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BRITISH DEFENCE PROJECTS SUBJECT TO COST INFLATION

Britain´s National Accounting Office takes stock. The British forces are not very fortunate with their large defence projects. Deliveries are often late and the costs are often much higher than projected.

At the first glance, the numbers don't look bad. All in all, the 25 largest defence projects of the British forces cost approximately 1,6 billion Pounds less than in the original estimates. However, according to the National Accounting Office (NAO), this is due to significant fluctuations in the Trident nuclear submarine and Eurofighter programs. Putting these two programs aside, the NAO's most recent annual report reveals an increase of costs to the amount of 695 million Pounds.

Along with the cost problem the Accounting Office points out the highly obvious difficulties in meeting the deadlines. The average delay when putting new systems into service is about two and a half years. Only four of the 25 programs are proceeding according to schedule. Unforeseeable technical difficulties are listed as reasons in 40 percent of the cases, along with delays resulting from the necessary coordination in cooperation projects.

In half of the cases, the increase in costs is blamed on the difficulty in making exact predictions. The second most important factor is the inflation, followed by program delays and changes to the specifications. The depreciation of the British currency is a factor especially affecting international projects. According to the report, the British defence ministry in London has the tightest grip on those programs which were contracted at a fixed price.

The aerospace projects are no exception to the above statements which concern the entire British forces. The reason for these numbers, some of which are really devastating to the taxpayers, can be looked up in the so called Major Project Reports.

One third of the cost increase (407 million Pounds) in the development of the Eurofighter EF2000 is due to 1994's "reorientation". Another 273 million Pounds were booked due to higher development costs, especially of equipment. This is added by 208 million Pounds for changes in the accounting procedures, along with 92 millionPounds because of the fact that Germany is not participating in certain subsystems any more. The program delays are being related to technical problems (20 months) and the "changed budgets of the four partner nations".

Considering the complexity of the program, the EF2000 is still doing quiete well ñ at least in comparison to two other programs, which supposedly are in a much worse position.

Facing shocking price increases and delays in the mid-life update (MLU) of the RAF Tornado fleet, the only solution seemed to be a reduction of the technical requirements and a drastic cut down to just 146 aircraft. According to the report, the technical and financial complexity of the program was simply misjudged. The redefinition took a year while technical problems and the tight budget caused a delay of two years each.

The EH 101 Merlin anti-submarine helicopter program is a story in itself. The shown 245 million Pounds of increase in costs are only related to 1991. When the program was started in 1982, the helicopter was supposed to cost 971 million Pounds, now it´s four billion pounds. Technical problems (among other things several prototypes crashed) generated a delay of two years.

However, there are positive examples as well. So far, British Aerospace managed to keep the costs for the new ASRAAM missile below the projections, among other things by using a cheaper rocket motor. The withdrawal of other countries from the program, which was started as a multi-national development, saved 10 million Pounds. However, two redefinition phases delayed the in-service time by four years.

From page 42 of FLUG REVUE 10/96