Full Report - National Audit Office

part three3.4 The implementation of the new arrangementshas gone well, to time, and on budget. Six newCustomer Estate Organisations are now in place toserve the Royal Navy, Army, Royal Air Force, DefenceLogistics Organisation, the Centre and Permanent JointHeadquarters. The Customer Estate Organisations areresponsible for establishing the future estate requirementsof the frontline users; for liaison with Defence Estates; andfor monitoring the delivery of the required outputs.3.5 Project Alexander principles have now been extendedto the Garrisons in Cyprus, Gibraltar and the Falklands.The intention is to roll out the new ways of working toGermany and to consider doing so for the remainingdeferred areas, such as Reserve Forces and Cadets, duringthe course of 2005. Separate management arrangements arein place or are being developed for those Private FinanceInitiative projects outside of Defence Estates’ functionalcontrol, for the estate occupied by US forces and, notably,for the majority of the training estate. The Departmenthas also been cited as an example of good practice in theprocurement of construction projects in the National AuditOffice Report ‘Improving Public Services through BetterConstruction’ published in March 2005.New contractual arrangements are beingrolled out3.6 The Department spends some £1.3 billion a yearon its estate of which more than half is on generalmaintenance and refurbishment. The Departmentuses a range of procurement methods including PrimeContracting, Private Finance Initiative/Public PrivatePartnership and conventional contracts. Previously, estateprocurement lacked a single-point of responsibility andwas hampered by the huge number of client-customerinterfaces, imprecise allocation of risk, and vulnerabilityto fraud and malpractice. A history of problems withthe former system, including poorly directed funding,inconsistencies between the approaches adopted by partsof the Department and varying standards, had led to thepoor quality of the estate.3.7 The Department is seeking to involve industry in amuch broader and collaborative way through the PublicPrivate Partnership initiatives, “Smart Construction”initiatives, and by applying the principles of PrimeContracting. The objective of Prime Contracting is toachieve better long-term value for money throughimproved Supply Chain Management, incentivisedpayment mechanisms, continuous improvement,economies of scale, and partnering. Requirements aredrawn up in output terms to stimulate industry to come upwith innovative solutions and to enable risk to be clearlyallocated to where it can best be managed.Regional Prime Contracts3.8 The Department is to contract for the bulk of itsmaintenance and minor new works in the UK throughthe award of five Regional Prime Contracts by the end of2005, except where this work is covered by an existingPrivate Finance Initiative deal. Each of the contracts willrun for seven years initially with an option to extend theperiod to ten years subject to satisfactory performance(Figure 6).6Time lines for the Regional Prime ContractsThe five Regional Prime Contracts will be let over 2003 to 2005RPC Scotland let 31 March 2003Option to extendRPC South West let 26 March 2004RPC South East let March 2005RPC Central let September 2005RPC East let October 20052003 20042005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Source: National Audit Office18MINISTRY OF DEFENCE: MANAGING THE DEFENCE ESTATE