• Departmental equipment project performance remains relatively poor, with delays of c.80% and cost increases of c.40% vs. initial estimates. It is notable that cost and duration escalation appear to be recognised primarily when projects are relatively mature (over 75% duration expired between Main Gate approval and latest forecast ISD).
• Whilst the Department measures performance vs. Main Gate, projects are accepted onto the Equipment Programme based on Initial Gate estimates. Therefore the cost increase from Initial Gate is of material concern.
• Within the average data for mature projects96 it should be recognised that:
- large projects (spend / duration) appear more likely to be subject to significantly greater delays and cost overruns than average; and
- projects which have benefited from the application of Smart Acquisition principles throughout their lifecycle appear somewhat less likely to be late and over the estimated cost defined in the Main Gate business case (although the causality of this benefit remains uncertain due to the nature of "Smart" projects available for analysis).
• DE&S' management of risk (through maintenance of the 10%, 50%, 90% estimates for duration and cost) appears to be relatively poor.
• It is not clear from the data which are currently tracked by the Department that the consequences of changes to requirements for new equipment are being appropriately captured and considered prior to the change being accepted. Changed requirements were reported to be a significant issue in the qualitative research process that the Review team has undertaken, but the evidence is less obvious in the self-declared quantitative data which exists within the Department. The Review team believes that significant data anomalies exist; this undermines somewhat the Review team's confidence in the self-declared quantitative information on causes of change to cost and time estimates.
• The UOR process is perceived by the Front Line Commands to be working, an assertion that is supported by the limited analysis which the Review has conducted. The increased importance afforded to the time dimension in the Performance / Cost / Time envelope during UOR procurement appears to force more meaningful trade-offs with cost and/or performance.
• The full cost of delay on projects in the EPP is not being captured by the Department and is significantly greater than the costs monitored by the NAO in the Major Projects Reports. Unmonitored costs are significant at a Departmental level although challenging to estimate due to limitations of the data
- Departmental costs associated with the run-on of existing equipments, and those costs incurred within DE&S (primarily costs associated with maintaining project teams longer than necessary) are not currently tracked in any systematic way.
- it is clear that the costs imposed on industry as a result of delay and opportunity costs from delays to equipments in the EPP are significant, but they are subject to considerable uncertainty.
• A large number of factors exist from relatively early in a project's lifecycle that later lead to delay and increased costs. This includes the failure of the Department to consider whole life costs on a regular basis throughout the CADM phase of the CADMID cycle. These effectively hide true costs and store up problems for later in a projects life (including support costs whilst in-service) and are incentivised by the network of user / customer / supplier relationships as it currently exists between FLCs, MoD Capability Sponsor, DE&S and industry.
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96 Those more than 75% complete or in-service