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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 meeting the technical requirements of the majority of its customers, whilst continuing to improve cost control and beginning to bring delays under control. On the top 10 projects in the assessment phase, where the objective is to prioritise solutions and reduce risk to an acceptable level, he told Parliament that the MoD has yet to develop a comprehensive set of measures to assess the success of the phase and whether it is spending the right amount of time and money reducing risk.

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Since 1998, the Ministry of Defence has been working under new processes known as Smart Acquisition, which are intended to enable the Department to buy military equipment “cheaper, faster and better”. The Major Projects Report 2001 this year examines how performance under Smart Acquisition is being measured. Sir John reports that the Department needs to better assess the impacts of Smart Acquisition and is working to develop more comprehensive indicators to demonstrate whether its acquisition performance under Smart Acquisition is improving.

Key findings in the Report are:

From examination of the top 20 projects in demonstration and manufacture:

  • performance against 80 per cent of cost, time and technical parameters is the same, or better than it was a year ago;
  • the Department is continuing to control project costs better – costs have decreased for the second year running (by some £100 million), and overall forecast costs are £42.7 billion, or 6.6 per cent (£2.6 billion ) above approval;
  • some projects continue to slip but there is evidence that the Department is beginning to slow the rate of slippage – four of the 20 projects (Swiftsure and Trafalgar Class Submarine Update, Seawolf Mid-Life Update, the Advanced Short Range Air-to-Air Missile, and Attack Helicopter) have slipped in the last year by a total of 29 months, less than half the slippage reported in the Major Projects Report 2000; and
  • the Department is continuing to meet the majority of the military customer’s requirements (93 per cent) but, in the last year, technical factors have led to performance falling short of requirements on two projects, Spearfish and the Advanced Short Range Air-to-Air Missile.

From examination of the top 10 projects in the assessment phase:

  • the Department needs to be able to reliably assess and quantify the extent to which risks are being reduced in the assessment phase but does not currently do this in a comprehensive and suitably quantified way; and
  • the Department is rightly looking to develop better, more quantified risk reduction measures and to use them in conjunction with cost and time measures to inform successful assessment phase performance.

On measuring the progress of Smart Acquisition:

  • information on whether Smart Acquisition is delivering the expected benefits is available but does not capture all of the continuing benefits anticipated across the Department and through the life of the equipment. The Department’s £2 billion Smart Acquisition target provides information on the initial cost reductions made only in the procurement phase; and
  • the Department is working to improve the link between the different sources of information to provide a comprehensive and coherent assessment of the progress of Smart Acquisition across the Department through evolving the current metrics and developing new ones.

"I am concerned, however, that comprehensive indicators are not yet in place to measure the success of the assessment phase in reducing project risk, which is key to future successful acquisition. Nor are there measures to fully assess whether all of the benefits of Smart Acquisition are being achieved. MoD should give priority to establishing such indicators."

Sir John


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