Heightened pressure on the global financial market has prompted the UK Ministry of Defence to re-evaluate the funding model for elements of its Military Flying Training System (MFTS) deal.

The MoD signed the first part of its wide-reaching MFTS framework with Lockheed Martin/VT joint venture Ascent last June, but reluctance on the part of major lenders to back private finance initiative contracts and the falling value of Sterling are threatening forthcoming acquisitions of basic and rotary-wing trainers.

"There is a change in thinking in the market for long-term PFIs," says Lockheed's Fred Ross, managing director for Ascent Flight Services. "We are doing market soundings with some that won't shy away, and have brought in the experts from the City. We are talking to the right people."

However, Ross told IQPC's Military Flight Training conference in London that planned deals for new basic trainers and to replace the MoD's current helicopter training arrangements could now shift to rely on public-private partnership funding.

In a sign of the difficulties facing the MoD and training system partner Ascent, a process launched last October to replace the UK's tri-service Defence Helicopter Flying School's (DHFS) activities from March 2012 has recently been suspended.

The MoD late last year identified a contract duration of "approximately 20 years", but industry sources say a proposed 15-year term raised doubts over whether it would acquire new aircraft, and limited business opportunities for potential bidders.

FB Heliservices delivers the current DHFS system under a 15-year PFI deal, but a source close to the project notes: "There is very little clarity for the rotary community on what comes next".

The experiences of the MFTS programme are echoed separately by Andy Baker, head of the MoD’s Private Finance Unit, who says: “For PFIs, the problems in the global banking markets have been especially hard”.

 

Noting “a significant downturn in the availability of private finance and increased rates of borrowing”, he says: “alternative procurement models using lessons learned from PFI are increasingly being explored, and in some cases pursued, but value for money remains the main driver.”

 

Major PFI projects for the UK’s SAR-H search-and-rescue helicopter recapitalisation effort and its Defence Training Review are in the procurement phase, says Baker, writing in the February 2009 issue of the Defence Equipment and Support organisation’s Desider publication. Other potential deals include a training service to support the Royal Air Force’s future fleet of 25 Airbus Military A400M transports, he reveals.

Source: Flight International

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