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Over the past ten years, the Ministry of Defence has introduced a number of reforms to the way it procures defence equipment, but its performance on Major Projects remains variable. As part of its annual report to Parliament, the National Audit Office examined twenty of the largest defence equipment projects. The report found that, during the 2007-08 financial year, forecast costs for these projects rose in aggregate by a further £205 million over their original budgets and forecast in-service dates slipped in aggregate by an additional 96 months. On current forecasts a quarter of these projects will not achieve all of their key performance objectives.

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The Ministry has worked with its industrial and commercial partners to deliver urgently needed operational requirements and made sensible decisions to prioritise where this is appropriate. The Watchkeeper unmanned aircraft is not due to come into service until 2010, so the Ministry worked with the contractor to fast track the delivery of an interim capability by mid-2007 to meet pressing operational needs. The Department has also used the Urgent Operational Requirements process to buy 13 High Mobility Engineer Excavators from JCB for £6.2 million, upgraded to a standard suitable for deployment on current operations, to replace the delayed Terrier armoured engineering vehicle project.

The Ministry of Defence changed the delivery programme for the Beyond Visual Range Air-to-Air Missile to deliver it when it was needed and at the lowest cost. The Ministry has adopted a two stage delivery programme to build the missile and demonstrate it before integrating it with a specific aircraft type. The second stage will see the missile integrated with the Typhoon aircraft as part of the Typhoon Future Capability Programme. The changes to the project, including the increased duration, have led to a £111 million overall in-year cost increase.

But overall performance continues to be varied, with five of the projects examined by the NAO showing significant cost or schedule problems in the past year (2007-8). These projects were the Nimrod Maritime and Reconnaissance Mark 4 Aircraft, Terrier armoured engineering vehicle, Soothsayer electronic warfare system, Naval Satellite Communications Terminals and the Beyond Visual Range Air-to-Air Missile.

Factors that contributed to cost increases and delays reported included shortcomings in project management, a lack of realism at the project outset, failure to identify project dependencies (such as limited influence over United States’ weapons development programmes) and underestimated costs.

“The Ministry of Defence’s major defence projects experienced further aggregate delays of 96 months and cost increases of £205 million in 2007-08. The Department has taken reasonable decisions to reflect defence priorities and progress has been made in improving procurement practice. But performance remains variable and, until the MoD and the defence industry improve their decision making processes and show sustained learning from previous projects, value for money will not be consistently delivered.”

Tim Burr, head of the National Audit Office


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