RBS 87
9. INTERNATIONAL PERSPECTIVE 89
9.1 COLLABORATIVE PROCUREMENT PROGRAMMES 89
9.2 MOD INVOLVEMENT IN MULTI-NATIONAL DEFENCE CO-OPERATION 90
9.2.1 Existing MNDC 91
9.2.2 Benefits and Risks of MNDC 92
9.2.3 Possible Future Developments for MNDC 94
9.3 EUROPEAN DEFENCE 96
9.3.1 EU Common Security Policy 96
9.3.2 EU Defence Structures and Strategic Defence Policy 97
9.4 POTENTIAL FOR USE OF PFI IN THE INTERNATIONAL DEFENCE ARENA 98
10. FUTURE PROSPECTS 100
 

APPENDICES

 103
APPENDIX 1. THE FEASIBILITY STAGE OF MOD PFI CONTRACTS 103
APPENDIX 2. THE PROCUREMENT PHASE OF MOD PFI CONTRACTS 104
APPENDIX 3. THE CONTRACT MANAGEMENT PHASE OF MOD PFI PROJECTS 105
APPENDIX 4  GLOSSARY OF TERMS 106
TABLES & CHARTS
CHART 1 ESTIMATED CAPITAL EXPENDITURE FOR MOD SIGNED PFI PROJECTS (£ MILLION) FOR THE FINANCIAL YEARS 1995/6 TO 2001/2 11
TABLE 2 GDP PERCENTAGE CHANGE PER ANNUM 1980-2004 15
CHART 3 INTEREST RATES AND INFLATION (RPI) FROM 1990-2004 16
CHART 4 PDI & SAVINGS RATIO 1980-2004 17
CHART 5 LEADING COUNTRIES IN TERMS OF MILITARY EXPENDITURE IN 1999 19
TABLE 6 MOD SIGNED PFI PROJECTS 1995 TO 1997 35
TABLE 7 MOD SIGNED PFI PROJECTS 1997/8 36
TABLE 8 MOD SIGNED PFI PROJECTS 1998/1999 37
TABLE 9 MOD SIGNED PFI PROJECTS 1999 TO 2001 39
TABLE 10 MOD SIGNED PFI PROJECTS FINANCIAL YEAR 2001/02 41
TABLE 11 MOD PFI PROJECTS PREFERRED BIDDER ANNOUNCED 42
TABLE 12 MOD PFI PROJECTS ISOP ISSUED/CONVERGENCE 44
TABLE 13 MOD PFI PROJECTS ADVERTISED AND CURRENTLY UNDER NEGOTIATION 45
TABLE 14 MOD PFI PROJECTS ADVERTISED AND CURRENTLY UNDER NEGOTIATION 48
TABLE 15 MOD PFI PROJECTS ON HOLD AT NOVEMBER 49
TABLE 16 ESTIMATE OF PRIVATE SECTOR INVESTMENT IN DEFENCE - PFI DEALS SIGNED 2000/1 51
CHART 17 HISTORY OF DEFENCE EVALUATION AND RESEARCH AGENCY 53
CHART 18 FEASIBILITY PHASE OF MOD PFI CONTRACTS 103
CHART 19 THE PROCUREMENT PHASE OF MOD PFI CONTRACTS 104
CHART 20 THE CONTRACT MANAGEMENT PHASE OF MOD PFI PROJECTS 105

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