The MOD’s latest announcement on tying profit rates more closely to delivery performance is an important development for single source defence contracting.
The headline is understandably about incentivising suppliers to deliver on time and on budget. But one practical implication is that the quality of the agreed delivery baseline becomes even more important.
For Qualifying Defence Contracts (QDCs), this should not only be a cost risk conversation.
Cost risk analysis remains essential, but if profit is increasingly linked to performance against agreed dates, then schedule risk analysis (SRA) becomes increasingly relevant. Delivery dates should be realistic, evidence-based and understood by both parties before they become the benchmark against which performance is measured.
That means properly testing assumptions around programme logic, dependencies, approvals, production constraints, supply chain maturity, integration, trials, acceptance and decision points.
A challenging delivery date may be appropriate. An untested or unrealistic one creates problems for everyone.
Good SRA helps MOD and industry agree dates that are ambitious but credible, and provides a clearer basis for managing performance throughout the life of the contract.
At Redstone Risk, we have a proven track record over many years in undertaking cost and schedule risk analyses for complex programmes, supporting clients in establishing realistic, evidence-based baselines.
