CMA using competition policy to support the MoD in its review of defence contracting

Why should I read this?

On 18 November, in a letter to Rachel Reeves, Chancellor of the Exchequer, Doug Gurr, Interim Chair, and Sarah Cardell, Chief Executive, of the Competition and Markets Authority (CMA), state that they are actively supporting the Ministry of Defence (MoD) in its review of defence contracting, following the Industrial Strategy Defence Sector Plan, and remain keen to do more. Specifically, this includes an open offer from the CMA “to help tackle bid-rigging in public procurement through the deployment of AI tools and other data science techniques” which the CMA would like to discuss further with the Government.

These comments follow swiftly on from comments made last month by Doug Gurr when he said “that procurement is a problem - with rules so complex that it is easier to sell anywhere other than the UK” and asked for “evidence of where procurement is holding back firms from scaling and succeeding”.

The statements align with the UK Government’s Strategic Steer published in May 2025 directing the CMA to prioritise sectors that drive economic growth. Defence is explicitly listed amongst eight “growth-driving” sectors for market studies, investigations and remedies.

It is clear therefore that the CMA plans to work closely with the MoD to leverage public procurement and crack down on bid rigging in the defence sector to increase growth in the UK.

Changes to the public procurement regime are therefore actively under review, and further reform is expected.  With a drive to support new, smaller players and reduce incumbency advantages, alongside a crackdown on illegal bid rigging in defence contracts, suppliers in the defence sector should be on notice about the potential impact of these developments on their businesses.

Potential Impacts

1. Potential for relaxation of procurement rules in some sectors to support “scale-ups”

The CMA wants to assist agile, perhaps disruptive, smaller competitors to grow fast to become strong competitive forces – known as ‘scale-ups’.  Winning larger public contracts and using the resulting advantageous cash flow to grow is considered a particularly helpful mechanism to increase competition.  The CMA’s September discussion paper on scale-ups asked for views from industry as to where public procurement could be used, changed or improved “to drive market dynamism” and remove competitive barriers, especially if the position in the UK is worse than overseas.  As a result there is a significant possibility that by Spring 2026 the CMA will recommend the relaxation of at least some procurement rules in some sectors.

2. Better designed procurements to shape markets may involve more centralisation of procurements

In its recent response to a Cabinet Office Consultation on narrower changes to the Procurement Act 2023, the CMA made much wider comments.  It is recommending public authorities, which would include the MoD, consider how their buying activity can shape relevant supply markets because they are often important buyers.  Choices in the design of procurements can influence the number, size and diversity of firms left active on a market and can therefore impact a market’s resilience.  The choice of evaluation criteria can influence where the focus of competition in the procurement will be – e.g. only price, or different aspects of quality or innovation.  Finally, feedback to unsuccessful bidders can help them improve and increase competition in procurements which repeat.

This type of design is easier or more effective when procurement is more centralised as skills, resources and market knowledge are not split across several buying contracting authorities.  This, along with joint procurements to increase buyer pressure, may become a prompt for more combined or centralised procurements in the future.

3. Pressure on incumbents

As well as more competition in procurements, incumbent suppliers can now expect a greater push to do things which will reduce barriers or increase competition in any re-procurement.  Experience shows that this pressure can be fairly uncomfortable, particularly when it arises (as it often does) shortly before a re-procurement. Responses need to be carefully calibrated as the incumbent often wants to make the most of their market advantage, but without irritating the procuring authority too much.

4. Tough enforcement will increase

In common with other international competition regulators, the CMA continues to give high priority to enforcement against bid rigging in public contracts as a means of saving taxpayer’s money, quoting research that bid rigging typically increases prices by 20%.  A crackdown on bid rigging was specifically referred to in the CMA’s letter of 18 November, with a clear offer made to the MoD to use AI tools to detect bid-rigging activity in defence contracting. Relatedly, the new Procurement Act 2023 has increased the amount of data which needs to be reported and more data may make detection easier by making anomalies stand out more.

5. Debarment from procurements

Defence contractors found to have breached competition law (or a wide-range of other obligations) can be banned from tendering for public contracts for up to 5 years and added to a central  debarment list.  As a means of uncovering bid-rigging in public contracts, very recent changes to the CMA’s leniency regime provide that the first in to apply for leniency before the CMA has started an investigation will have guaranteed immunity from public exclusion and debarment.

Comment

These latest developments make clear that defence is a priority sector for competition oversight and pro-growth policy. To that end, the CMA will look to work closely and openly with the MoD in its efforts to help promote resilience in the public finances by seeking to leverage public procurement rules to help shape and unlock dynamic markets, to support scale ups, to deliver economic growth and to save taxpayer’s money by cracking down on illegal bid rigging.

Whilst the detail for changes to the rules is as yet unknown, we should expect changes fairly soon and the impact of this new approach to be felt across the defence sector supply chain, as the CMA continues on its mission to deliver growth to the UK economy.