The Ministry of Defence (MoD) needs to do “consistently better” in improving cost management and reducing delays in the delivery of its major equipment projects according to the government's financial watchdog.
Although there are signs that MoD is beginning to take a more realistic approach to managing equipment procurement, “continuing problems” in managing major projects show that MoD “has more to do to address its longstanding issues on project performance”.
The 'Ministry of Defence Major Projects Report 2012', an annual study by the National Audit Office into military procurement spending, has reviewed data for the 16 largest MoD major equipment projects and nine further projects where the main investment decision has yet to be taken, including the 'Successor' project for replacing Trident nuclear weapon submarines. “There will always be factors over which the Department has limited control, but it must do more to learn from previous projects", the report concluded.
The National Audit Office reports that the projects examined in their study are forecast to cost £6560 million more than their approved budget – an increase of £468 million since last year. The total slippage in project deliveries has risen by 139 months over the year from 30 months last year, meaning that the projects investigated will now take more than a third longer than originally planned to complete.
The Audit Office found that the causes of these delays were “reoccuring problems on which we have reported regularly” and that “the continuing incidence of such problems indicates the Department has more to do to set realistic timescales”.
Cost increases were caused mainly by a £257m overspend on the Future Strategic Tanker Aircraft and an extra £217m on the Navy's Queen Elizabeth class aircraft carriers. These were partially offset by savings on other programmes.
"In these circumstances it is not yet possible to conclude the Department is consistently delivering value for money from managing its major projects," the report says.
Following the launch of HMS Astute and HMS Ambush, the Astute submarine programme no longer has as large an influence on the overall figures for the MoD's performance in managing major projects as in recent years. Nevertheless, the Audit Office report states that the first three Astute class submarines will cost more than £1.1 billion than planned and that over the last year costs for both the fourth and fifth submarines were over budget. Neither of the two Astute class submarines currently afloat has been accepted into full service with the Royal Navy yet.
The Audit Office points out that delivery of HMS Astute to the Navy is “critical” to attack submarines' readiness profile, and that the delay in Astute's entry into service will delay the Navy's plans to improve the capability of its submarine fleet.
For the first time, the report provides a snapshot of the status of two projects key to the programme to replace the Trident nuclear weapons system – the Successor submarine project and the 'core production capability' project for refurbishment of the Rolls-Royce Raynesway plant in Derby where submarine reactor cores are manufactured. (For a detailed analysis of the National Audit Office comments on these programmes please download the briefing note at the end of this article).
Delays, overspending, and uncertainties in managing major projects have had knock-on effects and reduced the MoD's ability to plan and manage the defence budget effectively. MoD has been forced to spend almost £1.8bn on stopgap measures to extend the life of existing equipment because delays to projects and budget cuts have left it with gaps in its capability to support forces fighting in Afghanistan.
The National Audit Office said that “critical shortfalls” remain in some capability areas. Failure to deliver new equipment on time will leave the military short of air-to-air refuelling and transport aircraft. Between 2014 and 2016 there will be a “capability gap” in tactical transport aircraft and at times up to 2017 there will be shortages in both air transport and air-to-air refuelling aircraft. From 2022 the Air Force will face a shortfall of approximately one third in tactical transport aircraft.
The Falcon communications system, classed as an “urgent operational requirement” for troops in Afghanistan, has also been delayed and will not be available before the British withdrawal, the Audit Office found.
Download our briefing note on the National Audit Office comments on the Trident replacement programme here: