Committee of Public Accounts


Press Notice No. 50 of Session 2005-06, dated 27 June 2006


FIFTIETH REPORT: MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 2005 (HC 889)

Mr Edward Leigh MP, Chairman of the Committee of Public Accounts, said today:

"The MOD is still unable consistently to manage individual defence projects so that our servicemen and women have the new equipment they need, when they need it and to cost.

"The Department in 2005 cut the forecast costs of its largest 19 projects by some £700 million. But this is not the good news it seems. Cuts have been achieved mainly by reducing the amount of weaponry on order or by being less demanding about the specifications of the kit. Each project is now expected to be delivered, on average, some 20 months late. And the total forecast cost of the largest projects still stands at £29 billion, compared with the original budgeted figure of £26 billion.

"The MOD is continuing to put some of its poor performance down to a number of 'toxic legacy' projects. This hand wringing has gone on far too long. It is now time for the Department finally to get a firm grip on these projects and provide truly realistic performance, time and cost estimates."

Mr Leigh was speaking as the Committee published its 50th Report of this Session, which examined three main issues: enhancing programme and project management of defence acquisition; the impact of older projects on overall acquisition performance; and value for money from the Defence Industrial Strategy.

The Major Projects Report 2005 provides information on the time, cost and performance of the Ministry of Defence's (the Department's) 20 largest projects where the main investment decision has been taken; and the 10 largest projects in the Assessment Phase. For the approved projects, forecast costs were some £700 million lower compared to the previous year. This change was primarily due to reductions in either capability or platform numbers to balance the overall programme. Total forecast costs for these projects now amount to £29 billion, some 10% over budget. In-year timescale slippage increased by 45 months, giving a total delay of 375 months, or an average of some 20 months per project. The Department does, however, expect to meet the majority of its Key User Requirements.

The Government launched its Defence Industrial Strategy in December 2005. The Strategy flows from the wider Defence Industrial Policy (2002) and was developed directly in response to the changing threat facing the United Kingdom and consequently the manner in which equipment will be procured and used in the future. The Strategy aims to promote a sustainable and globally competitive defence manufacturing sector. If the Department and its industry partners can implement the Strategy successfully it could mean a significant improvement in the delivery of operational capability to the frontline but there are risks to be managed not least in sustaining competitive pressures. Projects could be delivered on time and at the right cost with this improved performance reflected in future Major Projects Reports.

Notes

1. Forecast costs for the approved projects exclude the cost of the Typhoon combat aircraft, which is commercially sensitive.

2. As an annual report, the Committee's conclusions and recommendations should be read in conjunction with the findings of earlier Major Projects Reports as part of a sequence of recommended improvements.


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