Improving the performance of defence contracts

Public Accounts Committee Closed Inquiry
Opened: 9 Jun 2021 Closed: 5 Aug 2021 Parliament page
The National Audit Office and the Public Accounts Committee regularly report on the delays and cost overruns, across many significant Ministry of Defence (MoD) equipment procurement programmes, that have been “eroding our national defence and security for years”. Specific recent examples include boats 4-7 of the Astute attack submarine (£1 … Read more
8 Recommendations
16 Conclusions
1 Report
1 Oral session
2 Letters
1 Event
Activity timeline 5 events
21 Jan
2022
Report published
3 Nov
2021
Report published
21 Sep
2021
Correspondence
9 Sep
2021
Correspondence
12 Jul
2021
Oral evidence
Oral evidence sessions 1 session
12 Jul 2021
View on parliament.uk
Improving the performance of defence contracts
Andrew Forzani · Ministry of Defence David Williams · Daily Mail Sir Simon Bollom · Ministry of Defence
Title HC No. Published Items Response
Twenty-Second - Improving the performance of major defence equip… HC 185 3 Nov 2021 24 Responded
Recommendations & Conclusions
24 results
2 Recommendation Accepted
Twenty-Second - Improving the perf…
We are deeply concerned about departmental witnesses’ inability or unwillingness to answer basic questions and...
We are deeply concerned about departmental witnesses’ inability or unwillingness to answer basic questions and give a frank assessment of the state of its major programmes. The Department is not sufficiently open about programme progress and risks. A few weeks … Read more
Government Response
The government agrees with the Committee’s recommendation for greater transparency, committing to ensure future Accounting Officer Assessment letters include more detailed evidence on value for money and that the Permanent Secretary issues annual reminders to SROs by January 2022.
HM Treasury
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3 Recommendation Accepted
Twenty-Second - Improving the perf…
The Department does not make enough demands of its suppliers to share the financial risks...
The Department does not make enough demands of its suppliers to share the financial risks as well as the rewards of contracting for major equipment capabilities. The Department is dependent on a limited supplier base to deliver its major equipment … Read more
Government Response
The government accepted the recommendation and committed to writing to the Committee by the end of May 2022. This letter will set out evidence of how it holds suppliers to account and fairly apportions risk and reward across its contracts.
HM Treasury
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4 Recommendation Not Addressed
Twenty-Second - Improving the perf…
The Department continually fails to learn from its mistakes.
The Department continually fails to learn from its mistakes. The Department has been delivering equipment programmes for decades and has overseen many expensive failures. There have been at least 13 formal reviews of defence procurement policy over the last 35 … Read more
Government Response
The government describes existing systems for learning from experience (LfE) and ongoing efforts to standardise LfE information, along with established Strategic Partnering and Category Management Programmes and an Acquisition and Approvals Transformation Programme. However, it does not commit to providing the specific clear plan requested by the Committee.
HM Treasury
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5 Recommendation Accepted in Part
Twenty-Second - Improving the perf…
The Department will not secure a step change in performance until it can recruit and...
The Department will not secure a step change in performance until it can recruit and retain the highly skilled staff that it requires. The Department continues to suffer from skills shortages in key areas critical to effective contract and programme … Read more
Government Response
The government agrees with the recommendation and outlines actions to address skill gaps and improve retention. These include building on existing leadership training, recruiting and retaining specialist resources, introducing specific talent management for SROs, and investigating options to improve SRO continuity.
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6 Recommendation Accepted
Twenty-Second - Improving the perf…
The Department continues to be unclear about what additional capability the taxpayer will get from...
The Department continues to be unclear about what additional capability the taxpayer will get from the extra £16.5 billion in the 2020 Spending Review. We remain to be convinced that the government’s substantial uplift to the Department’s budget will not … Read more
Government Response
The government accepted the recommendation, committing to provide further detail and a breakdown of the £16.5 billion funding in the upcoming Equipment Plan report in February 2022, clearly distinguishing between new capabilities and existing shortfalls.
HM Treasury
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1 Conclusion Not Addressed
Twenty-Second - Improving the perf…
On the basis of a report by the Comptroller and Auditor General, we took evidence...
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Ministry of Defence (the Department) and Defence Equipment & Support on improving the performance of major equipment contracts.1
Government Response
The government's response is a boilerplate introductory statement confirming it is responding to the Committee's report, without addressing any specific content.
HM Treasury
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7 Conclusion Accepted
Twenty-Second - Improving the perf…
Cost increases or cuts to funding on the Department’s programmes can have a profound impact...
Cost increases or cuts to funding on the Department’s programmes can have a profound impact on the level of military capability that can be achieved. For example, it is procuring considerably fewer Ajax armoured vehicles and Challenger 3 tanks than … Read more
Government Response
The government disagrees with the Committee's conclusion regarding the impact of cost increases on military capability, asserting new funding will address threats. It commits to providing further detail and a breakdown of this £16.5 billion in an upcoming equipment plan report for publication in February 2022.
HM Treasury
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8 Conclusion Not Addressed
Twenty-Second - Improving the perf…
We questioned the Department in detail on the Ajax programme to procure armoured reconnaissance vehicles...
We questioned the Department in detail on the Ajax programme to procure armoured reconnaissance vehicles for the Army. In 2014, the Department agreed a deal with General Dynamics United Kingdom (GDUK) to procure 589 vehicles - down from an initial … Read more
Government Response
The government's response is boilerplate text acknowledging its report and listing other relevant reports, but it does not address the Committee's detailed observations and concerns regarding the Ajax programme.
HM Treasury
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9 Conclusion
Twenty-Second - Improving the perf…
The Department had told the NAO that it considered initial operating capability achievable by the...
The Department had told the NAO that it considered initial operating capability achievable by the end of June 2021, but in our public evidence session, witnesses could not tell us when some sort of capability will be secured, even in … Read more
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10 Conclusion Accepted
Twenty-Second - Improving the perf…
The Department has spent nearly £4 billion of its budget by March 2021—including payments to...
The Department has spent nearly £4 billion of its budget by March 2021—including payments to GDUK of £3.1 billion—out of budgeted whole-life costs of £5.5 billion.26 It has so far received 14 vehicles, 2% of its contractual fleet requirement.27 Witnesses … Read more
Government Response
The government acknowledges the importance of managing supplier performance and risk, citing existing measures such as CAAS, firm price contracts, and liquidated damages. It commits to writing to the Committee by May 2022 to provide evidence of how it holds suppliers to account.
HM Treasury
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11 Recommendation Accepted
Twenty-Second - Improving the perf…
HM Treasury directs that Accounting Officers should confirm to Parliament that procurements remain value for...
HM Treasury directs that Accounting Officers should confirm to Parliament that procurements remain value for money (VFM) where there are significant changes to costs and schedules. The Accounting Officer had assessed eight of the projects examined by the NAO for … Read more
Government Response
The government accepted the recommendation, committing to ensure future letters to the Committee contain more detailed evidence for value for money assessments and that the Permanent Secretary will remind SROs of their obligations by January 31, 2022.
HM Treasury
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12 Conclusion Accepted
Twenty-Second - Improving the perf…
We asked witnesses about the process for determining value for money and whether it monitors...
We asked witnesses about the process for determining value for money and whether it monitors whether programmes remain so. The Department told us that there are routine ‘touchpoints’ through a capability’s life, but acknowledged that it does not routinely take … Read more
Government Response
The government, while disagreeing with the Committee's conclusion on VFM evaluation, agrees with the implied recommendation for transparency and commits to ensuring future letters to the Committee contain more detailed evidence and that the Permanent Secretary issues annual reminders by 31 January 2022.
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13 Recommendation
Twenty-Second - Improving the perf…
Across the 20 projects and programmes examined by the NAO, 14 are being procured partly...
Across the 20 projects and programmes examined by the NAO, 14 are being procured partly or wholly non-competitively, despite the fact that ‘competition by default’ has been departmental policy for nearly a decade. In only four of these cases was … Read more
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14 Conclusion Accepted
Twenty-Second - Improving the perf…
The Department spends significant sums on the developmental stages of programmes while suppliers may not...
The Department spends significant sums on the developmental stages of programmes while suppliers may not be paying their fair share. The Department argued that it is standard practice to pay for work against agreed milestones across areas such as development, … Read more
Government Response
The government acknowledged the Committee's concerns regarding supplier contributions and risk apportionment. While disagreeing with the specific conclusion, it committed to writing to the Committee by May 2022 to provide evidence on how it manages supplier accountability and risk.
HM Treasury
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15 Conclusion Acknowledged
Twenty-Second - Improving the perf…
Problems with supplier performance include their inability to undertake complex design work within agreed timetables,...
Problems with supplier performance include their inability to undertake complex design work within agreed timetables, difficulties in satisfying safety regulators’ requirements, and their inability to project management effectively due to under- resourcing.37 However, the Department has also contributed to problems, … Read more
Government Response
The government recognizes challenges with equipment delivery and states it has existing governance and measures in place to ensure contractor obligations. It commits to writing to the Committee by May 2022 with evidence on how it holds suppliers accountable and apportions risk, but does not specifically address the department's own poor management of integration or GFA delivery.
HM Treasury
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16 Conclusion
Twenty-Second - Improving the perf…
The Department has ambitions to improve delivery performance through use of ‘agile’ procurement—delivery methods where...
The Department has ambitions to improve delivery performance through use of ‘agile’ procurement—delivery methods where the requirement and solutions are developed collaboratively in discrete steps with flexibility around requirements, cost and schedule. However, delivery teams found that agile approaches were … Read more
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17 Conclusion Accepted
Twenty-Second - Improving the perf…
The Department’s willingness and ability to systematically record its learning from existing programmes is critical...
The Department’s willingness and ability to systematically record its learning from existing programmes is critical to securing improvements in the future. There have been at least 13 formal reviews of defence procurement policy over the last 35 years, which have … Read more
Government Response
The government states that systems are already in place to identify and share lessons, with ongoing efforts to standardise LfE information. It highlights existing Strategic Partnering and Category Management Programmes and an Acquisition and Approvals Transformation Programme aimed at embedding continuous improvement.
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18 Conclusion Accepted
Twenty-Second - Improving the perf…
The same lessons have been identified again and again across programmes, including underestimation of programme...
The same lessons have been identified again and again across programmes, including underestimation of programme complexity at the design stage, users being unclear about their requirements, the need to have sufficient resources and skills in place, and shortcomings in delivering … Read more
Government Response
The government states that systems are in place to identify and share lessons, with ongoing work to standardise LfE information. It also points to existing Strategic Partnering and Category Management Programmes and an Acquisition and Approvals Transformation Programme for improving delivery.
HM Treasury
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19 Conclusion Accepted
Twenty-Second - Improving the perf…
In 2018, the Department established a Strategic Partnering Programme (SPP) to maximise commercial leverage with...
In 2018, the Department established a Strategic Partnering Programme (SPP) to maximise commercial leverage with its 19 most important suppliers by improving contract performance and managing strategic risks.45 The Department told us that the 38 C&AG’s report, para 3.16 39 … Read more
Government Response
The government responded by describing its existing Strategic Partnering Programme (SPP) and Category Management, stating these are based on good practice and are already in place to deliver cashable savings.
HM Treasury
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20 Conclusion Accepted
Twenty-Second - Improving the perf…
The Department has relatively more ambitious savings targets of £628 million over the next 10...
The Department has relatively more ambitious savings targets of £628 million over the next 10 years for its ‘category management’ programme. Category management involves grouping together related products and services into market ‘segments’ to generate efficiencies. The Department’s earlier attempt … Read more
Government Response
The government confirms that category management is in place to deliver £628 million in savings through more efficient ways of working. It also mentions existing systems for learning from experience and the implementation of an Acquisition and Approvals Transformation Programme.
HM Treasury
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21 Conclusion Accepted in Part
Twenty-Second - Improving the perf…
Having the right people in place to manage suppliers is essential to ensure programme progress...
Having the right people in place to manage suppliers is essential to ensure programme progress and to hold suppliers to account. However, many of the Department’s programmes were reliant on temporary contractors to fill these roles, especially in the Department’s … Read more
Government Response
The government acknowledges the competitive market for project delivery skills and outlines plans to enhance recruitment and retention of expert resources, including building on existing training programs. It is introducing specific talent and career management for SROs and investigating options to reduce SRO turnover.
HM Treasury
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22 Conclusion Accepted in Part
Twenty-Second - Improving the perf…
The Department is also reliant on contractors on some of its maritime programmes, where between...
The Department is also reliant on contractors on some of its maritime programmes, where between one sixth and one third of staff working on the Spearfish, Type 31e frigate and Fleet Solid Support programme teams are contractors. The Department puts … Read more
Government Response
The government acknowledges the competitive market for project delivery skills and describes plans to build on existing training programs to recruit and retain expert resources. It is introducing specific talent management for SROs and investigating options like minimum tour lengths, fixed term contracts, and retention allowances to reduce SRO turnover.
HM Treasury
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23 Recommendation Accepted
Twenty-Second - Improving the perf…
Senior responsible owners (SROs) have responsibility for ensuring a programme meets its objectives.
Senior responsible owners (SROs) have responsibility for ensuring a programme meets its objectives. SROs oversee governance of programmes and steer them through key decision points, assisted by a delivery team. The NAO’s analysis showed that the median time in post … Read more
Government Response
The government accepted the recommendation, committing to build on existing leadership training, introduce specific talent and career management for MOD SROs, and investigate options to reduce SRO turnover, including minimum tour lengths.
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24 Conclusion Accepted
Twenty-Second - Improving the perf…
The Department secured an additional £16.5 billion in funding over the next four years in...
The Department secured an additional £16.5 billion in funding over the next four years in the 2020 Spending Review. Given the Department’s track record of short-term financial management, and schedule delays and cost growth across its programmes, we asked the … Read more
Government Response
The government acknowledged the Committee's observation regarding the lack of clarity on the £16.5 billion funding. While disagreeing with the Committee's conclusion, it committed to providing a detailed breakdown in the February 2022 equipment plan report, distinguishing between new capabilities and existing shortfalls.
HM Treasury
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Government Response AI assessment · 21 of 8 classified
Accepted 14
Accepted in Part 3
Acknowledged 1
Not Addressed 3
Total 8 recs + 16 conclusions
Correspondence 2 letters
21 Sep 2021 Correspondence from David Williams, Permanent Secretary, Ministry of Defence, re follow up to 12 July 2021 PAC oral evidence session: Improving the performance of major equipment contracts, dated 14 September 2021
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9 Sep 2021 Correspondence from Andrew Forzani Director General, COMRCL Ministry of Defence, re Correction related to “Improving the performance of defence contractors, HC185 dated 12 July 2021 - Fixed Priced Contracts, dated 2 August 2021
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