Press Release - Ministry of Defence: Major Projects Report
2000
22 November 2000
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 is
expecting to meet the technical requirements of customers but not
always within cost and time. There is evidence that the Ministry of
Defence has begun to control costs better but control of time
remains a problem. Sir John's report also covers the top 10 defence
equipment projects in the assessment phase, when options for
meeting the requirement are considered, and he told Parliament that
there is scope for improvement in cost and timescale performance
during the assessment phase.
The Ministry of Defence has changed the way that it organises
and conducts procurement business following implementation of Smart
Procurement, which is now sustained and reinforced under the new
heading Smart Acquisition. The Major Projects Report 2000 does
present some evidence to judge whether the disciplines of Smart
Procurement are beginning to lead to improved performance. However,
it is very early to expect to see any major impact on the projects
in the report, all of which were begun before the introduction of
Smart Procurement.
From examination of the top 20 projects in demonstration and
manufacture, the National Audit Office found that:
- forecast costs are 0.2 per cent (£78 million) lower than last
year - 5.7 per cent (£2.4 billion) higher in total than at
main investment approval - and newer projects are showing less cost
overrun per year than older projects. Most of the reduction in the
last year relates to future expenditure and includes a £62 million
saving on the Eurofighter programme which is dependent on
successful contract negotiations;
- the average project delay is getting longer - on average,
in-service dates have slipped by 3 months since last year to
28 months in total, against the timetables set at main investment
approval. Seven projects experienced delays totalling 63 months in
the last year and slippage will increase if the risks allowed for
in approvals materialise;
- delays have led to capability shortfalls on 13 projects;
and
- the Ministry of Defence expects to meet 98 per cent of the
customer’s key requirementswhen the equipment enters service.
From examination of the top 10 projects in the assessment phase
(in which technical issues are investigated, performance traded
against overall cost, and where the costs of the phase are
generally less than 15 per cent of the total procurement cost for
the project), the National Audit Office found that:
- the Ministry of Defence has not yet decided on the targets
which it will use to measure the success of the assessment phase,
although the objectives of the assessment phase are clear; and
- for eight of the 10 projects, the average cost variation is 13
per cent and the average variation from the approved assessment
phase timescale is 8 months. The other two projects (BOWMAN and the
Microwave Landing System) were approved before 1995 and are showing
much greater cost and time variations.
In the Major Projects Report 1999, the National Audit Office
examined the impact of slippage on the operational capability and
costs of four case study equipments – the Air-launched Anti-Armour
Weapon (known as Brimstone), the Medium Range TRIGAT anti-tank
weapon, the BOWMAN communications system and the Type 45 Destroyer.
Since then, there have been significant developments affecting
these projects. The Major Projects Report 2000 examines the
operational and cost impacts of these developments and the National
Audit Office found that:
on Brimstone
- the Ministry of Defence has decided to buy Maverick G missiles
which will partially fill the capability gap created by the delays;
and
- the delays will cost the Ministry of Defence around £48 million
in total, if the purchase of Maverick G missiles is included.
on the Type 45 Destroyer
- the first three ships will enter service with some capability
shortfalls acceptable to the customer and the improved operating
capability will be achieved through an Incremental Acquisition
programme; and
- running on the Type 42 Destroyers will cost the Ministry of
Defence an additional £565 million on operational and support
costs, albeit offset by the delayed investment in the Type 45.
on Medium Range TRIGAT
- the United Kingdom withdrew from the collaborative Medium Range
TRIGAT project in July 2000 and the Ministry of Defence will
write-off £115 million in development costs; and
- the Ministry of Defence is reviewing its anti-armour system
requirements and sustaining the Army's current limited medium-range
anti-tank capability is dependent on extending the shelf-life of
the current weapon (MILAN).
on BOWMAN
- the in-service date for the main BOWMAN system is uncertain;
and
- the Ministry of Defence has re-opened the competition to seek a
cost-effective solution to the BOWMAN requirement and will need to
write-off development costs of between £35 million and £102
million.
Sir John said today:
"I welcome the encouraging signs that the Ministry of
Defence is improving cost control on major projects and in future
Major Projects Report I will look to see that this improvement is
sustained. It is also reassuring that the Ministry of Defence is
expecting to meet the technical requirements for new equipment for
the Armed Forces. However, that equipment is not always available
on time is a concern and it is disappointing that the average
project delay is getting longer. The Ministry of Defence must
translate the improvements on cost that are coming through under
Smart Acquisition to time as well and must reduce project
delays."
Notes for Editors
The 2000 Major Projects Report is the first to be produced a new
format which reflects the Smart Procurement reforms and changes
flowing from the introduction of Resource Accounting. Direct
comparison with the data in earlier reports is not possible, but
the National Audit Office has analysed the in-year trends in cost
and performance between 31 March 1999 and 31 March 2000 to ensure
that changes in performance can be tracked.
Press notices and reports are available from the date of
publication on the NAO website at http://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 65/00
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