Briefing: Dividing up risk on UK defence estate works

Dye, John V.H. and Simpson, Yvonne M. (2010) Briefing: Dividing up risk on UK defence estate works. Proceedings of the ICE - Management, Procurement and Law, 163 (1). pp. 3-6. ISSN 1751-4304 (print), 1751-4312 (online)

Abstract

Regional prime contracting consists of a number of 7–10-year frameworks for the maintenance and improvement of the UK Ministry of Defence estate. Part of the regional prime contractor’s remit is to undertake capital works up to £15 million in value and whose core procurement method is design and construct. Due to the need for early contractor involvement, there can be no affordable, pre-agreed fixed price for these complex projects due to the risk permutations. This paper discusses the methodology behind the management of these projects so they are progressed quickly using maximum price target cost. Adapted from Ministry of Defence equipment procurement, this assesses cost and risk including a pain/gain sharing mechanism. A crucial element is the risk register and the mathematical assessment of uncertainty. By these measures, the project team is able to successfully manage cost and risk while achieving known improvements to timescales of 25%. There is anecdotal evidence that the period from inception to site commencement may improve by up to 50% in comparison with traditional fixed-price procurement.

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