Defence secretary leads charge against 'conspiracy of optimism'

23 February 2011
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Ministers will approve “guarantees of realistic budgets” in future before the Ministry of Defence (MoD) starts spending on procurement projects.

In a speech at the think-tank Civitas, defence secretary Liam Fox said the government plans to defeat the “conspiracy of optimism” on projects that causes escalating costs.

“Too often in the past, in order to get pet projects included in the programme, unrealistic costs have been accepted at the outset knowing that they can be recovered later due to what are euphemistically called ‘cost overruns’,” he said.

“These practices in the MoD would not be tolerated in the private sector and they cannot be tolerated in the MoD. By looking at and approving programmes in isolation from the totality of departmental spend any programme can be made to look affordable.

“From now on, guarantees of realistic budgets for development, procurement and deployment must be presented to ministers before spending can begin on new programmes.”

This is among the measures announced to provide greater accountability, transparency and ensure “cost-control is rigorously enforced”. It follows strong criticism of defence procurement by the Committee of Public Accounts yesterday, that highlighted a “cycle of failure” of delays and overspending at the MoD.

Fox added he would chair a “major projects review board” to assess quarterly updates on programmes to ensure that they are on time and within budget. The Board would also have powers to publish information on “projects of concern” to hold civil servants and suppliers to account.

The government will also seek a new relationship with suppliers.

Although the interests of vendors are currently represented by the National Defence Industries Council, Fox said it was “self-appointed and excludes some of the department's major suppliers”.

Instead a new Defence Suppliers Forum will include representatives of “the full range of the Department’s suppliers from the UK and overseas and which will better reflect the industry as a whole”.

The MoD recently put Bernard Gray, author of an independent review that was highly critical of the way the department buys, in charge of defence purchasing to provide “clear direction and leadership”.

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