South Norfolk MP Richard Bacon, a member of the Commons public accounts committee has said that the MoD is 'camouflaging' its budgets to give the impression it has procurement costs under control. Mr Bacon said: “The MoD might claim to have reduced its procurement costs, but in truth it has simply moved money around to give the impression that procurement costs are under control”.
Since April 2005, the Ministry of Defence (MoD) has reduced the forecast costs for its top 20 projects by reallocating expenditure to other projects or budget lines.

“£1 billion has been transferred between projects and budget lines since 2005”. 

“These transfers are acting as a smokescreen, hiding costs such as logistics and training, and masking the fact that costs are not really falling.   Many of the same people continue to be responsible for the transferred budgets, which often get moved to smaller projects attracting less attention from Parliament or the press”.

“This creative accounting might produce better-looking balance sheets, but it does nothing to improve the MoD’s management of procurement costs.  Rather than camouflage its balance sheets, the MoD needs to take a long, hard look at why it still cannot keep procurement costs under control”. 

Mr Bacon was speaking as the Commons public accounts committee published its report on the Ministry of Defence’s major procurement projects.  Since April 2005, the Ministry of Defence (MoD) has reduced the forecast costs for its top 20 projects by reallocating expenditure to other projects or budget lines. In 2007, it has reallocated £609 million, making a total of over £1 billion reallocated over the last two years.

The report finds that, by transferring costs outside the boundaries of the Major Projects Report, the MoD is not providing Parliament with the full picture on the cost of individual military equipment projects.  In addition, these transfers may not represent a cost reduction for defence spending as a whole and the transferred budgets also fail to include training and logistics support costs.

The report also finds that, although allocating costs to those best placed to manage them is sensible for accountancy purposes, many of the same project teams continue to be responsible for the transferred budgets.   

22 July 2008
 

See also::
PAC REPORT: Major Projects Report 2007