Auditor to shoot down MoD over £1bn cost overruns

The Ministry of Defence will receive a bloody nose this week for cost overruns of at least £1bn on its biggest military equipment projects.

The Ministry of Defence will receive a bloody nose this week for cost overruns of at least £1bn on its biggest military equipment projects.

The National Audit Office is due to release a critical assessment of the MoD's 20 largest schemes on Wednesday, raising fresh questions over the way the Government buys its weapons.

This follows last year's damming NAO report, which revealed that cost overruns had topped £3bn. While the figure this year will be lower, it will test ministers' claims that a new way of buying arms from the private sector, called "smart procurement", would put an end to large- scale cost overruns and delays.

Projects expected to come in for criticism include the £20bn Eurofighter-Typhoon. Developed by Britain's BAE Systems, EADS and Finmeccanica of Italy, it is nearly five years late. This summer, fresh design glitches emerged over the warplane's guns. The project was singled out for particular criticism in the last NAO report.

Similarly, the Astute submarine, the Nimrod aircraft and the Brimstone missile programme will feature again in the report.

However, it is understood that newer projects will also be mentioned by the NAO. Insiders say there were cost overruns and delays on the project to build six Type-45 destroyers, developed by BAE and VT Group.

Smaller shipbuilding contracts are also proving a drain on the public purse. Embarrassingly for the MoD, one of the very first projects to be run under smart procurement - the £330m Landing Ship Dock Auxiliary contract to construct four ships for the Royal Navy - has already run into trouble. To cover design changes, BAE has lodged a claim for over £20m, and shipbuilder Swan Hunter is understood to have made an even larger claim.

The NAO report will heighten tensions between the Treasury and the MoD's Defence Procurement Agency (DPA), which is in charge of buying equipment for the armed forces.

One government insider said the Treasury was planning to propose an overhaul of the agency after the general election. The DPA is already experimenting with new ways of working with private companies. On the £3bn project to buy two aircraft carriers from BAE and Thales, for example, the DPA is looking to appoint a private company to project-manage the construction of the vessels.

However, the Treasury is considering taking this one step further by forcing the DPA to appoint a private manager to take full charge of projects, including thrashing out commercial agreements with suppliers.

It its understood that a project called MARS, to supply the Royal Navy with support ships, could be the first to run under the new system.