Strategic Defence and Security Review: the opportunities for SMEs

Strategic Defence and Security Review:

The opportunities for SMEs

Introduction James Turgoose, Director of Public

Policy JBP

Philip Dunne MP Keynote Speech:

Strategic Defence and Security Review: the opportunities for SMEs

Q&A chaired by

Professor Derek Braddon Emeritus Professor of Economics, UWE

Steven Morgan, MoD Director

Commercial: 10 commandments for intelligent

clients

Steven Morgan, MOD Director Commercial and Supply Chain Champion

Ten Commandments for the Intelligent Client

Managing our Supply Chain

a New Way

MOD is a giant customer

We are UK industry’s single largest customer

MOD accounts for 45% of ALL HMG procurement spend

MOD’s direct spend with SMEs was £822M

Indirect SME spend through primes was around £3

billion

47% of new contracts by number were

competed in FY 2014/15

So over half are single sourced

The value and scope of MOD’s equipment

programme limits the opportunities for SMEs

at Tier 1

Many more opportunities within the supply

chains of major programmes

The problem

Enable SMEs and non-traditional suppliers to bid

more easily for defence and security business

Encourage SMEs to partner in bidding for

government contracts too big or complex to

manage alone

Continue simplification of procurement

processes, making them shorter and more open to

innovative solutions

Appoint a senior official in MOD as Supply Chain

Champion

Our intention: SDSR

The new MOD Supply Chain Champion

• Advocate competition-establish a network of

advocates across MOD

• Liaise with senior colleagues across MOD –

we need to be joined-up

• Challenge our policies and practices where

they make it difficult for SMEs to participate

fully in our business

• Engage with Cabinet Office in support of

wider government strategic supplier

management

Embed Network of Supply Chain Advocates across MOD

Work on behalf of existing and new

suppliers

Provide impartial advice and guidance

Understand local requirements and

needs

Perform dispute resolution at a local

level

Identify trends (positive and negative)

and escalate appropriately

This is all fine, but…

…we need to be smarter in our

commercial management

The Ten Commandments

for the Intelligent Client

1. Define the Need

2. Specify the Requirement

3. Chunk the work

4. Select Ideal Source

5. Craft incentivised, Aligning

Contract

6. Support the Contractor

7. Enforce Contracts

8. Integrate Contractor Outputs

9. Commission Integrated Outputs into

Outcomes

10. Evaluate Effectiveness

Shared Benefits

Improved efficiency and agility in responding

to MOD demands and requirements

Potential for internal efficiencies in supply

chain

Shared intelligence supporting management

of supply chain risk

Access to wider market of potential suppliers

Supply Chain: MOD Leads

Lead Minister:

Philip Dunne

Minister for Defence Procurement

Supply Chain Champion:

Steven Morgan, MOD Commercial Director

Supply Chain Development:

Sim Carswell, Supplier Relations Team

[email protected]

07880 556433

mailto:[email protected]



And to summarise:

A level playing field for SMEs

Better overall VfM for MOD

Behavioural change in MOD and across its

supplier base

Barbara Doornink, Senior Vice President Leidos: Leidos and LCST

JBP Defence Conference An Introduction to Team Leidos

Barbara Doornink

This document contains information that is commercially sensitive and proprietary to Leidos and shall not be duplicated, used or disclosed outside the Government for any other purpose.

“Working together to

modernise and

transform LCS to

ensure we are fully

able to meet the

changing needs of our

Armed Forces”

Who is Team Leidos?

Storage, Distribution & Freight Commodity Support Services

Prime Contractor

•Support chain integration

•Information Systems /

Business Intelligence

•Storage, Distribution and

Freight worldwide

Inventory mgt of

• Defence clothing

• Medical

• General commodities & food

•All commodity vendor

agreements

•Procurement

Team Leidos is Investing in:

Better infrastructure

Better equipment

Better systems

Better flexibility

People development

To provide the MOD with:

Improved visibility & control

Improved speed & reliability

Improved service at less cost

To ensure that customer get:

what they want, when they want it

The total LCS spend in each of the Commodity

areas varies according to demand

Defence Clothing

Spend £74M

Contract £67.7M

Non Contract £6.3M

Total Spend 14/15 - £302M

General Supplies

Spend £82.1M

Contract £71.2M

Non Contract £10.9M

Medical Supplies

Spend £47.4M

Contract £24.4M

Non Contract £23M

Food £98.8M

Contract £86.6M

Non Contract £12.2M

This document contains information that is commercially sensitive and proprietary to Leidos and shall not be duplicated, used or disclosed outside the Government for

any other purpose. 5


Supplier and SME numbers

6

MEDICAL

Total , 127 140

No. of su

pplie

rs

120

100

80

60

40

20

0

Total

20

1

DEFENCE CLOTHING

T

otal , 24

15

1 GENERAL SUPPLIES

Total , 5

0 0

FOOD

T

otal , 45

15

1

SUPPLIES

T

otal , 19

8

0

OLG

58

3

Totals

Total 34 24 5 45 19 127

SMEs 20 15 0 15 8 58

SW SMEs 1 1 0 1 0 3

Axis Title

Leidos Suppliers

Total SMEs SW SMEs

A significant minority of our suppliers are SME’s, with Defence Clothing and General Supplies particularly well

represented*

Team Leidos is actively looking to enhance the supplier base and we have already hosted two conferences

with current MOD suppliers and plan to include additional suppliers and industry groups at future events. * On-contract supplier data only

6


What we will do

Adopt consistent SRM principles across

all our product groupings

Ensure the right data is provided to our

suppliers to enable them to make the right

decisions

Invite and encourage innovation

How we will do it

7

Real-time, accessible information

Available through a state of the art SRM

portal

Develop continuous improvement and

development plans with each of our

suppliers

Benefits to us all

Consistent application across all commodities

and categories

Proactive issue management to improve SRM

Engaged, informed suppliers making better

decisions and delivering change

Mutually beneficial

relationships which offer great

opportunities to our suppliers

Supplier Relationship Management Solution

7

EU Public Contracts Directives (2015) – Some Key Points

• The updated Regulations are intended to make the procurement process

faster, less costly, and more efficient for suppliers and procurement

organisations

More modern, with some outdated or superfluous provisions removed

Less bureaucratic

More flexible and commercial

• SME (Small and medium enterprises) participation should be

encouraged by breaking exercises into lots

• Greater use of supplier self-declaration encouraged, with the winning

bidder(s) only to produce required documentation/certification

• Poor performance on previous contracts now permitted as grounds for

exclusion

• New requirements for contracting authorities to put safeguards into

contracts against conflicts of interest.


8

real cost reduction

− volume-buying (demand

aggregation)

− competitive sourcing

process efficiencies

− standardised processes

− centralised platform, storage,

documentation

risk management

− standardised legal clauses

− clause deviation control

− compliance documentation

− supply risk management

− control and monitoring reports

Our processes and systems are what will set us apart

9

This document contains information that is commercially sensitive and proprietary to Leidos and shall not be duplicated, used or disclosed outside the Government

for any other purpose.

Procurement

Contract Management

Finance

Inventory Management

iProcurement

P2P

eCatalogue

Advanced Reporting / MI

Management of KPIs & SLAs

10

SUPPLIER SELF-REGISTRATION


Three year transition plan

1st August 2015: Service

Commencement Date

Gain a full understanding

of the current business

and commence seamless

transfer

Build and fit out a new

Defence Fulfilment

Centre (DFC) at

Donnington – open Nov

2016

Redistribute stock and

reconfigure transport

network

Introduction of new IS

infrastructure and

improved processes

2015

2016

Transformation and Continuous Improvement (CI)

2017 On-going training and

people development on

new systems and ways of

working

12

This document contains information that is commercially sensitive and proprietary to Leidos and shall not be duplicated, used or disclosed outside the Government

for any other purpose.

Thank you

For more information:

Email - [email protected]

Website – www.leidos.com/uk

“Proud to be delivering the MOD’s Logistic

Commodities and Services (Transformation) contract”


http://www.leidos.com/uk

Mark Cook, Executive Chairman Stirling Dynamics:

How can SMEs take advantage of the SDSR?

stirling-dynamics.com

Innovation and engineering excellence

Aerospace

Marine

Energy

© Stirling Dynamics 2016

Challenges and Improvements

MoD Procurement – A SME Perspective

Mark Cook, CEO Stirling Dynamics

1 February 2016


● Perspective of a SME – focus on “small” o Stirling Dynamics - £10m, 80 employees – aerospace & marine technology

and consultancy services o Datong £10m, 70 employees – surveillance technology o Persides £6m, 40 employees – video technology & consultancy services

● Experience covers start-up and large defence prime contractor

● Summary o SDSR 2015 reinforces the importance of SMEs in the supply chain and

promises improvements to come o Policy direction is sound but needs more teeth o Today though, the practical implementation falls short

● Challenges faced and suggestions for improvements, covering o The procurement process o FATS o Technology development

Introduction

32


● No mechanisms to support contract award to a SME consortium o A consortium of small companies can deliver a cost-effective capability but

contracting agencies will still seek a single company with sufficient financial capacity to assume the prime contract

o Where SMEs partner with larger primes their influence on direction is diminished and, potentially, innovation is restrained

● Typical business development activities conducted within industry not uniformly accepted by PTs (e.g. cold contact, capability briefings)

● Significant work to respond to RFQs o Not always proportional to the contract value o Much more paperwork than working with prime contractors

● Inconsistent approach to declaring available budget

● Other bidders not always declared by PT – hinders opportunity for teaming discussions

● RFQ response times can be prohibitively short o Favours those companies with established relationships o Difficult for other companies to form consortium and prepare a response

The Procurement Process (1 of 2)

33


● Security clearances o Certain projects need DV clearance which lapse when the sponsoring project ends o The time delay to apply for re-instatement on a new project can be prohibitively

short resulting in loss of opportunity

● Questions & Answers o Response times for Q&A needs improving

o Sufficient time needs to allowed to accountant for answers once provided

● Constructive feedback from PTs to an unsuccessful tenderer o Inconsistent between PTs

o Ranges from none to defensive posturing o Restricts ability to learn for next time

● Value for money o The drive for “Value for Money” usually comes down to cheapest

o Through-life costs considered but rarely overturn cheapest up-front procurement price

● Terms and Conditions of contract o Vary markedly between PTs – inconsistent approach

o DEFCONs – can be overly onerous for small companies and the detail is unlikely to be fully understood

The Procurement Process (2 of 2)

34


● New entrants and capability updates for registered companies only allowed periodically o Can be multiple years if FATS is continuously renewed rather than re-

tendered o Can exclude new talent unless they team with a FATS registered

company (which will increase cost as that company applies its mark-up) o Benefit of capability updates not recognised until next FATS tender

● To be accepted as an approved supplier the company needs to provide evidence of previous contracts in the relevant capability category o For startups or rapidly growing companies that track record of previous

contracts may not exist o It’s the skill and experience of employees, associates and consortium

partners that will deliver a capability o Business with MoD is therefore excluded until track record is

established with industry contracts

● Completing the FATS tender is a major (expensive) task for SMEs

FATS (Framework Agreement for Technical Support)

35


● The UK continues to generate great ideas but could improve on commercialisation with the right level of government funding

● Improvements o Approach to IPR has improved

o R&D tax credits work well

● Grant funding o Many different approaches, but few cover essential core labour and

overhead costs

o So the investment by SMEs is proportionally more significant than for larger companies

● Full financial support for R&D is essential to SMEs if the UK is to be competitive in the global market o Without this a SME will, by necessity, focus on the core business

imperative of keeping the cash flowing in through other routes

Technology Development

36


● An idea borne out of military operational need to be developed by a consortium of SMEs

● UK Police, Army and Air Force supported the concept and proposed solution

● DSTL asked by government to review solution – twice

● Each SME invested considerable sums to develop the concept and initial designs

● Government funding lined-up to progress to first flight, but…

o Funding diverted at the last minute to support other government departments

● China now interested

● A missed opportunity for UK Plc?

R&D Example – Scorpion Gyrojet

37


● FATS – needs a major overhaul

● Mandate a proportion of procurement goes to SMEs o For both direct procurement and through prime contractors

● Facilitate open engagement with industry at the working level

● Improve grant funding mechanisms, harmonise approach and increase funding o Linked to business size

● Widen the scope of CDE to include higher technology readiness levels and create more SBRI projects linked to MoD needs

● Join up commercial and military aerospace R&D funding through, for example, the Aerospace Technology Institute

● Address the practical procurement issues stated herein

Suggested Improvements

38

Ian Tomlinson-Roe, HR lead for Government and Public Sector, PwC

Can Small be Competitive?

JBP WEAF Conference 1st February 2016 Ian Tomlinson-Roe, Human Resources leader for Government and Public Sector at PwC

www.pwc.com

PwC

The Future of Work

42

February 2016

Small is beautiful

Companies begin to break down into collaboration networks of smaller organisations; specialisation dominates the world economy

Orange World

Companies Care

Social responsibility dominates the corporate agenda with concerns about demographic changes, climate and sustainability becoming the key drivers of business

Corporate is king

Big company capitalism rules as organisations continue to grow bigger and individual preferences trump beliefs about moral responsibility

Green World

Blue World

PwC

The Employee Life Cycle

43

February 2016

The role of HR

The role of the individual

The role of the technology

The role of the organisation

PwC

Corporations V SMEs

44

February 2016

Corporations SMEs

• Attract Presence at graduate fairs

Wide range of opportunities (apprenticeships,

internships, graduate schemes)

Jobs well advertised

• Develop Sponsored qualifications

Mentoring programmes

Internal placements and secondment opportunities

• Retain Competitive benefits packages

Clear career paths

Increased global mobility

• Deploy More opportunities for a varied career

What advantages do SMEs have?

Philip Margerison, Defence

Suppliers Service, MoD

Abbey Wood:

Selling to the MoD

Defence Suppliers’ Service 46

PHILIP MARGERISON

SELLING TO THE UK MOD

Email: [email protected]

Tel: 030 679 32844/32843/32832

Website: www.contracts.mod.uk





What MOD spends to provide and sustain military

capability

• In FY 2014/15 approx. £19.6Bn spent with third parties on a wide

range of products & services – amounts to 40-45% of total

Government spend with third parties

• Direct spend with SMEs in FY 2014/15 of £832M with over 7,000

different SMEs

• This does not include business that SMEs have with MOD suppliers


Contracts placed:

In FY 2014/15 approximately 2,000 new contracts

• 60% valued at less than £100K

• 7,500 contractors with extant contracts

• Approx 1,500 Commercial Officers in the overall MOD acquisition

organisation


Approach

• Reasonable Opportunities to Compete

• Impartiality & Consistency

• Confidentiality

• EU Public Procurement Regulations

• Advertise Requirements

National Security through Technology: Technology,

Equipment & Support for UK Defence and Security

• White Paper published early February 2012

• Section devoted to SMEs – important aim is to make it easier for them

to do business with UK MOD


Package of Measures to Increase Opportunities for

SMEs to Participate in Government Procurement

• Abolition of PQQs for requirements below £100K – adopted new common core PQQ

across Government

• Greater use of ‘lotting’ strategies and outcome-based specifications

• A ‘mystery shopper’ service so businesses can tell Government where there are still

issues

• Simplified template for contracts below £250K

• Flagging of opportunities that may be suitable for SMEs

• Creation of an SME panel


Commercial Toolkit

• Available to MOD staff & industry

• Contains guidance on a wide range of commercial policy topics, DEFCONs,

DEFFORMs etc

• Available via the Acquisition Systems Guidance

• www.gov.uk/acquisition-operating-framework (free use, requires no-cost

registration)

• Commercial Toolkit;

https://www.aof.mod.uk/aofcontent/tactical/toolkit/content/defcons/defcon.htm

• Select either ‘Guidance Topics’; ‘DEFCONs’ or ‘DEFFORMs’


http://www.gov.uk/acquisition-operating-framework





https://www.aof.mod.uk/aofcontent/tactical/toolkit/content/defcons/defcon.htm

Cyber Security

• From 1 January 2016 MOD will require supplier to have Cyber Essentials

certification in place. This will apply to all new contracts

• Covers transfer of MOD identifiable information, as defined in DEFCON 531, from

customer to supplier or generation of information by supplier specifically in support

of an MOD contract

• Requirement for all potential suppliers to have Cyber Essentials certificate by

contract start date & for annual renewal

• Requirement to be flowed down supply chain where sub-contracts satisfy same

criteria

• Trade Associations informed & will flow down requirement to members & their

supply chains

• Information on Cyber Essentials at www.cyberessentials.org.uk


Advertising MOD’s Requirements

MOD routinely advertises:

• All its competitive and non-competitive, ‘warlike’ and ‘non-warlike’ requirements for

goods & services valued at £10,000 and above are advertised free of charge, on the

Defence Contracts Online (MOD DCO) portal (www.contracts.mod.uk)

• MOD DCB magazine available on subscription starting at £325 pa

• Requirements which meet the relevant criteria of EU Public Procurement Regulations &

are above relevant thresholds also advertised in Official Journal of the European Union

(OJEU) and ‘Contracts Finder’ portal as well as on the MOD DCO portal

• MOD requirements valued at below £10K are not advertised centrally and are generally

procured on a local or regional basis


http://www.contracts.mod.uk/



• Contract Notices

• Contract Bidders’ Notices

• Competitive/Non-competitive Contract awards

• Sub-Contract Opportunities

• Addendum




Guide to Contract Notices

Contract Notices Identification number

Expressions of Interest deadline

Issuing branch

Summary

QA Standards



Contract Bidder

Tender No.

ITT Issue Date

Deadline

Issuing Branch

Summary of Requirements

Issued To



Non-Competitive

Contract Awards

Issuing Branch


Contract No.

Awarded To

.



Competitive

Contract awards

Issue date

Issuing branch


Awarded to



Supplier Information Database (SID)

• SID accessed via www.contracts.mod.uk website

• Companies can submit their profiles free of charge

• SID available to MOD acquisition staff as a resource to help draw up a tender

list/source a product or service

• Over 8,000 companies have submitted their profiles to the SID

• By logging their profile on the SID, it does not guarantee that companies will be

invited to tender for MOD requirements



Contracts Finder Portal

• Overseen by Crown Commercial Services (CCS)

• Search across central Government & wider public sector for contract opportunities over

£10K

• Find out future opportunities

• Search for details of previous tenders & contracts

• Free to use; easy search facility; provide free e-mail alerts

• £52Bn contract notices in last 12 months; £177Bn forecast contract opportunities over next

6 years

• Updated early 2015

• Accessed via https://www.gov.uk/contracts-finder

• Contact details – Service Support Team e-mail [email protected]

https://www.gov.uk/contracts-finder





DEFENCE SUPPLIERS’ SERVICE Part of Supplier Relations Team (SRT)

Help Desk



Tel: 030 679 32844/32843



Defence Suppliers’ Service

• Explain UK MOD Procurement & Procedure

• Provide Information brochure

• Provide Product requirement advice

• Provide Contact points

Information Pack


Amanda Deeks, Chief Executive South Gloucestershire Council

Thank you for attending and do join us for lunch

Strategic Defence and Security Review: the opportunities for SMEs

Government & Nonprofit

Transcript of Strategic Defence and Security Review: the opportunities for SMEs