14 September 2007
The Public Accounts Committee has accused the Ministry of Defence of 'massaging' its procurement savings figures by £539m.
The PAC's September 11 report on the MoD's major project spending examined the claim that the ministry had saved £781m by controlling costs better and improving contracting arrangements in 20 of its largest projects. But the PAC found that only £242m of this represented genuine savings.
PAC chair Edward Leigh said: 'We are pleased to see efforts by the department to control the costs of projects. But old habits die hard. More than half of the sum which the MoD has claimed to save has simply been loaded on to other budgets. We have no idea what cuts will have to be made to other activities… as a result of this massaging of the figures.'
Of the £781m the MoD claimed to have saved in 2005/06, the PAC found that £91m related to a rebate and exemption from Revenue & Customs, while £448m was either reclassified as expenditure in other budget lines or transferred to corporate management spending.
'These reallocations have achieved cost reductions for the individual projects but do not represent a saving to the department as a whole,' the PAC's report states.
'By transferring the costs elsewhere it may potentially have to forego activities which could otherwise have been provided.'
At £27bn, the most recent forecast cost for the 20 projects was £2.6bn over the original budget.
Cumulatively, the projects were now 433 months – or 36 years – behind schedule.
PFsep2007
