The Ministry of Defence has spent almost £600m from the military‘s equipment budget to hire hundreds of outside specialists and consultants, routinely breaching government guidelines controlling this type of expenditure.
An internal audit of the defence contracts signed in the last two years highlighted numerous flaws and warned that control of the MoD purse appeared to be “poorly developed or non-existent”.
The report also stated that defence officials made little or no effort to ensure that contracts provided value for money. Despite the numerous concerns raised in the report, a defence minister said nothing was wrong.
The scale of the spending, and the apparent lack of control, come at a time when the department has been making thousands of civilian and military personnel redundant to cut spiralling costs.
The MoD confirmed the figures and said new, stricter rules had now been introduced.
The disclosures have angered union leaders, who argue that the MoD is paying the price for losing too many in-house specialists, forcing it to rely on hiring expensive help from the private sector.
Figures obtained under the Freedom of Information Act show the MoD spent £564m in the last two years buying in “technical support” for teams running the department’s biggest engineering and procurement projects. In 2006, the MoD spent £6m.
The sums have been rising dramatically year on year in part because of a new regime introduced by Labour in April 2009, which allowed senior defence officials to hire specialist, short-term help for “niche” tasks – without needing authorisation from a minister. In the first year of the new regime, spending jumped by £130m to £297m. Spending this year will reach £267m.
In total, 380 firms are now being paid to give the MoD technical support and consultancy.
Amid concern from union leaders that spending was running out of control, the MoD asked a senior civil servant to conduct a review of the programme – called Framework Agreement for Technical Support (FATs).
The final report was circulated earlier this month. It concluded it had “no assurance” that guidelines were being followed.
The executive summary said:
• There were “significant weaknesses” in the cases submitted for money.
• There were “weaknesses in the robustness of scrutiny” by those in charge of the budget.
• Contract extensions were approved when they probably should have been rejected.
• In 75% of cases looked at, contracts were awarded without any kind of competition, meaning that the “ability to demonstrate value for money was compromised”.
• Not enough effort was put in to ensure the jobs could have been done “in-house”.
Despite concerns within the department, two weeks after the interim report was published, the defence minister Andrew Robathan told union leaders in a letter: “I am … content that appropriate safeguards are in place.”
Steve Jary, national secretary of Prospect, a union representing MoD civil servants, said his members had first raised concerns about FATs months ago, and said the MoD had to publish more details of the spending.
“We need to know what this money been spent on and at what cost to the equipment programme. We need to know how much of the £250m-plus spent on FATs has been spent wrongly, without proper scrutiny and without ministerial approval.”
The union believes the increase in spending on contractors is a direct result of cuts over the last few years.
“Thousands of engineering and scientific jobs have gone in pursuit of arbitrary headcount reductions. Their work now has to be contracted out, and FATs has been a way to do this while hiding the extra costs,” Prospect argued.
“A saving on FATs of just a third – £100m – equates to 5,000 jobs.”
Jim Murphy, the shadow defence secretary, said he was “concerned” about the revelations.
But one Whitehall source blamed Labour for introducing a programme that was too lax. “This looks like another case of waste and profligacy under Labour. Ministers in the last government clearly had no control on what the MoD was spending its money on.”
The MoD said that the a new, stricter regime had been adopted because of the internal report.
“The framework ensures that equipment programmes can access a range of technical support services such as independent airworthiness certification to ensure our military aircraft meet the very highest safety standards, something civil servants cannot provide.
“This summer the government instigated an internal audit to assess the procurement of this technical assistance. As a result of the findings of that report we are tightening the approvals process to ensure proper scrutiny of spending under this framework.”
The MoD was unable to say whether Robothan knew about the internal audit when he sent the letter.
The ministry has a separate budget for management consultants. It spent £20m on them last year, and £71m the year before.
Unions want it to disclose whether any money from the equipment budget has been spent on management consultants too – which would be another clear breach of government guidelines.