Defence Reform Act – a new regime to negotiate
Small and specialised firms in the defence sector could find commercial life under the new regulatory regime of the Defence Reform Act 2014 easier to predict and safer to negotiate.
The purpose of the Act is to provide a regulatory framework to be applied where a process of compulsory tendering is inappropriate because, for example, there are very few companies able to provide the services the MoD seeks to secure. The philosophy behind it is that the MoD should get value for money and the contractor should make a reasonable return on its services.
To that end, an elaborate regime of calculating an appropriate charge has been developed. This has been achieved by the establishment of the Single Source Regulations Office and the making of detailed rules by means of the Single Source Contract Regulations 2014.
The Act and Regulations affect ‘qualifying defence contracts’ and ‘qualifying sub-contracts’, which the MoD uses to procure goods, works or services for defence purposes. To qualify, a contract must be worth more than £5m, be made with the UK Government and not relate to intelligence activities, the acquisition of land, the management or maintenance of land or buildings.
Qualifying defence contracts are those made between the MoD and prime contractors, and to qualifying sub-contracts made between such prime contractors and their chosen sub-contractors. This second element is of particular relevance to the large number of defence and security SMEs in the Three Counties who often seek the business development and expansion opportunities such sub-contracts afford.
David Ashcroft, Senior Legal Counsel with Harrison Clark Rickerbys, whose commercial experience is now largely focused on the defence and security sector in the Three Counties, shared his expertise on this significant development with the Herefordshire Defence and Security Group recently, giving local businesses a chance to hear more about the advantages and considerable complexities of the Act and Regulations.
David said: “This is not an easy area to negotiate your way around – it is very complex, so good legal advice is essential. But the Act does offer group members a regulated route that opens the door to sub-contractors by setting out what is needed and the rules of the game.”
If you have concerns about how the Act affects you, David can be contacted at firstname.lastname@example.org