Recommendation 17

Because of high and volatile inflation, the MoD has changed its approach to contracting with suppliers. Formerly, around 25% of contracts were ‘firm price’, whereby the supplier bore the inflation risk.51 However, the MoD said that the cost of such firm price contracts has now become too great, and that it was not getting good value for money offers when 42 Q 112 43 Q 31; C&AG’s Report, para 2.20 44 Qq 130, 132; C&AG’s Report, para 2.20 45 Q 113 46 Qq 118, 119 47 Q 83 48 Q 108 49 Qq 128, 129 50 Q 108 51 Q 21; C&AG’s Report, para 2.4 MoD Equipment Plan 2023–2033 13 trying to get suppliers to bear the cost of inflation through new contracts.52 Instead, the MoD has decided to take on more inflation risk itself by linking cost increases in contracts to appropriate indices.53