1.  Since April 2005, the Department has reduced the forecast cost of procuring its major military equipment projects by transferring almost £1 billion to other projects or budget lines. The Department should address the fundamental causes of the rising costs rather than dealing with problems by simply transferring costs and budgets internally.

2.  By continuing to transfer costs outside the boundaries of the Major Projects Report, the Department is not providing Parliament with the full picture on the cost of individual military equipment projects. The metrics that the Department develops for measuring its performance on acquisition for future Major Projects Reports should provide a comprehensive picture of the cost of bringing the equipment into service. For example, the Report should cover the cost of acquiring and supporting the equipment and of providing training for personnel to use it.

3.  Some of the transfers were not budgeted for and do not represent real savings. The Department could not provide concrete examples of the impact of these transfers on other areas of Defence spending. For each of the reallocations over the last two years, the Department should provide the Committee with a full statement of the effect of the cost transfer on the other budget holders, including the activities they have had to forego, and/or the compensating efficiencies they have made.

4.  The Department is spending £305 million to maintain the United Kingdom's shipbuilding industry in line with the Defence Industrial Strategy White Paper, but has not developed metrics to assess whether it is getting value for money from these payments. The Department should develop clear statements of what successful outcomes from the expenditure would be and how it plans to measure progress towards what are long-term aspirations.

5.  The future viability of the United Kingdom's shipbuilding industry rests on the procurement of the new aircraft carriers, and after five and a half years the Department has only just signed the contract. Past experience shows that delaying projects leads to increased costs in the long run. The Department and the Treasury need to look carefully at experience on the Future Aircraft Carrier project and identify specific lessons which they can apply on forthcoming projects to prevent such potentially damaging delays.

6.  The Department is ordering fewer munitions for the Guided Multiple Launch Rocket System and transferring a budget of £165 million to the Indirect Fire Precision Attack project to fund alternative munitions. There is no guarantee that the Indirect Precision Fire Attack project will be approved as currently envisaged, and so there is a risk that frontline troops will go short of equipment. The Department should develop a robust methodology which, as a minimum, should cover analysis of operational requirements, technical risk and likelihood of timely delivery. This would allow it to demonstrate to the Committee the cost-effectiveness of this and future transfers between projects.

7.  There are a wide range of factors leading to cost and time overruns on defence projects, and despite numerous reforms to working practices, the Department seems unable to bring about lasting improvements. The Department should conduct an in-depth analysis of the way previous change programmes and initiatives were implemented to understand why they failed to deliver, as well as identify how to secure and sustain the necessary improvements in performance.