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The Major Projects Report 2006 provides information on the time, cost and performance of 20 of the largest projects of the Ministry of Defence (the Department) where the main investment decision (known as Main Gate) has been taken; and the top ten projects in the earlier Assessment Phase.
During 2005-06, the Department undertook a review of the 20 post-Main Gate projects to control its costs better. This Review has reduced the costs of these projects as recorded by the Major Projects Report by £781 million. Of this sum, £91 million is attributable to a rebate and exemption from HM Revenue and Customs. £242 million result from steps taken by the Department to stay within its budget through better management of commercial and contractual arrangements, more cost effective means of delivery, re-assessing quantities required, and more appropriate accounting treatments. However, £448 million of costs were either re-classified as expenditure in other procurement or support budgets or transferred to other budgets for corporate management. These re-allocations have achieved cost reductions for the individual projects but do not represent a saving to the Department as a whole. By transferring the costs elsewhere it may potentially have to forego activities which could otherwise have been provided.
Total forecast costs for the approved projects now amount to £27 billion, some 11% over budget. Forecast in-service dates slipped 33 months in-year, and there is a cumulative delay of 433 months for the projects over their lives so far. The Department expects that 17 projects will meet their Key User Requirements, one fewer than in 2005-06.
The Department is placing increased emphasis on through life management of Defence projects, involving the life-cycle management of the products, services and activities required to deliver integrated capability to the customer. To this end, the Department has merged its Procurement and Logistics functions into the Defence Equipment and Support organisation.
On the basis of a Report from the Comptroller and Auditor General,[1] we took evidence from the Department on three main issues: the impact of the cost saving measures identified by the Departmental Reviews in 2005-06, the performance of individual projects, and the Department's initiatives to improve acquisition performance. As an annual report, our conclusions and recommendations should be read in conjunction with the findings of earlier Major Projects Reports as part of a sequence of recommended improvements.
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