In today's Sunday Times, written by:
[email protected]
Defence company accused of cheating defence ministry of millions
Britain's biggest defence manufacturer, BAe Systems, is under investigation by the Ministry of Defence police after a whistleblower claimed that managers cheated the taxpayer of millions of pounds.
In detailed allegations to police and The Sunday Times, Bob McCartney, a former engineer with the company, said that some managers at its Marconi subsidiary charged the MoD hundreds of thousands of pounds for trivial "non-jobs" taking just hours to complete.
McCartney said that he had personally worked on one such contract - to make minor software modifications on the RAF's Tornado jet. "This job required two days of work for one man - myself," he said. "It was very simple and in-volved basically reading a manual and changing one line of software code. For this job, the company charged the Ministry of Defence several hundred thousand pounds."
The practice of overcharging - with clear echoes of the famous $600 (£400) coffee pots ordered by the American military - was widespread throughout the company, it is claimed. McCartney blamed a combination of "sloppily written" contracts by the MoD and opportunism by Marconi for the overcharging.
"The MoD did not know what they wanted. Marconi put the job specification to them and they approved it without realising," he said.
The proceeds from overcharging were, McCartney claimed, used to cover up overspends on other projects. Contracts which were supposed to be "fixed price" often went over budget. In theory, these overspends should have been paid for out of Marconi's profits. Instead, McCartney said, managers would "raid" other MoD projects for the cash.
"Nobody was stashing money in Swiss bank accounts," he said. "The fraud was used to protect their profits and make up for often mind-boggling incompetence."
McCartney also claimed that Marconi misappropriated MoD money to finance development of its own, separate products - not destined for the MoD, but for sale on the open market. Such development should have been paid for out of company funds, but was instead unwittingly financed by the taxpayer, he said.
McCartney claimed he had attended a meeting in 1998 where a named Marconi manager explicitly instructed staff to lie to the MoD about what their contract money was really paying for.
McCartney worked for Marconi, mainly at its site in Stanmore, west London, between 1995 and this year. Most of his claims relate to the time before Marconi was taken over by BAe Systems, formally known as British Aerospace, last year. McCartney left the firm for the civilian sector two months ago. In a reference, BAe Systems, described him as "competent and trustworthy".
A spokesman for BAe Systems said McCartney's allegations were regarded as "serious" and that an internal investigation had been launched. "We are working to get to the bottom of this matter," he said. No staff have yet been suspended or disciplined.
McCartney was interviewed for nine hours by officers from the MoD police fraud squad. A police spokesman confirmed that a fraud investigation had been launched.
Ministers, faced with a growing cash crisis in defence, are desperate to reduce the vast cost of procurement - which consumes almost 45% of the MoD's budget - £9 billion out of £22 billion. Treasury officials have made clear that perceived inefficiencies in defence procurement undermine the MoD's case for more funding to relieve severe problems in the frontline services.
There is, however, likely to be bad news on defence procurement for the government this week. The National Audit Office's big projects report, to be published on Thursday, will catalogue enormous delays and cost overruns in 25 of the largest defence projects.
It is expected to say that "smart procurement", the government's initiative to claw back costs, has yet to produce convincing results for the taxpayer.
--------
Why am I not surprised by any of this?