5.5 Although in theory, competition between suppliers can provide evidence that the Department is achieving the optimum cost for the programme, for various reasons it is often absent for the largest, most complex programmes (as explained in paragraph 3.2). Competition is useful for exposing unrealistic assumptions by the Department. Teams for both the Type 31 frigate and the Fleet Solid Support ship had to rethink their first attempts at a competition, as suppliers did not consider the required level of capability deliverable within the cost parameters set by the Department.
5.6 In the absence of competition, the Department carries out comparisons against VFM benchmarks, but this is not an exact science. In two cases we examined - the Skynet 6 military satellite and the Fleet Solid Support programme - the proposed cost was higher than the VFM benchmark. In both cases, the SROs questioned the quality and completeness of the benchmark, for example where benefits are not easily monetised. The Department subsequently approved both business cases (in the latter case, subject to satisfactory completion of negotiations with suppliers). In addition, a benchmark is not always available. For example, supplier ownership of intellectual property rights, or the nature of international agreements, might mean the Department does not have access to actual costs.