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Bidders for one of the government鈥檚 largest outsourcing contracts have been left bemused after the Ministry of Defence鈥檚 estate arm quadrupled to 拢400m the value of its contract for a private sector partner to manage its operations just days after issuing the tender for the work.

The news emerged as the Defence Infrastructure Organisation (DIO) admitted that it does not have enough staff or skills to deliver its operations and, despite a cross-Whitehall crackdown, has been forced .

It also comes after it had delayed by a further year its tranche of construction, repairs and maintenance contracts, worth up to 拢9bn, with the contracts not now set to be awarded until 2014.

The original tender issued by the DIO for its strategic business partner on 30 May 2012 put the total value of the contract at 拢100m over 10 years. This value was then restated in subsequent procurement information sent to potential bidders - including the pre-qualification questionnaire (PQQ) - on 7 June.

Days later potential bidders were told that the total value of the contract had been revised up to 拢400m with an addendum to the original OJEU notice issued to this effect on 16 June.

The updated tender added that the 拢400m figure was 鈥渙nly an estimate of the potential fee available to the strategic business partner鈥� and that 鈥渢he final contract value may be higher than the estimate provided in this notice鈥�.

For more on this story see Allister Hayman鈥檚

The sudden move to massively increase the value of the job, which is one of the government鈥檚 largest outsourcing contracts and will see the successful bidder managing the DIO鈥檚 拢3.3bn annual budget as well as the defence estate, worth nearly 拢20bn and comprising more than 4,000 sites, left potential bidders bemused.

Firms expected to bid for the job include Capita, which is teaming up with URS, Jacobs, Telereal Trillium, Bechtel, Serco and CH2M Hill, which are expected to form consortia with property and estate firms such as Jones Lang LaSalle, Land Securities and Savills.

A senior figure at one potential bidder, who did not want to be named, said officials 鈥渄id not provide much in the way of an explanation鈥� for the change in value of the contract, despite questions asked at a recent industry day hosted by the DIO.

鈥淚t鈥檚 a massive change and it completely changes the way you think about the job,鈥� he said.

Another bidder, who also wanted to remain anonymous, said the DIO had yet to work out exactly what role they wanted the strategic business partner to play. 鈥淭hey don鈥檛 really quite know what they want yet. Is the role straight asset management? Or is it about rationalisation and transformation of the estate? They鈥檙e thinking it through as we go along - as is everyone else,鈥� he said.

But another bidder said the move had come as the result of feedback from the market. 鈥淧ut it this way: they were told that 拢100m was too low for what they were looking for,鈥� he said.
A DIO spokesperson said the value of the contract was 鈥渞evised upwards in the light of a better understanding of the possible cost reductions and opportunities for estate rationalisation that exist鈥�.

鈥淭he contract value is designed to be largely incentive-based and represents the estimated total over 10 years,鈥� he added.

But Labour鈥檚 shadow defence minister Alison Seabeck said the sudden change in contract value was an 鈥渋ndication of mistakes being made by acting in haste鈥�.

She also attacked the DIO鈥檚 move to delay the award of up to 拢9bn worth on construction contracts.

鈥淭he uncertainty of the decision to push back to 2014 the majority of the construction contracts will damage confidence in the sector, including construction, their subcontractors and their workforce,鈥� she said.

鈥淭here are also concerns that as jobs are cut in the DIO that there will be an issue about the capacity to manage the change coming forward.鈥�