G.4. Potential capability gap costs

There is an opportunity cost associated with project delay to meet the 'capability gap'. 'Spot markets' may have to be accessed to rapidly fulfil operational requirements. Specific examples are given in Figure G-2.

Note: * FTSA - air to air refuelling tanker which has some airlift capability

Source: Review team interviews; MoD press releases; Press articles; Oanda; CMIS (February 2009); US DSCA

Figure G-2: Examples of "opportunity costs" associated with capability gaps caused by delay

MoD capital expenditure on Operations and Peacekeeping has totalled c.£2.0bn from 2002-03 to 2007-08188. Given the proportion of the UORs for Operation Telic by value that hastened existing planned equipment (33%), introducing new capabilities previously unprogrammed (20%) or modifying existing equipment/infrastructure (17%)189, it is estimated that 33% - 70% of UOR expenditure was required to meet the cost of delay, i.e., c.£110m-£250m p.a.

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188 MoD Annual Reports

189 MoD written evidence to Defence Committee (Dec 2003)