Select Committee on Public Accounts Fifth Report


38. The Department has not yet set targets for its performance measures for the assessment phase and does not have a measure to show whether risk is reduced sufficiently to enable a sound decision to be taken at Main Gate. Asked why it had taken so long to set these performance measures and when they would be fully in place, the Department said that setting the measures was difficult, and that the measures agreed would have to be used for all assessment phase projects, not just those in the Major Projects Report. However, the Department promised it would have the measures in place by 1st April 2001.[46]

39. Following the changes to the approval process associated with Smart Acquisition approvals the Department approves the cost and in-service date of an equipment which it is 90 percent confident of achieving, while basing its plans on a lower/earlier figure which it is 50 per cent confident of achieving. Timescale and cost performance is measured in the Major Projects Report by comparing the current forecast in-service date or cost underpinning the Department's plans (the 50 percent estimate) with the latest acceptable in-service date or highest cost set at approval (the 90 percent estimate). This means that individual projects approved under >Smart' procedures will be forecast to enter service earlier or cost less than their approved in-service date or procurement cost unless all of the risks allowed for in the 90 per cent approval materialise.[47]

40. The differences between the 50 percent and 90 percent figures can be very large, for example, the Multi-Role Armoured Vehicle is reporting a 31-month negative in-service date variation. In this case, the Department said it was unfortunate that one of the first projects to appear under the new regime was a two-nation collaborative programme which might soon become a three nation programme if the Netherlands joined. This uncertainty had increased risk, and that there were a number of other international factors which would bedevil the programme through development. If these uncertainties were added up, the 31 months did not look like a generous allowance of time.[48]

41. Asked how large, on average, it expected the risk provisions for time and cost to be at Main Gate, the Department suggested that the absolute differences would be variable between projects. The fact that one project approved under ASmart@ procedures, the Seawolf Midlife Update, had already breached its 90 percent in-service date approval by 3 months showed it was not being institutionally generous to itself.[49]

42. All of the projects covered in the Report were conceived before Smart Procurement, and the Department suggested that it was still early to expect to see improvements in timescale performance from the application of Smart Procurement principles reflected in the Major Projects Report. Only when projects with significant delays such as the C-130J begin to pass out of the Report, and new >Smart' projects entered the Report, would the average delay decrease. The Department was confident that this effect would start to become apparent from the Major Projects Report 2002.[50]


43. The Department is not clear what level of risk it expects will remain in projects at Main Gate and how this will be measured. A much clearer definition of the acceptable level of risk at Main Gate is needed and the Department must give priority to defining this and how to measure it.

44. Under Smart Acquisition, the Department bases its Main Gate Approval on the cost and in-service date of an equipment which it is 90 percent confident of achieving. We note that the SeaWolf Mid-Life Update project has already exceeded the in-service date which the Department was 90 percent certain of achieving by some three months. This does not bode well for the future.

45. The Department does not expect there to be big improvements in the timescale performance reported in the Major Projects Report until 2002, some four years after Smart Acquisition was first introduced. Whilst the timescale performance reported in the Major Projects Report will continue to reflect pre-Smart Acquisition projects for some years, we will expect to see signs of improvement as new Asmart@ projects come through.

46  Qs 202B203 Back

47  C&AG's Report (HC 970 (1999B2000)) para 1.13 Back

48  Q204 Back

49  Q205 Back

50  Qs 280B281 Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 28 November 2001