By Andrew Chuter
Published: 3 Feb 2010 10:48 USAs Defence News magazine

LONDON - Britain's Ministry of Defence will act to reduce spiraling growth in program costs and delivery delays, which the National Audit Office estimated cost 1.2 billion pounds ($1.9 billion) in 2008-09 for the department's 15 biggest programs alone.

The MoD warned in an acquisition reform strategy published today that it was no longer possible to continue buying equipment at the same levels as previously and that "difficult choices" would have to be made.

"We can no longer set out to buy as much as we did previously; we need to be more firmly focused on the central priorities flowing from the new Strategy for Defence and the [upcoming] strategic defence review. We need to decide what is, and what is not, affordable in the context of our defence and national security policies and we need to ensure our short-term budgeting takes account of long-term impacts," the document says.

The most important commitments in the strategy involve taking "tough decisions and sticking to them, having ensured the plans were deemed strategically aligned, affordable and achievable," it says.

Among the long list of major reforms are a commitment to inform Parliament annually of the cost and affordability of the equipment and support program against a 10-year planning horizon agreed by the Treasury and audited by the National Audit Office; a strengthening of top-level oversight of the equipment program with an equipment committee chaired by the permanent undersecretary; and the production of a new defense industrial strategy reflecting the outcome of a wider defense review planned to get underway after the next election.

The new acquisition strategy rolled out here today said the MoD intends the reforms to drive down average cost growth on equipment programs to no more than 0.4 percent and would like to achieve 0.2 percent a year. In 2008-09, the British saw equipment program costs rise 5.6 percent.

The document was published alongside a government green paper outlining the issues for consideration ahead of a strategic defense review to be called immediately after a general election due by midyear.

The acquisition strategy aims to reduce program slippage dates from the 2008-09 performance of 5.9 months to 0.8 months per year.

Demonstrating much lower levels of cost growth and delays was one of two indicators the report highlighted for demonstrating whether the reforms, some of which are already being carried out, are a success.

Equipment and Support Plans

The other indicator, the report says, is an independent audit undertaken each year showing that the MoD can afford its equipment and support plans.

Delays and cost overruns to the A400M airlifter, the Astute nuclear submarine and the Queen Elizabeth aircraft carriers were largely to blame for the poor 2008 performance, but Britain has a history of problems delivering major projects on time and to budget.

The new strategy comes in the wake of damning criticism of the acquisition process here in an MoD-commissioned review conducted by businessman Bernard Gray that was published last October.

The MoD said at the time it accepted most of Gray's recommendations and has published the new strategy detailing just how the government hopes to remedy past acquisition failures.

It's the fourth attempt at acquisition reform since Labour come to power in 1997, the two latest efforts being the defense industrial strategy in 2005 and defense acquisition change program of 2006.

Defence acquisition reform minister Lord Drayson has been in charge of the latest proposals as he was with the 2005 and 2006 efforts.

In a statement, Drayson said it is vital to make defense acquisition as efficient as possible. "This is a strategy for major reform. At its center is a radical plan to increase the transparency of our equipment plan to help ensure it can be kept affordable and achievable."

Britain spends about 20 billion pounds on goods and services, about two-thirds of its annual defense budget.

Gray concluded current spending plans were unaffordable and would have to be cut back, an analysis the acquisition strategy document agrees with.

Public Debt Crisis

Even greater cost pressures are growing as Britain faces a public debt crisis brought about by the recession, which threatens to cut, or at best flat-line, defense spending.

Some of those cuts could come in the 2010-11 financial year but the big decisions on program cuts will likely have to wait the outcome of the strategic defense review.

The MoD said it will deliver its acquisition reform aims by creating equipment and support programs that:

■ Are affordable within likely resources.

■ Agile and responsive to changing priorities.

■ Realistic about costs and risks of what the MoD plans to acquire.

■ Embed a through-life approach to capability.

■ Build a more active and transparent relationship with industry.