Select committee: Public Accounts Committee
Conclusion 17
Nineteenth Report - MoD Equipment Plan 2023–2033
Published 8 Mar 2024
Addressed to HM Treasury
Public Accounts Committee The Equipment Plan 2023–2033 All items in this report Report on parliament.uk ↗ Inquiry on parliament.uk ↗
Conclusion (the committee's words)
Because of high and volatile inflation, the MoD has changed its approach to contracting with suppliers. Formerly, around 25% of contracts were ‘firm price’, whereby the supplier bore the inflation risk.51 However, the MoD said that the cost of such firm price contracts has now become too great, and that it was not getting good value for money offers when 42 Q 112 43 Q 31; C&AG’s Report, para 2.20 44 Qq 130, 132; C&AG’s Report, para 2.20 45 Q 113 46 Qq 118, 119 47 Q 83 48 Q 108 49 Qq 128, 129 50 Q 108 51 Q 21; C&AG’s Report, para 2.4 MoD Equipment Plan 2023–2033 13 trying to get suppliers to bear the cost of inflation through new contracts.52 Instead, the MoD has decided to take on more inflation risk itself by linking cost increases in contracts to appropriate indices.53
From: Public Accounts Committee, Nineteenth Report - MoD Equipment Plan 2023–2033 (HC 451), 8 March 2024
Government response
The government responded to the whole report on 28 May 2024.
Summary written by Accountability Index from the government's response. It is not the government's own words.The government agrees with the Committee's recommendations on consistent forecast costing, clearer signals to industry, assessing the new procurement model and reliance on allies, but disagrees with those on setting out cuts under a 2.5% shortfall and on reporting nuclear funding trends.
- On the 2.5% of GDP aspiration, the government disagrees with the recommendation; the department "does not intend to set out a list of capabilities that would be cut" because this would risk operational security and industry confidence.
- On nuclear costs, the government disagrees with the recommendation. If conventional budgets are affected by nuclear funding needs the department "will make that clear", but it considers going further "wholly speculative".
- The government agrees that all budget holders should treat forecast costs consistently, with a target implementation date of Spring 2025. The department "will seek to standardise" the data and its presentation.
- The government agrees to assess the impact of the Integrated Procurement Model, with a target date of December 2024. It will "monitor the increase in pace of delivery and provide updates as appropriate".