Recommendation 10

The Department acknowledged the risk of costs escalating on its biggest programmes— nuclear submarines and IT and communications systems—which are large, complex programmes involving the development of new technologies.19 It told us it assesses the risk of cost increases on projects and has embedded £13.5 billion in costings to enable senior responsible owners to manage risks that arise from delivering their projects. But the Department admitted that its independent cost assessors had estimated that there was £3.9 billion of risk over and above what is included in project budgets and the Department is also tracking £20 billion of cost increases that it judges, on balance, probably will not occur although at least some of these may materialise.20 The National Audit Office’s report also concluded that the Department’s approach to analysing cost risk and uncertainty means it is likely to have understated the level of risk in the Plan’s central forecast.21 While the Department has taken a more prudent approach on some high-risk projects, including the Dreadnought submarine programme, it has not explored whether its approach to assessing risk remains appropriate for new, complex projects.22