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Published 29 September 2022
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This publication is available at https://www.gov.uk/government/statistics/mod-trade-industry-and-contracts-2022/mod-trade-industry-and-contracts-2022
The Finance and Economics Statistical Bulletin series provides figures on the composition and scope of the Department’s expenditure, information on the impact of defence spending on the wider economy, and compares MOD’s spending to that of other departments and countries.
Trade, Industry and Contracts presents information on MOD spending with industry and commerce, and sets out the numbers, types and values of contracts placed by MOD, major equipment projects and payments made by MOD to its suppliers including via Foreign Military Sales (FMS) agreements with the US Government during 2021/22. Also included is a focus on the top ten companies that received the highest expenditure from MOD. Industry tables provide details of existing Private Finance Initiative (PFI) contracts. Trade data presents information on defence export orders.
Responsible statistician: Analysis-Expenditure Head of Branch
Telephone: 030 679 84442
Further information/mailing list: Analysis-Expenditure-PQ-FOI@mod.gov.uk
Background quality report: Background Quality Report
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This bulletin examines data relating to MOD’s spending on equipment and services. It is produced as part of the transparency and accountability of the Ministry of Defence to Parliament and the public. Detailed statistics and historic time series can be found in the related Open Data Source tables.
This edition of the Trade, Industry and Contracts bulletin includes a new table and related figures on Foreign Military Sales (FMS) agreement expenditure with the United States Government. The data presents a time series of MOD expenditure against FMS agreements as well as details of some of the top projects within the FMS portfolio. This is reported in addition to other payments by MOD Core Department to UK and foreign owned organisations, and not included within existing totals.
The latest export orders data is currently unavailable due to a later release date of the UK Defence and Security Export statistics. Therefore, the section has been temporarily removed from this bulletin, and whilst the respective data table is included, it has not been updated. It is the intention to update the figures in a planned revision by early 2023.
The information in this bulletin has a wide range of users including the media, politicians, academic researchers and the general public who use the information to:
In the report we will analyse the level of payments made to organisations and holding companies by MOD and its Trading Fund / On-Vote Defence Agency. Trading Funds are self-accounting units that have greater freedom than other government departments in managing their own financial and management activities. Since 2017/18, the only Trading Fund is the United Kingdom Hydrographic Office (UKHO). The Defence Science and Technology Laboratory (Dstl) ceased to be a Trading Fund in April 2017, becoming an On-Vote Defence Agency of the MOD through which it continues to run its own financial activities. For the remainder of this bulletin, we will therefore refer to payments as either by:
MOD – All entities within the MOD Department Boundary, including the UKHO and Dstl. Data is drawn from payments made through DBS Finance Systems and separate financial data provided by UKHO and Dstl.
MOD Core Department – Entities within MOD Departmental Boundary but excluding payments made by UKHO and Dstl. This will refer to payments made through DBS Finance systems.
The United Kingdom Statistics Authority (UKSA) has designated these statistics as National Statistics in accordance with the Statistics and Registration Service Act 2007, and signifying compliance with the Code of Practice for Official Statistics. The statistics underwent a full assessment against the Code of Practice in 2020.
Designation can be broadly interpreted to mean that the statistics:
Once statistics have been designated as National Statistics it is a statutory requirement that the Code of Practice shall continue to be observed.
This analysis looks at MOD’s 18 largest equipment projects on which the main investment decision has been taken (post ‘Main Gate’). The commentary reflects the affordability of spending plans for equipment procurement and support as at 31 March 2021.
It presents the affordability of plans following the strategy and financial reset provided by the Integrated Review and Spending Review, with projects supported by the multi-year financial settlement announced for Defence in November 2020.
Figure 1: CADMID Cycle
The diagram above shows the CADMID cycle, which is the basis for MOD Smart Acquisition. Smart Acquisition is a long-term MOD initiative to improve the way we acquire defence capability. The main investment decision is taken at Main Gate, i.e. the post assessment phase, with the aim of ensuring there is a high level of confidence in achieving time, cost and performance targets. Further information is contained in the MOD Equipment Plan.
There are four changes to the project population from 2020. The Challenger Life Extension Programme and Skynet 6A are additions to the list. These replace Queen Elizabeth Carrier which reached in-service date and the Warrior Capability Sustainment Programme following the decision in the Integrated Review to cancel the programme.
The total current forecast cost of the 18 projects in the MOD’s Project Performance Summary Table (PPST) 2021 is £59.6 billion. ‘Dreadnought’ was the most expensive post Main Gate equipment project in 2021, with a forecast cost of £12.1 billion.
Project teams produce cost forecasts using quantitative risk analysis to model the range of cost outcomes for projects. The cost forecasts are made at a confidence level where there is an equal chance of actual costs being above or below the forecast amount.
Forecast costs for several projects have changed this year. The greatest increase in forecast cost was for the ‘Marshall’ project which rose by £98 million compared to its cost in 2020. This is predominantly due to changes to capability requirements since the Main Gate investment decision, which includes changes to Marshall’s core Air Traffic Management capabilities. The greatest decrease in forecast cost was a £517 million saving for ‘P-8A Poseidon’ which was primarily due to the transfer of scope of initial aircraft and training support to a separate support approval.
It should be noted that since the 2020 publication of the PPST, the approval limits of ‘Lightning II’ and ‘Spear Capability 3’ (which sits under the grouped ‘Complex Weapons’ portfolio) have increased by £498 million and £928 million respectively. Since these were approval uplifts and not unexpected costs under existing project scope, last year’s project costs and forecasts have been adjusted to include the revised approval limits in comparisons.
Further details on the project changes can be found in The Defence Equipment Plan.
Figure 2: Forecast Costs of 18 Major Equipment Projects
Source: Project Performance Summary Table 2021
This section looks at the expenditure made to organisations and holding companies under the terms of competitive and non-competitive contracts. Set up in 2014, the Single Source Regulation Office (SSRO) regulates the procurement by the UK government of ‘single source’ (non-competitive) military goods, works and services.
In 2021/22, a total of £28.6 billion was paid by MOD Core Department to UK and foreign owned organisations (including defence suppliers and intermediate bodies). This is a nominal increase of £1.5 billion from 2020/21.
This figure includes direct MOD payments to the UK Hydrographic Office. Prior to 2017/18 this expenditure figure also included payments to the Defence Science and Technology Laboratory. However, Dstl ceased to be a Trading Fund in April 2017 and are therefore no longer paid through contracts processed by DBS Finance Systems and are instead funded through the central MOD budget.
Out of all MOD Core Department expenditure in 2021/22, 39% of spending went to organisations following a competitive bidding process. This is down from 42% of in-year spend through competitive sourcing in 2020/21. Since spending recorded via means where no competition marker is available has remained unchanged over the same period, it can be seen that there has been a slight shift to non-competitive payments in the latest figures.
Figure 3: Direct MOD Core Department Payments by Type of Contract in 2021/22 (VAT Exclusive)
Source: DBS Finance data sources
Other expenditure consists of payments made by means of miscellaneous transactions. These are agreements for goods and services that have been set up locally between MOD Branch and the supplier, and are legally binding, but do not have a competition marker recorded. Also included in this category are payments made to international projects such as the NATO Eurofighter Tornado Management Agency (NETMA) and the Organisation for Joint Armament Co-operation Executive Administration (OCCAR), payments made through the electronic Purchasing Card (ePC), as well as payments made to overseas governments and UK government departments. In addition, there are a large number of contracts where the competition status is not known/recorded. Expenditure figures for these contracts are also included within ‘Other’.
This section looks at MOD expenditure made via Foreign Military Sales (FMS) agreements with the United States Government. FMS is one mechanism used to purchase equipment from the US Government and is generally used either due to US security constraints, or for cost savings due to economies of scale, such as where it would be more cost effective for the UK’s MOD to procure through FMS than directly with the supplier.
FMS expenditure in this section is exclusive of all other sections, therefore it is not included within the total paid by MOD Core Department to UK and foreign owned organisations in 2021/22, nor is FMS expenditure included within the payments to the United States within Table 3a of the supporting data tables. Payments to the United States included in Table 3a (£1,030 million to the US Government and £482 million to the US Treasury) are predominantly for F-35 and Trident systems and are through international collaborative agreements.
In 2021/22, expenditure on FMS agreements totalled £1,076 million continuing a trend of yearly increases driven by expenditure on Apache and P-8A Poseidon agreements.
The top two projects under the FMS portfolio in 2021/22 were Apache at £388 million and P-8A Poseidon Maritime Patrol Aircraft at £370 million. Both these projects were announced in 2016 and have already delivered equipment to the Army and RAF respectively. Apache will be fully upgraded to a state-of-the-art capability by 2025 whilst the P-8A Poseidon has achieved Initial Operating Capability.
Figure 4: Amount Spent Through Foreign Military Sales Agreements with the US Government
Source: UKDPO data sources
Note:
Acronyms used are RPAS = Remotely Piloted Aircraft Systems, TLAM = Tomahawk Land Attack Missile.
This analysis presents payments made by the MOD to UK and foreign owned organisations, including defence suppliers and intermediate bodies. These organisations include UK and overseas defence contractors, overseas governments and other UK government departments, but exclude FMS payments to the US Government. DBS Finance is responsible for the majority of payments made by MOD, around 95% by value, whilst the UKHO and Dstl make their own payments. Some organisations have been excluded from the analysis because their information has been redacted in line with Transparency rules.
There were 363 organisations paid more than £5 million by MOD during 2021/22, 29 more than the previous year.
The organisations that received more than £5 million represent around 3.4% of the 10,600 organisations paid in 2021/22, however they received 94% of the direct expenditure. Furthermore, payments are heavily skewed to a small number of suppliers, with 50% of procurement spend going to just 19 suppliers. A similar distribution of MOD’s supplier expenditure was seen in 2020/21.
Only 20 suppliers received payments of over £5 million from either the UKHO or Dstl.
Payments which are not in the figures include those from British Defence Staff (United States) and those made through local cash offices.
Figure 5: Organisations Paid over £5 million in 2021/22
Source: DBS Finance, UKHO and Dstl data sources
Many of the suppliers paid by MOD are subsidiaries of larger holding companies. The term ‘holding company’ refers to companies which are full or part owners of other companies (subsidiaries and joint ventures). Payments to joint ventures have been allocated to their parent holding companies in proportion to their equity holdings. This analysis excludes payments made to public sector bodies, government departments and agencies, local authorities, UKHO, multi-nation project management agencies, charities and associations. All holding companies paid more than £50 million by MOD in 2021/22 are presented below.
It is important to note that figures in the following sections are for payments made by MOD directly to holding companies. It excludes the indirect MOD expenditure to holding companies which are made through Foreign Military Sales (FMS) agreements with the US Government, international collaborative agreements (such as NETMA and OCCAR) and industry supply chain payments. For example, The Boeing Company is the prime supplier for Apache and P-8A Poseidon, but these projects were procured by MOD through FMS payments to the US Government, totalling over £750 million in 2021/22, so this spend would not be included within the Boeing spend figure.
In 2021/22, there were 59 holding companies paid more than £50 million by MOD, three more than in 2020/21. The total combined expenditure with these holding companies in 2021/22 was £18.2 billion, representing 62% of the total expenditure by MOD and its trading funds. This includes eight companies paid over £500 million which is two less than the previous year.
Figure 6: Holding Companies Paid over £50 million by MOD in 2021/22
Source: DBS Finance, UKHO and Dstl data sources
This section explores the nature and scope of MOD business with its key suppliers within industry and commerce. It focusses on the ten holding companies who received the most expenditure from MOD during 2021/22. It examines the relative importance of MOD sales to company revenues, how this has changed over time, and the amount of MOD business that comes from competitively let contracts.
In 2021/22, almost 42% of total MOD procurement expenditure was with ten suppliers. This split is a slight decrease compared to the 43% seen with the top ten suppliers in 2020/21.
Leidos Holdings Inc and Thales appeared as new entries in MOD’s list of top ten suppliers in 2021/22. On 1 July 2021, AWE PLC became an arm’s length Non-Departmental Public Body of MOD. This had a considerable impact on total MOD spending recorded against Lockheed Martin Corporation which had previously had a majority share in the company. This restructuring has led to the company dropping out of the list of top suppliers after appearing in every iteration of the Trade, Industry and Contracts publication since 2013. The General Dynamics Corporation was the other supplier to fall out of the top ten and this was principally due to reduced contract payments for specialist vehicles with General Dynamics United Kingdom Limited.
Figure 7: MOD Procurement Expenditure with Top Ten Suppliers in 2021/22
Source: DBS Finance, UKHO and Dstl data sources
BAE Systems PLC was by far the largest defence supplier in terms of annual spend made by MOD, a position which has not changed for over a decade. This top spot was further reinforced after they received £157 million more in 2021/22 compared to the previous year, the largest nominal increase out of the top ten holding companies. In total, BAE Systems PLC received just under 14% (£3,991 million) of the total MOD spend in 2021/22.
Figure 8: Proportion of MOD Spend with Top Ten Suppliers in 2021/22
Source: DBS Finance, UKHO and Dstl data sources
This section aims to demonstrate the dependency of the top ten suppliers on MOD business by presenting total payments received from MOD as a percentage of their global company revenues.
Babcock and QinetiQ see their dependency on MOD business remain at over 55% in 2021/22.
In 2021/22, 56% of Babcock International PLC’s global revenue came from direct MOD spend. This is a slight decrease from their peak dependency over the past decade of 57%r in 2020/21 (revision follows the use of restated figures of Babcock’s global revenue). This is despite MOD spending with Babcock continuing to rise which can in part be attributed to payments made against the Future Maritime Support Programme (FMSP) which replaces the previous Maritime Support Delivery Framework (MSDF) for naval base operations, and submarine and surface ship fleet support.
QinetiQ Group PLC remains the most dependent of the top ten suppliers on MOD business with 61% of its global revenue coming from MOD payments in 2021/22. This figure has remained broadly consistent since 2014 when QinetiQ sold its US Services business, which has previously been responsible for around 30% of the company’s global revenue.
MOD’s highest paid supplier, BAE Systems PLC, has seen its dependency on MOD business remain relatively consistent at around 20% since 2012/13, with a slight peak of 23% in 2014/15.
For Ferrovial SA, the split of MOD spend out of the company’s total global revenue has increased from 1% in 2013/14 to 17% in 2021/22. This is attributable to the full takeover of the Carillion PLC Amey contracts.
For the remaining six suppliers, MOD sales accounted for less than 10% of their global revenue.
Figure 9: Dependency of Top Ten Suppliers on MOD Business
Source: DBS Finance, UKHO and Dstl data sources
Note:
Top ten supplier data labels not displayed: (In descending order) Rolls-Royce, Leonardo, Leidos, Thales, Airbus and Boeing.
This section looks at the level of competitive expenditure for MOD’s top ten suppliers relative to their non-competitive spending. Importantly to note, any MOD expenditure with these suppliers received through means without a competitive indicator is excluded from the analysis. These exclusions include contracts with a missing competition marker, miscellaneous expenditure, electronic Purchasing Card transactions, and payments made by UKHO and Dstl. See the MOD Expenditure by Type of Contract section for more details on the types of competitive contracts.
The amount of competitive contracting depends on the type of company involved. Service based companies, such as Ferrovial SA, receive almost all their work through competitive contracts. The more recognisable defence focussed companies hold a lower proportion of competitive contracts by value. Some of these defence companies receive payments almost exclusively through non-competitive contracts.
Over the past decade, BAE Systems PLC has seen a significant change in its percentage share of payments received from competitive contracts, dropping from 12% in 2012/13 to 5% in 2017/18. This figure remained relatively unchanged before a slight increase to 7% in 2021/22.
Leidos Holdings Inc was created following the split of the Science Applications International Corporation (SAIC) into Leidos and the new SAIC in 2013. In its first few years Leidos received minimal payments from MOD totalling under £5 million annually which were nearly all non-competitively sourced. In 2015, Leidos won a competitively placed contract with a value of £6.3 billion for the transformation of MOD’s logistic and commodity procurement services. Ongoing expenditure recorded against this contract has since seen the company’s level of competitive contracting with MOD dramatically switch from near zero to over 95%.
Ferrovial SA entered the top ten suppliers for the first time in 2018/19 due to its full takeover of Amey contracts previously run as a joint venture with Carillion. Ferrovial’s historic percentage of competitive contract spending is shown in Figure 10 although no direct payments were made by MOD to the company prior to 2013/14.
QinetiQ’s rising competitive percentage since 2018/19 can be attributed to their successful bid for, and increasing expenditure against, the Engineering Delivery Partnering contract. Through this contract, the company has become the default route for the procurement of engineering services for Defence Equipment and Support (DE&S).
Figure 10: Levels of Competitive Contracting with MOD’s Top Ten Suppliers in 2021/22
Source: DBS Finance data sources
Note:
These calculations exclude any contract expenditure where the competition status is unknown. Combined across all of MOD’s top ten suppliers, the unknown competitive spend of contracts in 2021/22 was £94 million. Figures also exclude miscellaneous transactions, ePC payments and Trading Fund expenditure. Therefore, competitive breakdowns shown here may differ from those shown in Table 4 of the ODS tables.
MOD Core Department places numerous contracts each year for a range of goods and services, including major equipment projects, infrastructure, and service support. This section provides an analysis of all new contracts placed by MOD Core Department broken down by whether they were let competitively or non-competitively. It further explores the level of new contracts placed with Small and Medium-sized Enterprises (SMEs).
Note: Provisional A revision of the total number and value of contracts let in 2021/22 is planned by early 2023. This is to account for delayed reporting of new contracts which has historically resulted in a small increase of around 1% in the number of contracts reported.
MOD Core Department placed 2,178p new contracts in 2021/22 with a collective value of £18.1 billionp. This is an increase of £6.4 billion compared to the previous year despite it being 73 contracts fewer in number.
The number of new contracts let each year decreased rapidly between 2009/10 and 2015/16. This historic reduction in the number of new contracts let by MOD was due to several factors including the increased use of Crown Commercial Service contracts and the privatisation of functions such as the military logistics capability and the Defence Support Group (DSG).
The value of new contracts placed can be quite volatile and so readily fluctuate year-to-year. It can be affected by particularly high value contracts, for example the 2015/16 figure was boosted by a £6.3 billion contract with Leidos Europe, which accounted for around 40% of the total value of contracts placed in that year.
In 2021/22 there were 25p new contracts let over the value of £100 million, with a combined total of £13.2 billionp. This compares to only the 11 contracts awarded above this value the year before at a combined total of £7.4 billion.
Of the 25 new contracts in 2021/22, five of these had a contract value of over £1 billion. Two of these were placed with Devonport Royal Dockyard Limited as part of the Future Maritime Support Programme (FMSP), and three for Future Defence Infrastructure Services (FDIS) split between VINCI Construction UK Limited and VIVO Defence Services Limited.
Figure 11: New MOD Core Department Contracts by Competition Indicator
Source: DBS Finance data sources
This section provides an analysis of the value and number of new MOD Core Department contracts with Small and Medium-sized Enterprises (SMEs) compared to all new contracts let in-year. Suppliers are classed as an SME or not according to the Organisation for Economic Co-operation and Development (OECD) definition of SMEs as companies with an annual turnover of less than €50 million and fewer than 250 employees. This definition is consistent with that used by the Cabinet Office.
MOD Core Department placed 707p new contracts with SMEs in 2021/22 with a collective value of £707 millionp. This is a decrease of 131p contracts and £490 millionp compared to 2020/21.
As laid out in the Defence SME Action Plan, the MOD has a target that 25% of its procurement spend will go to SMEs by 2022. Details published on direct in-year MOD expenditure with SMEs in MOD’s Regional Expenditure bulletin showed that 5% of MOD expenditure with UK industry in 2020/21 was with SMEs. An updated figure covering 2021/22 will be published in early 2023.
In terms of the percentage value of contracts placed with SMEs relative to the value of all new MOD contracts, this remained fairly consistent between 2018/19 and 2020/21 at 10%. The number of new contracts let with SMEs fell in 2021/22, and with it, also the overall value. SMEs now only make up 3.9% of all new contracts by value. The extent to which this percentage has fallen was exacerbated by a substantial increase in the value of contracts awarded to non-SMEs. This rose from £10.5 billion in 2020/21 to £17.4 billionp in 2021/22.
Provisional estimates show that compared to all new contracts placed in 2021/22, contracts with SMEs are let on a slightly more competitive basis. 52%p of new contracts with SMEs went to organisations following a competitive bidding process compared to 49%p of all new contracts placed in-year. In terms of contract value, the difference is much more noticeable with 70%p of the total SME contract value being let competitively in contrast to only 57%p of the total value all new contracts.
It should be noted that with a short time series, any trends could be due to the inherent variability of contract data and not indicative of a long-term trend. Therefore, these comparisons should be used with caution.
Figure 12: New MOD Core Department Contracts with SMEs by Competition Indicator
Source: Dun and Bradstreet, and DBS Finance data sources
This section provides an analysis of Private Finance Initiative (PFI) payments by MOD during 2021/22. PFI is a system for providing capital assets (such as buildings, vehicles, equipment and water systems) for the provision of public services. Typically, the private sector designs, builds and maintains infrastructure and other capital assets, and then operates those assets to sell services to the public sector.
The values in the chart below represent payments made against contracts relating to PFI projects. The PFIs presented are ‘signed’ MOD projects from the HM Treasury PFI database as at April 2018. Although this is an historic list of PFI projects, the Chancellor announced during the 2018 Budget that the UK government would not use PFIs for any new projects. We can therefore be sure of capturing ongoing PFI spending using the latest list of PFI contracts and drawing in-year payment data against them from DBS Finance’s contract expenditure database.
A total of £2.4 billion of payments was made across 37 PFI projects in 2021/22, equivalent to 8% of the total MOD Core Department expenditure. This is compared with £2.3 billion of payments across 39 projects in 2020/21, two projects fewer due to final PFI payments being made on NRTA Fire Fighting Training Units and RAF Lossiemouth Family Quarters.
The Future Strategic Tanker Aircraft PFI was in receipt of the highest amount of MOD expenditure in 2021/22 at £450 million. This is the most recent MOD PFI to come into operation, starting in 2012, and it maintains its ranking as top PFI for expenditure ahead of Project Allenby/Connaught at £412 million. Project Allenby/Connaught however, which provides fully serviced, purpose-built living and working accommodation for soldiers, has the furthest foreseeable contract end date with payments expected to continue until 2040/41.
This does not represent the PFI with the longest period of contract operation. This goes to the 39-year long contract set up for the design, construction and delivery of training services at the Medium Support Helicopter Aircrew Training Facility at RAF Benson.
Figure 13: Amount Spent on PFI Projects in 2021/22
Source: DBS Finance data sources
This short section on methodology sets out the processes and methods used to make some of the tables and charts in this bulletin. More detailed explanations of the data sources and methodologies used can be found in the related Open Data Source tables and Background Quality Report.
Structures for holding companies have been compiled from supplier expenditure data taken from the DBS Finance contract expenditure database. The suppliers are then mapped to holding company structures based on established Defence Equipment and Support (DE&S) company hierarchies plus Dun and Bradstreet supplier information. The structures are stored on an internal database and updated annually for all new companies appearing on the DBS Finance database.
Where a company is part of an identified Joint Venture, expenditure is attributed to the company based on their percentage share of ownership. For example, if Airbus owns 37.5% of MBDA, then 37.5% of MOD spend with MBDA is assigned to the Airbus expenditure total. Trading Fund (UKHO) and On-Vote Defence Agency (Dstl) data is included in the process. Expenditure with consortia, such as the Modus Services Ltd Private Finance Initiative to redevelop Main Building in London, is not distributed amongst the members of the consortia.
The new contracts dataset includes details of all HQ contracts, which are formal contracts set up by MOD Core Department, where payment is made through DBS Finance. These contracts were previously set up by Commercial Officers with a DEFFORM 57 submission. With the implementation of MOD’s CP&F end-to-end procurement system the contracts are input directly by Commercial Officers on to the system. Contracts have been included in the relevant financial year based on the start date of the contract entered on to CP&F.
Contracts set up for MOD using the Crown Commercial Service (CCS) are included in the analysis. The Crown Commercial Service manages the procurement of common goods and services, so that public sector organisations with similar needs achieve value by buying as a single customer.
The competitive indicator is taken from the contract statistics form entered on to CP&F. Since the introduction of CP&F in 2016/17 there have been ongoing issues with the visibility of data within the contract statistics forms attached to new contracts, hence increases to both the number and value of contracts where the competition marker is not known. The Analysis Directorate is working with the appropriate teams to resolve the issue and to ensure a wider coverage of these key data fields going forward. In 2021/22 the competitive breakdown of new contracts data are provided as provisional estimates. A revision of both the total number and total value of new contracts let in 2021/22 is planned by early 2023. This is to account for the delayed reporting of new contracts which has historically resulted in a small increase in the number of contracts reported by around 1%.
Contracting Purchasing and Finance (CP&F) provides a single online end-to-end procurement system for all MOD procurement activity. All other processes, especially paper-based systems, will be either replaced or subsumed.
Core Department refers to entities within MOD Departmental Boundary but excluding the Trading Fund UKHO and the On-Vote Defence Agency Dstl.
Crown Commercial Service (CCS) manages the procurement of common goods and services so that public sector organisations achieve value by buying as a single customer.
Current Prices show expenditure without removing the effects of inflation.
DBS Finance provides expert information, advice and services to and on behalf of MOD business areas, including processing four million invoices, totalling more than £23 billion a year. See also Defence Business Services.
Defence Business Services (DBS) was established on 4 July 2011 to transform the delivery of corporate services to the Department. The services delivered initially included: Civilian HR, Finance, Information Systems and some Information Services. On 1 April 2014 DBS merged with the Services Personnel and Veterans Agency and now has responsibility for managing HR processes for Military personnel including pay and pensions. Also see DBS Finance.
Defence Equipment Plan is the MOD’s annual report to Parliament on progress in equipment procurement. It provides a summary of each project’s current status and progress to date. It provides comparisons on current forecast costs and in-service dates. It is reviewed by the National Audit Office (NAO) to ensure transparency and assurance.
Defence Equipment and Support (DE&S) is a bespoke trading entity, and arm’s length body of the Ministry of Defence. By working closely with industry, partnering agreements and private finance initiatives, DE&S manage a vast range of complex projects to buy and support equipment and services to the armed forces.
Defence Science and Technology Laboratory (Dstl) was a former Trading Fund of MOD created in July 2001. It supplies impartial scientific and technical research and advice to MOD and other government departments. In April 2017 it ceased to be a Trading Fund and became an On-Vote Defence Agency of MOD.
Defence Support Group (DSG) was a former Trading Fund of the MOD created following the merger of the Army Base Repair Organisation (ABRO) and the Defence Aviation Repair Agency (DARA) on 1 April 2008. On 1 April 2015 the land repair and maintenance business was sold to Babcock. The remaining part of the business, the Air division and Electronics and Components division, stayed under MOD ownership as the Defence Electronics and Components Agency (DECA).
DEFFORM 57 completion of this form was mandatory for all contracts where the Defence Business Services (DBS) was the payment authority. It was used to set up a contract with DBS for payment purposes and was an important source of capturing data on contract activity within the Ministry of Defence. The form has now been subsumed into CP&F as data is input directly to the system by Commercial Officers.
Department for International Trade UK Defence and Security Exports (DIT UKDSE) helps the UK defence and security industries to export by building strong relationships with industry and overseas governments. Prior to 15 July 2020 it was known as the Department for International Trade Defence and Security Organisation (DIT DSO).
Electronic Purchasing Card (ePC) was introduced in 1997 as a convenient and cost-effective way to make low-value purchases. The card was made available to all public-sector organisations, including central government departments, local authorities and NHS organisations. When it was first introduced the card was called the Government Procurement Card (GPC) but has since been renamed.
Foreign Military Sales (FMS) are a mechanism used to purchase equipment from the US Government and is generally used due to either US security constraints or cost savings due to economies of scale. For example, where it would be more cost effective for the UK’s MOD to procure through FMS rather than directly with the supplier.
Holding Company refers to companies which are the full or part owners of other companies.
HQ Contracts are formal contracts set up by MOD Core Department which were previously set up by a DEFFORM 57. Details of HQ contracts are now recorded within CP&F with the data being input directly by Commercial Officers.
Ministry of Defence (MOD) is the United Kingdom government department responsible for implementation of government defence policy.
Miscellaneous Contracts are payment methods employed by DBS Finance (MOD’s primary bill paying authority) for running service items such as the provision of utilities. These items are covered by “miscellaneous” transactions, where no ‘MOD HQ Contract’ exists. These agreements for goods or services will have been set up locally between MOD Branch and the supplier and are legally binding.
National Audit Office (NAO) scrutinises public spending on behalf of Parliament. It is independent of government and audits the accounts of all government departments and agencies as well as a wide range of other public bodies. It reports to Parliament on the economy, efficiency and effectiveness with which government bodies have used public money.
NATO Eurofighter and Tornado Management Agency (NETMA) is the prime contractor for the Eurofighter Weapon System. The arrangements for the management of the Eurofighter programme were set out in the NATO Charter dated 18 December 1995, in which the international management agencies of the Tornado and Eurofighter programmes were integrated into a single agency, NETMA. This NATO agency is essentially a multi-nation HQ project office for these two collaborative projects, involving the UK, Germany, Italy and Spain. The RAF fleet of Tornado aircraft were retired from service in early 2019, and in the UK the Eurofighter is now called ‘Typhoon’.
OCCAR (Organisation Conjointe de Coopération en Matière d’Armement) – the Organisation for Joint Armaments Co-operation was originally set up in November 1996 by France, Italy, Germany and the UK with the aim of improving the efficiency and lowering the cost of managing co-operative defence equipment programmes involving European nations (for example A400M). Belgium and Spain are now also members.
Office for National Statistics (ONS) is responsible for the production of a wide range of independent economic and social statistics. The statistics are there to improve understanding of the United Kingdom’s economy and society, and for planning the proper allocation of resources, policy-making and decision-making. It is the executive office of the UK Statistics Authority, a non-ministerial department which reports directly to Parliament. ONS is the UK government’s single largest statistical producer.
Organisation for Economic Co-operation and Development (OECD) is an international organisation that works to establish evidence-based international standards and to find solutions to a range of social, economic and environmental challenges.
Private Finance Initiative (PFI) is a system for providing capital assets for the provision of public services. Typically, the private sector designs, builds and maintains infrastructure and other capital assets (such as buildings, vehicles, equipment and water systems) and then operates those assets to sell services to the public sector. In most cases, the capital assets are accounted for on the balance sheet of the private sector operator.
QinetiQ was formerly part of the Defence Evaluation and Research Agency (DERA). QinetiQ became a limited company in July 2001. UK government holds a Special Share, through the Secretary of State for Defence, which confers certain rights to protect UK defence and security interests.
Single Source Regulation Office (SSRO) was set up in 2014 and regulates the procurement by the UK government of ‘single source’ (i.e. non-competitive) military goods, works and services. It is the independent statutory regulator of single source defence procurement, issuing statutory guidance, assessing compliance and determining how the regime applies to individual contracts.
Small and Medium-sized Enterprises (SMEs) are recognised as organisations that have a turnover of less than €50 million and fewer than 250 employees. This definition is taken from the Organisation for Economic Co-operation and Development’s glossary of statistical terms and is consistent with the definition used across government, including that of the Cabinet Office.
Smart Acquisition is a long-term MOD initiative to improve the way defence capability is acquired. MOD no longer replaces military equipment, services, estates or business information systems on a like-for-like basis but instead takes into account how such a capability will integrate with other capabilities to achieve optimum effect by its armed forces. A through-life approach to acquisition is adopted, rather than concentrating resources on the initial procurement.
Trading Funds were introduced by the UK government under the Trading Funds Act 1973 as a “means of financing trading operations of a government department which, hitherto, have been carried out on Vote”. They are self-accounting units that have greater freedom than other government departments in managing their own financial and management activities. They are free to negotiate their own terms and conditions with their staff. For this reason, their grading structures do not always match that of the rest of the Ministry. From 2017/18, the UK Hydrographic Office operates as MOD’s only Trading Fund.
UK Hydrographic Office (UKHO) was formed as a Trading Fund of the MOD in 1996 and is responsible for the provision of global hydrographic products and services to UK Defence and commercial mariners. In addition, UKHO discharges the UK’s obligation to provide hydrographic products and services needed for safe navigation in UK waters.
UK Statistics Authority (UKSA) is an independent body directly accountable to Parliament. It was established on 1 April 2008 and the Authority’s overall objective is to promote and safeguard the quality of Official Statistics that serve the public good. It is also required to safeguard the comprehensiveness of Official Statistics and to ensure good practice in relation to Official Statistics. The UK Statistics Authority has three main functions: oversight of the Office for National Statistics (ONS) (its executive office), monitoring and reporting on all UK Official Statistics, and independent assessment of Official Statistics.
Figures marked with p are provided as provisional estimates.
Figures marked with r are revised from the previous edition.
Data visualisations marked with “//” indicate there is a break in the data series. Surrounding commentary will declare the impact on the figures and whether the break in series arises from a data issue, or a change in methodology or process.
Where rounding has been used, totals and sub-totals have been rounded separately and so may not equal the sums of their rounded parts.
Corrections to the published statistics will be made if errors are found, or if figures change as a result of improvements to methodology or changes to definitions. When making corrections, we will follow the Ministry of Defence Statistics Revisions and Corrections Policy. All corrected figures will be identified by the symbol r, and an explanation will be given stating the reason and size of the revision. Corrections which would have a significant impact on the utility of the statistics will be corrected as soon as possible, by reissuing the publication. Minor errors will also be corrected, but for convenience these corrections may be timed to coincide with the next annual release of the publication.
The Analysis Directorate welcomes feedback on our statistical products. If you have any comments or questions about this publication, or about our statistics in general, you can contact us as follows:
Analysis Directorate (Analysis-Expenditure)
Telephone: 030 679 84442
Email: Analysis-Expenditure-PQ-FOI@mod.gov.uk
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