The first significant Go-Co agreement in the UK was struck in 1993 when Hunting-BRAE, a consortium of Hunting Engineering, Brown and Root and AEA Technology, were awarded a seven year management contract for the Atomic Weapons Establishment ("AWE").
Since then, the model has been adopted for a number of other Government facilities, including the National Physical Laboratory ("NPL"), various Nuclear Decommissioning Authority ("NDA") sites and most recently the National Nuclear Laboratories ("NNL"). Further details can be seen in Table 9-2 and Table 9-3 below.
| Go-Co rationale | Date contractorised |
Atomic Weapons Establishment | Improved production management required | 1993 |
National Physical Laboratories | Cost efficiencies and "better value science" | 1995 |
Nuclear Decommissioning Authority (Sellafield sites) | Drive cost and time savings through competition of contracts | 2008 |
National Nuclear Laboratories | Retain nuclear technology skills base in the UK | 2009 |
Source: Company websites and annual reports
Table 9-2: Major Go-Co's in the UK
| Contractors involved | Annual funding / turnover | Annual dividend to contractor | Number of staff | Time from tender to contract award |
Jacobs Engineering Lockheed Martin Serco | £767m (2007) | £59m (2007) | c.4,000 | c.1 year (2000) | |
SERCO | £65m (2007) | £2.9m (2007) | 627 | 18 months (1995) | |
NDA (Sellafield sites) | AMEC | £1,300m | Up to £50m | 12,000 | c.2 years |
Serco Battelle University of Manchester | £200m | £21m (trading profit) | 700 | 7 months |
Source: Company websites and annual reports
Table 9-3: Details of major Go-Co's in the UK
It should be noted particularly that the MoD has operated a Go-Co arrangement over the AWE since 1993. This contract was competitively re-let in 2000 on a 25 year basis (although pricing for the contract was only set for part of this period). The MoD retains a controlling share which allows the Department to regain control of the organisation if performance is poor. The Go-Co is compensated in the form of a management fee, expressed as a percentage of the value of services delivered, adjusted for performance as per the contractual detail. The basic fee rate has been negotiated down by around 1/3 over the past five years The Review team's discussions with the IPT managing the AWE contract suggest that recent experience with this partnership arrangement has been very positive with the contractor delivering to a high standard within a set of systems and strategic requirements. The AWE has also significantly benefitted from draw down of relevant skills from the parent body organisations (e.g., implementation of Earned Value Management) and experience in recruitment and retention of appropriate senior staff has been positive.
From the MoD's perspective the most significant challenges in operating the contract have been developing an "eyes on, hands off" style of monitoring and control with the contractor and the demonstration of ongoing value for money at contract re-pricing points (without competitively re-letting the contract). Fee rates have been gradually reduced over the life of the contract.