Many engineering companies are undergoing a paradigm shift from product delivery to through-life service support. Firms are increasingly required to supply products and to provide support services throughout the product lifetime (Davies et al. 2003; Olivia and Kallenberg, 2003, IfM, 2003). This requires new business, operational and information system models that extend thirty years or more into the future (Prencipe et al. 2003, Morelli, 2003). The shift applies across a range of different sectors, including defence, healthcare, aerospace, automotive and construction. The shift from product delivery to service provision is especially well established in aerospace and defence procurement. There are a number of drivers for this change including changing procurement policies in the public and private sectors (HM Treasury, 2000), extensive market segmentation, the need to control spares and support activities and pressures to reduce environmental impact (White et al, 1999, McAloone, 2003). The emergence of the Private Finance Initiative (PFI) in construction has had a substantial effect on the procurement of hospitals, prisons, schools and defence training establishments (cf. HM Treasury 2003, NAO, 2003) and has initiated supply side consolidation and re-positioning (Green et al. 2004; Winch, 2000). In this and other sectors, contracting arrangements such as 'prime contracting' also provide the basis for evaluating competence on the basis of service provision (MoD 2002). Of particular importance to the UK is that it enables companies to compete on knowledge rather than cost, thereby supporting emerging trends towards the knowledge economy (DTI, 1998). There is urgent need for research support if the UK is to compete effectively in these emerging markets.
The change to a product-service model has substantial potential benefits as it encourages greater efficiency and more sustainable approaches to engineering by improving the scope for supply-side innovation. For example, in aerospace the emergence of "power by the hour" as a service has challenged traditional engine suppliers to rethink their technology offering – which will in turn lead to a revision of the design rules developed over the past 30 years. (IfM, 2003, Deloitte, 1999). Such initiatives provide the basis for an incentivisation structure that increases performance through collaborative working. One of the prime drivers behind the use of such integrated procurement approaches is their potential to overcome the process discontinuities of traditional procurement routes. They present a significant opportunity to integrate design and manufacture with ongoing aspects of in-service operation such as facilities and asset management.