Source · Select Committees · Public Accounts Committee
Recommendation 5
5
Acknowledged
Set out long-term impact of short-term savings and complete F-35 whole-life cost forecast.
Conclusion
The Department has taken a narrow and short-term approach to management and costs and has failed to realistically appraise the programme’s whole-life cost. The Department acknowledges that it reduced the pace of aircraft deliveries to make short-term financial savings at multiple points in the programme, notably in 2010. In 2021 the Department decided to pause building a sovereign facility for assuring that aircraft retained their stealth capabilities, which is required for its freedom of action policy. The Department similarly delayed providing 809 Naval Air Squadron’s infrastructure by 6 years, increasing costs by almost £100 million. It did so despite knowing it would cost more money in the long-term and create a gap in capability. The Department also failed for many years to significantly update its public whole-life cost, which hardly increased from its 2013 estimate of £18.425 billion covering the first 48 aircraft to the then out of service date of 2048. In response to the 2025 National Audit Office report the MoD published a whole-life cost of almost £57 billion for all 138 aircraft to the new out of service date of 2069. But this still does not include non-equipment costs such as personnel, fuel and infrastructure which are included in the NAO estimate of £71 billion. recommendation The Department should: a. set out in its upcoming Defence Investment Plan the expected long-term impact on costs and capability of any short-term savings measures, on both the F-35 and other major programmes, and b. build on its recent whole-life cost analysis by including all relevant non-equipment costs to give a more complete through-life cost forecast of the programme. 4
Government Response Summary
The government agreed to include all non-equipment costs in whole-life cost forecasts, stating it already develops such models but accepts there is an opportunity to go further and will strengthen its approach as part of Defence Reform.
Government Response
Acknowledged
HM Government
Acknowledged
The government agrees with the Committee’s recommendation. and is included as a mandated element of the capability’s investment case at the point of outline and full business case approval decisions. Whole life costs are used to inform both economic assessment of investment choices and financial planning. While the department already develops whole life cost models that extend beyond equipment costs, for example covering personnel and infrastructure costs too, the department accepts that there is an opportunity to go further in developing and presenting a fuller and more complete view of through-life cost. The department will continue to strengthen its approach to whole life cost modelling as part of the work that is being taken forward under Defence Reform.