Replacement of MPS helicopters

Report: 15
Date: 15 September 2005
By: Commissioner

Summary

Following successful pre-contract negotiations, this report seeks authority to award a single source contract for the purchase and in service support of three helicopters, replacing machines introduced into service between 1993 and 1996. The choice of helicopter type was approved by the Finance Committee of 23 September 2004 (agenda item 19) subject to Home Office (HO) capital funding approval of up to 40%.

A. Recommendation

That Members are asked to approve:

The award of a single source contract for the following:

1. The purchase and role equipping of three helicopters, associated spares and tooling, of which up to 40% will be met by the HO. Details are in the exempt Appendix 1.
2. A Service By Hour (SBH) maintenance contract for both the engines and airframe for a period of five years (fixed for the first two years) and with an option for a further five years to cover the anticipated life of the helicopters. Details are in the exempt Appendix 1.

B. Supporting information

1. As a result of a 2002 audit by the Metropolitan Police Authority (MPA) Internal Audit Directorate, the MPS was required to produce a helicopter replacement strategy for its three helicopters. In 2003 the Territorial Policing Command Team (TPCT) approved an Air Support Unit (ASU) report that outlined the operational requirement for helicopter air support in the MPS. An option paper was prepared and presented to the MPS Management Board (MB) in April 2004 when the commencement of a fleet replacement programme was approved.

2. The MPS Resource Approval Committee (RAC) approved the business case for replacement in August 2004 and authority to commence the replacement programme was given by the MPA Finance Committee on 23 September 2004, subject to Home Office capital funding being made available.

3. In February 2005 the HO advised the MPA that it had been awarded a capital grant, spread over two years, towards the purchase of the preferred aircraft based on the original full cost estimate.

4. The selection of the preferred aircraft, as approved by the MPA in September 2004, necessitated single tender action as it can only be purchased through the manufacturer’s UK distributor. The preferred aircraft is included in the latest PITO (Police Information Technology Organisation) Framework Arrangements. The negotiation of the precise requirements for fit-out, spares and equipment resulted in a reduction, of estimated costs based on the PITO framework pricing. Details are in Exempt Appendix 1.

5. Central Operations Business Group approved a paper for submission to the MPS Investment Board (IB), on behalf of MPS Management Board, on 12 August 2005.

6. On 23 August 2005, the MPS IB reviewed the paper and gave authority to seek MPA approval to award a contract to the preferred bidder.

7. The current capital programme includes for the provision of these helicopters. Adverse movement of the exchange rate would have affected the allocated sums for this requirement, but this was mitigated and offset by successful negotiations resulting in a reduction of the capital required.

8. The additional associated revenue costs were submitted and included in the MPS Medium Term Financial Plan (MTFP) in 2004/05. However, after revised estimates these costs have increased and further funding is required. This additional revenue relates directly to the preferred maintenance arrangements for the new aircraft, the cost of entering into a Service by the Hour (SBH) arrangement with the supplier, and will be met from within the existing Central Operations budget.

9. From an operational standpoint, a non-SBH approach would be unacceptable as the helicopter would be unavailable for long periods due to repairs and/or spare parts being required. This is a significant business driver. An SBH agreement would reduce this risk of potential helicopter downtime to a few days maximum.

10. Without taking out an SBH agreement, the MPS would have to purchase and maintain its own stock of spares to compensate. This approach would still not reduce the downtime risk to a level comparable to that under SBH.

C. Legal implications

This procurement exercise was conducted in accordance with EU and UK regulations and relevant directives. The EC145 aircraft is included in the latest PITO (Police Information Technology Organisation) Framework Arrangements for the supply of Helicopters and Role Equipment (2003), which removed the necessity to undertake a separate OJEU process. If the award recommendation is approved, contracts (for both aircraft purchase and SBH maintenance) between MPS and the preferred supplier will be put in place.

D. Race and equality impact

The equal opportunity and diversity policies of the preferred bidder were reviewed as part of the tender process. The Human Rights Act 1998 has been incorporated into their policies and procedures and an equal opportunities policy is in place, including provision for ‘positive action’. The preferred bidder has also declared that they have not appeared before an employment tribunal or prosecuted for breaching employment regulations. Based upon the tender return the preferred bidder was deemed as meeting the criteria.

E. Financial implications

1. As approved by the MPA in September 2004, the current capital programme was based on the assumptions that two aircraft would be replaced in 2005/06 and one in 2006/07 and the airframes and maintenance contracts would be purchased in Euros at an exchange rate of £1: €1.50. This was also based upon receiving a Home Office grant, which was awarded to the MPS in February 2005.

2. As a result of the adverse movement in exchange rates, the required capital would have increased by £0.4m. This however has been more than offset by successful negotiations held between the ASU, Procurement and the supplier, resulting in a reduction of the full capital requirement. The programme has also been delayed meaning that all three aircraft will be scheduled for delivery during 2006/07. However, part payment for the aircraft will take place during 2005/06 utilising the HO grant received. Exempt Appendix 1 provides a breakdown of the capital cost.

3. Replacing the current aircraft with the preferred aircraft will result in additional revenue costs. As agreed by Investment Board August 2005, a proportion of these additional costs are to be met within the existing Central Operations budget. Exempt Appendix 1 provides greater detail.

F. Background papers

• Investment Board Paper for the Replacement of MPS Helicopters dated August 2005
• Business Case for Replacement of MPS Helicopters dated August 2004
• Financial Data supporting August 2004 Business Case
  MTFP 2005/06
• MTFP 2005/06 Appendices A - C
• MTFP 2005/06 Appendix D

G. Contact details

Report author: R. Walmsley, Engineering Manager MPS ASU
Anne Jones, TP Business Support Accountant, Finance Services

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

Send an e-mail linking to this page

Feedback