The Ministry of Defence Equipment Plan 2018 to 2028 sets out its equipment and support budget for the period 2018 to 2028.
The plan includes equipment already in use, such as the Typhoon combat aircraft, as well as equipment in development, such as four new nuclear-armed submarines.
The report, found here, concludes:
“The Department’s Equipment Plan remains unaffordable, with forecast costs exceeding budgets by £7.0 billion over the next 10 years. This variance could increase or decrease depending on different circumstances, with the Department estimating a worst-case scenario of costs increasing by £14.8 billion should all the identified risks materialise. However, some of its analysis remains optimistic and costs could increase further. The Department is improving its understanding of affordability risks, but we are not yet fully confident in the robustness of some of its underlying assumptions, particularly around efficiencies.
The Department recognises that continued unaffordability of the Plan is not sustainable and has presented the nature and scale of the challenges it faces more clearly in its latest Plan. However, as we have previously recommended, it still needs to undertake the necessary analysis and make the decisions needed for the Plan to be affordable. In January 2018, it established MDP to take the action needed to close the affordability gap, but this work has not yet concluded. Given that 84% of the identified affordability challenge falls in the next four years, the Department must make decisions now. During the current period of uncertainty, the Department has resorted to short-term decision-making, increasing the longer-term risks to value for money and the likelihood of returning to past poor practices.”
To bring the plan into balance, the NAO recommend that the Department must:
- make the decisions required to defer, de-scope or delete programmes as soon as possible so as to address the affordability challenge;
- ensure decisions are supported by a full and transparent evidence base to demonstrate longer-term value for money; and
- outline its decisions, including the financial and broader implications, to Parliament. In setting its Plan for 2019 to 2029, the Department must:
- continue its current plans to improve cost forecasting and consider, as part of this, what can be learnt from the work of the Cost Assurance and Analysis Service;
- ensure greater consistency across TLBs and delivery organisations in how risk and uncertainty are reflected in project costs, for example, through further challenge of TLBs, in line with our recommendation last year;
- continue, for example through delivering its current plans to improve financial leadership, to improve its understanding of affordability risks, and their impact, across the Equipment Plan portfolio. This includes using this insight to inform the size of its contingency budget; and
- improve central oversight of efficiency savings by ensuring that there is a single point of accountability, a central view of efficiencies included in the Plan, and a clear and accessible audit trail for all the efficiencies included in the Plan.