Government was 'over-optimistic' about fighter jet costs

3 March 2011
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3 March 2011 | Paul Snell

The cost of each Typhoon fighter jet is now 75 per cent more expensive than initially expected.

Even though the government is buying 30 per cent fewer warplanes than it initially wanted, development and production costs have still seen a 20 per cent increase. Development costs, which are unaffected by order numbers, have doubled. And although the £13.5 billion cost of production is actually within the original estimate made in 1996, the Ministry ofDefence (MoD) is purchasing 72 fewer planes.

The report, Management of the Typhoon Project, published by the National Audit Office said production and development costs had increased by £3.5 billion in total - £2.2 billion of which was down to “inefficient collaborative commercial and managerial arrangements” as a result of slow-decision making and differing objectives. Another £1 billion has been added to the bill because of delays to the project, and more than £332 million because of changes to the specification.

"Our examination has shown that key investment decisions were taken on an over-optimistic basis; the project suffered from corporate decisions to try to balance the defence budget; and the Department did not predict the substantial rate at which costs would rise. None of this suggests good cost control, a key determinant of value for money," said Amyas Morse, head of the NAO.

There are also issues with the availability of spare parts for the aircraft, which is limiting flying hours. A combined 30 per cent of spares for the planes were either delivered late, or have not been delivered at all, but the contracts to provide these contain no penalties for late delivery.

The report did say the MoD now has a better grasp of the costs of the project and has put the “building blocks” in place to get better value for money in future.

It added developing and buying defence equipment with other nations – as has happened with the Typhoon – is a good way of reducing costs, but needs to be better managed, and this project should be reviewed to establish what worked and what did not.

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