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The Major Projects Report 2003 provides information on progress made by the Ministry of Defence in procuring major defence equipment against cost, time and technical performance targets. It covers 30 projects split, according to Smart Acquisition principles, between the 20 largest projects on which the main investment decision has been taken, and the 10 largest projects yet to reach that point. For the 20 largest projects, costs are forecast to have increased by £3.1 billion in the last year, and are now 6.1 per cent over their approved costs. Difficulties on four older projects (which predate the introduction of Smart Acquisition) account for the majority of cost and time overruns. Following on from a NAO report on this topic (HCP 195, session 2003-04; ISBN 0102926581) published in January 2004, the Committee's report examines four main issues: the impact of the large cost overruns and delays; departmental risk management; ways of developing a more constructive relationship between the Department and industry; and lessons that need to be learned to avoid such poor procurement performance being repeated in future.
Following on from an NAO report (HCP 1159-I, session 2003-04; ISBN 0102930481) published in November 2004, the Committee report considers the recommendations of the Major Projects Report 2004. This report examined cost, time and technical performance data for 30 defence projects in the year ended March 2004, which included 20 post-Main Gate projects (where the main investment decision to proceed had been taken by the Ministry of Defence, and ten projects still in the assessment stage. The Committee's report focuses on three main issues: the impact of the continuing large cost overruns and delays; the challenge of handling large complex projects; and whether the latest reform programme will succeed where previous ones have failed. Findings include that the £4.8 billion of cost overruns recorded in the Major Projects Reports 2003 and 2004 will put further pressure on an already tightly-stretched defence budget; and the principles underpinning Smart Acquisition are sound, but have not convincingly improved defence procurement because they have not been consistently applied. The conclusions and recommendations set out build upon those given in previous Committee reports, particularly that in 2003, and these should now be progressed as a consistent and coherent programme.
Following on from the NAO report (HCP 595-I, session 2005-06; ISBN 0102936250) published in November 2005, the Committee's report examines the recommendations made to improve the MoD's procurement of defence equipment focusing on time, cost and performance data for 30 defence projects in the year ended March 2005. This covers the 20 largest projects where the main investment decision has been taken and the 10 largest projects still in the assessment stage. The Committee's report focuses on three main issues: options for enhancing programme and project management of defence acquisition; the impact of older projects on overall acquisition performance; and value for money from the Defence Industrial Strategy. Findings include: i) the MoD has reduced the forecast costs of its top 19 projects by some £700 million, but these cuts were needed to bring the Defence Equipment Plan under control rather than the result of better project management; ii) some of the latest capability cuts are short-term expediencies which may result in an erosion of core defence capability or in higher costs throughout the life of individual projects; and iii) despite previous assurances that it had restructured many of its older projects to address past failures, the MoD still attributes much of its historic poor performance to so called "toxic legacy" projects which continue to accumulate considerable time and cost overruns, and it is now time that such projects were put on a firm footing with realistic performance, time and cost estimates against which the MoD and industry can be judged.
This report examines whether the Ministry of Defence's (MoD) governance and budgeting arrangements are fit for purpose and whether it understands the serious implications of reprioritising projects after committing to them. The Committee identifies the serious consequences of failings in the governance and budgetary processes. Even using the MoD' own, over-optimistic estimates the defence budget is unaffordable by some £6 billion. The exact size of the gap is dependent on the assumptions made about future funding, but the gap could easily be £36 billion. Intentional decisions to delay some projects have increased total procurement costs and represent economies of the short term and overall are poor value for money on the specific projects affected, the report said. The decisions were taken as part of a wider package to try to make the defence programme affordable over the next few years. They account for two thirds of the £1 billion of cost increases on projects in the last year. Crucially, they mean the Armed Forces will not get the operational benefits of new capabilities as quickly as expected. Decisions to delay projects, change requirements and reduce the numbers of equipments being procured adversely affect the MoD's ability to secure value for money from its commercial partners. The MoD is in the strongest negotiating position with industry before it places a contract. Slowing projects down once started almost inevitably increases their costs and takes pressure off contractors to become more efficient.
The Major Projects Report 2008 provides information on the time, cost and performance of 20 of the largest military equipment projects being undertaken by the Ministry of Defence, where the main investment decision has been taken, as well as the top 10 projects in the earlier Assessment Phase. In the last year, the 20 biggest projects suffered a further £205 million of cost increases, and 96 months additional slippage. This is the worst in-year slippage since 2003. The total forecast costs for these projects have now risen to nearly £28 billion, some 12 per cent over budget. Total slippage stands at over 40 years, a 36 per cent increase on approved timescales. The number of Key User Requirements reported as being "at risk" of not being met has also increased from 12 to 16 in the last year. This is a disappointing set of results, particularly because the problems are being caused by previously identified failures such as poor project management, a lack of realism, not identifying key dependencies and underestimating of costs and timescales. The reoccurrence of these problems suggests that the Department's latest acquisition reforms, introduced in 2001, are not yet resulting in the Department making better investment decisions or improving the execution of its defence projects. Project delays also have a detrimental impact on operational capability and costs, in some cases forcing the Department to buy interim vehicles and continue using equipment suffering from obsolescence in Afghanistan and either older Hercules aircraft will have to serve beyond their planned out of service date, or other transport aircraft will have to be bought or leased to address a growing gap in capability.
This report from the Committee of Public Accounts provides information on the time, cost and performance of the 20 largest projects of the Ministry of Defence where the main investment decision (known as Main Gate) has been taken. This report follows on from a two volume NAO report published in November 2006 (HCP 23-I/23-II, 06/07 - ISBNs 9780102943740; 9780102943733), into the major projects of the Ministry of Defence. Evidence was taken by the Committee based on the NAO report, covering three main issues: the impact of the cost saving measures identified by the Departmental reviews in 2005-06; the performance of individual projects; the Department's initiatives to improve acquisition performance. The Department undertook a review of the 20 post-Main Gate projects, which reduced costs by £781 million. With £91 million a HM Revenue & Customs rebate, and £242 million the result of better management of commercial and contractual arrangements. But, £448 million of the costs were reclassified as expenditure in other procurement or support budgets or towards corporate management. The re-allocations have, according to the Committee, achieved cost reductions for individual projects, but do not represent a saving for the Department as a whole. Total forecast costs for the approved projects amounts to £27 billion, some 11% over budget. Forecast in-service dates slipped 33 months in-year, and there is a cumulative delay of 433 months for projects over their lives so far. The Department is now placing increased emphasis on through life management of Defence projects, involving the life-cycle management of the projects, services and activities.
In order to deploy troops in key military operations at short notice, the Ministry of Defence employs a system known as the Urgent Operational Requirements. The purpose of this method is to provide speedy and flexible procurement of capabilities, and it has been a major feature of UK recent military operations in Afghanistan and Iraq. Following on from an NAO report (HCP 1161, session 2003-04, ISBN 0102930589) published in November 2004, the Committee's report focuses on three main issues: the importance of identifying and costing likely Urgent Operational Requirements; improvements to the way the MoD captures data on the process and outcomes, and the scope to apply lessons from Urgent Operational Requirements to the regular procurement programme.
This report examines the Ministry of Defence's progress in meeting cost, time and performance targets for its 15 top-spending military equipment projects. The Committee has reported before that the defence equipment programme is unaffordable with commitments exceeding forecast budgets over a ten year period by £36 billion. The MoD's short term decisions to keep in year expenditure within voted limits and the need to understand the full cost implications of these decisions have damaging consequences. In this year alone the cost of the major projects rose by £3.3 billion and nearly £5 billion was lost by late cancellations. The scale of problems created by this financial imbalance masks the improved performance of the majority of projects against cost and budget. The Strategic Defence and Security Review (SDSR) offered the Department an opportunity to bring its plans into balance with the expenditure limits set in the Comprehensive Spending Review. Projects such as the Nimrod MRA4 and Sentinel aircraft have been cancelled, accepting greater operational risks in some areas and writing off nearly £5 billion of taxpayer's money. But implementing the SDSR will require further decisions and the renegotiation or cancellation of a significant number of existing contracts to make the programme affordable. The Department has a poor track record in taking such decisions on the well informed basis necessary to optimise value for money. Other projects examined in detail include the Queen Elizabeth Class aircraft carriers and the Typhoon aircraft.