3.8 Figure 6 sets out challenges to successful delivery faced by the projects and programmes we examined, including the areas in which suppliers were not delivering to the contract. Problems with supplier performance referenced by delivery teams included:
• the technical ability of suppliers to execute complex design work within the agreed timetable, and meet the requirements of defence standards, including the ability to provide safety cases that satisfy the various military safety regulators, for example the Spearfish torpedo upgrade; and
• suppliers' ability to project manage effectively. This was sometimes due to a wider under-resourcing of the work by the supplier. A particular issue was the management of other parts of the supply chain, for example in the case of the Type 26 frigate.
The Department has made achievement of milestones more difficult in some cases by changing user requirements after the contract was let. For example, on the Ajax armoured vehicle, user changes required renegotiation of the contract with the supplier.
3.9 Once a project or programme has experienced difficulties, we saw examples of the Department intervening, with engagement at senior levels; staff being embedded on site to improve relationships; improved programme controls; sharing of management information; and, where relationships had broken down, staff changes on both sides. These interventions are reported as yielding benefits but would have been better put in place before problems occurred. The Department has also mitigated some of the consequences of poor performance by imposing financial penalties, or withholding payments, where allowed in the contract.
3.10 Some suppliers have under-performed on a range of contracts over time, and anticipation of this happening again shows up on risk registers and in teams seeking to identify lessons from other programmes. However, even when under-performance is significant, the Department appears reluctant to remove a supplier from a contract because of the knock-on effects of 'resetting' a programme. Under current regulations, the Department is unable to bar suppliers from future contracts unless it has removed them from a previous contract for poor performance. In December 2020, the government published a green paper on transforming public procurement.23 It proposes that the best-performing suppliers should be rewarded with a greater share of government contracts, and conversely that it should be easier to take into account past supplier performance when awarding future contracts.
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23 Cabinet Office, Transforming public procurement, CP 353, December 2020.