Blow to BAE as warships don't come in

The £6bn project to equip the Royal Navy with new Type 45 warships - hailed as an "innovative" partnership between the public and private sectors - has run into trouble.

Involving BAE Systems, VT Group and the Government's Defence Procurement Agency, the project was supposed to see the first destroyer in service by November 2007.

But insiders have revealed that the ships aren't likely to be ready until late 2008 at the earliest, or 2009.

The news is another blow to BAE, which is facing delays on some of its largest government defence projects, notably the Nimrod spy plane, which is suffering huge cost overruns.

The revelation will also be an embarrassment to Defence Secretary Geoff Hoon, whose department has been severely criticised for mishandling its spend on major projects.

The Type 45 project was signed in late 2000, with an initial order for six destroyers and an option on a further six. VT will build the ships' funnels and masts at its new £50m yard in Portsmouth, before they are moved by barge to BAE's Scottish yards at Scotstoun and Govan on the Clyde. Because of cutbacks in the defence budget, partly as a result of the cost of invading Iraq, the MoD is now expected to buy just nine ships in total.

Insiders revealed there are two reasons for the 12-month delay. First, the Type 45 project required Treasury approval before contracts were issued. Iit is understood that one condition imposed by the Treasury was that the ships would be operational by 2007. A senior source close to the project said: "The MoD put forward this timetable to guarantee Treasury approval, knowing it was pretty tight to say the least."

A source close to the Treasury said it was now "monitoring the situation very carefully".

Delays a have also accrued because MoD officials have failed to supply the Type 45 project design team in Glasgow - lead by BAE and VT - with all the technical information in time. "The situation is hugely frustrating," said one person involved.

In a joint statement, the Defence Procurement Agency and BAE said: "As it stands, the in-service date is November 2007. It is too early to say if any changes to this date are necessary. We are constantly reviewing the project, and should an amendment be made, then we will make an announcement in appropriate time."

The Government now faces another damning report by the National Audit Office (NAO), which in December is due to publish its annual investigation into MoD projects. Its last report found that 14 of the 20 defence projects were behind schedule, over budget or both. Sir John Bourn, the head of the NAO, told Parliament that the MoD had shown signs of improvement, but "maintaining this will be a challenge".

Edward Leigh, chairman of the Commons Public Accounts Committee, warned that the MoD was "storing up problems for future years".