The National Audit Office has begun an investigation into the £5bn Defence Information Infrastructure (DII) contract - a programme that has run into major problems, as revealed by Computer Weekly and Channel 4 News this month.
The Ministry of Defence awarded a contract for the Windows-based DII, described by the NAO as one of the largest IT programmes in the world, to the EDS-led Atlas consortium in March 2005.
The project aims to replace separate networks and systems with 150,000 terminals running on a single IT infrastructure for the army, navy and air force, at 2,000 defence sites worldwide.
Under the original plans 70,000 terminals were due to have been delivered by this summer, but fewer than 17,000 were live by the end of October. The MoD said the numbers are now "ramping up".
The NAO will examine how the DII was planned and designed, how the implementation has gone to date, and whether the right governance and management arrangements are in place to enable continued delivery in the future.
The NAO is also expected to investigate the MoD's decision to award a further contract to Atlas before there was sufficient evidence that its earlier work had represented value for money.
The public spending watchdog, which plans to publish its findings in the summer, said the department's "most important business change and projects depend on elements of DII being implemented successfully and on time".
MP Richard Bacon, a member of the Public Accounts Committee who has regularly asked questions on the DII contract, said he welcomed the NAO inquiry into the MoD programme. He said he had serious concerns about its progress, the problems encountered, and whether its scope could be cut back.
The leaders of the DII project have defended it. In an interview with Computer Weekly, the MoD's DII programme director Bob Quick and Howard Hughes, chief operating officer of Atlas, did not deny there have been difficulties, but they said the scheme was on a sound footing.
The NAO's decision to investigate the DII shows that it is prepared to report on large IT-based programmes part-way through a 10-year contract. In the past, the NAO has reported on IT-based projects when they have been curtailed or abandoned because of serious problems.
Last June, the NAO broke with tradition and reported on the NHS's National Programme for IT when contracts awarded under the scheme had run for less than three years. The contracts are worth £6.2bn and are due to last 10 years.
The Ministry of Defence split the Defence Information Infrastructure contract into three increments. The MoD's original plan was to award the first increment - worth about £2.3bn - to the Atlas consortium and assess the consortium's performance before awarding the further two phases. But in December 2006 the MoD decided to award Atlas a further phase of work, worth about £750m, before the first increment had finished and been fully assessed.
New DII contract awarded before first phase assessed