'Endemic' problems on MoD kit purchases

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The Independent Online

The Government’s system for purchasing defence equipment is in such a state that “the problems and sums of money involved have almost lost their power to shock, so endemic is the issue”, according to an official report.

The long-awaited dossier, commissioned by the Ministry of Defence, found an “overheated” process ordering often “unaffordable” projects which were, on average, five years late and £300 million over budget.

The investigation, led by entrepreneur and former defence adviser Bernard Gray, estimated that the total budget overrun amounted to £35m. The report stated: “It seems as though military equipment acquisition is vying in a technological race with the delivery of civilian software systems for the title of ‘world’s most delayed technical solution’. Even British trains cannot compete.” Mr Gray continued: “The MoD has plans to acquire equipment which are significantly in excess of any likely budget that’s going to be available to pay for them.”

Mr Gray recommended that the MoD’s procurement arm, the Defence Equipment and Support (DE&S) should be changed into a separate, publicly-owned, contractor-operated body.

However, this was rejected by the Government because, it held, the vital input made by the military into the purchase programme is likely to be weakened by the proposed change.

Lord Drayson, the Minister for Strategic Defence Acquisition Reform, said Mr Gray “pulls no punches… And we value its directness. It has put its finger at the heart of the challenge we are facing.”

Mr Gray, who was asked to compile the report by then-Defence Secretary John Hutton, said his team discovered a “toxic set of incentives” within the procurement system under which those involved would consistently underestimate the cost of programmes, which in turn led to delays as the department found that it could not afford to complete the programmes at the rate it had planned.

Mr Gray added that the system being “overheated” meant that it could not easily make changes to accommodate the demands made by current conflicts such as Afghanistan.

Instead of infrequent Strategic Defence Reviews – the last one was 12 years ago – Mr Gray suggested a review should be held at the end each decade.

Defence Secretary Bob Ainsworth said the MoD was undertaking a series of changes in response to the report, adjusting the equipment programme “to bring it into balance with future requirements and the likely availability of resources”.

More sophisticated techniques would be applied to the costing of projects, while the business relationship between MoD head office, DE&S, and the service commands would be “sharpened”.

The shadow Defence Secretary Dr Liam Fox said: “The Gray review tells a sorry tale of serial incompetence. The Ministry of Defence must focus on getting the military what they need, when they need it, and clearly the system isn’t delivering that the moment. We have said a Conservative government would legislate, if necessary, for regular defence reviews, and that we would consider 10-year capital budgets for the Ministry of Defence. The procurement process needs a radical shake-up, and no option will be off the table.”