MoD under fire for £3bn overspend

5 February 2004
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05 February 2004 | Simon Binns

The Ministry of Defence is under pressure to show improvements in its smart procurement initiative after a £3 billion overrun on major projects last year.

The latest report from the National Audit Office also shows evidence of poor risk management and average delays of nine months per project.

BAE Systems also came in for heavy criticism, as four of its "legacy" projects - the Eurofighter aircraft, Astute-class attack submarines, Nimrod reconnaissance and attack aircraft and Brimstone, an air-launched anti-tank weapon - accounted for £2.7 billion of the overspend.

Keith Hartley, director of the Centre for Defence Economics at York University, said smart procurement is creating better-run programmes, but at a price.

"Smart procurement projects are delivering success in terms of contract time specification, but there are already cost overruns and they have not addressed advanced technology problems."

Hartley added that the MoD's recent decision to award a £13 billion contract for refueling aircraft to Airbus presented BAE with a genuine rival in the market for the first time.

Edward Leigh, chairman of the Commons' public accounts committee, said the MoD's performance was worrying.

"Smart acquisition promised to improve the management of these projects, but I am worried because even some of the new ones are already subject to delays and cost rises. The principles the MoD is trying to apply are sensible, but it must translate these to improvements in performance."





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