National statistics

MOD trade, industry and contracts 2021

Updated 3 February 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 during 2020/21. 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.

1. Key Points and Trends

£27.2 billion	Paid by MOD Core Department to UK and foreign owned organisations in 2020/21.
	An increase of £0.6 billion from 2019/20.
£11.8 billionr	Value of new contracts placed during 2020/21.
	An increase of £0.7 billionr from 2019/20.
43%	Total MOD procurement expenditure with top ten suppliers.
	A small decrease from 44% in the previous year.
£3.8 billion	Expenditure with BAE Systems PLC, the most to any holding company in 2020/21.
	Of which 94% was through non-competitive contracts.
£2.3 billion	Expenditure against existing Private Finance Initiative projects in 2020/21.
	A decrease from £2.5 billion in 2019/20 but still accounting for 9% of total MOD Core Department payments.
£7.9 billion	Estimate of identified UK export orders of defence equipment and services in 2020.
	A decrease of £3.1 billion from 2019.

Responsible Statistician: Analysis-Expenditure Head of Branch

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Background Quality Report: Background Quality Report

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2. Introduction

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.

2.1 Table Removal

Prior to 2018, tables were published showing the ‘Balance of Payments for ‘Trade in Services’’. Similarly, figures on ‘PFI Projects with Planned MOD Unitary Charge Payments over £25 million’ were present up to 2020. Due to ongoing issues on the quality and availability of data it was decided that these tables will be removed. The MOD is continuing to work with data providers to improve the quality of our data sources. Further information is available in the Background Quality Report.

2.2 Table Reinstation

Following an extensive data gathering exercise, we are now in a position to resume publication of tables and related figures in this bulletin on ‘New Contracts Placed with Small and Medium-sized Enterprises (SMEs)’.

During a scheduled revision of these figures in February 2022, added data quality has also meant it is now possible to present the split of new contracts placed with SMEs by competition type (Tables 6c and 6d). Previously, the SME data was presented in a single table containing details on the total value and number of new contracts with SMEs only.

Additionally, we have further produced a breakdown of MOD’s in-year SME expenditure with UK industry. However, whilst these statistics were previously published in the Trade, Industry and Contracts bulletin series, it has been deemed that MOD’s Regional Expenditure bulletin, which specifically covers MOD spending with UK industry, is now a more suitable fit. As such, these figures shall be incorporated into the Regional publication from 2022 onwards. Further information is available in the Background Quality Report.

2.3 Context

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:

• understand the size and distribution of payments made to organisations by the MOD.
• set the context for other information on Defence.
• assist in understanding the impact of changes in Defence policy, for instance changes to Single Source procurement practice.

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.

2.4 A National Statistics publication

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:

• meet identified user needs.
• are well explained and readily accessible.
• are produced according to sound methods.
• are managed impartially and objectively in the public interest.

Once statistics have been designated as National Statistics it is a statutory requirement that the Code of Practice shall continue to be observed.

3. Major Equipment Projects

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 1 April 2020. As a result, it should be noted that it presents the affordability of plans before the announcement of additional funding in the Spending Review and decisions considered through the Integrated Review. The timing also means that it does not recognise the full implications of the COVID-19 pandemic.

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.

The total current forecast cost of the 18 projects in the MOD’s Project Performance Summary Table (PPST) 2020 is £59.9 billion. ‘Lightning II’ was the most expensive post Main Gate equipment project in 2020, with a forecast cost of £8.9 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 ‘P-8A Poseidon’ project which rose by £110 million compared to its cost in 2019. This was predominantly driven by fluctuations in exchange rates. Combined across all 18 PPST projects, varying exchange rates accounted for a £335 million increase to in-year costs.

The greatest decrease in forecast cost was a £724 million saving for ‘Lightning II’ which was primarily the result of maturing the forecast estimates from the US programme office and risk review. Another notable decrease for in-year change on costs to completion came from the ‘Mechanised Infantry Vehicle’ which fell by £576 million. This project entered the list of major equipment projects in 2020 following its approval to begin the Demonstration and Manufacture phase during the 2019/20 financial year. The reduction in forecast spend was mainly due to the removal of a VAT charge from HMRC under International Collaborative Defence Arrangements.

Further details on the project changes can be found in The Defence Equipment Plan.

Figure 1: Forecast Costs of 18 Major Equipment Projects

Source: Project Performance Summary Table 2020

4. MOD Expenditure by Type of Contract

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 2020/21, a total of £27.2 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 £0.6 billion from 2019/20.

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 2020/21, 42% of spending went to organisations following a competitive bidding process. This is down from 44% of in-year spend through competitive sourcing in 2019/20. However, spending recorded via means where no competition marker is available has risen by one percentage point over the same period.

Figure 2: Direct MOD Core Department Payments by Type of Contract in 2020/21 (VAT Exclusive)

Source: DBS Finance data sources

4.1 Other Expenditure

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, the introduction of a new Contracting, Purchasing and Finance (CP&F) online end-to-end procurement system at the end of 2016 has increased the number of contracts where the competition status is not known, expenditure figures for these contracts are also included within ‘Other’.

5. Organisations Paid over £5 million by MOD

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. 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 334 organisations paid more than £5 million by MOD during 2020/21, six fewer than the previous year.

The organisations that received more than £5 million represent around 3.3% of the 10,000 organisations paid in 2020/21, however they received 94% of the direct expenditure. Furthermore, payments are heavily skewed to a small number of suppliers, with the top 18 receiving around one half of the total procurement expenditure. A similar distribution of MOD’s supplier expenditure was seen in 2019/20.

Only 18 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 3: Organisations Paid over £5 million in 2020/21

Source: DBS Finance, UKHO and Dstl data sources

6. Holding Companies Paid over £50 million by MOD

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 2020/21 are presented below.

In 2020/21, there were 56 holding companies paid more than £50 million by MOD, one less than in 2019/20. The total combined expenditure with these holding companies in 2020/21 was £18.3 billion, representing 66% of the total expenditure by MOD and its trading funds. This includes ten companies paid over £500 million which is unchanged on the previous year.

Figure 4: Holding Companies Paid over £50 million by MOD in 2020/21

Source: DBS Finance, UKHO and Dstl data sources

7. Focus on Key Suppliers

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 2020/21. 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.

7.1 Expenditure with Top Ten Suppliers

The MOD’s top ten suppliers were the same in 2020/21 as in the previous year. Total payments to those suppliers increased by just over £15 million compared to 2019/20. Put side-by-side with the earlier increases seen in total MOD spending in 2020/21, it shows that MOD expenditure did not rise equally across those inside and outside of the top ten.

In 2020/21, over 43% of total MOD procurement expenditure was with ten suppliers. Despite the small increase in their combined expenditure, this split is a slight decrease compared to the 44% seen with the top ten suppliers in 2019/20.

Figure 5: MOD Procurement Expenditure with Top Ten Suppliers in 2020/21

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 hasn’t changed for over a decade. This top spot was further reinforced after they received £175 million more in 2020/21 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% (£3,834 million) of the total MOD spend in 2020/21, a similar proportion seen last year.

Figure 6: Proportion of MOD Spend with Top Ten Suppliers in 2020/21

Source: DBS Finance, UKHO and Dstl data sources

7.2 Dependency on MOD Business

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 50% in 2020/21.

In 2020/21, 54% of Babcock International Group PLC’s global revenue came from direct MOD spend, an increase from 50% in 2019/20 and the highest the figure has been over the past decade. The recent continued rise in MOD spending with Babcock seen since 2016/17 can be partly attributed to increasing payments made against the Maritime Support Delivery Framework and its ongoing support of the Royal Navy’s surface fleet.

QinetiQ Group PLC remains the most dependent of the top ten suppliers on MOD business with 58% of its global revenue coming from MOD payments. This figure has remained broadly consistent since 2014 when QinetiQ sold its US Services business, which had 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 15% in 2020/21. 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 7: 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, Airbus, General Dynamics, Lockheed Martin and Boeing.

7.3 Levels of Competitive Contracting

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.

The introduction of the CP&F system as an end-to-end procurement system at the end of 2016 increased the number of contracts where the competition status is not known. Whilst improvements have been made to obtain any missing data fields, there remains amongst the top ten suppliers in 2020/21 a number of contracts without a competitive marker. Figures should therefore be used with caution as an indication of the current known proportion of competitive to non-competitive in-year expenditure only. In 2020/21, QinetiQ Group PLC received £21 million of expenditure through contracts with a missing competitive indicator which through the current process is omitted from calculations. If it were found that this was all through non-competitive placed contracts, then QinetiQ’s competitive split of 37% presented below would fall to 36%. Further details on the exclusions for each supplier in 2020/21 are listed in Table 5c of the supporting data tables.

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, a level which has remained relatively unchanged since. Over a similar initial period, Lockheed Martin Corporation saw a sharp rise in expenditure through competitively placed contracts. Coupled with decreasing non-competitive contract spending, Lockheed saw its level of competitive contracting rise from 59% in 2013/14 to 85% in 2017/18. Competitive spend with the company as a percentage of all its known competitive expenditure has further increased to now reach a new high over the past ten years of 86%. Factoring in any contract expenditure without a given competitive indicator for either company in 2020/21 would have had a negligible impact of less than one percentage point change on the given proportions.

Ferrovial SA entered the top ten suppliers for the first time in 2018/19 due to its full take over of Amey contracts previously run as a joint venture with Carillion. Ferrovial’s historic percentage of competitive contract spending is shown in Figure 8 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 an 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 8: Levels of Competitive Contracting with MOD’s Top Ten Suppliers in 2020/21

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 2020/21 was £55 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.

8. New Contracts Placed

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: Revision
A revision of the total number and value of contracts let in 2020/21 was made in February 2022. This was to account for delayed reporting of new contracts, and also address an issue where the quality of data was not sufficient to produce a competitive/non-competitive breakdown for 2020/21. Processes in place to manage data quality mean that the competitive splits can now be provided.

8.1 New Contracts by Competition Indicator

MOD Core Department placed 2,251^r new contracts in 2020/21 with a collective value of £11.8 billion^r. This is an increase of £0.7 billion^r compared to the previous year despite it being 163^r fewer contracts.

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 inflated 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 2020/21 there were two new contracts let over the value of £1 billion. These were placed with BAE Systems Global Combat Systems Munitions Ltd for the supply and service of next generation munitions and with Capita Business Services Ltd for training services to the Royal Navy and Royal Marines.

Figure 9: New MOD Core Department Contracts by Competition Indicator

Source: DBS Finance data sources

8.2 New Contracts with Small and Medium-sized Enterprises

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 838^r new contracts with SMEs in 2020/21 with a collective value of £1.2 billion. This is an increase of £0.2 billion compared to the previous year despite it being 73^r fewer contracts.

As laid out in the SME Action Plan 2019 to 2022, the MOD has a target that 25% of its procurement spend will go to SMEs by 2022. Details on direct in-year MOD expenditure with SMEs were published in MOD’s Regional Expenditure bulletin in January 2022. In terms of the percentage value of contracts placed with SMEs relative to the value of all new MOD contracts, this has remained around 10% since 2018/19.

Despite the number of new contracts let with SMEs decreasing, the overall value of new SME contracts increased. This was principally down to the letting of two new contracts of over £200 million each, compared to just one over this amount in 2019/20.

Compared to all new contracts placed, contracts with SMEs are let on a more competitive basis. In 2020/21, 53% of new contracts with SMEs went to organisations following a competitive bidding process compared to 47% of all new contracts placed in-year. In terms of contract value, the difference is much more noticeable with 79% of the total SME contract value being let competitively in contrast to only 40% 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 10: New MOD Core Department Contracts with SMEs by Competition Indicator

Source: Dun and Bradstreet, and DBS Finance data sources

9. MOD Payments on Private Finance Initiative Projects

This section provides an analysis of Private Finance Initiative (PFI) payments by MOD during 2020/21. 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 £2.3 billion of payments was made across 39 PFI projects in 2020/21, equivalent to 9% of the total MOD Core Department expenditure. This is compared with £2.5 billion of payments across 40 projects in 2019/20, one project fewer due to the Tornado GR4 Simulator PFI coming to an end as the RAF Tornado fleet retired from service.

The Future Strategic Tanker Aircraft PFI was in receipt of the highest amount of MOD expenditure in 2020/21 at £447 million. This PFI is the most recent MOD PFI to come into operation, starting in 2012. It replaces last year’s top PFI for expenditure, Project Allenby/Connaught, at £391 million in 2020/21 as the most expensive in-year PFI project. 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 11: Amount Spent on PFI Projects in 2020/21

Source: DBS Finance data sources

10. Estimates of Identified Defence Export Orders

In 2020 the UK won defence orders worth £7.9 billion. This was worth 6% of the global defence export market, and was a decrease of £3.1 billion compared to 2019.

The decrease in 2020 highlights the highly variable nature of year-to-year export orders. Despite the overall reduction in total export value for the year, UK core business remained strong and included an order of 38 Typhoon aircraft from Germany worth over £1 billion. The Air Sector remains the dominant sector for defence exports with 58% of all orders in terms of value.

Figure 12: UK Export Orders by Sector

Source: DIT UK Defence and Security Export Statistics 2020

The percentage of defence exports to the Middle East in 2020 dropped to 19% from 58% the year before. This was due to the economic impact of COVID-19 on regional defence budgets and the price of oil. As a result, 2020 saw Europe become the UK’s largest regional market with 43% of its orders. UK defence exports to both Latin America and Africa were less than 1%.

Figure 13: UK Defence Export Orders to Regions in 2020

Source: DIT UK Defence and Security Export Statistics 2020

Over the last decade the UK has exported orders worth a total of $126 billion and maintains its position as the second highest defence exporter behind the USA.

Figure 14: Top Defence Exporters 2011 to 2020

Source: DIT UK Defence and Security Export Statistics 2020

More information on identified export orders can be found in the DIT UKDSE Statistics for 2020. It should be noted that export orders can be cancelled or changed at any time after the initial order has been placed.

11. Methodology

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.

11.1 Holding Companies

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 Lockheed Martin owns 51% of AWE Management, then 51% of MOD spend with AWE Management is assigned to the Lockheed Martin 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.

11.2 New Contracts

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 2020/21, the competitive breakdown of new contracts data was initially removed due to these issues. Processes to manage data quality have subsequently made it possible to provide this data in full within this bulletin revision.

12. Glossary

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.

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.

13. Further Information

13.1 Symbols

Figures marked with ^p are provided as provisional estimates.

Figures marked by ^r are revised from the previous edition.

13.2 Rounding

Where rounding has been used, totals and sub-totals have been rounded separately and so may not equal the sums of their rounded parts.

13.3 Revisions

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.

13.4 Contact us

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

If you require information which is not available within this or other available publications, you may wish to submit a Request for Information to the Ministry of Defence under the Freedom of Information Act 2000.

If you wish to correspond by mail, our postal address is:

Analysis Directorate (Analysis-Expenditure)
Ministry of Defence
Oak 0 West, #6028
MOD Abbey Wood North
Bristol
BS34 8QW

For general MOD enquiries, please call: 020 7218 9000

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