Competitive tedering may have seemed to Government officials, who had been stung once too often by the cosy uncompetitive tendering of the past, a brave new way of securing the best equipment at the best price. To industry, it has proved an immensely costly and wasteful process.
Sixty years ago, things may have been different. It cost Hawker £25,000 to develop the Hurricane, quickly recouped on a unit selling price of £5,000. Today, the Eurofighter EF2000 will cost £10 billion to develop, for a unit selling price of £36 million. While there may be some useful spin-offs from the design process, the bulk of the expenditure by an unsuccessful contender is wasted.
If the process nevertheless produced the best equipment available at the best possible price, then the cost to industry could perhaps be forgiven. In fact, there is an argument that it falls short here, too, because of the nature of the teaming arrangements needed for a complete bid. The fact is that there are few companies which can produce a major aircraft or system on their own. Most contenders, in most competitions, must compete as parts of multi-disciplined and probably multi-national consortia.
Take the example of the UK's recent Replacement Maritime Patrol Aircraft (RMPA) contest. Each consortium consisted of an airframer and a systems house. The UK Ministry of Defence probably hoped that the winning contender would combine the preferred airframe, the preferred mission system and the best price, but there was no guarantee that it would. In the end, the customer has suggested that one of the unsuccessful but politically preferred mission-systems bidders should be brought on to the successful team. Effectively, all the years of competitive marketing and tendering did not even produce a single winner.
It could be argued that the MoD would have been better off running a tender only for the overall integration and supply of the RMPA, and let that successful tenderer select the best airframe/mission-system combination.
Even that would be a short-term solution. The real question is: is it realistic to expect the industry to go through the process of competitive tendering as currently interpreted? The question is given more weight by the intrusion of politics into such contests. The UK's recent batch of awards again provides a clear example. There were at least seven teams bidding for the Conventionally Armed Stand-off Missile programme, each of which spent millions of pounds on its bid. Yet almost from the start, politics dictated that the BAe-Matra Stormshadow should be selected. If it had not won, the French Government would not have given approval for Matra to merge its missiles business with that of BAe.
The competition may have resulted in cutting the price of the eventual contract, but a full-blown process of competitive tendering is hardly necessary to achieve that aim.
In the USA, the bidding process has been refined to the point where the principal contractor-sponsored competition is paper-based. The Pentagon selects perhaps only two contractors to go forward from a paper evaluation to a hardware competition and - crucially - it is the Pentagon which pays for those two competitive pieces of hardware to be built.
A clear UK stance on tendering becomes even more pressing given the move towards a centralised European procurement agency. The UK is now embarking on that path with France and Germany, which have always put industrial policy well ahead of competition. Somewhere between the two approaches there must be a better way to buy.o
"The MoD probably hoped the winner would combine the preferred airframe and mission system and the best price."
Source: Flight International
