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Case Studies in the Defence Sector

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Case Studies in the Defence Sector

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  1. To insert other ready-formatted pages: go to the insert menu/slides from files/ select ‘presentation inserts.ppt’ Click the display button, then click the button on the right (marked with red below). Click on the slide(s) to insert then insert and close. Do not re-size text boxes as they are measured to fit paper with pre-printed Freshfields Bruckhaus Deringer design. The red lines indicate absolute top and bottom. If you accidentally change the text boxes, go to ‘format/slide layout’ and choose the top left hand corner slide called ‘title slide’ and click ‘re-apply’. Case Studies in the Defence Sector Andrew P.S. Hart28 October 2005

  2. Case Studies in the Defence Sector • An admission • The bad news – at least for me • The good news – I hope, for you • "The advantages of the PFI model for the MoD include shifting the risk of project delivery to the contractor while allowing the Ministry and Armed Forces to use the state-of-the-art system as and when they need to. Spare capacity will be offered by Paradigm to MoD-approved overseas governments and international organisations such as NATO, providing much better value for money than traditional asset procurement.“ • Use of these techniques is possible in sensitive areas such as defence

  3. refurbishing accommodation estates refurbishing barracks air to air refuelling tankers sea vehicles tank transporters heavy lifting cranes military flying school – rationalising training for army, navy and air force pilots defence training rationalisation – rationalising specialist training in a number of key disciplines (for example, military police and aeronautical engineering) Wide Variety of Projects • Defence sector is one of the largest PFI sectors in the UK • Asset range for UK Defence Sector PFI projects varies enormously • Recent examples include: • MoD comfortable adopting these techniques close to front line

  4. Skynet 5 – Military Satellite Communications • Largest MoD PFI project to date in the UK - £2.5 billion contract over 15 years • Background – replacement and upgrading of Skynet 4 • What it consists of: • New satellites • Management system • Land terminals • Ship terminals • The contractor – Paradigm • The sub-contracts

  5. “PFI – Meeting the Investment Challenge” Criteria • July 2003 – last comprehensive review by UK government of PFI progress and performance in the UK across all sectors • There is a major capital investment programme, requiring effective management of risks associated with construction and delivery • The private sector has the expertise to deliver and there is good reason to think it will offer value for money • The structure of the service is appropriate, allowing the public sector to define its needs as service outputs that can be adequately contracted for in a way that ensures effective, equitable and accountable delivery into the long term, and where risk allocation between public and private sectors can be clearly made and enforced • The nature of the assets and services identified as part of the PFI scheme are capable of being costed on a whole-of-life, long-term basis • The value of the project is sufficiently large to ensure that procurement costs are not disproportionate • The technology and other aspects of the sector are stable and not susceptible to fast-paced change • Planning horizons are long-term, with assets intended to be used over long periods into the future

  6. Skynet 5 – Benefits and Advantages • Difference between Skynet 4 and Skynet 5 • Frees up MoD time for core military tasks • Substantial cost savings - £500 million • Secures MoD access to flexible, reliable and latest technology • Use as and when required and offering of spare capacity enhances value for money • Can extrapolate to other defence projects • MoD’s Major Projects Report 2004 suggests that the project is on schedule

  7. Defence Sector in the UK – Future Commitment • January 2005 – establishment of a central Private Finance Unit (PFU) within the MoD • Had “the support at the highest level in both Defence and HM Treasury” • October 2005 – PFU has circulated a standard form PFI Project Agreement for defence projects to PFI practitioners • Clear message – the UK MoD see the efficiencies and benefits of the private sector in the procurement of equipment and services …….they are comfortable about using these techniques even in supposedly sensitive areas…….and they are getting organised about it

  8. © Freshfields Bruckhaus Deringer 2005 The information and opinions contained in this presentation are not intended to be a comprehensive study, nor to provide legal advice, and should not be relied on or treated as a substitute for specific advice concerning individual situations. This presentation speaks as of its date and does not reflect any changes in law or practice after that date. HK315394

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