Contracting for complex performance in markets of few buyers and sellers: the case of military procurement
Caldwell, Nigel; Howard, Mickey
Date: 28 January 2014
Journal
International Journal of Operations & Production Management
Publisher
Emerald
Publisher DOI
Abstract
Purpose – The aim of the paper is to identify and review the impact and challenges of new
contractual arrangements on UK military procurement and other limited or oligopolistic markets.
Design/methodology/approach – The unit of analysis is the large-scale procurement programme.
Two cases of major military platforms (naval and air ...
Purpose – The aim of the paper is to identify and review the impact and challenges of new
contractual arrangements on UK military procurement and other limited or oligopolistic markets.
Design/methodology/approach – The unit of analysis is the large-scale procurement programme.
Two cases of major military platforms (naval and air defence) examine through-life maintenance or
“contracting for availability” and build theory on procuring complex performance (PCP). Propositions
are developed from the literature then tested and extended from the case analysis, supported by
35 interviews from buyer and supplier representatives.
Findings – Examining UK military platform procurement reveals a perspective not present in fast
moving high volume supply chains. In oligopolistic markets such as defence, the Ministry of
Defence (MOD) represents a market of one, seeking ambitious and non-incremental innovation from
the prime contractor during the procurement process. The new contractual arrangements show an
increasing shift in responsibility to the prime contractor who coordinates service support and supply
chain incentivisation over extended, often multi-decade platform lifecycles.
Research limitations/implications – The cases were conducted separately and later compared.
Whilst based on defence sources, the paper concludes with general recommendations for all
public-private complex procurements and seeks to explore other industry sectors as part of further
research into PCP.
Originality/value – Examined from a theoretical and practical perspective, the cases reveal the
challenges facing procurement in major public-private projects. The changing role identified reflects
extended timescales and the quasi-market military procurement environment, compounded by current
economic and politically charged conditions. Procurement by default increasingly plays a new shaping
role in large-scale programme management driven by outcome-based contracting. Customers such as
the MOD must re-evaluate their role under these new contractual arrangements, providing leadership
and engaging with future contracting capability and innovation.
Management
Faculty of Environment, Science and Economy
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