5.9 Despite the delays, cost increases and other challenges faced by the programmes we examined, none were subsequently seen as poor VFM. In 2016, departmental scrutineers did comment that the VFM of the Type 26 frigate had been 'eroded' due to the inability to find an affordable solution for the original requirement of 13 ships. Typically, once the Department has entered into a relationship with a supplier, ending the arrangement and restarting the process would provide additional delays and affordability problems, so the current arrangement is often described as offering the 'best' VFM in the circumstances. Figure 8 illustrates that programmes can incur considerable expenditure over a number of years without clarity about VFM.
| Figure 8 The value for money (VFM) case for the Ministry of Defence's Warrior armoured vehicle upgrade The Ministry of Defence (the Department) spent over £580 million on the Warrior armoured vehicle programme without being clear on whether the programme constituted value for money In February 2010, the Warrior programme team sought approval from the Department's Investment Approvals Committee (IAC) to proceed to the demonstration phase, but the business case did not include a formal assessment of VFM. Scrutineers considered there was little to choose on cost-effectiveness grounds between either of two bids and a 'do minimum' option. The case was ultimately approved in October 2011. During this period, the estimated date of entry into service slipped from 2014 to 2020. In response to updates in 2016 and 2018, the IAC asked the team to provide a clear statement of the programme's VFM in the forthcoming request for approval to manufacture, but this submission continued to slip. In February 2019, the accounting officer provided an assessment of the programme to the Committee of Public Accounts. This stated that it was too early to conclude on the programme's VFM, but the available evidence was that the current solution still offered 'best VFM'. The team reported the Cabinet Office's view that a significant capability could still be delivered, although not within the parameters approved in 2011. By now, expected date of entry into service was 2023. In October 2020, the Infrastructure and Projects Authority advised that a proper VFM assessment was still not possible, and it was therefore still too soon to seek approval for the manufacture stage. As at December 2020, the programme team expected to achieve initial operating capability in 2026 and full operating capability in 2028, and expected to have spent over £580 million on the programme by March 2021. However, in March 2021, the government announced in the Integrated Review of Security, Defence, Development and Foreign Policy that it had cancelled the upgrade programme. Source: National Audit Office analysis of Ministry of Defence documents |
5.10 As described in paragraph 2.9, the programmes we examined were prone to slippages in their estimated dates of entry into service once on contract. The Department has not indicated that such slippage affected VFM, despite the loss of value to the Department from the absence of these capabilities, leading to a need to manage obsolescence or capability gaps for longer periods. Our sample of programmes included the armoured vehicles reported on by the House of Commons Defence Committee in March 2021. The Committee stated that the absence of these new and upgraded vehicles would leave the Army seriously overmatched in any conflict.34
5.11 HM Treasury directs that accounting officers should confirm to Parliament that procurements remain VFM where there are significant changes to cost and time parameters. Besides the Warrior armoured vehicle, there were seven instances of accounting officer assessments among the programmes we examined:
• The assessments for the Future Maritime Support Programme (July 2019), Type 31e frigate (January 2020), and Fleet Solid Support ships (November 2020) all stated that VFM would be delivered in the future.
• The assessment for the Skynet 6 military satellite (October 2019) stated that VFM would be determined when each element of the programme reached its main investment decision. We found the programme had previously stated that VFM would be achieved through competition, but that Departmental delays to the subsequent declaration of a UK-sovereign capability only allowed for a single source solution.
• The assessment for the Protector unmanned aerial vehicle (November 2019) stated the programme remained VFM despite a two-year delay and increased costs of £326 million.
• The assessment for the Ajax armoured vehicle (October 2020), stated the programme remained a VFM solution despite slippage of entry into service from July 2020 to June 2021, with a worst-case scenario of slippage to December 2022.
• The assessment for the A400M transport aircraft (March 2021) stated only that the programme remains within the most recent cost boundaries set by the approving authority.
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34 House of Commons Defence Committee, Obsolescent and outgunned: the British Army's armoured vehicle capability, Fifth Report of Session 2019-2021, HC 659, March 2021.