36. One of the ways in which to demonstrate that the costs of a Change represent VfM is through competitive tendering. This has not always been done in the past. However, competitive tendering of the underlying costs of Changes should be the default option for Major Changes unless the nature of the Project or the Change precludes this. Where competition is not viable other methods of testing VfM should be considered (e.g. independent analysis, benchmarking or cost audit) or by using existing costs and extrapolating these to the Change in question. Acquisition team members may also like to consult with the MOD Commercial Project Enablement Team - Cost Assurance & Analytical Service (CAAS). Appendix B sets out guidance on what should be included in a price breakdown relative to a Change and how the various aspects of Change may be value-tested. While this is not authoritative guidance it may provide useful suggestions for members of other acquisition teams who are considering Changes.
37. If competitive tendering is viable, acquisition team members should be as proactively involved in the competition as possible, for example by suggesting companies which may be invited to tender for the work. Care should be taken, however, not to do anything which could be seen as changing the allocation of risk between the parties.
38. The importance of achieving value in relation to Major Changes was demonstrated by a statistic in the recent NAO Report which stated that, "Although major changes [are] relatively uncommon, they contributed 90 per cent of the total spend on changes in 2006."17
39. While competitive tendering is helpful for identifying the lowest priced tender, it may also elicit other factors which may influence value for money. Examples of this would be where, if appointed, a particular tenderer may increase the likelihood of performance failures by the contractor, or would reduce the residual value of the underlying assets. These aspects may be taken into account in determining which tender offers the best value for money.
__________________________________________________________________________________________
17 Report by the Comptroller and Auditor General HC 205 Session 2007-2008, dated 14 January 2008, page 10, para. 1.10. Note that this statistic is not defence-specific. However, from our survey of acquisition team members, it would appear that similar trends prevail in defence.