MoD errors on deals cost taxpayer 'at least pounds 150m': MPs have called for officials to be punished over failures in defence projects. Christopher Bellamy reports

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The Independent Online
AT LEAST pounds 150m of taxpayers' money has been wasted because of 'incredible' basic errors and negligence in several major new military equipment purchases, including failure to account for VAT on a new satellite communication system, MPs claimed yesterday.

They also demanded that those in the Ministry of Defence responsible for these errors be identified and punished.

A highly critical report published yesterday by the all-party Commons defence committee said: 'We . . . find it incredible that basic errors such as the omission of VAT from the estimated cost should occur and not be detected in an organisation whose business is to manage procurement programmes of this type.'

The MPs examined the means used to account for inflation, looking into three areas of defence procurement. Their findings follow an earlier report by the Comptroller and Auditor-General.

The committee looked at anti- tank mines in view of recent cost increases, the Trigat anti-tank system, at the Alternative Earth Station for the military satellite communication system, which MoD reports had suggested was significantly over estimate, and at the methods used to account for inflation, already investigated by the National Audit Office.

The report reveals: The cost of developing a new ground station for the military satellite communication system rose by 62 per cent, from pounds 61m to pounds 99m.

The cost of a new pounds 37m system to scatter mines from a fighting vehicle soared by tens of millions of pounds, although the final cost is still classified information.

Rejecting an offer by IBM of an inflation index for the pounds 1.5bn contract for 44 Merlin EH101 helicopters for the Royal Navy, cost pounds 95m.

The committee was 'exasperated' by the MoD's explanation that not enough effort was put into the project definition phase of the ground station and that current procedures would have identified all the risks. MPs were also 'dismayed at the cost increases and delays that have beset the Alternative Earth Station programme'.

Besides the fact that there was no back-up in the system during the Cold War, it was here that the MoD officials failed to foresee the imposition of VAT. 'The pounds 38m (2 per cent) cost increase resulted from the fact that the work covered by the specification did not reflect the true scope of the work that was needed,' the report said.

'We are exasperated by this explanation . . . Perhaps such basic lessons will only be learnt and implemented when staff are reprimanded or otherwise penalised when they do not apply them . . . senior officials should now take personal responsibility for ensuring that failures . . . do not happen again'.

Defence Procurement: Certain projects and accounting for inflation. HMSO; pounds 12.15.

(Photograph omitted)

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