Watchdog warns of defence project delays and overspending

Major defence projects are being hit by delays and overspend despite government promises to control costs, the Whitehall spending watchdog has warned.

The National Audit Office found costs of the 16 largest projects had risen by £468m and slipped in timescale by 11 years, seven months in the past year.

Labour said "waste and delay" were characteristics of the coalition's equipment programme.

Defence Secretary Philip Hammond said inefficiencies were being wiped out.

Mr Hammond told BBC Radio 4's Today programme that the culture at the Ministry of Defence was changing and "strong progress" had been made in the move to improve the handling of projects.

He said the National Audit Office's (NAO) report had been "fair" and had recognised that the MoD had made progress but likened improving efficiency at the MoD to "turning around a super tanker".

"There are years and years of financial mismanagement and poor management around MoD projects and it is going to take a while to turn it around and get the level of performance that we want. But we are determined to get it," he added.

'Critical shortfalls'

The NAO's annual report on the MoD's major equipment projects said the overall costs of the department's projects have risen by a total of £6.6bn and commissions have been delayed overall by 39 years since being ordered.

The report warns that delays to new RAF transport and refuelling planes could lead to critical shortfalls until 2017.

The MoD has already spent £787m in filling gaps caused by delays to the programmes to deliver new air-to-air refuelling and transport aircraft programmes.

It said that officials were considering extending the life of the RAF's VC10s - due to be retired from service in March - then using the Tristar, which goes out of service next year, to meet air-to-air refuelling needs until the new planes are ready to take over.

Delays to the transport aircraft, the A400M, which is due to enter service in March 2015, six years later than planned, have meant the MoD has had to acquire extra aircraft to ease pressure on the RAF's transport fleet.

Meanwhile, delays to a £32m Falcon communications system for Afghanistan mean it will not now be ready until after British troops have withdrawn in 2014.

Tim Banfield, who wrote the NAO report, said there were "some early signs that the MoD is beginning to make some more sensible decisions about how it goes about buying defence equipment".

However, he said the MoD had some way to go and was "at the start of a long journey".

He told the BBC: "Defence projects are big, they're complex, they go on for a long while, but what we would hope to see is that the Ministry of Defence starts to make better decisions about when it invests and better information, about costs, risks and realistic timescales. And there is much less turbulence as they go forward.

"The one thing we want from the MoD is to be able to see consistency and certainty."

The spending watchdog did acknowledge early signs of progress in controlling spending, but overall it concludes the MoD needs to do better.

NAO head Amyas Morse said the MoD "faces a difficult task striking a balance between delivering the capabilities it wants and those it can afford".

"There will always be factors over which the department has limited control, but it must do more to learn from previous projects," he said.

'Tough decisions'

Margaret Hodge, who chairs the Commons public accounts committee, which oversees the NAO's work, said: "Yet again, the MoD's annual report card on its 16 largest defence projects has found unacceptable cost increases and delays, making it harder for the ministry to deliver today's capability needs and close tomorrow's capability gaps."

And shadow defence secretary Jim Murphy said: "Less than a year after [Defence Secretary] Philip Hammond claimed to have balanced the budget, waste and delay are characteristics of his equipment programme."

But the defence secretary said that "thanks to rigorous financial management", the government had "dramatically reduced the annual cost growth of the biggest equipment projects from more than £3bn under the last year of the previous administration, to under half a billion pounds".

"The 0.8% growth in programme cost represents much less than the rate of inflation for the year," said Mr Hammond.

He said that fuel inflation and other factors outside of the department's control were responsible for three-quarters of the cost increase over the past year.

Mr Hammond told the BBC: "I'm confident that we are making strong progress but I recognise that we have a lot of work to do.

"We have tightened up procedures and we're confident that we're winning this battle."