Review of Acquisition for the Secretary of State for Defence

Procurement and support of military equipment consumes around 40% of
annual defence cash expenditure and is of immense importance to the
nation. The dedication of a wide group of individuals in attempting to deliver
a complex programme of future capabilities while supporting our Armed
Forces in current combat was apparent to the Review team throughout this
work. The Department’s commitment to improvement in acquisition is
genuine and progress in some areas has been significant.

Nonetheless, the Ministry of Defence has a substantially overheated
equipment programme, with too many types of equipment being ordered for
too large a range of tasks at too high a specification. This programme is
unaffordable on any likely projection of future budgets.
This overheating arises from a mixture of incentives within the Ministry of
Defence. In particular, the Armed Forces, competing for scarce funding,
quite naturally seek to secure the largest share of resources for their own
needs, and have a systematic incentive to underestimate the likely cost of
equipment.

Unfortunately the current system is not able to flush out at an early stage the
real costs of this equipment, nor does it make effective prioritisation or
rationalisation decisions. As the MoD almost never cancels an equipment
order, the process of over-ordering and under-costing is not constrained by
fear on the part of those ordering equipment that the programme will be lost.