MoD DII project could cost £7bn

One of Whitehall’s biggest IT projects, the Defence Information Infrastructure [DII], is expected to cost £4.5bn more than was announced to Parliament in 2006 when two MPs asked separate questions about the scheme’s total estimated costs.

The difference between the announced cost in 2006 of £2.3bn and the new figure of £7.09bn is because the Ministry of Defence, the department responsible for DII, did not reveal the total whole-life programme costs when replying to the questions by Liberal Democrat MP Mike Hancock and Conservative Mark Prisk.

The full figures have been released for the first time because of a report published today [4 July 2008] by the public spending watchdog the National Audit Office.

The Mod’s lack of candidness has been criticised by MP Richard Bacon, a member of the Public Accounts Committee, who will be questioning the ministry on the DII report at a forthcoming hearing.

Costs of EDS contract under DII are under firm control

The National Audit Office found that the costs of the DII contracts with the Atlas consortium, led by EDS, are under firm control. The MoD has paid EDS less than the supplier had originally expected because of delays in the roll-out of 18 months. Payments to Atlas are based largely on the rate at which DII terminals are rolled out. 

But the contracts awarded to Atlas represent only a part of the total expected cost of the DII.

The £7bn DII project includes costs such as an internal amount set aside to manage future risks, work not yet contracted for, departmental overheads and non-Atlas costs of DII-related programmes including wide-area support services,

None of this was explained to MPs Hancock and Prisk when they asked their questions in 2006. They had asked about “project” costs. The MoD gave them only the “contract” costs of the initial phase of the DII.
 
MoD knew DII total costs would be at least £5.8bn when answering MP questions 

It has also emerged that the MoD knew a year before it answered the MPs’ questions that the actual projected total projects of the DII would be at least £5.8bn – more than double the figure given to the MPs. 

The £5.8bn figure has since risen to £7bn in part because the higher cost includes “additional capabilities for the deployed environment which were not in the original scope of DII”.

It’s hard for MPs to get straight answers to questions on Whitehall’s big IT projects

The concealment of the full expected cost of the DII contract shows how difficult it is for Parliament to get clear and open answers to even simple questions about Whitehall’s most high-risk IT projects and programmes.

Computer Weekly has campaigned for the publication of “Gateway” reviews – independent internal assessments of IT projects – to shed some light on the progress or otherwise of risky programmes, but the government has been prepared to go to the High Court to keep them secret.

The DII project and its progress

The Defence Information Infrastructure is designed to replace over 300 different legacy systems installed in all three armed services. The aim is to deliver 150,000 terminals to 300,000 users at 2,000 sites including ships and submarines, and forces on the front-line in Iraq and Afghanistan.

The NAO said in a statement on the report: “The DII has delivered important benefits, but has run into implementation difficulties, and key elements are running significantly late.

“When planning the system, the MoD did considerable work to understand and mitigate risk, by learning from other large computer projects, and devised robust commercial, governance and decision-making structures.

“The Programme has delivered a number of improvements to the existing IT systems within the MoD, such as improved user support and reliability. Where DII has been introduced, it has generally been available when it should be.

“The Programme has also helped the Department develop and install at short notice two systems supporting frontline troops on operations in Afghanistan. But, throughout 2005 and early 2006, problems emerged with two key elements of the Programme: the rollout of hardware and the creation of software.

“62,800 computer terminals were due to be in place at permanent defence sites by the end of July 2007. At the end of April 2008, only 29,000 had been delivered. The completion date for the installation of the first increment of the Programme is 18 months late.”

Tim Burr, head of the National Audit Office, said: “It was always going to be a demanding task for the Ministry of Defence to replace its diverse information technology with a single, high quality system… the Programme has run into difficulties and further concerted action will be needed to increase the rate of roll out of terminals and to deliver the remaining software.”

What the MoD says – and doesn’t say

A spokeswoman for the Ministry of Defence made no specific comment on the department’s replies to the MPs Mike Hancock and Mark Prisk, though she suggested that there was nothing untoward about the answers. She referred us to the Cabinet Office for its general line on answering Parliamentary questions.

On the NAO report in general the MoD’s Permanent Secretary Sir Bill Jeffrey said:

“The DII is a major programme which is already delivering benefit to our front-line troops and the wider department. I am pleased that the NAO has recognised the essential soundness of the business case, commercial and governance arrangement, and the progress we have made in delivering the system.

“As the report brings out, we still have some problems to overcome in rolling out the system completely, but we are working hard to overcome these, and will be helped in doing so by the NAO’s recommendations.”

**

Mike Hancock’s question of the MoD, 17 July 2006. He asked:  

“what the original estimated costs and in service delivery date was for the Defence Information Infrastructure project; and what the current situation is in each case”.

The reply:

“Increment 1 of the Defence Information Infrastructure contract was awarded to the ATLAS Consortium, led by EDS, in March 2005 with an estimated value of £2.3 billion. This estimated value remains extant. There is no “in service delivery date” as such within the contract. The contracted “New Services Commencement Date” was originally March 2006. This date was subsequently revised to May 2006 and was met successfully.”

**

Mark Prisk’s question of the MoD, 7 November 2006. He asked for a list of the department’s five most expensive IT projects since 2001.

The answer in the case of the DII:

“Originally estimated cost: £2,297m

“Most recently estimated cost: £2,313m

“Outturn: £252m

“Comments: This relates to the Increment 1 contract only Increments 2 and 3 have not yet been let.”

 

Links:

Full report on DII – National Audit Office

MoD’s £5bn DII hits major problems – ComputerWeekly.com

DII a disaster? – Channel 4 News

NAO points to defence IT delays – Kable

UK defense computers behind schedule, over budget – US online news

EDS Scoops £4bn MoD outsourcing contract – Silicon.com

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Unfortunately yet another example of the endemic spin by Whitehall departments. The question asked by Hancock in July 2006 could not have been clearer - it was about the project and not the contract. As such, an honest response from MoD would have been to detail the project costs including those incidental (or project-related) costs which were being incurred (and justified to the Treasury) in order to deliver the project. Instead the answer was not simply economical with the truth it was positively misleading.

It really is time that NAO held the departments' feet to the fire on project and programme budgeting - too often the costs of delivering a new capability mushroom - with a significant portion of the overrun hidden in "non-contract" costs or project-related costs. Whilst I applaud Richard Bacon's attempt to hold the Executive to account - it is probably futile given the continuing culture of secrecy and obfuscation regarding project management and real accountability by the SRO. Of course if the Gateway Review process worked properly and was not simply a convenient and mediocre smokescreen... They should start by publishing the reports for all to see and publicly identifying the key managers and naming the reviewers - the control of budgets and timescales might suddenly start to matter in Whitehall and the quality of the reviews would increase dramatically.

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The concealment of the full expected cost of the DII contract shows how difficult it is for Parliament to get clear and open answers to even simple questions about Whitehall's most high-risk IT projects and programmes.

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