At this point it is also worth noting that there is more than one way to overbid. Whilst programme costs are often genuinely uncertain when they go in the
plan, nevertheless there is a lot of evidence that they are systematically overbid in two ways:
• first by simply having unrealistically low costs; or
• second, by going in the plan with a simplified capability that is then subsequently enhanced, with implications for total programme costs.
This is the phenomenon widely recognised at the MoD as "entry-ism". There is undoubtedly considerable risk in up-front estimation for major projects with unproven or undeveloped technologies, but it is in the interests of no one involved in the equipment planning process to adopt a conservative approach to cost or risk identification. As described above, the military stakeholders will have little or no accountability for downstream cost increases, but will be judged on ability to further their single Service objectives. The cycle times for major projects are invariably long enough that given civil service rotation frequency, blame is unlikely to fall on those involved at the outset. Even industry finds it in its best interest to advocate unrealistic costings, until later in the project lifecycle when costs need to be firmed up.
This phenomenon can be observed widely outside defence wherever major, technically challenging infrastructure projects are attempted It is described in a thoughtful research paper by the World Bank on the causes of underestimation or overrun of costs over a wide range of project types and geographies.55 In their words "Understated costs and overstated benefits = project approval".
The low probability that projects will be cancelled once they have advanced beyond Initial Gate is another important aspect of the acquisition programming that makes entry-ism so ingrained56. By this stage, in addition to the military agenda (which still reflects justification based on Defence policy), it is highly likely constituency politics, BERR, and industry will have been mobilised in support, taking any go/no go decision out of the Department's sole control.
__________________________________________________________________________________________________________________________________
55 World Bank Policy Research Working Paper 3781, (Dec 2005)
56 Of the 40 projects that have passed Initial Gate since April 2004 (start of CMIS) only one has been cancelled. Overall, less than 5% of the 165 projects that have been active since 2004 have been cancelled