Defence project overruns cut by £700m

Friday, 25 November 2005 12:00 AM

The Ministry of Defence (MoD) has cut overruns on defence procurement projects by £700 million, according to the financial watchdog.

However, the National Audit Office (NAO) reveals in its annual report that the department is still set to spend £29 billion on its 19 biggest defence projects this year.

This is ten per cent (£2.7 million) more than originally predicted, while the report finds that each project has been delayed by an average of two and a half months.

Last month, the public accounts committee condemned the MoD's performance in delivering defence projects, saying that in the last two years, the costs of its largest projects soared by £4.8 billion.

But in today's report, the NAO finds cutbacks are beginning to have an effect on spending costs. It cites a decision to refurbish 12 rather than 18 Nimrod maritime patrol planes, and notes that a reduced order for Meteor missiles and Stingray torpedoes saved £346 million.

"The decrease in the forecast costs is a positive sign that the MoD is starting to bring its equipment programme under control," said John Bourn, head of the NAO.

"However, it is too early to judge whether this is the start of a sustained improvement in the MoD's project management.

"Important in achieving this improvement will be a greater understanding of projects at the outset, including an objective assessment of risk and benefit, and that is why the assessment phase is so important."

The UK's order for 232 Eurofighter jets was not included in the report due to political sensitivities over current spending negotiations between Eurofighter nations Germany, Italy, Spain and Britain.

Since the Conservative government first approved the Eurofighter programme in 1987, the cost of the order has risen by £2.3 billion. Last year the programme was forecast to cost £19 billion with the first planes delivered in June 2003, 54 months late.

Speaking ahead of the report earlier this week, procurement minister Lord Drayson said the MoD was bringing its spending and costs under control.

"What we can see here is a significant improvement, although we still have a huge job to do and there are going to be bumps in the road," he said.

However, shadow defence spokesman Gerald Howarth condemned the MoD for making cuts in future capabilities to cover up over-spending, saying: "The MoD has, once again, moved the goalposts deliberately to mask the extend of the cost over-runs and delays."

He added: "This government's continue to mismanage the defence procurement budget and once again it is our armed forces who will pay the price through delays and cuts in capabilities and platforms, depriving them yet further of the essential tools they need to do the job."

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