UK Inquiry Tracker

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

Treasury minutes: Government response to the Committee of Public Accounts on the Twenty Second report from Session 2021-22

3 Nov
2021

Report published

Twenty-Second - Improving the performance of major defence equipment contracts

21 Sep
2021

Correspondence

Correspondence from David Williams, Permanent Secretary, Ministry of Defence, re follow up to 12 July 2021 PAC oral evidence session: Impro…

9 Sep
2021

Correspondence

Correspondence from Andrew Forzani Director General, COMRCL Ministry of Defence, re Correction related to “Improving the performance of def…

12 Jul
2021

Oral evidence

Improving the performance of defence contracts

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

Reports 1 report · click to expand

Title	HC No.	Published	Items	Response
Twenty-Second - Improving the performance of major defence equip…	HC 185	3 Nov 2021	24	Responded

Recommendations & Conclusions

14 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 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 before our evidence session it considered initial operating capability on the Ajax programme achievable by the end of June 2021. That did not happen and now it has no timescale for when these armoured vehicles will be ready for service. While witnesses told us that investigations into noise and vibration issues are continuing, they could not explain the likely causes or remedial action necessary. So far, the Department plans to offer 310 service personnel hearing tests, but the potential long-term health implications of this failure remain unknown. In addition, the Department’s refusal to explain the magnitude of its financial exposure in the event of a contract termination demonstrates a disregard for Parliament and taxpayers. We were struck by witnesses’ reluctance to attribute problems with the Crowsnest and Ajax programmes to providers’ poor performance or project management, even though in both cases it is a matter of public record. In this situation it is essential to monitor robustly whether value for money is still 6 Improving the performance of major defence equipment contracts being achieved. But the Department admits that it does not routinely monitor value for money of programmes, nor have its Accounting Officer Assessments rendered sufficiently clear accounts of value for money. Recommendation: The committee expects the Department to develop a more transparent approach to assessing value for money. In particular, the Accounting Officer Assessments letters—which come to this committee when significant changes occur on major programmes—should include a more detailed and frank assessment of how the changes impact on the value for money case as defined at the start of the programme. Show less

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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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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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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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.

HM Treasury

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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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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.

HM Treasury

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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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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 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 for an SRO was 22 months, against median programme length of 77 months, reflecting the career path requirements of the senior officers who fill most SRO roles. A recent departmental survey found that many SROs did not feel empowered to carry out their roles, while some felt least competent in areas important to the effective management of suppliers.54 We asked the Department what it is doing to ensure that the role of SRO becomes an important part of the CV for military officers. The Department claims it has a good record of putting SROs through Major Projects Leadership Academy 49 C&AG’s report, para 17 and Figure 7 50 C&AG’s report, paras 4.6–4.7 51 Qq 83–84 52 Qq 85–86 53 Q 103 54 C&AG’s report, para 4.11 Improving the performance of major defence equipment contracts 17 training,55 but some of its own survey respondents reported difficulty in accessing it.56 The Department was non-committal on the actions it plans to take, but said that it is looking at personnel policy to ensure project and programme delivery are recognised as military trades in their own right. It also aspires to ensure that SROs spend at least 50% of their time on programmes and said it has experience of some personnel staying on programmes for longer than a traditional military appointment (‘double touring’).57 We also asked whether, for military SROs, the Department had thought about moving towards a model whereby the SRO stays in post throughout the term of a particular contract, and promotion is dependent on the successful delivery of that contract. The Department said it had experience of “double-touring” people to get longer terms in office, and that there were examples where it would be happy to see military SROs promoted ‘in Show less

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.

HM Treasury

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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

Parliament page

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

Parliament page