MoD savings drive impairs vehicle procurement

20 May 2011

21 May 2011 | Angeline Albert

The Ministry of Defence’s (MoD) need to identify significant savings has meant UK troops do not have enough armoured vehicles on the front line.

A National AuditOffice report said the MoD’s drive to make savings in order to stay within its budget for 2010-11 and beyond, leads to changing budgets each year, which in turn creates delays to equipment projects and adds extra long-term costs to the procurement process.

The study said the need to generate short-term savings for the MoD often results in spending on equipment being reduced. These savings tend to be realised by either deferring or cancelling the expected signature of contracts, or re-negotiating existing contracts to defer expenditure or reduce order sizes.

The MoD’s approach over the last decade to renewing its core armoured vehicle fleet does not represent value for money, the NAO said. Since 1998, armed forces have received only a fraction of the equipment that the department has set out to buy.

The report, The cost-effective delivery of an armoured vehicle capability, said: “Too many major projects have been cancelled, suspended or delayed” and as a result the department will not have enough armoured vehicles until 2025.

While the department has delivered a number of smaller projects worth £407 million, it has spent £718 million on equipment that has not yet reached the front line - some of which have been cancelled or suspended indefinitely.

The report said: “The department has to live within its means on an annual basis, but we are concerned that its decision-making is based on cutting uncommitted funding as a reaction to cost growth rather than as a result of careful consideration of its needs.”

To meet the needs of armed forces, the NAO recommended the MoD consider buying vehicles in smaller batches based on a common vehicle design to minimise differences in logistic support and training requirements.  It also recommended it have a default position of purchasing off-the-shelf equipment that, if necessary, can be incrementally upgraded in the future.

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