MoD must find over £1bn in savings
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MoD must find over £1bn in savings
The Ministry of Defence (MoD) is being forced to find savings of more than £1 billion to cover cost overruns on major projects, the public spending watchdog has revealed.
The National Audit Office (NAO) expressed "disappointment" that some of the Government's biggest defence programmes were continuing to incur significant extra costs.
The disclosure comes amid growing disquiet about military funding, with Prime Minister Gordon Brown coming under fire from former chiefs of the defence staff last week over his treatment of the armed forces.
While the total projected overrun on the MoD's 20 most expensive projects remained almost static over the last year at £2.5 billion, the NAO said this had only been achieved by shifting £609 million to different budgets in 2006/7.
The same arrangement had removed another £448 million from the major projects budget in 2005/6.
The "re-allocated" costs, totalling £1.057 billion, are being addressed through efficiency savings and reductions in the quantities of orders.
The figures came in the NAO's annual Major Projects Report, which also said there had been additional delays to projects totalling 38 months, compared to 33 months last year.
Edward Leigh, the Tory chairman of the Commons Public Accounts Committee, accused the MoD of "slipping costs from one budget to the next".
"It has moved more than £1 billion between internal budgets over the last two years," he said.
"We need to be clear: these are not savings. This juggling act must not happen again next year. The MoD should focus its creative efforts more on effective project management and less on shuffling figures around on balance sheets."
The National Audit Office (NAO) expressed "disappointment" that some of the Government's biggest defence programmes were continuing to incur significant extra costs.
The disclosure comes amid growing disquiet about military funding, with Prime Minister Gordon Brown coming under fire from former chiefs of the defence staff last week over his treatment of the armed forces.
While the total projected overrun on the MoD's 20 most expensive projects remained almost static over the last year at £2.5 billion, the NAO said this had only been achieved by shifting £609 million to different budgets in 2006/7.
The same arrangement had removed another £448 million from the major projects budget in 2005/6.
The "re-allocated" costs, totalling £1.057 billion, are being addressed through efficiency savings and reductions in the quantities of orders.
The figures came in the NAO's annual Major Projects Report, which also said there had been additional delays to projects totalling 38 months, compared to 33 months last year.
Edward Leigh, the Tory chairman of the Commons Public Accounts Committee, accused the MoD of "slipping costs from one budget to the next".
"It has moved more than £1 billion between internal budgets over the last two years," he said.
"We need to be clear: these are not savings. This juggling act must not happen again next year. The MoD should focus its creative efforts more on effective project management and less on shuffling figures around on balance sheets."
The NAO and PAC are absolutely right. This juggling to reapportion costs, and presenting it as a savings, is common.
Instead of faffing around with such financial sleight of hand, the MoD should do something far simpler. They should identify real savings that do not affect time, cost or performance. And if you think that’s impossible, how about £300M last year from just two suggestions from one person? Both were recurring, with on-going through life savings, albeit at a lower level. But I’m not sure if they were taken up because this, of course, is embarrassing. It’s easier to just cancel a few programmes and carry on wasting.
Instead of faffing around with such financial sleight of hand, the MoD should do something far simpler. They should identify real savings that do not affect time, cost or performance. And if you think that’s impossible, how about £300M last year from just two suggestions from one person? Both were recurring, with on-going through life savings, albeit at a lower level. But I’m not sure if they were taken up because this, of course, is embarrassing. It’s easier to just cancel a few programmes and carry on wasting.
Maybe the chickens have come home to roost after so many years of promoting military people and sending them to do accountants jobs in MoD. If I had a pound for every one of the smug staff suits who had considered themselves so clever in manipulating the Long Term Costings to try and get the latest new project funded, I would be as rich as a defence contractor
You would think they had just printed all the extra money themselves but they didn't seem to realise that robbing Peter to pay Paul just comes back and bites you in the a&se.
You would think they had just printed all the extra money themselves but they didn't seem to realise that robbing Peter to pay Paul just comes back and bites you in the a&se.
The elephant in the room is still welfare spending, but I can't see Broon grasping that nettle, especially north of the border. The odd billion on defence is neither here nor there when set against the lunatic spending on benefits and tax credits.
One of the biggest causes of delay and cost over-run is spec change. If the big boys made their mind up and stuck with their decission you'd find that you would get a lot more projects delivered on time and on budget. Every time they change the spec, the manufacturers suck their teeth and say "sorry its going to cost X anount and of course we'll have to start the design all over again." and all the time rubbing their hands with glee.
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This explains why the A400M is only funded for the plumbing for fuel tank protection. The plumbing needs to be paid for this year but the ring fenced funding for the OBIGGS system will have to wait for a FY some time down the line. This is all well and good, but now that Treasury rules on UORs have changed, requiring MoD to stump up 50% of costs, what happens if a higher priority funding item comes up in the same FY as the OBIGGS is due?
Coherence and Defence Policy, words you never hear from a Labour Government.
Coherence and Defence Policy, words you never hear from a Labour Government.
Spec change is only a part of it and often only occurs after significant time has elapsed getting all the approvals lined up and scrutinised by every hangar-on in MB and Treasury. Therein lies half the problem - too many cooks and too many b8ggers who can put a project on hold while their own pet question (often valid, but equally often, not) is answered.
I've sat in a room in MB and watched a mere four-ringer arbitrarily sh1t-can a fully-worked up requirement that had passed all the relevant scrutiny and had actually got through Initial Gate (no mean achievement in itself) only to have it's assessment phase funding savaged as part of the EP4.5 round a few years back. That one decision led to reworking a whole tranche of OA and associated requirementalism that knocked the job back well over a year. That particular project has still to get to the stage of placing it's first order, despite being an arguably more important than CVF (and a relatively simple) item to acquire.
No-one argues with relevant and proportionate scrutiny, particularly when it's taxpayers money and the people in charge are often only there for a 2 year tour, but the current shenanigans - so-called Smart Procurement - are laughable...
I've sat in a room in MB and watched a mere four-ringer arbitrarily sh1t-can a fully-worked up requirement that had passed all the relevant scrutiny and had actually got through Initial Gate (no mean achievement in itself) only to have it's assessment phase funding savaged as part of the EP4.5 round a few years back. That one decision led to reworking a whole tranche of OA and associated requirementalism that knocked the job back well over a year. That particular project has still to get to the stage of placing it's first order, despite being an arguably more important than CVF (and a relatively simple) item to acquire.
No-one argues with relevant and proportionate scrutiny, particularly when it's taxpayers money and the people in charge are often only there for a 2 year tour, but the current shenanigans - so-called Smart Procurement - are laughable...
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MoD have been told by the treasury to delay the FRES in order to save a load of cash.
What did Gordon Brown say the other day in defence of all the guns pointing at him?
"We are committed to giving our soldiers the best kit available"
but then a few days later tells the MoD to delay the best kit available in order to save money.
What's going to happen after we leave Iraq? Regiments and equipment will be disbanded and more aircraft mothballed just like it was after 1991.
Are we the only country fighting conflicts whereby we shed a load of squadrons, aircraft, tanks, infantry and ships? And do so before we have any replacements even close to near completed and find we are in such a state because of it we cannot conduct the military operations properly and lifes are put at risk?
What did Gordon Brown say the other day in defence of all the guns pointing at him?
"We are committed to giving our soldiers the best kit available"
but then a few days later tells the MoD to delay the best kit available in order to save money.
What's going to happen after we leave Iraq? Regiments and equipment will be disbanded and more aircraft mothballed just like it was after 1991.
Are we the only country fighting conflicts whereby we shed a load of squadrons, aircraft, tanks, infantry and ships? And do so before we have any replacements even close to near completed and find we are in such a state because of it we cannot conduct the military operations properly and lifes are put at risk?
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Well, according to Truth Central, we are doing very well with the kit we already have!
For those with access; http://defenceintranet.diiweb.r.mil....etExceeded.htm
The need to measure and record everything, though, does occasionally lead to some spectacular lunacy.
Logistics efficiency target exceeded. 29/11/2007
DE&S has achieved logistics efficiencies of £360 million in financial year 2006/07, exceeding the forecast of £225-£300 million.
This success is down to finding more efficient and effective ways of doing business, and to more evidence being available within the organisation of the benefits of these new ways of working.
The achievement doesn’t just relate to financial savings, but also improvements in operational effectiveness, against which DE&S has had a financial value allocated for the first time. Contributing to this has been improved availability of Harrier and Warrior, a reduction in through-life support costs for Typhoon and the extra man-hours made available by reducing the routine servicing schedule for the SA80 rifle. These are classed as output efficiencies and DE&S has delivered £140 million of these against a target of £105 million. It is on track to exceed its £50 million target for 2007/08, and efficiencies associated with the new change programme, PACE, will contribute to this.
General O’Donoghue says:
'This is particularly commendable given the other priorities DE&S has to deal with daily. It’s a great achievement, but we must bear in mind that DE&S still has to deliver around £170 million of logistics efficiency in 2007/08 to meet our Gershon target. Recording evidence is really important because I’m sure a lot of good work is going unrecognised through lack of auditable evidence. During the 2006/07 scrutiny by Defence Internal Audit (DIA), over £60 million of efficiency was disallowed for insufficient or unclear evidence. I recognise, however, that reporting efficiencies can be a significant burden in some areas. I am therefore pleased to report that we have agreed with the Permanent Under Secretary to reduce from a monthly to a quarterly reporting regime, and continue to work to reduce this burden further in future.'
DE&S has achieved logistics efficiencies of £360 million in financial year 2006/07, exceeding the forecast of £225-£300 million.
This success is down to finding more efficient and effective ways of doing business, and to more evidence being available within the organisation of the benefits of these new ways of working.
The achievement doesn’t just relate to financial savings, but also improvements in operational effectiveness, against which DE&S has had a financial value allocated for the first time. Contributing to this has been improved availability of Harrier and Warrior, a reduction in through-life support costs for Typhoon and the extra man-hours made available by reducing the routine servicing schedule for the SA80 rifle. These are classed as output efficiencies and DE&S has delivered £140 million of these against a target of £105 million. It is on track to exceed its £50 million target for 2007/08, and efficiencies associated with the new change programme, PACE, will contribute to this.
General O’Donoghue says:
'This is particularly commendable given the other priorities DE&S has to deal with daily. It’s a great achievement, but we must bear in mind that DE&S still has to deliver around £170 million of logistics efficiency in 2007/08 to meet our Gershon target. Recording evidence is really important because I’m sure a lot of good work is going unrecognised through lack of auditable evidence. During the 2006/07 scrutiny by Defence Internal Audit (DIA), over £60 million of efficiency was disallowed for insufficient or unclear evidence. I recognise, however, that reporting efficiencies can be a significant burden in some areas. I am therefore pleased to report that we have agreed with the Permanent Under Secretary to reduce from a monthly to a quarterly reporting regime, and continue to work to reduce this burden further in future.'
The need to measure and record everything, though, does occasionally lead to some spectacular lunacy.
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'course it depends in whose pot you look.
Our pot has a £nnnk surplus, or underspend whichever way you look at it.
A friend also has an overflowing pot but can't use it to improve builidngs etc. What would he like?
There is money sloshing around the system but a bit like an aircraft's fuel tanks, bit here, bit there. T&S tank is dry. Chairs and carpets are still available.
Our pot has a £nnnk surplus, or underspend whichever way you look at it.
A friend also has an overflowing pot but can't use it to improve builidngs etc. What would he like?
There is money sloshing around the system but a bit like an aircraft's fuel tanks, bit here, bit there. T&S tank is dry. Chairs and carpets are still available.
The "re-allocated" costs, totalling £1.057 billion, are being addressed through efficiency savings and reductions in the quantities of orders.
Well I for one do not believe that there are any "savings" left to be had - only reductions in capability. If there were "savings" the MOD wouldn't be offering up 2 GR 4 sqns as a "savings" measure. That isn't a saving it's a cut in capability.
And reductions in the quantities of orders isn't a saving, it's a cut in capability. Why do the papers allow the MOD forked tongues to get away with it?
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Looks very much like removing current reserve capacity 'cause it is not needed - like Jaguar, like Lynx, like that aircraft that WEBF keeps going on about, like the old Humber Pig we had to buy back, like frigates, destroyers, submarines, etc.
Wonder how much it would cost to rent a parking lot as Davis?
But the GR9 is being extended.
Or are we extending the GR9s because their replacement isn't going to be ready on time?
Either way the potential to lose 2 GR4 sqns is a cut in capability not a savings measure.
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Roland,
I have no idea. It could be one, it could be the other, it could be both.
I know the Tonka has a role in the Gulf and this is different from the GR7 role in the Stan. If they felt that the Gulf could be managed with less Tonkas now and a future need in both areas and else where covered by the Tiffy in due course then a 'capability holiday' is on the cards.
Don't half
up the WSN(N) FJ planning. Planning?
I have no idea. It could be one, it could be the other, it could be both.
I know the Tonka has a role in the Gulf and this is different from the GR7 role in the Stan. If they felt that the Gulf could be managed with less Tonkas now and a future need in both areas and else where covered by the Tiffy in due course then a 'capability holiday' is on the cards.
Don't half
up the WSN(N) FJ planning. Planning?
Oh that it were only £1Bn in total....
Rumour control has it the real figure the MoD has to find is a lot, lot more...
The problem that the Govt/MoD has is how to Spin the deep cuts that are coming in the light of the "you've never had it so good" CSR spin; it also underlines the point made by the Ex-CDSs in the Lords last week.
You can just see the Mandarins & Appratchniks scurrying around MB putting the thumbscrews on the current Top Brass to prevent them from joining the assault and frantically trying to find some positive news....whilst all the time praying for a "good day to bury bad news".
Some major and unpalatable Cuts are coming. Or, they could do what they always do, and "re-profile" the capital costs over more years, hence massively increasing the overall costs, and effectively shafting their successors with the problem!!
Rumour control has it the real figure the MoD has to find is a lot, lot more...
The problem that the Govt/MoD has is how to Spin the deep cuts that are coming in the light of the "you've never had it so good" CSR spin; it also underlines the point made by the Ex-CDSs in the Lords last week.
You can just see the Mandarins & Appratchniks scurrying around MB putting the thumbscrews on the current Top Brass to prevent them from joining the assault and frantically trying to find some positive news....whilst all the time praying for a "good day to bury bad news".
Some major and unpalatable Cuts are coming. Or, they could do what they always do, and "re-profile" the capital costs over more years, hence massively increasing the overall costs, and effectively shafting their successors with the problem!!
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A little bird told me a couple of non-lifex* tankers are for the chop next year, in response to the net reduction of pointy things. This simple paper plan looks great until it is remembered we do use them for other things - not least as a little more flexibility when the original route jet breaks down.
Our decision makers need more time at the coal face - our point is being missed.
*In RAF terms.
Our decision makers need more time at the coal face - our point is being missed.
*In RAF terms.