34. If a Change is going to be processed through the existing contract, then the MOD will necessarily be in a single-source situation, negotiating with the incumbent contractor. This means that the MOD may have a weakened negotiating position and, if the contractor is entitled to charge a margin on the underlying costs of the Change, then this may reduce the incentive on the contractor to manage its sub-contract costs. Change protocols should address methods of protecting VfM. This should also be a key consideration when discussing Changes with the private sector partners.
35. Analysis conducted by the NAO suggests that, where there are no contractual protections in place in relation to VfM, the resulting cost to the MOD may be greater.16 This emphasises the importance of aiming to introduce some of the principles of best practice, as described in paragraph 9 to 15 above.
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16 Report by the Comptroller and Auditor General HC 205 Session 2007-2008, dated 14 January 2008, page 14, para. 2.9.