Originally Posted by
pba_target
Some really good points raised ref "buying domestic". Question from someone who's never been involved in procurement:
We all know that something bought in the UK doesn't actually cost the (exorbitantly high) sticker price as the treasury sees a lot of the money back in tax etc in the long run. Has anyone ever heard of the MOD being given a budgetary "reward" for buying British ? Take Merlin 3 Vs Chinook - to buy equivalent lift from Westlands costs (for the sake of argument) twice what Boeing are asking - does the treasury flex the MOD budget to allow for that?
It's not expressed like that but, for example, any aircraft under a certain tonnage is (or was) free of VAT.
There have been various 'Defence Industrial Strategies' over the years, aimed at protecting certain sectors or technologies; sonics used to be one, with procurers directed to Buy British (GEC-Marconi), regardless of cost or quality - which was high and relatively poor when compared to, for example, CD(C). My experence is that the bigger problem was a current defence minister insisting on contracts being awarded to manifestly unsuitable companies in their constituencies. Then, 6 months or a year in, the company would ask to be released fom the contract, delaying matters for years. On one notable helicopter programme, the work causing the problem was then carried out by a young RN officer at Boscombe, and two other companies, but the original company paid in full. No, I don't know of any Committee who has dared mention that one!
Very often the perceived high sticker price is caused by low volume production, and bespoke designs. Neither is the fault of the procurers. Before any contract is let the person with the technical and financial signature (in practice the technical project manager or director) must actually make a written declaration that the price is 'fair and reasonable', and sign it. It's nothing to do with financiers. To aid the decision he/she has Tech Costs people, and Commercial ensure contracts can be post-costed, and excess profit recovered through alterations in the QMAC.
As an aside, Westland (as was) were well-known for declaring any excess profit ASAP, often in time for the project manager to ask the Service if they wanted to add any 'nice to haves'. Everyone benefitted, as negotiating an amendment to the QMAC was a nause, diverting scarce resources for months. You'd have to ask someone who had the misfortune to work with Boeing if they did the same. I should add that this excess profit was usually as a result of efficiency, not a high quote. Getting the Trials Installation right first time saves on one production installation, which can be a significant percentage in a small fleet.