2 The impact of older projects on
overall acquisition performance
7. The Department blames its overall poor performance
on the older projects which remain in the Equipment Plan and Major
Projects Reports for many years, the so called toxic legacy.[18]
Previous cost and time overruns on these older projects do continue
to impact on the overall forecast time and cost budgets. But only
current performance on these projects features in the inyear
cost and time variations reported on in the Major Projects Report.
The Department argued that the challenge with the older projects
is to deal retrospectively with poor contracts and inappropriate
levels of financial exposure.[19]
It regarded the Astute submarine; Nimrod MRA4 aircraft; Type 45
Destroyer and Typhoon as particularly difficult projects.[20]
Figure 1 illustrates the problems on Astute, Nimrod MRA4
and Type 45 projects and what the Department has done to
rectify them:
Figure 1:
Cost and time histories of the Astute submarine, Nimrod MRA4 aircraft
and Type 45 destroyers.[21]Astute
submarine
 Nimrod
MRA4 Aircraft
Type
45 destroyers
Source: National Audit Office
8. As Figure 1 illustrates, the Department has experienced
great difficulties on the Nimrod MRA4 aircraft project. As reported
in the Major Projects Report 2003,[22]
the Nimrod was forecast to be delayed a further 3½ years
and cost a further £540 million in-year. The Department recognised
the problems and restructured its contract with BAE Systems and
introduced improved project management. But still Nimrod continues
to slip and to cost more money.
9. Eight of the more recent projects are forecast
to be delivered on or less than their budgeted costs. Time overruns
forecast in-year are concentrated on four more recent projects
and Nimrod, leaving other projects in the Major Projects Report
forecasting no additional in-year delays.[23]
The Department has now had many years to sort out the problems
on older projects and in some cases has put them on new contractual
footings.
10. Historically, the in-service date of a project
was set as the delivery to the front-line of a particular piece
of defence equipment. For example, the in-service date for Typhoon
was measured by the delivery of the first aircraft to the Royal
Air Force, which was achieved in June 2003. This date did not
represent delivery the start of operational capability, however,
since supporting elements such as training and logistics had still
to be delivered. The aircraft is not yet available operationally
to the Royal Air Force. The elements needed to provide operational
capability are called 'Lines of Development', and include infrastructure,
logistics, organisation, personnel and training as well as the
equipment itself.
11. Although the Department has made considerable
progress in addressing inconsistencies in setting credible In-Service
Dates for projects, the term is not always applied consistently,
nor does it always represent real delivery of defence capability.
More recent projects in the Major Projects Report have in-service
dates that do relate to the delivery of defence capability to
the front line. For example, the in-service date for Precision
Guided Bomb provides for a stated number of weapons and suitably
modified aircraft; trained personnel and support equipment; as
well as the necessary flight test programme clearances to permit
the capability to be used on operations.[24]
12. More consistency is required, however, across
the individual capabilities listed in the Major Projects Report.
Some projects, such as Nimrod MRA4, still focus on the delivery
of pieces of equipment, even though there was the opportunity
to change this when the in-service date was modified in February
2003. In some cases, the Department has modified in-service dates
to better reflect the delivery of operationally-available capability.
For example, the Airborne Stand-Off Radar system had its in-service
date amended to include the operational availability of the system.
But not all project in-service dates are expressed in terms of
all the Lines of Development necessary to ensure the capability
is operationally usable and supportable.[25]
18 Q 39 Back
19
Qq 39, 42 Back
20
Qq 37, 39 Back
21
Q 42; C&AG's Report, Project Summary Sheets, pp 67,
107 Back
22
43rd Report from the Committee of Public Accounts, Ministry
of Defence: Major Projects Report 2003 (HC 383 Session 2003-04);
Qq 3, 42; C&AG's Report, Ministry of Defence: Major Projects
Report 2003 (HC 195, Session 2003-04) paras 3.2-3.23 Back
23
C&AG's Report, Ministry of Defence: Major Projects Reports
2003 (HC 195, Session 2003-04) Figures 4, 6 and Appendix 3 Back
24
C&AG's Report, Project Summary Sheets, p75 Back
25
C&AG's Report, Project Summary Sheets, p93; C&AG's
Report, Ministry of Defence: Major Projects Report 2004
(HC 1159, Session 2003-04) Box 1, p12 Back
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