MoD gripped by 'conspiracy of optimism'

27 December 2011

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27 December 2011 | Paul Snell

The Ministry of Defence is gripped by a "conspiracy of optimism", which creates cost overruns and lengthy delays.

But reforms to deals with these problems are simply treating "the symptoms of procurement failure, not the causes", and will continue unless the UK makes difficult decisions about its defence needs.

This was the conclusion of the BBC Radio 4 documentary Buying Defence, an examination of the repeated blunders of MoD purchasing undertaken by the defence anaylst Francis Tusa. He argued that spending has fallen faster than ambitions, and unless the question of what the UK expects it military to be capable of is answered, the issues of waste and inefficiency will continue.

According to the show, the MoD is probably paying the right amount for its equipment, but inital cost estimates are unrealistic. Tim Banfield of the National Audit Office told the show the department is "not routinely ripped off" but is "over-optimistic" about what equipment will cost to buy. Lord West, who previously served as the first sea lord, said the £3.5 billion cost to build two aircraft carriers was plucked out of the sky and "ridiculous". Labour MP and chairwoman of the Public Accounts Committee Margaret Hodge, said the cost could rise as high as £8 or £9 billion.

There is a "powerful logic", the show said, behind deciding to buy equipment, without finding the finance for it in advance - because once programmes are started, they are rarely cancelled. And this is in the interest of both the military and industry.

The programme repeated criticisim that civil servants are "outgunned and outmanouvered" by the private sector at the negotiation table, hindered by a small supplier base and an industry that comes up with additional costs. "We need mechanisms to stop them getting away with it and to hold their feet to the fire," said Lord West. But Hodge believes there is a "culture of evasion" at the MoD and the person responsible is never held accountable for their decision-making.

According to Bernard Gray, the chief of defence materiel, there needs to be an "injection of skills" to achieve a "cultural and managerial shift" to take place. "We need to do it as a scale block activity," he said. "Not one person at a time".

Gray has already set out three potential ways in which the private sector could play a greater role in defence procurement. He likened the situation to the Olympic Delivery Authority's work with CH2M HILL to build the Olympic venues, with the public sector working alongside a private delivery partner.

He has the support of defence minister Peter Luff, who says the government will be "as radical as it needs to be to achieve changes", and that "the status quo was unlikely to endure" - although he ruled out full privatisation of the MoD's procurement arm Defence Equipment & Support.

But Hodge warned "the civil service does a lot to ensure outsiders are marginalised", and the jury is still out on Gray's plans for reform.

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