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.