Engineering news
The Ministry of Defence (MoD) has been slammed by an influential group of MPs for failing to get a grip on procurement activities, which they said resulted in it taking short term decisions to keep within annual expenditure budgets but then failing to understand the full cost implications of its actions.
Such decisions increased the cost of the MoD’s major projects by £3.3 billion in 2009-10 alone, said a report by the House of Commons public accounts committee. The scale of problems created by this financial imbalance masked the improved performance of the majority of projects against cost and budget, it said.
The report said that when the MoD signed the contract for the two new Queen Elizabeth aircraft carriers, it was already aware that the overall defence budget was unaffordable. “The decision was a compelling example of the department’s failure to exercise adequate governance and control over its expenditure programme,” it said.
Just seven months after it signed the carrier contract, the MoD made a decision in distress in an attempt to balance the defence budget and delayed the project without understanding the £1.6 billion cost implications. “That such an important decision was taken based on inadequate information about the longer-term costs and consequences points to an organisational culture in which there is a lack of clarity about accountability and responsibility,” said the report.
The public accounts committee also said that the decision to fly a different type of aircraft off the carriers was not based on a full understanding of the costs. The MoD was confident that the additional costs incurred in fitting catapults and arrester wires to the carriers would be more than offset by procuring lower-cost aircraft. But the report said that an inadequate understanding of costs on this matter was indicative of more deep rooted problems in the way the MoD took decisions. “In future the department, working closely with the Treasury, should only take key decisions when it has sufficient financial and other management information to demonstrate the actions it chooses to take are both affordable and represent value for money,” it said.
Defence secretary Liam Fox said that he planned to tackle financial mismanagement at the MoD. He said “fantasy projects” which make their way into the defence programme had to stop, and that the department’s biggest projects would be regularly assessed.
Fox said he had asked the MoD to ensure that no projects began unless there was a firm budget for development, procurement and deployment. “Otherwise we end up with fantasy projects which are not much more than a wish-list and that has to stop,” he said.
Fox defended the government’s decision to scrap the Nimrod MRA4 aircraft, saying that the project was an example of delay and budget overrun. He said: “These aircraft were nine years delayed. They still weren’t airworthy and they still had cost the taxpayers billions of pounds.
“What I am doing today is to make sure we don’t get another project like that because we need to have real time control of these projects.
“It’s quite unacceptable that a project should run nine years beyond its time and cost the taxpayers billions with nothing being done to redress that.”