Defence orders overshoot as war is declared on waste

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The Independent Online
The cost of all but one of Britain's 25 biggest defence projects went up last year and only five of them are expected to be on time, according to a report issued yesterday.

The National Audit Office report says that the average delay on major projects, worth pounds 33bn in total, has increased from 35 to 40 months; the Challenger 2 tank project slipped by a further two years and is now three years late, although not significantly over price. The EH 101 Merlin helicopter project is expected to cost pounds 650m more than originally envisaged - "in part due to crashes of prototype aircraft" - and is expected in service five years late.

Just two weeks ago George Robertson, the Secretary of State for Defence, committed himself to the elimination of waste as part of the Strategic Defence Review. He focused on the procurement of defence equipment which takes about pounds 9bn a year out of the pounds 23bn-a -year defence budget.

In evidence to the House of Commons Select Committee on Defence, Mr Robertson announced a drive for "smart procurement", using new contractual procedures to get the best value for money and making more use of commercial products. In some cases, the NAO found new methods had already worked - especially the "no acceptable price, no contract" arrangement which had knocked pounds 160m off the price of the Navy's two new commando assault ships from pounds 589 m to pounds 429m.

However, most of the report's findings are a sharp reminder to the MoD to get its act together. The NAO, headed by Sir Alan Bourn, the Comptroller and Auditor General, notes that although the ministry filled in the sheets it was given correctly, its information on running costs for older equipment was "weak or incomplete in three out of five cases where a slippage of two or more years had occurred. This could adversely affect their their ability to judge budgetary priorities accurately."

The only major project where estimated costs decreased is also the biggest - Trident nuclear submarines, where a reduction of pounds 3.4bn is forecast. This helped absorb a net forecast increase on the other 24 projects, giving a drop of pounds 694m (2 per cent) overall. Another big project, the Eurofighter 2000 aircraft, shows a net increase of pounds 1.3bn, and the remaining 23 projects about the same.

The MoD said a quarter of the slippages were deliberate, in order to balance their books by delaying expenditure, and not because of delay on the part of manufacturers, which the audit office recognised.

The report also accepted that the MoD had agreed a recovery plan with Vickers, the tank builders, to try to get the project back on schedule. With international projects - the four-nation Eurofighter and the Cobra radar system - the problems of dealing with other countries (Germany, in both cases) delayed the expected in-service date.

9 NAO, Major Projects Report 1996. HC 238, 15 August 1997

Over budget and overdue: Eurofighter, Merlin helicopter and Tornado

Worst five cost overruns.

Eurofighter 2000 multi-role aircraft (pictured left). Built by British Aerospace in collaboration with German, Italian and Spanish firms. Total cost of 232, pounds 15bn. Estimated cost increase: pounds 1,360m. Estimated in service: 40 months late.

EH 101 Merlin helicopter (pictured right; Photograph: APL) (Navy) and support helicopter (Army/Marines). GKN/Westland. Total cost of 66 helicopters: pounds 5bn. Estimated cost increase: pounds 650m, estimated in service: 64 months late.

Spearfish heavyweight torpedo. GEC-Marconi. Total cost - number classified - pounds 1.7bn. Estimated cost increase: pounds 200m. Estimated in service: 80 months late.

Tornado GR1 mid-life update modifications. British Aerospace. Total cost of 142 aircraft: pounds 934m. Estimated cost increase pounds 400m. Estimated in service: 64 months late.

Extra Sea Harriers (to replace lost aircraft). British Aerospace. Total cost of 23, pounds 293m. Estimated cost increase: pounds 100m. Estimated in service: on time.