Transparency data

UK second-generation search and rescue aviation (UKSAR2G): accounting officer assessment (March 2021)

Updated 27 November 2023

This statement has been completed voluntarily to demonstrate that issues of regularity, propriety, value for money and feasibility have been properly considered in relation to the outline business case (OBC) for the UK second-generation search and rescue aviation (UKSAR2G) programme.

Context

The UKSAR2G programme will procure a successor service to both the UK search and rescue - helicopters (UKSARH) and aerial surveillance and verification (ASV) contracts when they expire between 2024 and 2026.

These contracts provide Her Majesty’s Coastguard with helicopter assets and operations to comply with international search and rescue (SAR) obligations, rescuing people in distress around the UK coast, and fixed-wing assets and operations to monitor for polluting, illegal or anticompetitive activity.

The Marine and Coastguard Agency (MCA) has developed proposals for a successor service that:

• moves away from the existing one-size-fits-all approach, with market-led asset and basing proposals reflecting true need, informed by use of historic data
• recognises the collaborative nature of SAR and the increased usage of HM Coastguard assets and capacity by other parts of government, for example the police, NHS and border force
• encourages maximum competition to drive value and innovation, for example use of unmanned (drone) assets during the lifetime of the contract
• continues to provide a service that rescues thousands of people every year

Regularity

Provision of SAR is not bound by legislation, but rather United Nations’ International Maritime Organization Conventions to provide a SAR service and collaborate internationally.

The OBC has been approved by HM Treasury and detailed costs will be included in the MCA’s comprehensive spending review bid later this year (and were presented in the spending review 2020 (SR20) bidding process).

HM Treasury approval is contingent upon DfT, MCA and the Home Office working together to develop options on the consolidation of assets between UKSAR2G and the National Police Air Service. This is to be completed in advance of the spending review later in 2021.

The anticipated 2021 spending review bid of £2,607 million (resource departmental expenditure limit (RDEL) and IFRS16 capital departmental expenditure limit (CDEL) including irrecoverable VAT, combined) will seek to agree funding for a contractual payment mechanism that reimburses successful bidders for their pre-operational costs as services commence at their respective locations, and for their respective lot, rather than amortising these over the contract lifetime (estimated in cash terms, £120 million in 2024 to 2025, £225 million in 2025 to 2026 and £367 million in 2026 to 2027).

The actual value will depend on bidder solutions (as UKSAR2G is solution agnostic) and their relative levels of existing scale and infrastructure.

The higher spend in the earlier years of the contract will lead to reductions in later years and results in an estimated £115 million saving over the OBC’s worst-case figure of £2,722 million, which was based on an amortised pre-operational cost model.

This approach is deemed to offer the best value for money, price and contract risk. It has been agreed by the investment portfolio and delivery committee (IPDC), has received recommendation from the HM Treasury spending team and has been signed off by the Chief Secretary to the Treasury.

The benefits of this approach are that it encourages greater competition, better contractual incentives for suppliers to deliver to transition plans and supports inclusion of smaller to medium size enterprises. Prior market engagement has indicated that an estimated £500 million minimum saving could be achieved over the UKSAR2G contract lifetime by potential suppliers.

Cabinet Office spend controls and the Civil Service Chief Operating Officer have given their approval to the OBC and proceed to market. Following the tender, competitive dialogue, negotiation and contract award, the full business case will be supplied to the IPDC for approval in 2022.

Propriety

The UKSAR2G OBC has been considered by the infrastructure and project authority (IPA) gateway 1 and gateway 2, the latter receiving an amber/green rating in September 2020. IPDC has agreed both the OBC and the previous strategic outline business case (both fulfilling the requirements of HM Treasury’s Green Book). UKSAR2G does not breach any parliamentary control procedures or expectations.

Feasibility

HM Coastguard has a successful history of delivering SAR and UKSAR2G will build on this.

In addition to the successful completion of the IPA gateway 2 with an amber/green delivery assessment, MCA has undertaken significant market engagement and further IPA gateways are planned.

The UKSAR2G programme has also been agreed at ministerial level and by IPDC. The Department for Transport’s commercial assurance board (CAB) is reviewing the progress of procurement at a detailed level as it progresses. This includes the:

• lotting strategy
• evaluation methodology
• draft terms and conditions
• protections against supplier failure

MCA has engaged with non-executive directors on its board and the DfT board to challenge assumptions and provide additional scrutiny.

Value for money

The UKSAR2G OBC cost-benefit analysis, assured by DfT and agreed by IPDC, estimates a benefit-cost ratio (BCR) of 14.58, representing very high value for money.

The costs of UKSAR2G are driven by the capital and service delivery cost estimates produced by the ‘should cost’ model presented in the financial case of the OBC.

The benefits of UKSAR2G are primarily driven by the value of lives saved through the delivery of a SAR aviation service. The value of lives saved is estimated using the DfT value of prevented fatality figures, coupled with the historical statistics of people rescued per annum by the aviation SAR service.

The negative environmental impact of the aviation assets has also been considered in the CBA, accounting for the emissions released through the burning of fuel. While not a contributor to the benefit-cost ratio (BCR), there are a wide range of additional benefits to UKSAR2G that were not monetised. These include services provided in support of other government departments and the political benefits of meeting our obligations.

Analytical assurance of the value for money is ‘medium’ due to the MCA allowing bidders a higher degree of flexibility in their proposals (‘solution agnostic’), true estimates of costs and benefits will not be available until tenders are completed and evaluated.

Accounting officer’s conclusion

As the accounting officers for the MCA and DfT group, we have prepared this summary to set out the key points that informed our decision to continue work on UKSAR2G by beginning procurement in early 2021.

We have considered this assessment of the programme and its outline business case against the 4 accounting officer standards of regularity, propriety, value for money and feasibility. We are satisfied the programme:

• relies on clear regulatory and operational powers
• meets the standards of managing public money and accords with the generally understood principles of public life
• represents good value for money for the Exchequer as a whole
• is feasible to deliver

In particular we note that:

• this project represents very high value for money
• though complex and challenging, the MCA has a tested track record in successful delivery of this sort of procurement
• progress to final business case will depend on funding being secured in spending review 2021 (SR21)

We will work with the Home Office to satisfy HMT’s condition that there is consolidation of assets with the National Air Police Service. We are satisfied that the programme is a good use of public resources.

Bernadette Kelly

Department for Transport

16 March 2021

Brian Johnson

Chief Executive

Maritime and Coastguard Agency

17 March 2021