In the blog regarding this problem( ukarmedforcescommentary, of which the original link seems to have disappeared) the author writes that the costs of mitigating BAE's cockup should not come out of the defence budget. Well, good luck with that one UK taxpayers.
We know, of course, that when Nimrod was cancelled that the resulting redundancy and other cancellation costs were paid, not by BAE, but the UK taxpayer
Evidence relating to this was given to both Haddon-Cave and Lord Philip.
Essentially, the issue is this. While a contract exists between MoD and the contractor, most designs are "Under Ministry Control" (as opposed to Under Contractor Control). Therefore, there are crucial dependencies MoD are responsible for. It has been claimed earlier there was incorrect/incomplete documentation in this case. Maintaining up to date documentation is part of that UMC obligation.
This has not been MoD policy since 1991. It is one of the "savings at the expense of safety" confirmed by Haddon-Cave, although he omitted to say who implemented it.
If the company can demonstrate any such failure of obligation, then MoD are liable to a large degree. If it went to court (it seldom does) that degree of liability might be part of the judgement.
The same applied to Nimrod, where the issue was
exactly the same. The primary output of this process is the Safety Case. It was not MoD policy to have a valid Safety Case therefore they could not meet their obligation to deliver Qty (x) Nimrod MR2s in to the conversion programme at an airworthy, known and maintained build standard. Notwithstanding any error on BAeS's part, MoD didn't have a leg to stand on, on perhaps the most fundamental component of operating an aircraft. I imagine BAeS would have enjoyed their day in court, although it would have lasted about 2 minutes. Especially when it became known the Nimrod office had been warned in 1994, and at regular intervals thereafter.