MoD project costs still rising

14 Oct 10
The cost of the 15 largest defence projects increased by £3.3bn last year, according to the National Audit Office

By Vivienne Russell

15 October 2010

The cost of the 15 largest defence projects increased by £3.3bn last year, according to the National Audit Office.

The NAO’s Major projects report 2010, published today, concluded that the Ministry of Defence’s decision to reduce its cash-flow requirement in the short term resulted in long-term costs that represented poor value for the taxpayer.

For example, slowing down the Queen Elizabeth Class aircraft carrier project ended up costing an extra £650m.

Similarly, actions to address cost overruns have failed to demonstrate good value. Although the MoD has progressively reduced the number of Nimrod MRA4 reconnaissance aircraft from 21 to 9, the aircraft’s unit costs are now three times the figure originally expected.

But the NAO also drew attention to some positive findings. In 2009/10, the cost performance on the majority of projects was broadly stable, for the second year running. The rate of project overruns also fell significantly and 98% of performance indicators were likely to be met.

NAO head Amyas Morse said: ‘In-year performance on the majority of large defence projects which we examined has been encouraging. This reflects the efforts which the department has put in to improving project control and introducing innovative practices at the level of the individual projects.

‘But central departmental decisions were taken to balance the defence budget which had the effect of driving very significant additional cost and delay intro the equipment programme; this represents poor value for money for the taxpayer.’

Defence Secretary Liam Fox said: 'The MoD has been living beyond its means for too long and project costs have been allowed to get out of control. Having inherited a £38bn black hole in the MoD’s finances I am determined to balance our books and start ensuring the department operates within its means.
'Next week’s Strategic Defence and Security Review will provide a long-awaited opportunity for the MoD to plan properly for the future and to get back to a balanced budget. We must establish a solid base upon which to build our future equipment programme to avoid the project cost overruns that are the hallmark of Labour’s legacy.'

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