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Last Updated: Friday, 23 January, 2004, 15:28 GMT
Warning over MoD kit overspend
Eurofighter
The Eurofighter is one of the projects affected by overspend
The Ministry of Defence is facing heavy criticism for an overspend of more than 3bn on major projects.

A National Audit Office study points to mounting costs and late delivery for a number of programmes, including fighter planes, submarines and missiles.

Nearly 90% of the cost overrun was down to four delayed major projects involving the UK company, BAE Systems.

All four are "legacy projects", costly schemes started long before Labour took office and reformed procurement.

The report's publication comes soon after the MoD faced criticism over equipment shortages in the Iraq war.

In a further blow to BAE Systems, the Financial Times said the MoD was about to award a 13bn contract, to replace the RAF's refuelling aircraft, to a team led by Franco-German defence group EADS.

Defence procurement minister Lord Bach, speaking on BBC Radio 4's Today programme, refused to comment on the newspaper report about the deal but said a decision was close.

DEFENCE OVERSPEND
1. Eurofighter: 60 months late, 1bn over budget
2. Nimrod: 71 months late, 400m over budget
3. Astute submarines: 43 months late, 1bn over budget
4. Brimstone missiles: 126m over budget
The paper quoted a unnamed senior MoD official as saying: "You don't keep employing a plumber who continually floods your house."

Lord Bach denied there was any effort to "punish" BAE but said the arms industry in general must "raise its game".

The report could prompt criticism of BAE and a former chief executive admitted giving unrealistically low prices at the outset of projects in order to get them commissioned.

Sir Raymond Lygo, chief executive of the firm in the 1990s, told BBC Radio Five: "A well-known fact, whether anybody admits it or not, is you'll never get any programme through the government if you ever revealed the real cost.

"After a year you say 'I'm terribly sorry but the costs have now risen for this reason and the other reason'."

The report also raises concerns over an average nine-month increase in forecast delays in getting equipment into service.

I am disappointed by the large rises in costs and delays on four older projects in particular
Sir John Bourn
NAO
The four worst performing projects highlighted by the NAO's Major Projects Report 2003 all date from the mid-1990s or earlier and have been plagued by a history of technical problems and delays.

The most well-known is the Eurofighter Typhoon warplane. Nimrod reconnaissance planes, Astute submarines and Brimstone air-launched anti-tank missiles also ran into major problems.

Together, the report says, they account for 2.7bn or 87% of the cost overrun and 79% of the total "slippage" in delivery times.

The report studied the top 20 outstanding MoD projects where the main decision had been made to invest and proceed with the project and 10 projects still in the assessment stage.

The total current forecast for the cost of these 20 outstanding projects is 51.9bn, an increase of 3.1bn in the last year and 6% over the amount approved for spending.

Conservative MPs criticised the government for allowing costs and delivery times to slip.

Edward Leigh, chairman of the influential Commons Public Accounts Committee, said the MoD's performance on delivering major projects was "extremely worrying".

THE EUROFIGHTER
UK to get 232 Eurofighters
Made in UK, Italy, Spain and Germany
Can fly twice the speed of sound
Now capable of ground attack
First conceived in 1983

A BAE spokesman said: "BAE Systems has formulated and is now executing continuous improvement in all areas under its control in the company's performance on major MoD projects."

Since the legacy projects were commissioned the MoD has introduced "smart" defence procurement, as well as working to remove more of the burden of risk in projects from the government.

NAO Auditor General Sir John Bourn said: "I am disappointed by the large rises in costs and delays on four older projects in particular."




WATCH AND LISTEN
The BBC's Evan Davis
"The age-old problem of defence purchasing will not go away"



SEE ALSO:
Defence boss slated over war kit
22 Jan 04  |  Politics
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16 Jan 04  |  Politics
How big is the UK arms trade?
09 Sep 03  |  Business


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