Major defence project costs 'balloon' by £6.6 billion

10 January 2013

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10 January 2013 | Adam Leach

The combined cost of the 16 largest Ministry of Defence (MoD) projects has increased by a total of £6.6 billion since they were first approved.

Ministry of Defence: The Major Projects Report 2012, published today by the National Audit Office (NAO), reported that over the past year, the 16 projects, which include the Queen Elizabeth Aircraft Carrier, have been delayed by a combined total of 139 months and cost £468 million more than first forecast. All together, this means that the projects have accrued delays totalling 468 months and extra costs of £6.6 billion.

The NAO accepted a portion of the extra costs, such as £336 from fuel inflation on the Future Strategic Tanker Aircraft, were beyond the MoD’s control. But it said the department must learn more from historic performance and in particular, set more realistic timescales for completing the projects.

In a note giving her initial thoughts on the report, Margaret Hodge MP, chairwoman of the Committee of Public Accounts (PAC), said: “These latest overruns mean that since these 16 projects were approved, their total cost has ballooned by £6.6 billion, with delays of an unbelievable 39 years.”

Amyas Morse, head of the NAO, said: “The continuing problems highlighted in my report show that, if it is to make the most of the money available, the department has more to do to address its longstanding issues on project performance.”

A statement from the MoD explained the increase in cost over the past year was significantly lower than in the final year of the last administration. It said: “The NAO’s annual Major Projects Report (MPR) has found that for the financial year 2011-2012, the annual cost increase for the sixteen-biggest equipment programmes was £468 million, seven times lower than the last year of the previous government, which MPR 2010 recorded as £3.26 billion.”

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