Ten-year PFI deal means MoD could lose out on future savings, says NAO

23 Mar 00
The Ministry of Defence failed to maximise value for money in its £612m telecommunications system under the Private Finance Initiative, the National Audit Office has found.

24 March 2000

According to an NAO report published this week, the MoD has limited future savings and technological developments by procuring a 'fixed' telecommunication system locked into a ten-year PFI deal with BT.

The ministry should have assessed the potential disadvantages of a fixed scheme, particularly in the light of rapid changes in the telecommunications industry, the NAO found.

'How effectively the contract deals with changes will therefore be an important element in ensuring value for money,' the report states.

But the PFI deal was awarded at a 'good price' of £612m, plus an estimated £170m in 'related expenditure'. The MoD is expected to make savings of £30m a year, around 20% of its annual fixed telecommunications costs.


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