Report shows MoD spending still failing to prioritise UK jobs over cheapest price

A new report by Prospect trade union, which represents more than 11,000 private and public sector defence workers in the UK, has shown that the MoD’s so called “Social Value Test” (SVT) is not being applied properly when it awards government contracts.

The SVT is supposed to be considered when allocating defence contracts to ensure maximum benefit for UK communities in any government expenditure. The government has said that it is a key plank of its levelling up agenda to make sure government spending benefits communities in the UK.

Prospect’s report shows that this simply isn’t working as intended. The added weight given to headline “price” when tendering means that other considerations, such as how many UK jobs will be supports, rarely come into play. This is leaving us with a growing engineering skills gap, a failure to meet climate change goals, and missed opportunities to use defence spending to level up the country.

In 2020, for example, the MoD announced the UK would equip its new Apache helicopters with missiles made in the US by Lockheed Martin, despite a competitive bid from British firm MBDA which employs 4,000 staff and is based in the UK.

The report suggests a number of changes be applied to the SVT, including giving more weight to non-price considerations and measuring tenders against KPIs such as climate, jobs, skills, and local investment.

Sue Ferns, Prospect’s senior deputy general secretary, said:

“The MoD is responsible for more than £11bn of annual competitive contract expenditure which, if directed properly, can have the dual effect of supporting British business and driving the levelling up agenda. To date this potential benefit has not been delivered as well as it ought to be and the Government is failing in its mission to increase the contribution to UK prosperity from defence.

“The main reason is that headline price is still the primary driver of procurement decisions rather than a holistic assessment that considers the impact on local communities, the economy and climate change alongside headline price.

“A more rounded approach would enable the government to use defence spending strategically to help drive its levelling up agenda while supporting skills, and reinforcing the UK’s sovereign defence capabilities from design to build.

“It is also the case that if we have a larger, more diverse and competitive UK defence industry, supported by spending government money in the UK, it brings down the overall cost of all those things that are automatically carried out on a sovereign basis. This saves money in the long run as well as improving skills and security.”

Chris Evans MP, Shadow Minister for Defence Procurement, said:

“The MoD’s procurement system is failing British businesses.

From wasting billions of pounds in cancelled contracts to the Social Value Test not being applied properly, Ministers are repeatedly missing opportunities to provide and support local jobs across the country.

Our defence and aerospace industries are national assets and Labour is committed to a “British Built by default” approach to defence procurement which would support the growth of the British defence sector and build resilience in our supply chains.”