Press Release - Ministry of Defence: Major Project Reports
2002
4 December 2002
Sir John Bourn, head of the National Audit Office, reporting
today on the Major Projects Report 2002, told Parliament that the
Ministry of Defence is showing a continued improvement in overall
performance but that maintaining this will be the challenge. There
are also encouraging signs that Smart Acquisition is resulting in
innovative programme design and risk is being measured more
regularly. However, performance on individual projects once
underway is more varied and some projects are continuing to suffer
from delays in both the Demonstration and Manufacture stage and in
the Assessment Phase.
Key findings in the Report are:
From our examination of the top 20 projects in the
Demonstration and Manufacture phase:
- The MOD expects to meet the vast majority of the military
customer's requirements;
- The project population has changed significantly to include 10
projects which have been approved since Smart Acquisition was
introduced. Under this new approvals process, it is more difficult
to directly compare our results with previous Major Projects
Reports;
- The MOD is continuing to control overall project costs. Costs
have decreased again in-year by £100 million and, under the new
approvals process, total project costs are within approval;
- The Department expects that overall, projects will take longer
than originally forecast to come into service, but the extent of
the delay has been reduced again;
- During the last year, results on individual projects have been
mixed, with 14 of the 20 projects experiencing either a time
slippage or a cost increase and two showing both;
- Analysis of historic Major Projects Report performance shows
that cost increases are traditionally reported in the middle of the
procurement cycle and time slippage reported either early or
towards the end. The challenge for the MOD and Smart Acquisition is
to break this mould to help ensure that projects are more likely to
be delivered to time and cost. Future Major Projects Reports will
include more projects which have been approved under Smart
Acquisition which will enable us to determine whether Smart
Acquisition is helping the MOD to improve its performance.
From our examination of the top 10 projects in the
Assessment Phase:
- All 10 pre-Main Gate projects are using quantified measures of
risk and eight out of 10 are using methods which are designed to
assess the technical maturity of projects;
- Approved timescales for the Assessment Phase are often
optimistic. Five out of the eight projects which have targets for
the Assessment Phase are taking longer than forecast;
- There is early evidence that wider risks to some projects were
underestimated. Of the five projects to move from the Assessment
Phase to Demonstration and Manufacture in the last year, all have
shown an adverse movement against their cost or time forecasts and
one project (A400M) has exceeded its approved timescale although it
has reported a £200 million cost reduction.
On Smart Acquisition Innovation and Risk:
We examined three projects which have used innovative methods:
C-17, an example of leasing to fill a short-term capability gap;
Type 45 Destroyer, using principles of incremental acquisition and
partnering with industry; and Skynet 5, where a Private Finance
Initiative will be used to fill the capability. The case studies
show that the MoD is taking advantage of the scope for innovation
that Smart Acquisition allows and highlight the importance of
carefully managing associated risks.
Sir John said today:
"The Ministry of Defence is controlling costs and
expects to meet the technical requirements of the armed forces in
most cases. But delays continue to be a problem with some projects.
The reasons for these delays are complicated – a mixture of
over-optimism and systemic factors. The Ministry of Defence has
made some progress in tackling these factors this year, and future
Major Project Reports will provide evidence to assess further
progress."
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 employing some 750 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 72/02
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