MoD’s poor practices blamed for project cost overruns and delays

Poor practices at the UK Ministry of Defence have resulted in soaring costs and lengthy delays on many military procurement programmes, often even before contracts were signed, according to parliament’s spending watchdog.

A National Audit Office report published on Thursday laid bare a range of inadequacies at the MoD, as well as across its suppliers, including poor project management and inadequate contractor performance.

The watchdog reviewed 20 programmes, with a combined forecast cost of £120bn, after budget increases had been included. It found that the expected cost of nine programmes rose between the initial business case being put forward and the main investment decision being taken. 

On three occasions, including for the Army’s Challenger III tanks and the Navy’s Type 31e frigates, the cost rose by 59 per cent or more. In some cases, the department responded to cost increases by reducing the number of units to be procured to remain within budget. 

The analysis also found that 13 programmes were showing cumulative net delays of 254 months in achieving entry into service since being signed. The delays were owing to a variety of factors, including setting over-optimistic schedules early in projects. The longest delay was 79 months for the A400M military transport aircraft.

Gareth Davies, the head of the NAO, said: “Too often the MoD doesn’t deliver its major equipment contracts as planned due to a combination of supplier underperformance, a failure of the MoD and suppliers to get to grips with the technical complexity of projects, and [resorting to] short-term solutions to affordability problems.”

The criticism heaps further pressure on the department’s procurement record which has come under fire in recent weeks over fears that the Ajax armoured vehicles it has signed a £5.5bn contract to buy are beset by extreme noise and vibration problems which are causing injuries to troops. The first 14 new vehicles, which promise enhanced battlefield surveillance capabilities, were due to come into service at the end of this month but this timeline is likely to slip. 

Meg Hillier, chair of the House of Commons public accounts committee, said that although these “multibillion pound contracts are designed to deliver equipment which is crucial for the nation’s defence”, time and again, “they are delivered late and at greater cost than initially expected”.

The report, Hillier added, showed that the MoD “continues to struggle to secure value for money from its equipment contracts”.

Francis Tusa, editor of Defence Analysis, said the report highlighted the “conspiracy of optimism that everything would come right at the end” continued to dog defence procurement.

“We have seen four, maybe five substantial attempts to reform the procurement of large programmes since the late 1990s. The same issues have been highlighted time and again. This report shows that none of the lessons are ever learnt. These failings are costing money,” he said. 

The NAO said the MoD was trying to improve its record on contract delivery. The government’s defence and security industrial strategy, published in March, aims to build a more strategic relationship with industry to help improve procurement. 

The MoD said it was committed to “delivering value for money through new streamlined processes and developing our industry contracts with a focus on delivery”.