'Broken' defence procurement system wasting billions, MPs say

PAC 'extremely disappointed and frustrated' that MoD has not learned lessons
Photo: Sascha Steinach/DPA/PA Images

MPs have called for an “urgent rethink” of the Ministry of Defence’s “broken” system for buying military equipment, which they have said is costing the tapayer billions.

In a damning report yesterday, MPs said they were “extremely disappointed and frustrated” that the MoD did not appear to have learned from its mistakes despite years of inquiries and scrutiny by other parties like the National Audit Office.

It said the department did not do enough to demand suppliers share financial risks when awarding contracts, and prioritised contracts for bespoke – and riskier – equipment over proven solutions.

It said evidence it gathered during its inquiry suggested the department was “complacent” about the risks of delays and budget inflation as it handled some of the most “complex, costly and risky programmes in government”.

Civil servants rated their confidence in delivering their programmes on time and on budget as “red” or “amber/red” in eight out of 19 programmes running in March, according to the report.

The MPs said witnesses to the inquiry failed to convince them the department “will not simply throw good money after bad”, based on its previous behaviour. They cited the Protector unmanned air system programme, which has incurred hundreds of millions of pounds of additional cost.

There have been at least 13 formal reviews of defence procurement policy over the last 35 years, according to the report. However, a central register of learning from experience was only established in December 2020.

The MPs urged the MoD to set out exactly how it plans to use the register to learn from mistakes.

And they said the Treasury and Cabinet Office should review the “broken” procurement system to ensure the MoD is equipped to deliver the goals of the Integrated Review published last year. The review said the department would have to deliver military capability to deal with growing global conflict and instability in the coming years.

The joint review should examine how the MoD holds suppliers to account; the culture and relationships between programmes’ senior responsible owners, end users and delivery agents; and how the department calculates cost and schedule estimates using technical risk assessments.

Without this intervention, the MPs said, the MoD has “failed to assure us it is taking these matters sufficiently seriously or that it can quickly deliver a radical step-change in performance through its improvement plans”.

“Not sufficiently open”

The report also called for a more “transparent approach” to assessing value for money, saying the MoD is “not sufficiently open about programme progress and risks”.

The department has admitted it does not routinely monitor value for money of programmes, the MPs said. Accounting officer assessments meanwhile have not rendered “sufficiently clear accounts of value for money”.

The assessment letters sent to PAC when significant changes occur on major programmes should include a “more detailed and frank assessment of how the changes impact on the value for money case as defined at the start of the programme”, the report urged.

Committee members also said they were concerned about the way witnesses provided evidence, saying some civil servants demonstrated an “inability or unwillingness to answer basic questions and give a frank assessment of the state of its major programmes”.

They said witnesses to the inquiry were unable to explain possible causes of or solutios to problems being investigated with armoured vehicles being procured through the Ajax programme – which was supposed to be completed by the end of June but now has no timeframe for being delivered.

“We were struck by witnesses’ reluctance to attribute problems with the Crowsnest [maritime airborne surveillance and control capability] and Ajax programmes to providers’ poor performance or project management, even though in both cases it is a matter of public record,” the report said.

And MPs said the MoD had refused to explain how much financial exposure it would have if it ended a contract, which amounted to a “disregard for parliament and taxpayers”.

Committee chair Dame Meg Hillier said "no matter who we ask across the ministry", civil servants had said they needed extra funding to solve the problems with procurement.

However, PAC's report said the MoD was still unclear what additional capability the £16.5bn extra funding it was given in the 2020 Spending Review would deliver. 

“Despite years of official inquiries and recommendations and promises of learning and change, we have still heard nothing from the MoD to give any assurance about our biggest concern, which is now that last year’s lauded and substantial uplift to the department’s budget will not simply be used to plug financial holes across its programmes," Hillier said.

"MoD senior management appears to have made the calculation that, at the cost of a few uncomfortable hours in front of a select committee, they can get away with leaving one of the largest financial holes in any government departments’ budget, not just for now, but year after year. This committee is determined that this state of affairs cannot, and will not, continue.”

An MoD spokesperson said: “This report reflects the complex challenges of delivering defence capability for our armed forces, but also the commitment and professionalism required to keep our people and the UK’s interests safe, by purchasing world-class equipment such as Lightning II stealth fighter jets, and the Queen Elizabeth aircraft carriers.”

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