Vanguard Magazine

20 JUNE/JULY 2018 www.vanguardcanada.com Some further contractual issues relate to end-of-contract or mid-contract issues. Although equipment normally belongs to SPV, the procuring agency may change its mind about contract extension or reten- tion of the equipment midway through the contract. This gives rise to a major unforeseen circumstance. Moreover, step-in rights for the defence force and its exit strategies for a variety of reasons, from sub-par performance of the SPV to changing strategic circumstances, also are unforeseen circumstances. From the larger perspective of the coun- try, there are three further factors that im- pact this comparison. First, PPPs gener- ate further private sector business for the defence industrial base rather than public sector production of these inputs into de- fence, which opens up the possibility to use excess capacity from low peace-time demand for the capability in generating commercial business. This allows spread- ing overheads and stimulates long-term investment due to steady future revenues deriving from the long-term contracts un- der PPPs. Second, one of the conventional argu- ments for professional armies is the inef- ficient use of country's human resources in a draft defence force. Similarly, since certain military capabilities can be pro- vided by the private sector, self-selection will lead to better use of human resources as those productive workers who are not motivated to serve as military can still compete for jobs in PPPs. Third, the defence force risks losing its internal capacity to evaluate the SPV per- formance during the contract and at the end of the contract when a choice must be made between further PPP provision or a switch back to in-house provision. This is often termed as smart buyer capacity. Loss of this capacity opens the buyer to exploi- tation during the contract by failures to identify service deficiencies and by bidders if PPP provision continues. UK's Voyager capability When the British Ministry of Defence decided to outsource this capability by soliciting interest in 1998, six consortia pre-qualified, rather a large field of com- petitors for the purpose, noting that two to three competitors are typical in this slice of defence markets. However, upon consolidations, the field narrowed down to two competitors, AirTanker and Tanker & Transport Services Company (TTSC). They submitted proposals in 2001, not- ing that the TTSC proposal was based on Boeing 767 aircraft. The UK government offered £10 million to the losing bidder in order to compensate bidding costs and hence enhancing competition. The cost of taking part in these complex PPP bidding processes at the time was estimated at between £0.5m and £2.5m. Streamlining the bidding process by devis- ing model contracts and publishing them reduced these transaction costs. Another recent initiative by the UK government was to consider granting bidders access to public sector comparators to reduce bid preparation costs. However, this would undermine the fundamentals of sealed-bid tenders by facilitating implicit collusion around public sector costs. Revised bids were submitted in 2003 and AirTanker was declared winner in 2005, outbidding the public sector com- parator based on used Boeing 767 aircraft. Since there was and still is no other coun- try outsourcing the whole capability, the UK public comparator was unique. The AirTanker contract was finalized in 2008 and the service debuted in 2013, with full service levels reached in 2016. The Voyager capability offers strategic air lift, both personnel and cargo, and air-to- air refuelling. The core fleet of Voyager air- craft are equipped to refuel two jet fighters (under the wings) as well as a large aircraft (under the fuselage). The aircraft were later modified to satisfy the Theatre Entry Stan- dards by refitting them with platform en- hancements such as flight deck armour and vulnerable point protection. Moreover, one of the 14 A330s was recently converted to a VIP aircraft in 2015, years after the in- ception of Voyager, to carry ministers and the Royal Family on official visits instead of chartering commercial aircraft, resulting in savings of just under £1 million per year. AirTanker owns and maintains the 14 aircraft and the required infrastructure and provides the flight crews and the engineer in serViCe sUpport Royal Air Force Voyager. Photos: MoD/Crown

• Cover