Recommendations & Conclusions
15 items
4
Recommendation
Forty-Eighth Report - MoD Equipment Pla…
Acknowledged
The Department’s assessment of the Equipment Plan’s affordability still relies on over-optimistic assumptions about the cost of programmes and the efficiencies and cost reductions it will achieve. Although the Department assesses that the Equipment Plan is affordable over ten years, this obscures significant financial pressure. There is a deficit of …
Government response. The government states that the department carries out a rigorous annual process to review and challenge delivery teams’ costings and will provide an assessment of the key sources of uncertainty and risk in the forward plan in the next update …
HM Treasury
6
Recommendation
Forty-Eighth Report - MoD Equipment Pla…
Acknowledged
We are concerned that the Department has not yet developed a supply chain that can reliably and quickly deliver the capabilities and stockpiles it needs. The Department has started to replenish stocks gifted to Ukraine, the cost of which HM Treasury will cover through the Reserve. It is also working …
Government response. The government agrees and says it has published a Defence Supply Chain Strategy last year and is implementing initiatives including a MOD Supply Chain Development Programme, a Supply Chain Contingency Fund, and a tool to manage supply chain issues. It …
HM Treasury
10
Conclusion
Forty-Eighth Report - MoD Equipment Pla…
Acknowledged
The Ukraine conflict has demonstrated the renewed importance of land capabilities, but the Department acknowledged that there has been slippage in several major programmes.25 We are unconvinced by the Department’s assertion that it is doing all it can to speed up these programmes, or its claim that it could only …
Government response. The government recognizes the need to balance risk with speed and will write to the Committee with more detail on the department’s approach, including the scope to increase the pace of delivery to the front line, and provide an update …
HM Treasury
11
Conclusion
Forty-Eighth Report - MoD Equipment Pla…
Acknowledged
In the meantime, the Department’s struggles to deliver projects to modernise land capabilities leaves the Army reliant on out-dated vehicles.27 Although the first Boxer armoured fighting vehicle is due to be delivered in 2023, it will not achieve initial operating capability until 2025.28 The Department recently updated us on the …
Government response. The government agrees with the committee's recommendation and will provide an update on the implications for the Army's forward equipment programme and more detail on the department’s approach to balance risk with the speed of capability delivery.
HM Treasury
12
Conclusion
Forty-Eighth Report - MoD Equipment Pla…
Acknowledged
Even when Ajax is finally introduced, it will not operate to its full potential without the Morpheus communications system. This will integrate Ajax across the land, air and sea domains, allowing real-time information-sharing and connectivity with other capabilities, such as Lightning II jets, on the battlefield.32 However, Morpheus has also …
Government response. The government recognizes the need to balance risk with speed and will write to the Committee with more detail on the department’s approach, including the scope to increase the pace of delivery to the front line, and provide an update …
HM Treasury
13
Conclusion
Forty-Eighth Report - MoD Equipment Pla…
Acknowledged
Furthermore, the Department acknowledged that even if all the Army equipment in the Plan was delivered, that would not guarantee it could provide an operational division. This is because the current Plan does not address some risks, such as the need for “joint enablers” which facilitate operations.35 The Department provided …
Government response. The government agrees with the committee's recommendation and will provide an update on the implications for the Army's forward equipment programme and more detail on the department’s approach to balance risk with the speed of capability delivery.
HM Treasury
14
Conclusion
Forty-Eighth Report - MoD Equipment Pla…
Acknowledged
The Department told us that its 2022–2032 Equipment Plan is affordable, as the equipment budget exceeds forecast costs by £2.6 billion (1% of budget). However, we noted that the aggregate surplus obscures financial pressures in the short-term and in some Top Level Budgets – those organisations, including front line commands, …
Government response. The department will provide an assessment of the key sources of uncertainty and risk in the forward plan in the next update to the committee; forecasting across ten-years is inherently uncertain, plans need to be flexible to adapt to change, …
HM Treasury
15
Conclusion
Forty-Eighth Report - MoD Equipment Pla…
Acknowledged
We also noted that the Plan is only affordable if the Department achieves intended £13.8 billion of savings, £5 billion of which it has not yet developed plans to achieve.39 The Department may be over-optimistic in expecting to achieve all intended cost reductions and efficiency savings.40 In addition, of the …
Government response. The government agrees with the committee's recommendation and will provide an assessment of the key sources of uncertainty and risk in the forward plan in the next update to the committee.
HM Treasury
16
Conclusion
Forty-Eighth Report - MoD Equipment Pla…
Acknowledged
The Department may be over-optimistic in its assessment of project costs. The Department’s Cost Assurance and Analysis Service estimates that project costs could be between £5.2 billion and £14 billion higher than those in the Plan. The Department told us that the latter figure was a worst-case scenario and that …
Government response. The government agrees with the committee's recommendation and will provide an assessment of the key sources of uncertainty and risk in the forward plan in the next update to the committee.
HM Treasury
17
Conclusion
Forty-Eighth Report - MoD Equipment Pla…
Acknowledged
We are concerned that the Department seems reliant on delaying delivery of capabilities to keep the Plan affordable.44 The Department told us that the £13.2 billion management adjustment for realism represented a small amount of over-programming, and was based on historical performance and its assessment of deliverability, with supply chain …
Government response. The department will provide an assessment of the key sources of uncertainty and risk in the forward plan in the next update to the committee; forecasting across ten-years is inherently uncertain, plans need to be flexible to adapt to change, …
HM Treasury
18
Conclusion
Forty-Eighth Report - MoD Equipment Pla…
Acknowledged
The affordability of the Plan is also under pressure from external economic factors, including rising inflation and unfavourable exchange rate movements. In March 2022 the Office of Budget Responsibility forecast that inflation would reach 8.7% by the end of 2022.47 The Department reported that this would increase cost pressure on …
Government response. The department continuously updates its forecast of the cost of the equipment plan and reviews its affordability through the annual financial planning process. The government announced an additional £5 billion for defence in the remaining two years of the 2020 …
HM Treasury
19
Conclusion
Forty-Eighth Report - MoD Equipment Pla…
Acknowledged
Economic factors such as inflation and exchange rates will cause significant risks to the plan’s affordability. The Department told us that it has £25 billion of risks that are not included in its forecast costs because it deems these unlikely to occur, compared to £13 billion of more-likely risks that …
Government response. The department continuously updates its forecast of the cost of the equipment plan and reviews its affordability through the annual financial planning process. The government announced an additional £5 billion for defence in the remaining two years of the 2020 …
HM Treasury
20
Conclusion
Forty-Eighth Report - MoD Equipment Pla…
Acknowledged
We are also concerned about the impact of inflation on the Plan’s delivery, particularly the Department’s ability to obtain the skills required. The Department told us that it and its suppliers do not have enough data scientists, software engineers or project managers. This puts at risk the delivery of a …
Government response. The department continuously updates its forecast of the cost of the equipment plan and reviews its affordability through the annual financial planning process. The government announced an additional £5 billion for defence in the remaining two years of the 2020 …
HM Treasury
21
Conclusion
Forty-Eighth Report - MoD Equipment Pla…
Acknowledged
The Department acknowledged that inflation also makes it difficult for suppliers to deliver due to rising staff and material costs.55 As a result, the Department is changing its contractual approach to take account of the inflation risk and avoid suppliers charging a higher premium for continuing to take this risk …
Government response. The government agrees with the committee's recommendation and states that the department continuously updates its forecast of the cost of the equipment plan and reviews its affordability through the annual financial planning process.
HM Treasury
24
Conclusion
Forty-Eighth Report - MoD Equipment Pla…
Acknowledged
HM Treasury has provided the Department with £560 million to restart production lines in UK companies.62 The Department told us that it is working closely with key suppliers in the UK, including BAE Systems, MBDA and Thales, to invest in long-term strategic capabilities. The Department subsequently wrote to us outlining …
Government response. The government agrees with the committee's recommendation and outlines actions being taken in relation to defence supply chain strategy, including the creation of a MOD Supply Chain Development Programme, a Supply Chain Contingency Fund, and implementation of a tool to …
HM Treasury