MoD 'stabilises' major project costs, but delays continue

Gurjit Degun
13 February 2014

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13 February 2014 | Gurjit Degun

The cost of the Ministry of Defence’s (MoD) major projects “stabilised” in 2013 but the National Audit Office (NAO) predicts delays of around 25 years in total compared to original estimates.

The annual Major Projects Report 2013 found the cost of the 11 largest MoD projects rose by £708 million last year. The main contribution to this was a £754 million increase in the cost of aircraft carriers.

The NAO report added that the MoD saved £223 million through procurement processes in 2013. Part of this included a cost increase of £144 million in relation to revised costs by the Aircraft Carrier Alliance (ACA). During the negotiations that followed, the MoD secured £348 million of cost savings against industry’s original proposal.

The report added the MoD is using different methods of procurement to reduce the cost of some its major projects to balance its budget. “For example, [the MoD] has introduced a portfolio approach to the procurement of its complex weapons, which is expected to bring financial benefits of £1.2 billion in the period 2010 to 2019,” the NAO said.

Amyas Morse, head of the NAO, added: “With the exception of the aircraft carriers, the MoD’s largest projects have not shown significant increases in costs over the year and only small in-year delays. However, there remains a legacy of large complex projects that have already suffered significant cost increases and delays. Despite the increased stability there are still risks to affordability.

“The department has not subjected the half of its equipment budget related to support to the same degree of scrutiny as its procurement costs. Nor can it be certain that the impact of a £1.2 billion underspend on equipment and support in 2012-13 will not cause some increased cost and delay further down the line.”

Defence secretary Philip Hammond said: “Unlike the past, we do not have to make short-term cuts that delay programmes to simply live within our means.

“Balancing the budget and providing a clearer and more accurate forecast of our future requirements and resources has put MoD in a stronger position to respond to unforeseen changes and negotiate a better deal with industry.”

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