MoD procurement failing to provide value for money, say auditors

15 Dec 09
The Ministry of Defence’s approach to cutting major procurement costs is not providing value for money, government auditors have said
By Vivienne Russell

15 December 2009

The Ministry of Defence’s approach to cutting major procurement costs is not providing value for money, government auditors have said.

In a hard-hitting report released today, the National Audit Office branded the current defence programme ‘unaffordable’ but criticised the measures being deployed to address the deficit.

In its annual examination of the MoD’s major projects, the NAO noted that, although the gulf between the defence budget and planned expenditure had been reduced, a deficit of between £6bn and £36bn remained.

But the MoD’s tactic of saving money by allowing project timetables to slip was counter-productive and would lead to long-term cost increases, the report said.

In 2008/09, costs on 15 major defence projects increased by £1.2bn, with two-thirds of this increase directly attributable to the department’s decision to slow projects.

Auditors said the decision to delay the provision of Queen Elizabeth Class aircraft carriers is forecast to save £450m in the next four years, but will add more than £1.1bn in costs in subsequent years. The NAO said this represented poor value for money.

NAO head Amyas Morse said: ‘The Ministry of Defence has a multibillion-pound budgetary black hole, which it is trying to fix with a “save now, pay later” approach.

‘This gives a misleadingly negative picture of how well some major projects in MoD are managed, represents poor value for money and heightens the risk that the equipment our armed forces require will not be available when it is needed or in the quantities promised.’

Public Accounts Committee chair Edward Leigh warned that the MoD was ‘building up trouble for the future’.

‘Even assuming no reduction in the cash available for defence – and given the state of public finance, that’s a big assumption – there is a potential shortfall of tens of billions of pounds,’ he said.

Leigh urged the government to take radical action. ‘The MoD must ask itself tough questions, even about its biggest programmes such as fast jets and how the submarine-based nuclear deterrent should continue to be delivered. My own view is that there cannot be any sacred cows.’

Defence minister Quentin Davies said: ‘We fully accept the need to address shortcomings in our long-term equipment planning and that is why we are working on a strategy for acquisition reform, which will be published in the New Year.’

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