Summary

125.  The Defence Procurement Agency (DPA) continued to improve on the delivery of project core requirements and customer satisfaction ratings also increased. However, significant problems with a number of major projects, and in particular with the Nimrod MRA4 aircraft and Astute nuclear attack submarine programmes, meant that average cumulative project in-service dates slipped and average cumulative costs increased substantially. Significant milestones during the year included selection of the future carrier design and the aircraft to be operated from it, contract award for the multinational Meteor missile programme, the maiden flight of Typhoon (Eurofighter) production aircraft, and contract signature for Roll-on Roll-off ferries. Smart Acquisition continued to make progress, improving the Department's acquisition practices and processes. Contracts for several further major Private Finance Initiative projects were signed.

Procurement Performance

126.  Table 15 below summarises the DPA's performance against its project management and operating cost targets. The DPA continued to improve in meeting customers' key requirements (Key Target 1) and customer satisfaction rating (Key Target 4), meeting both these targets. However, the average forecast in year programme slippage (Key Target 2) increased to 7.2 months, and the average in-year cost increased to 5.4% (Key Target 3). Both these targets were missed. This was mainly due to delays in the Astute, Typhoon (Eurofighter), Brimstone, Nimrod MRA4, and A400M projects, and cost increases to Astute and Nimrod. These two latter programmes were subject to revised structuring and re-negotiation with BAE SYSTEMS, announced in February 2003. The impact of agreed improvements to processes and practices will take some time to improve results but their management is being closely monitored. Further details on the DPA's performance can be found in the Major Projects Report, published annually by the National Audit Office.

Defence Equipment Programme

127.  The Equipment Programme, which includes projects that harness new technologies and concepts, is rigorously reviewed every year, ensuring that the Department makes best use of the available resources and provides the Armed Forces with the capabilities required today and anticipated for the future. The 2003 Equipment Programme was dominated by the outcome of the 2002 Spending Review, which enabled significant new investment in the types of equipment identified in 'A New Chapter to the Strategic Defence Review' (see paragraphs 62-64). Equipment deliveries, reported by capability areas, are at Annex E.

128.  Significant project milestones during the year included:

• selection in September 2002 of the Future Joint Combat Aircraft variant to operate from our future aircraft carriers and the design of those carriers, and the announcement in January 2003 of an alliance approach as our intended way forward for building the carriers;
   
• signature of the Roll-on Roll-off ferries Private Finance Initiative contract, with delivery of all six ships now complete;
   
• contract award for Javelin anti-tank missiles;
   
• maiden flight of the Typhoon (Eurofighter) Series Production Aircraft;
   
• extension of the Bowman contract to encompass a Common Battlefield Application Toolset, Infrastructure and Platform Battlefield Information System and connectivity with Apache Attack Helicopters.
   
• selection of two prime contractors for the next stage of the Watchkeeper unmanned air vehicle programme; and
   
• contract signature for the Meteor Beyond Visual Range Air-to-Air Missile.

Taken together, these represent considerable progress in moving forward key programmes to modernise our equipment capabilities.

Smart Acquisition Programme

129.  Smart Acquisition improvements are estimated to have produced reductions of some £2Bn in the cost of MOD's planned equipment programme between 1998 and 2008. Smart Acquisition is now an integral part of MOD business and it is no longer possible to attribute savings directly to Smart Acquisition. Examples of Smart Acquisition best practice in 2002/03 included:

• in-service support for Nimrod aircraft generated 20% operating savings from the prime partner, through radical changes to business processes and contract setting;
   
• the repair project team for the Challenger 2 main battle tank delivered savings of £28M through the implementation of a whole-life approach to the equipment; and
   
• Project SLAM, to upgrade £1.3Bn of Service single accommodation, has designed and developed a business tool known as the Project Value Tree. This is recognised as the global benchmark for all single-living accommodation projects.

Acquisition Leadership Development Scheme (ALDS)

130.  The ALDS aims to develop future leaders in Smart Acquisition. Its intake is selected from all three Services, the Civil Service and Industry.

During 2002/03 it reached 418 members, which included an in-year intake of 117 new members and sabbatical returns.

Private Finance Initiatives (PFIs)

131.  The MOD continues to investigate innovative ways of acquiring quality and value for money services through Public Private Partnership agreements, including those taken forward under PFI arrangements. In 2002/03 three new PFI deals were signed (see Table 16), bringing £258M further private sector investment into Defence.

132.  The Department remains committed to using PFI wherever this delivers best value and does not compromise operational effectiveness. Some projects will provide support close to the front line as demonstrated by the Joint Rapid Reaction Forces Strategic Sealift (Roll-on Roll-off ferries). A robust and diverse programme continues to be taken forward (see Table 17).

Last Updated: 3 Dec 03