2 Shortcomings in the procurement
process
8. The National Audit Office was unable to conclude
whether FSTA was value for money. At the outset, the Department
entered into a deal which did not enable it to consider alternative
procurement options. There were also a number of shortcomings
in the management of the project.[22]
The Department has recognised a number of these through three
lessons learnt exercises completed in 2001, 2007 and 2010 and
is confident that it will be able to better manage or mitigate
these today. However we have raised these shortcomings in a number
of previous reports, including our annual review of the Department's
Major Projects.[23]
9. It took the Department almost ten years to reach
contract signature from the initial assumption of PFI in 1997,
as a result of the complexity of the deal.[24]
The Department had originally expected that it would take less
than half that time at three years, ten months and FSTA is now
expected to come into service five and a half years late in October
2011, with the last aircraft not expected to come into service
until August 2016.[25]
The delay also caused the Department to incur hidden additional
costs from needing to run on the current, ageing fleets, the increase
in internal staff time and the longer use of external advisors
during this period.[26]
10. The Department only received two bids in response
to its Invitation to Tender in 2001, which meant that competition
was limited. The Department then failed to make the most of what
competitive tension there was by selecting AirTanker as the sole
bidder in 2004. This was far too soon, given that the Department
subsequently took four more years to negotiate the contract to
signature.[27]
11. The Department did not have a clear understanding
of the requirements at the start and significantly added to the
project delays by not finalising requirements until close to the
end of negotiations.[28]
This failure to fix requirements quickly is a common problem across
the Department's equipment procurement activity and the Department
is now seeking to define requirements as early as possible, and
to discourage subsequent changes, as part of the Defence Acquisition
Reform Programme.[29]
22 Qq 161 and 176-177 Back
23
Qq 88, 94 and 162; C&AG's Report, para 1.5 Back
24
Qq 102-103, 106 and 108 Back
25
C&AG's Report, para 1.19 Back
26
Q 103; C&AG's Report, para 2.1 Back
27
Q 176; C&AG's Report, para 1.10, Figure 3 Back
28
Qq 3 and 114; C&AG's Report, paras 1.20 and 1.21 Back
29
Qq 114-115 Back
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