Report on MoD’s management of major projects

• Report: Ministry of Defence: Major Projects Report 2008
• Public Accounts Committee

Edward Leigh MP, Chairman of the Committee of Public Accounts, today said:

"Each year we closely examine the MoD’s performance in procuring 20 of its biggest military equipment projects. Today’s set of results, for the year 2007-08, is disappointing. In that year alone, the delay to the introduction of these projects increased by 96 months (the worst in-year slippage since 2003); and the forecast cost of all of them increased by another £205 million over the original budget, to a total of almost £28 billion.

"What lies behind this are the same old failings: including, at the start of projects, both a lack of realism and unjustified optimism about what can be achieved, at what cost and by when. The Department introduced reforms in 2001 but these have not yet had an effect: the projects with the most severe slippages in 2007-08 were the very ones where the main investment decisions were taken after 2001.

"The consequences of all of this for our service men and women are serious. Delays to projects have led to gaps in our present front-line capability. For example, the MoD has had to use in Afghanistan interim vehicles and kit approaching obsolescence. And the Department, to live within its budget, is having to trade some future defence capabilities. This will limit what our hard-pressed forces are able to do in future operations."

Mr Leigh was speaking as the Committee published its 20th report of this Session which, on the basis of evidence from the Ministry of Defence (the Department), examined the impact of time slippage and cost increases, managing projects more effectively at the early stages, and delivering projects successfully throughout their life.

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 Department, 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. In particular, the main investment decisions for Terrier, Soothsayer and the Naval Extremely High Frequency/Super High Frequency Satellite Communications Terminals were made after 2001, yet these were the projects which suffered the largest slippages in 2007–08.

Project delays also have a detrimental impact on operational capability and costs. The Terrier and Soothsayer In-Service Dates have already been missed, forcing the Department to buy interim vehicles and continue using equipment suffering from obsolescence in Afghanistan. An additional 3–4 year delay to the A400M aircraft means that 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.