Recommendation 5

We are doubtful that the Department can recover the programme within existing costs and commercial arrangements. The programme remains under significant pressure. It is more than a year behind even the revised schedule, trials involving Army crews have been suspended and noise and vibration issues remain unresolved. Despite these problems, the Department intends to continue holding General Dynamics to the current firm-priced contract for delivery of 589 vehicles. It claims that the relationship with General Dynamics is good and that both parties are working collaboratively. However, because of programme delays and missed milestones, the Department estimates that it owes General Dynamics £750 million for completed work, but has not paid anything since December 2020, and the parties remain in dispute. It is important that the Department uses appropriate commercial arrangements to incentivise delivery of the required capability, and it is seeking to resolve the technical issues and recover the programme through existing commercial terms. It says that the next step is to assess and seek internal approval for any changes to the schedule and definitions of capability, and agree any revisions to programme milestones with General Dynamics. However, the Department will not complete this process until it has determined how to resolve the noise and vibration issues, and so cannot say when it will decide on the programme’s future. Recommendation: Whether or not the Department concludes that it should continue with the current Ajax contract, it must review its commercial arrangements to ensure these are appropriate to incentivise its prime contractor to deliver the programme and agree a recovery plan.