Source · Select Committees · Public Accounts Committee
Recommendation 12
12
The Department’s adjustments to its cost estimates are still over-optimistic, including its assessment of the...
Conclusion
The Department’s adjustments to its cost estimates are still over-optimistic, including its assessment of the level of potential efficiency savings.26 We have previously raised our concerns that the Department was including efficiency savings that it was not confident of 17 Qq 10,11 18 Q 12 19 Q 26 20 Q 41; C&AG’s report, para 1.14 21 C&AG’s report, para 14 22 C&AG’s report, para 14, 1.16 23 C&AG’s report, Figure 7 24 Qq 26, 42 25 Q 27; C&AG’s Report, Carrier Strike – Preparing for deployment, Session 2019–21, HC 374, 26 June 2020 para 1.17 26 C&AG’s report, para 14 Defence Equipment Plan 2020–2030 11 achieving.27 This year, we again sought assurances that its forecast savings were achievable. The Department told us that it had modelled the maturity level of its forecast savings and had high confidence in its ability to achieve £8.2 billion of efficiencies included in the Equipment Plan, 66% of its £12.3 billion savings target for projects in the 2020–2030 Plan.28 However, despite our previous recommendations, the Department has again included £2.7 billion of efficiency savings for which it has not yet implemented delivery plans and £1.1 billion of savings with no delivery plans. It also needs to find another £0.4 billion of savings to achieve its savings target. If the Department fails to deliver these less mature efficiencies and find new efficiencies, then the Plan would be even less affordable.29
Government Response
Acknowledged
HM Government
Acknowledged
5.1 The government agrees with the Committee’s recommendation. Target implementation date: Autumn 2021 5.2 The next Equipment Plan report will explain the improvements made to assess risk in long-term projects and detail on the department’s planned efficiency savings. 5.3 As part of the work to strengthen the approach to assessing risk across the portfolio, the department has established a programme board to review how the department records risk in its financial forecasts to inform and support financial decision-making and control. The programme board has made several improvements, most notably the creation of centralised guidance on the methodologies for calculating risk costings and appropriate use. Supporting tools have also been made available to the project delivery community, which have purposefully been developed to accompany the new guidance. 5.4 The programme board will lead an implementation phase starting in financial year 2021-22, with the aim of fully embedding the guidance and improving the reporting, visibility and monitoring of risk across the portfolio. For the department’s major programmes, this will partly be achieved by improving risk management information presented at the Quarterly Portfolio Review.