The MoD’s management of its biggest equipment programmes is improving, the National Audit Office (NAO) yesterday acknowledged.
The NAO’s annual Major Projects Report (MPR) has found that for the financial year 2011-2012, the annual cost increase for the sixteen biggest equipment programmes was £468M, seven times lower than the last year of the previous government which MPR 2010 recorded as £3.26BN.
The cost increase for 2011/2012 represents just 0.8% of the £63BN total value of the sixteen biggest projects in the equipment programme.
The report, published today, found that almost three quarters of the cost increase in 2011/12 was due to increased oil costs leading to higher fuel price costs over the next 27 years for the RAF’s Voyager aircraft contract.
The NAO also assess any delays to the top programmes and found that six have reported no slippage. Unlike in previous years the NAO has found that none of the delay in the other 10 projects it due to the Department deferring progress for financial reasons.
Nine Voyager aircraft remain on track to enter air-to-air refuelling service in 2014 and the first aircraft has already flown over 1,000 hours transporting troops around the world.
The Department has already mitigated delays to the RAF’s new tactical transport aircraft (A400M), by purchasing two extra Boeing C-17 aircraft and two BAe 146 aircraft.
The RAF will have adequate numbers of transport aircraft to meet the requirements of the Strategic Defence and Security Review and Future Force 2020 – and by 2022 will have significantly greater air transport capacity (both tactical & strategic) than today.
Though Defence procurement inevitably involves highly complex projects, the NAO report acknowledges that 99% of the Department’s key performance measures for the delivery of equipment capability are set to be achieved.
Defence Secretary Philip Hammond said: “Thanks to rigorous financial management, this Government has dramatically reduced the annual cost growth of the biggest equipment projects from more than three billion pounds 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. Unlike the previous Government, who let spending spiral out of control, we have taken the tough decisions necessary to get the Equipment Plan under control. Fuel inflation and other factors outside of the Department’s control are responsible for three-quarters of the cost increase over the past year.
Secretary Hammond added: “It will take time to rectify years of mismanagement of the Programme, but the work this Government has done to balance the budget and address fundamental project management problems is paying off. We can now make more accurate cost projections and invest in the best equipment for our Armed Forces with more confidence than ever before."