21 The Department has regularly experienced difficulties in effectively managing its major equipment contracts, with frequent delays and cost increases. These stem from supplier under-performance; weaknesses in departmental contract management; the Department and suppliers underestimating the scope and technical complexity; and the Department prioritising short-term solutions because of its affordability challenges. Consequently, the Department has not been able to optimise value for money from the contracts for its largest, most complex equipment programmes. The recent Integrated Review and the announcement of £16.5 billion of additional expenditure, much of it for future defence equipment and support work, emphasises the urgency of strengthening how the Department manages key contracts.
22 To improve value for money the Department must follow through on its initial efforts to embed wider good practice in its commercial relationships and project delivery. These are promising steps, but it is early days for the initiatives, some of which have been tried unsuccessfully before and do not necessarily fit easily with the existing departmental culture. Strong leadership and sustained resources will be needed to fully embed these changes and deliver real benefits. A key part of the Department's agenda must also be to learn lessons routinely across the portfolio, including being honest in acknowledging and learning from examples of poor value for money when they occur.