Ministry of Defence wasting billions on flawed equipment projects, report warns

Delays on crucial programmes total 21 years, spending watchdog finds

Andrew Woodcock
Political Editor
Wednesday 03 November 2021 00:46
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<p>Ministry of Defence ‘leaving one of the largest financial holes’, report says </p>

Ministry of Defence ‘leaving one of the largest financial holes’, report says

The Ministry of Defence has wasted billions of pounds of taxpayer’s money by failing to improve its “broken” system for buying expensive equipment, a scathing report by MPs has found.

The report detailed MoD spending on 20 projects worth £163bn, including the “catastrophic” £5.5bn Ajax armoured vehicle programme by General Dynamics, which left more than 300 personnel needing hearing tests because of excessive noise and vibration and has delivered just 14 of the 589 units ordered in 2014.

Delays totalling 21 years have affected 13 programmes ranging from A400M transport aircraft and Crowsnest and Marshall radar systems to the Morpheus tactical communication and information system, the Warrior armoured vehicle upgrade and Spearfish torpedos, the Commons Public Accounts Committee found.

Late delivery of expensive and hi-tech equipment meant troops relying on ageing and near-obsolete kit, with old frigates having to be upgraded while the Royal Navy waited for promised replacements.

The committee said it was “extremely disappointed and frustrated” by the continued poor track record of the department, which is run by defence secretary Ben Wallace, and said that the Treasury and Cabinet Office should step in to impose an “urgent rethink” of its “broken” procurement systems.

The cross-party panel of MPs said the ministry had failed to convince them that the extra £16.5bn awarded in Rishi Sunak’s 2020 spending review would not simply be used to “plug financial holes” in existing programmes, rather than deliver new capability for taxpayers.

In 14 out of 20 cases, the MoD handed out contracts wholly or partially to a small group of suppliers without going through competitive tendering processes, even when there was no national security ground for doing so, the report found.

The MoD also failed to control contractors or ensure that they absorbed a share of additional costs as the bills for new kit spiralled upwards.

As a result, taxpayers were left bearing “too much of the financial risks for failure”.

The report called on the MoD to reduce its exposure to risk by opting more often for “off-the-shelf” kit rather than commissioning untested new equipment.

In response, it said: “The department does not make enough demands of its suppliers to share the financial risks as well as the rewards of contracting for major equipment capabilities.

“Suppliers should contribute their fair share of development funding to equipment programmes so they are sufficiently incentivised to deliver.”

Despite 13 formal reviews of defence procurement policy in 35 years, the MoD had failed to learn from experience and improve performance. Its current forecast for cash savings through its new strategic partnership programme comes to just £160m over 10 years – less than 0.1 per cent of total spend.

Committee chair Dame Meg Hillier said: “Despite years of official inquiries and recommendations and promises of learning and change, we have still heard nothing from the MoD to give any assurance about our biggest concern, which is now that last year’s lauded and substantial uplift to the department’s budget will not simply be used to plug financial holes across its programmes.

“It seems no matter who we ask across the ministry, whatever their particular responsibilities, they all point to this same additional funding as a solution to their problems.

“MoD senior management appears to have made the calculation that, at the cost of a few uncomfortable hours in front of a select committee, they can get away with leaving one of the largest financial holes in any government departments’ budget, not just for now, but year after year. This committee is determined that this state of affairs cannot, and will not, continue.”

The report said that MoD ministers and officials had failed to convince the committee that they were taking the cash haemorrhage “seriously” and would not simply “throw good money after bad”.

MPs were “deeply concerned” about the department’s inability to answer basic questions about its spending projects, and accused it of “complacency” about programmes which had been marked red because of concerns they would not deliver to plan.

The MoD admitted that it “does not routinely monitor value for money of programmes”, the report said.

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