How does defence procurement work?
Defence procurement deals with sourcing, negotiation and vendor selection for the goods, products and services that the Ministry of Defence has identified to meet its objectives. The MOD issues a formal contract notice for the goods or services it wishes to acquire and suppliers then apply to provide these solutions through a formal tender bid.
Defence procurement can appear confusing and complicated from the outside, but it can be extremely profitable and rewarding for your organisation once you are accustomed to how it works.
The MOD spends approximately £19 billion per annum with UK industry. It is one of the biggest procurement organisations in Europe, and is the single biggest customer for UK industry. The MOD advertises its tendering opportunities widely and uses several channels to help suppliers find defence contracts.
These include contract opportunities portals such as DCI, where you will have access to UK, European and global opportunities relating to:
- Emergency services
- Humanitarian aid
- Counter terrorism
- Homeland security
The MOD also advertises through the government’s own Contracts Finder portal where government departments and public bodies advertise tender and contract opportunities valued at £10,000 and above. Contracts over £10,000 are also advertised in the MOD Defence Contracts Online (DCO) portal.
All contract opportunities valued at, or above, the EU threshold are advertised in the Official Journal of the European Union (OJEU). These contract opportunities may also be published in a number of other printed and digital sources, but this can be disparate.
However, to reap the benefits which defence procurement can offer, you first have to understand how it works.
Here are our five steps which explain how defence procurement works:
1 – Identifying a need
Defence procurement always starts with a buying organisation identifying a need to procure goods, products or services.
To meet their objectives, defence organisations need to find the right products, goods and services and they rely on the procurement process to do so.
2 – Issuing the contract notice
Once this need has been recognised, the buying organisation will identify exactly what their requirements are, and formally write these up into a Contract Notice.
Within defence procurement, it should be noted that the MOD does not have a ‘preferred suppliers’ list but runs open competitions to find the services it needs. Thus, any supplier, large or small, who meets the requirements and criteria for a contract opportunity can tender if they wish.
3 – Sourcing, negotiation and vendor selection for the goods, products and services
After the contract notice has been published, and suppliers have applied to tender, the buying organisation must go through the applications and identify their preferred supplier.
Within defence procurement, the MOD procures goods and services through open competition in the domestic and global market, buying off the shelf where appropriate.
4 – Finalising the purchase order
Once the preferred supplier has been identified, the buying organisation will review the terms of the contract and formalise these in a Purchase Order. This will outline the terms of the contract, including timescales, deliverables and price.
5 – Delivering the goods
Once the Purchase Order is agreed on by both parties and the contract has been signed, the next step is the delivery of the goods, services or products.
At this final stage, the buyer will reconcile the goods with the terms outlined in the Purchase Order before making payments to the supplier. If the services have been delivered in line with the terms of the Purchase Order, payment will be made.
To make the most of the lucrative opportunities which defence procurement can offer, sign up for a free trial with DCI today!