Public Services > Central Government

PAC warns MoD over failing project delivery

David Bicknell Published 14 May 2013

House of Commons spending watchdog says MoD needs to become a more intelligent customer to challenge software-intensive project progress


The House of Commons' Public Accounts Committee has warned the Ministry of Defence (MoD) that it needs to act as a more intelligent customer to ensure the industry supporting it delivers projects to agreed timescales.

In its report on the MoD's Equipment Plan 2012-2022 and Major Projects Report 2012, the PAC said that cost effective procurement of major defence projects that are both affordable and delivered as planned is at the heart of providing for the nation's armed forces, and it added that delay is particularly a problem in the case of software development, leading to higher costs in a number of equipment projects this year.

"The department faces a particular challenge in delivering projects to agreed timescales," the committee said. "This is especially true for software-intensive projects, and we are concerned the department lacks the necessary expertise to monitor industry's progress and hold them to account. Ultimately, the department bears the risk of these delays in terms of military capability and we need greater transparency on these risks and how they are mitigated."

The committee added that the MoD frequently does not have sufficient controls in place to challenge industry on progress on projects.

"The department struggles to act as an intelligent client, ensuring industry delivers projects to agreed timescales," it said. "The department acknowledges this problem, and notes it to be a particular issue in relation to software development, which has caused slippage and therefore extra costs to a number of equipment projects this year."

As part of its contractual arrangements with suppliers, the committee suggested, the department should put in place performance metrics which enable it to monitor project progress and hold industry to account for delivery to agreed timescales, particularly in relation to software projects.

The committee added that the MoD continues to take an over-optimistic approach to risk. The practice of under-costing projects, leading to cost increases and unaffordability, has been a recurring problem at the department, it said.

"In 2012, the department put in place a £4.8 billion contingency provision to help manage cost instability. However, the contingency is just 3% of the total £159 billion ten-year equipment budget and has to be able to cover cost increases in a number of possible areas. These include: project under-costing; problems arising on procurement projects; and the risks associated with the support costs, such as the cost of recovering equipment from Afghanistan. The department needs to identify and quantify all significant risks to costs at both project and aggregate portfolio level, and use this to inform and justify the amount held centrally as a contingency provision," the PAC said.

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