MPs attack MoD's £3bn of cost overruns

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The Independent Online

The twenty biggest military equipment projects within the Ministry of Defence have slipped a further £3bn over budget in the space of a year, a damning report from a committee of MPs discloses today.

The report from the Commons Public Accounts Committee also reveals that over the 12-month period, these 20 major projects have fallen a further nine months behind schedule.

Among the procurement contracts highlighted are the £20bn Eurofighter Typhoon order, which is four and a half years late, and the Astute submarine programme, which is £1bn over budget and 43 months late.

BAE Systems is the main contractor on both, as well as two others singled out by the committee - the Brimstone air launched anti-armour missile and the Nimrod reconnaissance aircraft. Together, these four contracts account for 87 per cent of the cost overruns and 79 per cent of the delivery slippage.

The committee warns that the delays will have an impact on Britain's front line forces and criticises the MoD for failing to manage the projects properly, spending too little on the assessment phase of each project and operating in a culture based on the apportionment of blame.

The total costs to date of the 20 projects examined is put at £51.9bn - an increase of £3.1bn over the past year and some 6 per cent above approved budget levels. On average the projects have slipped by 18 months.

Edward Leigh, the Conservative MP and chairman of the committee, said: "Cost overruns of £3bn and delays of nine months on average on major defence projects within a single year is a poor performance."

He urged the MoD to apply the principles of "smart acquisition" properly saying there had been a gap between theory and execution. He also said the MoD should abandon the use of long-term fixed-price contracts covering both the development and production of complex defence equipment programmes as this approach was "unworkable".

The report says that despite an MoD policy of spending 15 per cent of initial procurement costs in the assessment phase, the actual figure was only 5 per cent, leading to poor understanding of the military requirements and industrial risks attached to major projects.

One good example of risk reduction highlighted in the report is the new airborne stand-off radar which had successfully completed its design stage because the right amount of time has been spent analysing equipment options and risks.