BAE in deep water over defence deals

The Ministry of Defence and its biggest arms supplier, BAE Systems, will be slated this week by the Government's spending watchdog for a series of cost overruns and delays to major projects.

The National Audit Office is expected to release its damning assessment of the MoD's 20 biggest projects on Friday, heaping pressure on the embattled Defence Minister, Geoff Hoon.

The report will come at a critical time for Mr Hoon. Last week he was forced to apologise to the widow of a British tank commander who died in Iraq because of an equipment shortage. Next week the Hutton report is due to be published. Mr Hoon has admitted that he may not survive the fallout.

The NAO report will also increase tensions between the MoD and the Treasury. Chancellor Gordon Brown has in recent months become frustrated by the MoD's demands for more money to shore up its troubled projects.

Four projects will be singled out for particular criticism in the report: Astute, Nimrod, Eurofighter-Typhoon and Brimstone.

The Astute project, to supply the Royal Navy with a fleet of submarines capable of operating for 25 years without refuelling, was supposed to be completed this year. But it ran into trouble during its design, and the first submarine will now be delivered in 2008. BAE, the contractor, has already made a £250m provision against it.

The contract for the Nimrod project, to provide the armed forces with a new maritime patrol aircraft, was originally signed with BAE in 1996. But the MoD was forced to renegotiate it in 1999 after technical problems. The aircraft will now not be delivered until the end of 2005; BAE has been forced to make nearly 700 people working on the project redundant.

Together, Astute and Nimrod have cost the taxpayer an extra £700m.

The Eurofighter-Typhoon combat jet, jointly developed by BAE and the European group EADS, will come in for particular criticism from the NAO. The £18.6bn project was scheduled to be completed in 1998. The date was pushed back to 2001 after technical glitches emerged. The RAF received its first plane in July, but it was immediately grounded after its brakes developed a fault. The planes are not expected to be in operation until 2006.

The RAF has suffered another setback with the Brimstone missile project - running 13 months behind schedule. Intended to replace the cluster bomb, the new weapon is due for delivery later this year. It is being developed by MBDA, a company owned by BAE, EADS and Italy's Finmeccanica.

The NAO report will, however, say that newer MoD projects developed under the so-called "smart procurement" system are less prone to delays. Smart procurement allows the greater involvement of front-line armed forces staff on big capital projects.

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