Auditor slams ‘save now, pay later’ MoD

15 December 2009

15 December 2009 | Gareth Mytton

Major UK defence projects are running 24 months late and 8 per cent over expected cost, according to a critical report by the National Audit Office (NAO).

The NAO report, Ministry of Defence: Major Projects Report 2009, said the current forecast cost of 15 projects is £60.2 billion, “an increase of £4.5 billion (or just over 8 per cent) compared with the expected costs when the main investment decisions were taken”.

It also warned if the defence budget is frozen and costs continue to increase the deficit could reach £36 billion over the next 10 years.

The total forecast cost has risen by more than £1.2 billion compared with the NAO’s major projects report in 2008. More than two-thirds of the increase was caused by decisions to slow progress on defence projects.

For example, delays to the Queen Elizabeth Class aircraft carriers will save £450 million in the next four years but add £1.1 billion to the lifetime cost of the project, “a net increase in the forecast cost of £674 million”. The NAO judged that this represents “poor value for money”.

Of the 14 projects with confirmed in-service dates, the average delay is 24 months per project, a seven-month increase on 2008. The A400M transport aircraft slipped by 48 months compared with last year’s report, the NAO said.

On some projects, the ministry has cut its orders to save money. It has cut the number of Lynx helicopters from 80 to 62, saving £194 million but also reducing the number of planned flying hours by one-third.

Amyas Morse, previously commercial director at the MoD and now head of the NAO, said: “The Ministry of Defence has a multi-billion pound budgetary black hole that it is trying to fix with a 'save now, pay later' approach.

“This gives a misleadingly negative picture of how well some major projects in MoD are managed, represents poor value for money and heightens the risk that the equipment our Armed Forces require will not be available when it is needed or in the quantities promised.”

Quentin Davies, minister for defence equipment and support, said: “This report focuses on the top thirty of almost two thousands projects managed by the MoD in the last financial year.

“During that time our priority has been - and continues to be - operations in Afghanistan and ensuring that our forces on the frontline have the equipment they need, and that is one reason why some projects that are not essential for current operations have been delayed.”

He added: “We fully accept the need to address shortcomings in our long-term equipment planning and that is why we are working on a Strategy for Acquisition Reform, which will be published in the New Year.”

Liam Fox, shadow defence secretary, said: “This constant failure to contain cost and keep to timetable means that taxpayers’ money is being wasted and our armed forces are being denied vital equipment which has meant a reduction in capability.”

The MoD also announced today that it would buy 22 new Chinook helicopters. The first 10 helicopters are expected to be ready in 2013.

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