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2006 has been a landmark year for defence equipment procurement. The Defence Procurement Agency (DPA) met, for the first time ever, all its Key Targets and was on course to meet the Public Service Agreement Target relating to defence acquisition. In July, the Ministry of Defence (MoD) announced that the DPA and the Defence Logistics Organisation (DLO) were to merge.
The performance of the DPA in getting to grips with cost overruns and in-service date slippage is to be welcomed. However, the reduction in cost growth is partly explained by a reduction in the number of equipments ordered. Re-assessing equipment requirements is sensible, but only as long as our Armed Forces do not lose out because of the need to meet cost growth targets.
The merger of the DPA and DLO should improve the management of acquisition on a through-life basis. Sufficient investment in staff training must be committed so that the expected improvements are delivered. The merger will result in substantial job reductions and the MoD needs to provide support to all those employees affected.
Problems are still being experienced on several key equipment programmes: unlimited financial liability on the Astute submarine; a price still to be agreed on the Future Carrier; assurances yet to be obtained from the US that the UK will get all the information it requires to operate the Joint Strike Fighter independently; and eight Chinook Mk 3 helicopters, which are desperately needed by our Armed Forces, sitting in hangars and unlikely to be in operation until early in the next decade. These problems need to be resolved.
It is essential that our Armed Forces on operations should have the equipment they need to carry out the task given to them and the Prime Minister's promise that commanders on the ground will get the equipment they want is welcome. While requests from the front line will need to be evaluated, the MoD, the DPA and the Treasury need to ensure that requests are processed with urgency; and the Treasury must recognise that the MoD will need additional funding to support new equipment once in service.
The four smaller-size projects we examined have generally performed well, particularly in terms of their performance against approved costs. Important lessons for larger equipment projects can be learned from the procurement of smaller-size equipment projects and equipment procured for operations through the Urgent Operational Requirements route.
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