MoD's cost mission
Ministry promises shift to resource accounting will prevent future cost over-runs.
The Ministry of Defence has pledged that its move to resourceuture cost over-runs. accounting and budgeting will prevent future cost over-runs in large procurement projects after it came under fire last week from the Public Accounts Committee.
The House of Commons’ watchdog warned the MoD that the #3bn over-run for 25 large procurement projects was ‘unacceptable’ and questioned why the ministry could give no sense of speed or scale of the improvements it hoped to make in relation to cost control.
The criticism of the MoD’s financial management and reporting follows the implementation of the Smart Procurement Initiative – currently being piloted – which is designed to enhance defence capability while acquiring and supporting equipment ‘more effectively in terms of time, cost and performance’.
Central to these plans are greater links with industry and contracts up to five years priced in cash, with longer-term contracts using output price indices.
MoD officials told the PAC that the main problem they faced was ‘getting the numbers right’ and providing summary sheets for projects on time.
Additionally, the ministry said its ability to forecast expenditure was something it needed to improve.
National Audit Office investigations found errors in all the 13 draft project summary sheets they had validated. MoD officials responded by saying the errors were small in many cases but acknowledged that they must try to ‘get it right’ in future.
John Spellar, under-secretary of state for defence, said the department would improve its performance.
‘This is precisely why we started the Smart Procurement Initiative during the Strategic Defence Review, when we identified many of the same problems as the committee. We are confident that Smart Procurement will deliver significant improvements in MoD’s performance and better value for money for the taxpayer,’ he said.
Among those projects to be piloted by the SPI are the Army’s new Apache Attack helicopter, upgrading of Nimrod aircraft and the procurement of the type 23 frigate for the Navy.
Through the use of these pilots, the MoD hopes to develop a credible plan for improvement in cost, quality and time. It also intends to develop a new procurement model to guide future work.
