The Ministry of Defence is beginning to ‘make realistic trade-offs’ in its procurement of major projects but could still do ‘consistently better’, government auditors said today.
In the latest Major projects report, the National Audit Office found the costs of the 16 largest defence projects had increased by £468m in 2012. Overall, the schemes slipped by a total of 139 months, reflecting delays in two-thirds of them. This means that, since the projects were originally approved, their costs have increased by £6.6bn (or 12%) and they are set to take almost a third longer than expected.It was also revealed that the £32m Falcon communication system being developed for use in Afghanistan will now not be deployed after technical problems caused major delays.
Auditors said the MoD needed to learn more from historic performance and set realistic timescales, although they added that in some cases it had already started to do so.
They also acknowledged that in some cases the MoD was having to make difficult decisions and move away from an approach that prioritised performance requirements over cost, delivery time and number of vehicles or vessels procured.
The report stated: ‘The department faces a difficult task balancing the tension between delivering the capabilities for which it has a stated requirement and those it can afford. Early signs show that it has begun to make realistic trade-offs between cost, time, technical requirements and the number of, for example, ships, aircraft or vehicles to be procured.’
It cited the fact that the department challenged the affordability of the proposed performance specifications of the Type 26 Global Combat Ship before the main investment decision was made.
NAO head Amyas Morse said: ‘The Ministry of Defence faces a difficult task striking a balance between delivering the capabilities it wants and those it can afford. There will always be factors over which the department has limited control, but it must do more to learn from previous projects.
‘The continuing problems highlighted in my report show that, if it is to make the most of the money available, the department has more to do to address its longstanding issues on project performance.’
Defence Secretary Philip Hammond said the government had made ‘tough decisions’ to get the MoD’s equipment programme under control.
‘Fuel inflation and other factors outside of the department’s control are responsible for three-quarters of the cost increase over the past year,’ he said.
‘It will take time to rectify years of mismanagement of the programme, but the work this government has done to balance the budget and address fundamental project management problems is paying off. We can now make more accurate cost projections and invest in the best equipment for our armed forces with more confidence than ever before.’
