Press Release - Ministry of Defence: Major Projects Report
2003
23 January 2004
Sir John Bourn, head of the National Audit Office, reporting
today on the top 20 defence equipment projects in demonstration and
manufacture, told Parliament that the Ministry of Defence (MoD) was
expecting to meet the capability requirements of its customers, and
difficulties on four projects predating the introduction of Smart
Acquisition had been the primary cause of large cost and time
variations in the year ended 31 March 2003. Smart Acquisition
projects had performed better in the last year than those predating
its introduction, but the challenge remained for the MoD to improve
performance in the longer term. The MoD recognised this and was
pursuing improvements.
Sir John’s report also covers the top ten defence equipment
projects in the assessment phase, where the objective is to reduce
risk to an acceptable level before committing the majority of
programme funding. The MOD’s approach to managing risk continues to
develop, but there is evidence that risks on some projects have
still not been sufficiently reduced.
Key findings in the Report are:
- The project population now includes 13 projects which have been
approved since Smart Acquisition was introduced in 1998 with the
objective of enabling the Department to buy military equipment
"cheaper, faster, and better". It also includes seven older
projects which were approved earlier.
- The MOD expects to meet 99 per cent of the military customer's
requirements.
- Costs have increased in-year by £3.1 billion and are now 6.1
per cent over their approved costs.
- Projects will take longer than originally forecast to come into
service. There has been an in-year slippage of 144 months, an
average in-year slippage of nine months per project.
- Most of the in-year cost variation and time slippage relates to
four older projects – Astute, Advanced Air-Launched Anti-Armour
Weapon, Nimrod and Typhoon. They account for £2.7 billion (87%) of
the in-year cost increase and 113 months (79%) of the in-year
slippage.
- Projects approved under Smart Acquisition are demonstrating
better cost and time control than older projects, but there are
warning signs that some projects may be continuing to follow the
historic trend of cost increase and delay as they mature. The MOD
recognises these concerns and is taking steps to address
them.
- Astute and Nimrod have both suffered from technical and project
management difficulties, leading to the restructuring of both
projects, delays to their in-service dates, and the MOD and
industry sharing the cost increases.
- The Advanced Air-Launched Anti-Armour Weapon has experienced
technical difficulties, and trials were rescheduled due to the
prioritisation of Storm Shadow for operational reasons. Typhoon has
also experienced technical difficulties, compounded by the loss of
a development aircraft in November 2002. Delays on both projects
have led to increased costs as resources are tied up in the
projects for longer than planned.
- Support Vehicle (Cargo and Recovery), which was approved under
Smart Acquisition, did not follow the standard procurement
strategy, bypassing the assessment phase where risk-identification
work would have been undertaken. As a result, there has
subsequently been significant in-year slippage of 19 months.
Sir John said today:
"Although it is good news that the MOD expects to meet
the technical requirements of the armed forces, I am disappointed
by the large rises in costs and delays on four older projects in
particular. There are encouraging signs that some projects are
performing better on cost and time, but it is worrying that others
seem to be following the historic patterns of cost increases and
slippages as they mature. The MOD recognises the challenge these
concerns present and is giving new impetus to the development of
improved acquisition. Its approach to managing risk continues to
develop, but there is evidence that risks on some projects have
still not been sufficiently reduced. Future Major Projects Reports
will assess whether this management of risk can be translated into
better cost and time control."
Notes for Editors
Press notices and reports are available from the date of
publication on the NAO website at www.nao.org.uk.
Hard copies can be obtained from The Stationery Office on 0845 702
3474.
The Comptroller and Auditor General, Sir John Bourn, is the head
of the National Audit Office which employs some 800 staff. He and
the NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their resources.
Press Notice 06/04
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