Tuesday, February 22, 2011

MoD 'must end contract failures'

22 February 2011 Last updated at 07:57 GMT Liam Fox said there must be an end to 'fantasy projects'

The Ministry of Defence must prove it has sorted out its equipment-buying programme or continue its "cycle of failure", MPs have warned.

The Commons public accounts committee said procurement delays and overspending had to be addressed.

It urged the MoD to provide its forecast for implementing government money-saving demands by April.

Defence Secretary Liam Fox said the budget had to find a balance matching "resources" with "aspirations".

Last autumn's Strategic Defence and Security Review urged savings of billions of pounds by cutting back on warships, fast jet fighters and thousands of soldiers, sailors and airmen.

It included the decisions to cancel the Nimrod MRA4 plane, withdraw the Sentinel surveillance aircraft and to mothball a yet-to-be-built aircraft carrier.

'Black hole'

The committee said the changes involved "greater operational risks" and writing off nearly £5bn of taxpayers' money.

It added: "Such decisions are never desirable. The fact that the department has been pressured to make them offers a compelling argument why it must address the problems which have affected defence procurement for decades and on which our predecessors have commented extensively.

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The MoD must demonstrate the same discipline in its defence procurement that our forces demonstrate in the field”

End Quote Margaret Hodge MP Public accounts committee "If it does not, the cycle of failure will continue, with badly needed capabilities being delivered later than planned and cost increases crowding other capabilities out of the equipment programme."

The committee was responding to a National Audit Office report, published in October, which said the "black hole" in MoD procurement had increased by £3.3bn in Labour's final year in office to reach around £36bn.

The department has started to renegotiate a large number of contracts.

But the committee's chairman, Labour MP Margaret Hodge, said: "In the wake of the defence review the MoD still has to spell out whether and how it has got its defence procurement budget under control.

"The MoD must demonstrate the same discipline in its defence procurement that our forces demonstrate in the field."

'New benchmark'

The MoD has not yet provided data to back up its opinion that fitting catapults and arrester wires to the Royal Navy's new aircraft carriers to allow them to carry a different type of plane will save money, said the report.

The two ships are being built at a cost of £5.2bn but, as a result of decisions made in the defence review, one carrier will be mothballed almost immediately and there will be no fast jets to fly off the vessels until 2019.

The committee's report said the carrier contract, signed in 2008, had set "a new benchmark in poor corporate decision-making".

Speaking to BBC Breakfast, Dr Fox said the defence budget had to be brought "back into balance so that we are matching our resources with our aspirations and for too long there has been a mismatch".

He said: "I've asked the new chief of defence materiel in the MoD to ensure that no projects begin unless we're sure that there's a budget for development, procurement and deployment because otherwise we end up with fantasy projects which are not much more than a wish list - that has to stop."

The defence secretary added that "substantial progress" was being made by a "very good new team" at the MoD.

But he said there was a need to tackle "the culture of optimism or the conspiracy of optimism as it's sometimes called".

This involved projects being priced too low initially, before costs "mushroomed" later, the defence secretary said.

"That's why we need proper cost assessments rigorously done from the outset," he said.

During a speech to the Civitas think tank in London later on Tuesday, Dr Fox is expected to "explain the dilemmas we face and outline the guiding principles of defence policy in a tightly constrained financial environment".

He is due to say that "poor cost-estimation" and "unrealistic timescales" on defence procurement "would simply not be tolerated in the private sector, and they will no longer be tolerated in the MoD".

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