Perm sec apologises after MoD overstates its inventory by more than 250 million items

Perm sec says reporting error backs up concerns raised by PAC and NAO about the department's management of its inventory
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By Tevye Markson

02 Apr 2024

The Ministry of Defence’s permanent secretary has apologised for a reporting error in which the department overstated the size of its inventory by more than 250 million items.

David Williams admitted the mistake added further weight to criticism that the department's inventory system is not joined up enough. 

The department had stated in its 2022-23 annual report and accounts that it had 740 million items in its inventory and 640,000 types of inventory.

In fact, these were the figures from its 2017-18 accounts, while the actual numbers for 2022-23 were 457 million items and 520,000 types of inventory. The reported overall net book value of £11.8bn was correct.

Williams revealed the mistake in a letter to the Public Accounts Committee, providing new figures which show the inventory stockpile has steadily reduced since 2017-18. 

The wrong numbers were used in reports on defence inventory management by the National Audit Office and Public Accounts Committee, which raised concerns about a lack of joint-up thinking.

In his letter to PAC, sent on 15 March, Williams said: “It has now been brought to my attention that there is an error in our reporting of inventory stockpile holdings, which has been reflected in the NAO report that underpinned the committee’s work on this issue, despite my having agreed its accuracy as part of the clearance process,” Williams said. “I apologise... there is no real excuse for our not having spotted it much earlier."

"Put simply, we have been actively managing the component parts of our inventory holdings rather than this overall quantity shown on our systems," he added. "Nevertheless, it is important that we are both able to report this data accurately and to do so in a way that builds confidence in our management of inventory."

Williams said the mistake “highlights the point” made by PAC and the NAO that inventory management “is not yet as joined up as it needs to be”. He added that the department is “making progress on addressing that legacy”.

The NAO had warned in September of “longstanding weaknesses” in the MoD's inventory management. It said these included “inefficient and poorly aligned activities and ageing legacy IT”.

Its report said the department “has historically taken a siloed approach to inventory management, resulting in a fragmented organisation which is difficult to align to its strategic goals”.

It also warned that the multiple bespoke systems used for inventory management, including two which are almost 40 years old, embed differences in working practices between different MoD organisations and mean “systems often cannot easily communicate with each other”.

The NAO also found that the department “does not fully understand the people and skills it needs across its inventory management, and staffing pressures are currently posing risks to delivery to the front line”.

PAC said in its follow-up report in January that the MoD's efforts to manage its inventory are hampered by “a complex organisational set-up with inefficient working practices”.

It also said the department holds “substantial amounts of inventory that is unserviceable, overstocked or beyond the service date of its related platform".

Williams said the correct figures show the MoD has had "markedly more success in managing down our inventory holdings than we have claimed".

"These values have been reducing over recent years due to proactive action by the department and as platforms and equipment have been withdrawn from service at the ends of their useful life," he added.

The MoD has been attempting to streamline its stockpile following criticism by the NAO in 2011 and 2012 after the watchdog found it was buying more inventory than it was using and was not consistently disposing of inventory it no longer needed. The department told PAC last year that it had reduced the net book value of its inventory by around £4bn between 2011 and 2023.

Both the NAO and PAC also warned that armed forces personnel had been placed at at "significant risk” due to medical inventory failures that saw units deployed with out-of-date medical supplies. The problem stemmed from a logistics contract awarded to a consortium under the “Team Leidos” banner in 2015, which runs to 2028.

In a Treasury minute published last week, the MoD said its efforts to address these issues "have resulted in a sustained period of above contractual target [of 92%] medical availability performance since September 2023".

In his letter to PAC, Williams added that the MoD is funding further improvements to the management of medical inventory under the Team Leidos contract "which will result in higher levels of availability of key medical equipment and stocks". He said the contractor is "on track to deliver these improvements by December 2024".

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