MPs attack 'abysmal' £2.8bn defence overspend

The Ministry of Defence's record on procuring new equipment was attacked as "abysmal" by MPs last night after a scathing report showed cost overruns of more than £2.8bn.

The Ministry of Defence's record on procuring new equipment was attacked as "abysmal" by MPs last night after a scathing report showed cost overruns of more than £2.8bn.

In one of the most critical assessments of any government department, the Commons Public Accounts Committee found the ministry had failed repeatedly to secure aircraft, weapons and communications systems on budget and on time.

The MPs even found delays to one anti-armour weapon project had left British troops vulnerable to attack during the Kosovo conflict last year.

The report, published today, says the years of delays to major projects commissioned over the past decade were "unacceptable", including the high-profile Eurofighter project. Worse still, it challenges the MoD's recent claims that new measures to improve the procurement process would result in the £2bn savings envisaged by ministers.

The committee had assessed progress on the ministry's top 25 equipment procurement projects for 1998, using original cost and timescale forecasts. The total cost over-run on the projects was £2.8bn, the equivalent of the procurement cost of 15 Type 23 frigates. Projects had slipped by an average of 43 months, an increase of six months on 1997 and the equivalent of some 27 per cent of the average project lifecycle.

As well as the Eurofighter, specific contracts which had suffered included Brimstone, an air-launched anti-armour weapon, the BVRAAM fighter plane missile, and Bowman, a hi-tech radio system.

David Davis, committee chairman and the Conservative MP for Haltemprice and Howden, said it was time the MoD measured itself against civilian companies in terms of costs and budgeting. "The MoD's track record in procuring equipment to time and to cost is abysmal. We have been hearing for a long time that smart procurement will lead to dramatic improvements. My committee will expect clear evidence that the potential savings being publicised are actually achieved and that MoD's procurement meets the standards expected in comparable situations elsewhere."

The MPs' report states that despite previous initiatives, the MoD's performance "remain unsatisfactory" and says "the causes of delays and cost overruns are unchanged".

It adds: "The department's current performance in procuring equipment to cost and to time was unacceptable, and there was no evidence that the department was controlling projects any better now than in the past, despite previous initiatives that had been presented to the committee."

The MPs also attacked the fact that defence inflation was running at 5 per cent or 6 per cent when factory-gate prices were falling. Such inflation accounts for around £400m of the increases in the 1998 report. Changes to equipment specifications remained a major cause of cost over-runs, costing £290m, and should be avoided unless absolutely necessary in future, they said. The MoD also continued to make "basic errors" in estimating programme costs, such as missing £2m VAT on the BVRAAM project.

The MPs expressed dismay that the Eurofighter project had already over-run by £1.5bn and 42 months and warned that they would monitor the project carefully.

Brimstone, an anti-armour weapon, had suffered a 10-year delay, caused by the MoD alone. "The unavailability of the capability that Brimstone would have provided to the Armed Forces has had an adverse impact on the UK's operations against armed threats during the 1990, including Kosovo," the report says.

Bowman, a tactical communications system, was due to enter service in 1995 and is now six years late, "resulting in a significant capability gap for the Armed Forces".

John Spellar, the Armed Forces minister, said improvement would included integrated project teams with responsibility for each project, a simplified approvals process and a improved commercial practices in teamwork with industry.