My right honourable friend the Minister of State for the Armed Forces (Adam Ingram) has made the following Written Ministerial Statement.

The Ministry of Defence has agreed to lower the threshold for the advertising of MoD contracts. This will give greater encouragement to small and medium enterprises (SMEs) to enter MoD business and is designed to further enhance the visibility and transparency of the UK defence equipment market.

Currently “non-warlike” requirements valued in excess of £93,000 are advertised in the Official Journal of the European Union (OJEU) and the MoD Defence Contracts Bulletin. “Warlike” requirements are only advertised in the bulletin if their value exceeds £500,000. In addition to this, “warlike” requirements exceeding £685,000 (€1 million) are advertised on the European Defence Agency's electronic bulletin board.

The changes to this will be phased in. On 30 April 2007, the threshold for “warlike” requirements will be lowered to £93,000. On 30 June 2007, this threshold will be lowered once more to £40,000. The threshold for “non-warlike” requirements will also be reduced to £40,000 on 30 June 2007. Furthermore, from 30 June, MoD project teams will be encouraged to consider advertising requirements with values as low as £20,000. This change could generate up to 7,000 additional adverts a year.

In line with one of the key themes of the defence industrial strategy, this is one of a range of initiatives aimed at making the MoD easier for small and medium companies to do business with. The MoD is committed to being SME-friendly, as these companies play a crucial role in UK defence business and represent a significant core of direct suppliers to the department. For example, in 2005 just over half of the defence contracts let were placed with SMEs, with a value of over half a billion pounds. Consequently this change has been welcomed by the defence trade associations.

The MoD already leads the way in the transparency of its tender and contract opportunities and procedures. In instigating the change we are being consistent with the general direction of EU policy and the work of the Office of Government Commerce. This change complements the European Defence Agency Code of Best Practice in the Supply Chain as well as the recently launched electronic bulletin board step 2. It is hoped that this will encourage similar moves by our European colleagues. It is a significant development and one which it is hoped will promote a dynamic and competitive supplier base.