Commissioned by the South Northants Action Group

Contents

Introduction

1. FiRe Control Project
2. C-NOMIS: Computer-National Offender Management Information System
3. NHS – National Programme for Information Technology (NPfIT)
4. Queen Elizabeth-Class Aircraft Carriers
5. Identity Card Scheme
6. A400M Transport Aircraft
7. Government Efficiency Scheme – Shared Service Centres
8. Red Dragon (St Athan)
9. Defence Training Review
10. Benefit Processing Replacement Programme (BPRP)

Projects outside the full criteria

 

Introduction

We recently commissioned a politics graduate to investigate significant projects initiated by government in the last ten years which might be deemed failures. The cost of the projects had to be measured in hundreds of millions of pounds (of taxpayers’ money). In addition at the time of deciding to proceed there should be plenty of evidence to suggest that the projects were likely to be flawed. The intention was to introduce some accountability into decisions made by MPs. Whereas in industry senior individuals can be in the firing line for major mistakes, such accountability rarely exists in the political world.

It transpired that many of the major projects which satisfied our set criteria were defence projects which frequently do not involve voting in the House of Commons. Nonetheless the research which was performed in a very limited amount of time has revealed a disturbing amount of misspent money.

The first part of the report lists ten projects that met our criteria. The second part lists projects which either fell outside the allotted time window or were too small in value to be considered. There are other projects which could be listed which currently continue to cost us hundreds of millions even though the schemes were initiated twenty or more years ago such as the Private Finance Initiative for schools and hospitals.

The total of taxpayers’ money spent on these ten projects which have failed to deliver what was originally proposed is estimated to exceed 33 billion pounds.

Peter Deeley

Andrew Bodman

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This paper has been published online with the proviso that the information contained is as accurate as we can readily establish and any inaccuracies should be reported to Peter Deeley phdeeley@hotmail.com for correction.

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1. FiRe Control Project: 

The project aimed to create nine regional fire control centres to co-ordinate the actions of 45 fire and rescue services across England, replacing 46 local fire control rooms. The original cost estimate in 2004 was £120 million. [1]

Voted for and passed in the House of Commons on 21 July 2004.[2]

MP in charge: John Prescott championed the project, pushing it forward.[3]

 

Why the project can be deemed a bad investment:

 

• It is not delivering what was originally required:

 

- No IT system was delivered.

- Eight out of the nine new regional control centres remain empty and a lease will have   to be paid for each of them for the next 24 years.

- The project was eventually scrapped in 2010[4]

• Over the original projected costs:

 

-  Projected cost at time of cancellation in 2010: £635 million

-  Department for Communities and Local Government (DCLG): spent £469 million in total on the cancelled project

-  Future cost of empty buildings could be as high as £431 million over the remaining 24 years. [5]

The reasons why MPs could have reasonably determined at the time the bill was passed that it would be an unsound proposition:

 

1.      DCLG pushed ahead without undertaking basic project approval checks, making decisions before testing the ideas for feasibility: the result was hugely unrealistic forecast costs and savings, naive over-optimism on the deliverability of the IT solution and under-appreciation of the risks. [6]

2.      The views of the people working in the fire and rescue services were not sought. Margaret Hodge stated; “the success of the so-called FiRe Control project crucially relied upon the cooperation of locally accountable and independent Fire and Rescue Services… the DCLG’s failure to recognise this and its failure to ensure local buy-in fatally undermined the project from the start”.[7]

-          Press release from the Fire Brigades Union (FBU): “This dangerous plan will axe all our excellent command and control centres and be a financial burden on the fire service and council tax payers for years to come. It’s expensive, it’s risky, it won’t save a single life and could end in total failure”.[8]

-          From the beginning the FBU constantly raised concerns with the leading actors and organisations involved. They commissioned three damning reports yet they were dismissed as ignorant scaremongers who did not know as much as the politicians, civil servants and consultants running the project. [9]

3.      The company awarded the contract had no direct experience of supplying emergency services.[10]

4.      Local Fire and Rescue Authorities were under no obligation to use the regional facilities. The Department did not devise or communicate a set of sufficient incentives to encourage them to support its delivery. Accountability for delivery was not placed in the hands of the Fire and Rescue Authorities that had the authority to commit the resources and accept operational responsibility.

5.      FiRe Control was based on unrealistic estimates of project costs and expected local savings. These estimates did not include the costs of meeting local and regional implementation or the costs of installing equipment.[11]

 

2. C-NOMIS: Computer-National Offender Management Information System – 2004

In June 2004, the National Offender Management Service (NOMS) initiated C-NOMIS to implement a single offender management IT system across prison and probation services by January 2008. C-NOMIS was intended to support a new way of working known as end-to-end offender management and to replace existing ‘prison inmate and local probation area offender case management systems’ with one integrated system, allowing prison and probation officers and others to access shared offender records. [12]

The aim of one integrated information system was to improve information sharing about offenders; address the lack of continuity and follow up of interventions with offenders as they move within the prison system and between prison and the community and to provide a clearer alignment of prison and probation work with offenders. [13]

 

Why the project can be deemed a bad investment: 

 

• It is not delivering what was originally required:

 

The C-NOMIS project was abandoned in 2007 due to huge cost overruns, delays and technical difficulties.

- Rather than introducing a single shared database with interfaces to other criminal justice systems, the programme will now consist of five separate projects:

1.      Replacement of several current prison systems with the C-NOMIS application;

2.      Creation of a national probation case management system based on an existing package called Delius;

3.      The introduction of a read-only data share facility between prison and probation;

4.      The creation of a single offender risk assessment system; and

5.      Replacement of the current prison Inmate-Information System. [14]

 

• Over the original projected costs:

 

-  The approved lifetime cost of the project rose from £99 million at its inception to £234 million in June 2005

-  By July 2007 C-NOMIS was two years behind schedule and estimated lifetime project costs had risen to £690 million.

-  The Minister of State imposed a moratorium while options for reducing the project cost were sought. NOMS evaluated a range of options and in January 2008 recommenced work on a re-scoped programme with an estimated lifetime cost of £513 million (including sunk costs). [15]

 

The reasons why MPs could have reasonably determined at the time the bill was passed, that it would be an unsound proposition:

 

• The system was commissioned from Electronic Data Systems (EDS) without a specific open competitive tender which was a flawed decision. EDS were, to the MPs’ knowledge, not the most appropriate contractor for the job. [16]
• Whitehall did not seek to win over the end-users of the scheme, particularly probation officers. The system required a change in their way of working -  without workers’ acceptance MPs could have determined that the project was an unsound proposition. [17]
• C-NOMIS was treated as an IT project and not a business-change programme. If MPs had looked more thoroughly into planning this project they would have concluded C-NOMIS was an unsound proposition as it simply stood as an IT project. [18]

 

3. NHS – National Programme for Information Technology (NPfIT)

The NHS NPfIT’s stated aim was to reform the way that the NHS in England uses information and hence to improve services and the quality of patient care. Central to the Programme was the creation of a fully integrated electronic care records system that is designed to reduce reliance on paper files, make accurate patient records available at all times and enable the rapid transmission of information between different parts of the NHS. The system intended to comprise for each NHS patient firstly, a detailed care record containing full details of the patient’s medical history and treatment. This record would be accessible to a patient’s GP and local community and hospital care for example, in the event that the patient is referred for hospital treatment. Second, a summary care record containing key medical information such as allergies, made available across England to NHS staff involved in treating the patient. [19] Original projected costs were £11.4 billion. [20]

Sir John Pattison who was HQ director of research and e-champion at the Department of Health at the time NPfIT was passed was invited to Number 10 in February 2002 to a seminar on IT where he and his colleagues were given ten minutes to make the case for a national programme to Tony Blair. As a result of the meeting Tony Blair gave the go ahead for the project. [21]

 

Why the project can be deemed a bad investment:

 

• It is not delivering what was originally required:

-  The original aim of the programme was to deliver care records systems to all NHS organisations by 2007 and for every NHS patient to have an electronic care record by 2010. The Department acknowledged that it will not now deliver these systems to all NHS organisations due to poor progress and consequent limited funds. [22]

-  By March 2011, the Department and the NHS had spent £2.7 billion on care records systems. The Department has failed to demonstrate the benefits achieved for the £2.7 billion spent to date on care records systems.  The Department has accepted it is unable to deliver its original vision of a standardised care records system with an electronic record for every NHS patient. It is now relying on individual NHS Trusts to develop systems compatible with those in the Programme, which means that different parts of the country will have different systems. Implementation of alternative up-to-date IT systems has fallen significantly behind schedule and costs have escalated.[23]

-  The Department has not got the best out of its suppliers despite having paid them some £1.8 billion since 2002. One supplier, Computer Sciences Corporation (CSC), has yet to deliver the bulk of the systems it is contracted to supply and has instead implemented a large number of interim systems as a stopgap. The other supplier, BT, has also proved unable to deliver against its original contract. The Department agreed a revised contract reducing the number of systems and increasing the price for each system BT had to deliver. [24]

The reasons why MPs could have reasonably determined at the time the bill was passed, that it would be an unsound proposition:

 

• The lack of formality of the provisional investment decision (the meeting with Tony Blair in February 2002) meant that the Government’s decision to invest in NPfIT was made without:

- “discussions or consultation with health professionals on what they most needed from a major IT-based investment
- a debate in Parliament or an inquiry by a Parliamentary committee
- consultations with NHS IT directors and patient groups
- trials assessing potential work-loads on new networks of national systems that could be used by hundreds of thousands of NHS staff and clinicians
- studies into the required changes in working practices among doctors, nurses and other NHS staff
- independent assessments of the feasibility of plans
- an independent safety report on whether migrating data from old to new databases could be achieved without disrupting the care and treatment of patients”.[25]

There was no Parliamentary scrutiny of the NPfIT before it was announced: nobody was able to challenge the assumptions implicit in the plans making the proposition for NPfIT unsound. Any such programme, especially one with so much of the tax payers’ money committed to it, should at least be planned properly and submitted for scrutiny by the relevant politicians for it to be deemed, even in part, a sound proposition.

John Pattison revealed at that time that NPfIT was not thought through fully. He said: “I don’t want to pretend that we’ve thought through all the consequences of this.” [26]

• Dr Paul Cundy, co-chair of the joint General Practitioners Committee and Royal College of General Practitioners IT Group, said:

“The initial timescale was to deliver this electronic record for everyone within 29 months. That was impossible. If you’d asked anyone anywhere near any sort of IT project they would have said ‘no’, it’s not possible.” [27]

 

4. Queen Elizabeth-Class Aircraft Carriers

The Queen Elizabeth-class aircraft carriers are being built for the Royal Navy. The carriers were to be fitted with short take off vertical landing (STOVL) aircraft and initially the projected cost for building the two aircraft carriers (HMS Queen Elizabeth and HMS Prince of Wales) was estimated at £3.5 billion.[28][29]

The proposal for the aircraft carriers was endorsed by the Defence White Paper in December 2003.[30]

When the project was first commissioned the HMS Queen Elizabeth was expected to enter service in 2016 and HMS Prince of Wales in 2018. The contract for the QE class aircraft carriers was announced in July 2007 and they were officially signed a year later on 3 July 2008.[31]

This appears to be a Government initiative that did not have a vote in the House of Commons.

 

Why the project can be deemed a bad investment:

 

• It is not delivering what was originally required: 

-  In the 2011 Strategic Defence and Security Review (SDSR) the Government announced that it had decided to convert the aircraft carriers in order to fit the catapults and arrester gear version of the US joint strike fighter (JSF). PM David Cameron thought it was the better aircraft and it would make the carriers more compatible with French and American equipment. The SDSR also claimed the carrier variant of the JSF would be cheaper in the long run, reducing “through-life costs by around 25%”.[32]

- The National Audit Office expressed deep concern about the cost of fitting catapults. These concerns contributed to the Government’s decision to deploy only one of the two carriers being built (HMS Prince of Wales) which according to estimates would be put to sea by 2020 and even then would only be at sea from 150-200 days a year. It was also not known how many planes would be able to fly from it or what kind. The second HMS Queen Elizabeth was to be put at “extended readiness” – in effect, mothballed.[33][34]

- With the addition of technical difficulties regarding the carrier variant of the JSF, the MoD concluded the carrier programme could be delayed by another seven years – to 2027 – unless it abandoned the plan.[35]

- However recently there has occurred another volte-face. The MoD predicted the total cost of putting cats and traps on both of the new ships would total £5bn. Hammond has told MPs that costs and delays of the cats and traps version of the JSF have become too great and that the best action now is to revert back to the STOVL aircraft which were earlier dismissed as expensive and less capable. By reverting back to the STOVL configuration, which is much closer to production, neither carrier will be mothballed and should now be ready for operations, by 2018.[36][37] 

• Way over the original projected costs:

- The cost of the two carriers was originally estimated to be £3.5bn. The Commons Public Accounts Committee thought costs were likely to increase to as much as £6.2 billion.[38] However now there has been another U-turn and latest cost estimates have yet to be released.

- According to Labour defence spokesman, Jim Murphy, the modification (adding cats and traps) to the carrier has wasted £258 million now that the Conservatives have decided to revert back to the STOVL version originally planned by Labour. The Defence Secretary Phillip Hammond on the other hand said the figure was actually around £100million plus ‘some exit costs’ payable to US contractors. Although a definitive figure has not been provided, both of these amounts are enormous and unacceptable.[39]

The reasons why MPs could have reasonably determined at the time the bill was passed that it would be an unsound proposition:

MPs should have known that the most efficient and cost effective carrier long-term is one that is compatible with British allies. Instead they chose the STOVL design that according to the SDSR was not compatible, more expensive and less capable. This led to the Conservative’s first U-turn.[40] MPs could have determined that the proposal for STOVL aircraft was unsound having information about alternatives at their disposal yet choosing the inferior model. The STOVL configuration was not the best option at the time the decision was made. The Government have reverted to STOVL now only because converting to the F35-C was becoming too costly and time consuming.

 

5. Identity Card Scheme 

The Identity Cards Act 2006 provided the legal framework required to establish a National Identity Register (NIR) and to issue ID cards to those on the Register.[41]

On 29 March 2006, the House of Lords backed the ID scheme by 287 votes to 60. MPs later approved it in the Commons by a margin of 301 to 84.[42]The scheme was worth £4.5 billion at its inception.[43]

 

Why the project can be deemed a bad investment:

 

• It did not deliver what was originally required:

-  The Identity Documents Act 2010 received Royal Assent on 21 December 2010. Identity cards ceased to be valid legal documents for the purposes of confirming identity, age or for travel in Europe on 21 January 2011. Under the terms of the act the National Identity Register was to be destroyed within two months of the act coming in to force. All personal information supplied during process of applying for an identity card, including photographs and fingerprints, were  destroyed by 21 February 2011.[44]

-  £250 million was spent on the scheme before it was scrapped; there are also four multimillion-pound contracts with private sector companies that are tied to the scheme. One of these will be cancelled, two scaled back and one left untouched as it involves the production of passports.[45]

- 15,000 ID cards were issued, (cards which are now invalid) at £30 each, a cost that will not be refunded.[46]

The reasons why MPs could have reasonably determined at the time the bill was passed that it would be an unsound proposition:

The reasons for introducing ID cards were widely contested:

• Ineffective:

- Crime – There was no evidence that crime levels in countries that already have ID Cards (such as France, Germany, Italy and Spain) had been reduced by having ID cards.

- Terrorism – Terrorists, especially suicide bombers, generally want to hide their intent not their identity. The 2005 Madrid train bombers carried ID cards which did not prevent them from committing their horrifying act.

- Identity fraud – Tony Blair said in May 2005 “ID cards are needed to stop the soaring costs of identity theft“. However ID fraud mostly occurs online, which ID cards would not affect.

-  Benefit fraud – The Government’s own statistics show 95% of benefit fraud is due to lying about circumstances, not about identity.

-  Illegal immigration – Asylum seekers already have to carry identifying documents.[47]

• Opposition – A poll, commissioned by the Joseph Rowntree Reform Trust, showed that British public opinion was deeply split over the introduction of identity cards, with 50% against the idea and 47% in favour.[48]

Many people raised these concerns about the ID cards scheme before it was voted for in the House of Commons. There were many warnings from officials, news outlets and professionals that the system would not be a useful document, and MPs were also aware of the lack of public support for the scheme. MPs therefore could have determined the proposition unsound at the time the bill was passed.

 

6. A400M 

The UK needed to replace its ageing air fleet and subsequently the decision was made to develop a European solution as other European countries faced the same problem.[49] On 16 May 2000 the Labour government chose the A400M as the replacement for its air fleet without a vote in the House of Commons.[50] The contract for the development and production of the A400M aircraft was subsequently signed with Airbus Military on 27 May 2003. The UK at the time agreed to buy 25 aircraft out of a total 180.[51] The aircraft’s planned in-Service Date for the United Kingdom at the time of signing was 2011[52] and the approved cost of the demonstration and manufacture phase for A400m was £2.498 billion.[53]

The aircraft was to be a hybrid, combining tactical and strategic capability. This posed large design challenges because it involved the development of an entirely new aircraft. The A400M was selected to meet the requirements and was to replace the Hercules C-130K fleet. [54]

European Aeronautic Defence and Space Company (EADS) agreed to a single-phase, commercial-type contract, including a fixed price and fixed delivery dates, on a very tight time line. [55] 

 

Why the project can be deemed a bad investment: 

 

It is not delivering what was originally required:

- When the A400M eventually becomes available, it will be more expensive, delayed and less capable than contractually agreed. [56]

- The A400M has been delayed by 4 years, according to the NAO the current in-service date will not be until March 2015. [57]

- EADS has confirmed that some navigation and low-level flight capabilities specified in the development plan are ‘simply impossible to deliver’. [58]

- It has been reported by the French Senate that the aircraft would likely be heavier than planned, which could negatively affect the A400M’s payload and range capabilities.[59]

• Over the original projected costs:

-  The forecast/actual cost of the demonstration and manufacture phase according to the NAO is now estimated to be £3.105 billion – an increase of £607 million from initial approved costs. [60]

-  On 8 February 2012 Prime Minister Cameron announced that Britain will be buying an 8th C-17 costing £200 million.[61] The shortage of military transports caused by the A400M delay has forced the UK to lease and subsequently purchase, C-17s as they are needed to support their operations in Afghanistan. Due to delays in the completion of the A400M the UK is increasingly spending on alternatives.[62]

- On 11 January 2010, Tom Enders, Airbus chief executive, stated that he was prepared to cancel production of the A400M if European governments did not provide more funding. Delays to the A400M project had already increased its budget by 25%. On 5 November 2010, the UK along with Belgium, France, Germany, Luxembourg, Spain and Turkey finalised the contract and agreed to lend Airbus Military €1.5 billion.[63]

The reasons why MPs could have reasonably determined at the time the contract was signed that it was a bad investment:

The Iraq war emphasised the growing need for new strategic and tactical airlift. The remaining C-130Ks, C-130Js and C-17s are operating beyond their out of service date meaning replacements are urgently needed in order avoid a widening capability gap and a negative impact on operations in the Middle-East.[64]

The Government’s decision to invest in the A400M would be perhaps more understandable if no viable alternatives were available. However alternatives were available. Rather than procuring the A400M, the UK could have ordered additional C-130J and C-17 aircraft. Not only did this viable alternative exist, it would have also offered the following advantages:

•  The A400M has not been tested so its eventual performance is unknown. The C-130J and C-17 on the other hand are combat-tested aircraft and both have performed well in Iraq and Afghanistan.

•  Each aircraft type requires a separate support structure. The RAF currently operates C-130Js and C-17s. Their logistical support chains already exist, and the RAF would not need to retrain crews to operate a new aircraft. Introducing the A400M would means having to spend on a new support structure.

•  The C-130J is in service with many air forces including the US Air Force. This logistical support would more obtainable around the world as the RAF could take advantage of the mutual service assistance between national air forces. This will not be the same with the A400M. Outside Europe, RAF operations will have to be supported from the main base.

• Both aircraft could enter service before the in-service date of the A400M if ordered now.

•  If additional C-130Js and C-17s were ordered instead of the A400M, it would be the less costly solution. [65]

The A400M will eventually be only slightly less expensive than the much larger C-17, and considerably more expensive than the C-130J. [66]

Considering the facts, perhaps the reason behind the UK’s choice for the A400M was more a political one than a practical one. The UK chose to buy into aircraft that had not yet been built let alone tested, which would not be available until the latter part of the decade at the earliest, and only had interoperability within Europe. This all being decided immediately after the Iraq war was declared. Their decision does not make sense from any angle unless it is looked at from a Euro-political stance. With the huge amount of money involved in procuring the A400M at a time when the UK’s war capability was paramount, the proposition for the A400M was clearly an unsound one, a fact which the MPs could have determined before the A400M was agreed upon.

 

7.  Government Efficiency Scheme – Shared Service Centres 

Government departments need a range of corporate functions including human resources, finance, procurement and payroll to manage their operations effectively. Cost savings can be made by sharing these functions. For this reason, in 2004, the Gershon Review recommended the UK Government pursue shared services to deliver these cost savings. The Cabinet Office encouraged individual departments to establish their own arrangements and as a result, between 2004 and 2011 eight major shared service centres emerged from central government.[67]

The review also suggested that job numbers would have to be significantly slashed for savings to be made, suggesting a total of 84,000 by 2007-08.

In the 2004 Budget Government laid out measures for efficiency savings in line with some of the recommendations made by the Gershon Review.[68]

Since the Gershon Review, central government has spent seven years implementing shared services. The five Centres examined by the recent NAO report were expected to cost £0.9 billion to build and operate core corporate functions and £20 billion worth efficiency gains were expected by 2007-08.[69]

In the 2004 Budget Government laid out measures for efficiency savings in line with some of the recommendations made by the Gershon Review.[70] 

 

Why the project can be deemed a bad investment: 

 

• It is not delivering what was originally required: 

- From five out of the eight Centres, the Government should, by its own estimates, have saved £159 million to the end of 2010-11. However, only one has broken even on its investment and the two Centres tracking benefits report a net cost of £255 million.[71]

- Although Gordon Brown has cut a large number of jobs in the civil service in keeping with the efficiency scheme’s aims, it has emerged that temporary workers have replaced them therefore no savings are really being made on employment.[72]

• Over original projected costs

- Instead of creating savings this scheme has gone beyond original projected costs – it is now overspent by £500 million, costs now totalling £1.4 billion.[73]

The reasons why MPs could have reasonably determined at the time the bill was passed that it was an unsound proposition:

• Individual departments were left to implement shared services themselves. By creating complex services that are overly tailored to individual departments, Government has increased costs and reduced flexibility.[74]
• Participation in the centres has largely been voluntary, this has contributed to little actual sharing of services between the departments and has meant the efficiency savings that were sought have not been realised. In fact losses have been made by four of the centres and just one has broken even.[75]

NAO head Amyas Morse, said: “The initiative for government departments to share back-office functions has suffered from an approach which made participation voluntary and tailored services to meet the differing needs of individual departments. The result was over complexity.”[76]

Margaret Hodge, chairwoman of the House of Common’s Committee of Public Accounts, said: “Departments lost sight of their overall objective to save money. They ordered tailor-made systems which have cost the taxpayer too much.”[77]

Because the Government did not stipulate in its proposition that the efficiency scheme should be compulsory or that departments should collaborate on building the centres to ensure services could actually be shared, the scheme has failed to make the savings it sought. MPs could have determined the efficiency scheme was an unsound proposition due to these omissions. Collaboration was vital if savings were to be made.

Likewise, cutting such a large number of jobs was an unsound proposition as many of the departments have simply replaced them with temporary workers. The workers are obviously still necessary, therefore to propose such large scale job cuts was an unsound proposition that MPs could have determined from the outset with the right calculations.[78]

 

8. Red Dragon 

Red Dragon was a project between the Ministry of Defence (MoD) and the Welsh Authorities for the development of the St Athan site in South Wales. Work on site preparation for the super-hangar commenced in February 2003. In March 2003 MoD signed an agreement with the Welsh Development Agency (WDA), which committed MoD to the rationalisation of the site and the land deal. The super-hangar was finished by the approved time and budget by December 2004 and in the following month Defence Aviation Repair Agency (DARA) began to move into its new repair facility. [79]

Meanwhile, in January 2003, MoD commissioned a strategic review of aircraft support, which reported in July. The findings of the End-to-End Logistics Review eventually led to announcements in March and September 2004 that DARA’s fast jet repair business for the Harrier jump jet and Tornado bomber at St Athan would close and the repair work would be moved to one main operating base for each fleet.

Some £134 million was spent on:

- the construction of a state-of-the-art aircraft maintenance facility (super-hangar) able to accommodate up to 48 Tornado jets for the Defence Aviation and Repair Agency (DARA), costing £107 million;

- the rationalisation of MoD’s requirement for infrastructure at St Athan, at a cost of £5 million; and

- a lease for 725 acres at the St Athan site, with a view to securing DARA’s continued presence and developing an aerospace park in the longer‑term, at a cost to the Welsh Authorities of £34 million (of which £12 million was paid to MoD for the land and airfield).[80]

Peter Hain on 4 December 2002: “I very much welcome the agreement on the Red Dragon Project in St Athan between the Minister of State for the Armed Forces, DARA and WDA, in August, for a state-of-the-art aircraft maintenance facility and a high tech aerospace park”.[81] This suggests there was no vote in the House of Commons.

 

Why the project can be deemed a bad investment: 

 

• It is not delivering what was originally required:

- Efficiency savings of only £57 million were made compared with an anticipated £263 million and when costs of £36 million for redundancy, removal and reorganisation of tenants at the site are factored in, savings were only £21 million.[82]

- As a result of the End to End logistics review, it was concluded that the jets should be serviced at their main operating bases and not a single servicing centre. In November 2005 MOD announced that all DARA St Athan’s fast jet repair business would close by April 2007. As a result, servicing of the Tornado GR4 bombers was to be transferred to RAF Marham in Norfolk while the Harrier GR9 jumpjets were to be serviced at RAF Cottesmore in Rutland – leaving Red Dragon without any clear purpose beyond 2007. Red Dragon’s cancellation left St Athan as a white elephant; therefore the £134 million was wasted.[83]

The reasons why MPs could have reasonably determined at the time the bill was passed that it was an unsound proposition:

The Commons Defence Committee said it was “incomprehensible” that the MoD decided to go ahead with the Red Dragon project before a logistics review had been completed.[84]

In making the decision to invest in St Athan, MoD had yet to reconcile its position on the right balance of logistical support for the RAF between provision at RAF bases, DARA and industry. The MoD itself had not decided whether it would need to award DARA some aircraft repair contracts after April 2004 to meet a strategic need, to protect security interests or maintain alternative capacity. DARA was assuming that it would win all its previous Royal Air Force fast jet business, which would enable it, as some of these aircraft were retired from 2011-12, to secure other new military repair contracts. MoD found it difficult to reconcile effectively its roles as owner of DARA, where it had to support the business, and its role as principal purchaser of military aircraft repair services, where the imperative was to achieve the most efficient support for aircraft. The need to deliver efficiency savings in the short‑term meant MoD did not assess the financial impact of delaying the super-hangar. The Chief Executive of Defence Logistics concluded that DARA was the only supplier for a large proportion of much repair work and therefore investing in Red Dragon was a sound decision. There did not seem to be much consideration of the fact that RAF was improving its sites and training rapidly and would be a main competitor for repair work in the very near future.[85]

The outcome of the review was a recommendation – subject to further work – to transfer repair to main military operating bases on the basis that each aircraft fleet would be maintained at a single location. The review estimated that this rationalisation would save the RAF in excess of £150 million a year, the majority of which would come from the fast jet fleets, compared with average savings of around £18 million a year from Red Dragon.[86]

The lack of a logistics review before Red Dragon was given the go ahead and the Government’s bias towards DARA meant that money was wasted needlessly on this project. MPs could have determined that the proposition was unsound due to a lack of efficiency savings if they had carried out reviews before hand and if their judgement had remained economical.

 

9. The Defence Training Review 

On 27 March 2001 a report called ‘Modernising Defence Training’ was published which recommended the implementation of The Defence Training Review (DTR).[87] The DTR was established to examine all individual training and education, Service and civilian, in the British armed forces. It was a ‘Public-Private Partnership’ (PPP) seeking to transform the way specialist training was delivered in the future.[88]

The programme consisted of 2 separate projects; Package 1 and Package 2. Package 1 would have involved provision of training or engineering and communications, while Package 2 was to provide training for logistics, security, policing and administration.[89]

On 17 January 2007 St Athan was chosen as the preferred site for DTR with an apparent lack of vote in the House of Commons. The Metrix consortium were appointed preferred bidder. [90]

“For package 1 we are confident that we have a broadly affordable solution that will deliver modern and efficient aeronautical engineering, electro-mechanical engineering and communications and information systems training. Currently, that is delivered at nine locations. Over a five-year transition period starting in late 2008, Metrix proposes to rationalise the estate, initially on to two major sites, St. Athan and HMS Sultan”. As a result it was anticipated that all technical training would move from RAF Cosford to Metrix’s main campus to be built on the RAF St Athan site. The St. Athan site will be largely a new-build facility. [91]

In 2008 St Athan was estimated to be a £12 billion investment over 25 years creating 2000 jobs. It was to accept its first intakes in 2012 and was planned to be fully operational by 2017 when the last of the current training centres would be closed.

 

Why the project can be deemed a bad investment: 

 

• It is not delivering what was originally required:

In 2010 the cost estimate rose by £2 billion to £14 billion over an increased 30 years.[92]

The projected savings from building the DTR were also incorrect. Savings and efficiencies were not as much as originally projected; one initial estimate figure projected £3bn in savings over the 25 years. The Public and Commercial Services Union (PCS) however later believed that the project would only save £400m in a best case scenario.[93]

Costs continued to rise above what was projected and agreed and consequently on 19 October 2010, the DTR project was cancelled.[94]

The Government incurred high abortive costs. Just under £200 million was wasted.  It was revealed that £158.5 million was already spent by the time the project was cancelled. Of that total £95.964 million was paid to the Metrix consortium and the rest went towards moving facilities at Cosford to St Athan. An extra £40 million was spent on prepping the St Athan site for the defence training review.[95]

 

The reasons why MPs could have reasonably determined at the time the bill was passed that it was an unsound proposition: 

The DTR should not have been given the go ahead for St Athan. It was a project that could have quite easily been built at RAF Cosford which already had the necessary facilities. If Cosford was chosen millions would not have been wasted transferring facilities to St Athan. The trained staff were at Cosford and many were unhappy about a move to Wales, therefore a lot would have likely been spent on redundancies. £370 million would have been spent on new living accommodation, plus more on new training/teaching facilities that just need upgrading at Cosford.[96]

More importantly, Armed Forces minister Bob Ainsworth admitted to Parliament in 2008 that there was an “affordability gap” in the project and that contingency plans for the project were already being reviewed. Major questions surrounded the viability and financial durability of the DTR in St Athan. A number of MPs and union officials questioned whether the funding plan for the DTR was sound considering the current economic climate and whether or not the DTR would have the required number of staff to actually function at a high level. [97]

According to Paul Bemrose, a chief negotiator at the PCS, package 2 was unaffordable from the outset: “When we met with the MoD to discuss the initial stages of package 2 we were told by a very senior officer that package 1 was just about affordable. That was before the credit crunch”.[98]

It seems as though the DTR was not planned sufficiently; one of the most expensive government programmes was given the green light during an economic slump, this lead to cancellation and a large sum of money being wasted. The sum may not have been quite so high had government chosen Cosford for the DTR which they could have determined from the start as the logical choice.

 

10. The Benefit Processing Replacement Programme (BPRP) 

BPRP was launched in November 2004 as a replacement for existing IT legacy systems to calculate benefit payments in Jobcentre Plus and the Disability and Carers Service (DCS).[99] It was expected that the existing legacy systems would become obsolete and there was no support for the platform on which they operated beyond 2012.[100]

MPs knew that the programme was likely to be complex and challenging. It was also a long-term programme, which involved a new approach to major IT development where commercially available software packages were configured for specific business purposes – in this case the highly complex benefit system. The initial investment was planned to be £300 million.[101]

 

Why the project can be deemed a bad investment:

In September 2005 Government became aware that the benefits of BPRP would not be deliverable within the planned timescales and that the programme was not affordable within the budget available. In February 2006 an internal Task Force reported that no alternative options for delivery of the key requirements had been identified. The Permanent Secretary commissioned also conducted an external review and in May 2006 the review concluded that alternative options for delivery of the core requirements within the planned budget were unachievable. At the same time, the focus of the Department shifted towards the delivery of the Employment and Support Allowance (ESA). It also started to become clear that the existing legacy systems would continue to be supported until at least 2020 and would not need replacing quite so soon. [102]

Consequently in May 2006 the programme was put on hold[103]  and in August 2006 the Investment Committee made the decision to close the programme. Formal closure took place in November 2006 with £138 million already spent on the project with a partial system built.[104] 

 

The reasons why MPs could have reasonably determined at the time the bill was passed that it was an unsound proposition:

BPRP was an ambitious IT project to replace the longstanding legacy systems. Government acknowledges that they did not fully appreciate the risks of this highly complex programme at the outset. The project was cancelled due to Government underestimating the cost of the programme.[105]

The fact that there were no contingency plans for such a complex high risk project meant Government was taking a huge gamble with taxpayers’ money.

Having the facts in front of them about the DWP’s budget, MPs could have determined that there was no wriggle room for the project financially. The project was therefore an unsound proposition.

MPs gave explanations about why the BPRP was cancelled regarding the new ESA that required increased attention and legacy systems that were more robust than was first thought.  However the robustness of the legacy systems should have been determined more accurately before BPRP began.[106]

As mentioned in the previous section, a task force review and an external review were carried out in 2005 long after the programme had been approved; they both concluded that the BPRP was unaffordable. These reviews should have been carried out before approval not after.

So soon after the BPRP was given the go ahead it was deemed unaffordable, it seems then that the BPRP was not given enough consideration financially before it was launched and by the time reviews were carried out £138 million had already been wasted.

 

Projects outside of the full criteria: 

Child Support Agency – 1993 – Outside date range

Libra Court Management System – 1996 – Outside date range

Typhoon – 1987 – Outside date range

Type 45 destroyer – 2000 – Outside date range

Carbon Capture and Storage – £84 million – Too small in value to be included

GCHQ – 1998 – Outside date range

Single Payment Scheme – EU scheme

Defence Information Infrastructure – way over budget and delayed – Beginnings of a success

Nimrod MRA4 – 1996 – Outside date range

Passport Services – 1999 – Outside date range

Criminal Records Bureau – 1999 – Outside date range

Individual Learning Account scheme – 2000 – Outside date range

Scope 2 system –£26 million – Too small in value to be included

Astute Submarines – 1997 – Outside date range

Co-ordinated Online Record of Electors – Too small in value

Paddington Health Campus Scheme – 2000 – Outside date range

Ministry of Defence Computer System – 1999 – outside date range

Debt Management scheme – 2000 – outside date range

New Tax Credits – 2000 – Outside date range

Individual Learning Account – 2000 – Outside date range

Benefit Payment Card – 2000 – Outside date range

Prism IT project – £99 million – Too small in value

VAT collection PPP/PFI – 2000 – outside date range

CRAMS – 1999 – Outside date range

MTAS – <£10 million – Too small in value

Metronet – Company went into administration – Out of government’s control.

The Immigration and Nationality Directorate’s (IND) Casework Application programme - 1996 – Outside date range

Joint Personnel Administration – Now working better

National air traffic service, new control centre – 1998 – Outside date rang

Personal Pensions – 1998 – Outside date range

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