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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 (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.

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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.

"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."

Sir John


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