The MoD's Defence Information Infrastructure (DII programme is running 18 months late and will be £182m over budget if nothing changes, a report by the National Audit Office (NAO) has revealed.
Despite trying to avoid the problems associated with previous government IT projects, the DII encountered serious problems in rolling out computer hardware and creating software.
The forecast cost of the DII has increased by £182m since the contract was first signed in 2005. Total costs are now estimated to be £7.1bn.
"Key elements are running late and the delays have led to continuing expenditure on less capable legacy systems," said the report.
The MoD contracted to have 62,800 terminals in place by the end of July 2007. At the end of April 2008, only 29,000 had been delivered.
The NAO report said, "These problems caused major delays to the roll-out of the first stage of the DII programme.
"The DII programme assumed that the roll-out of infrastructure and terminals would be more straightforward than transpired and that it would proceed at an identical pace at all sites."
The report said of the software delays, "The programme's inefficient processes for software design, issues with the designs themselves and changes in the Department's detailed requirements for core software have been the main causes of delay."
The DII programme is designed to replace 300 different computer systems.
Edward Leigh MP, chairman of the Public Accounts Committee, said, "The programme started with good intentions: it aimed to identify and avoid the risks that have dogged other government IT projects over the years. It is therefore disappointing that it has suffered problems with its roll-out of hardware and software.
"The MoD needs to work hard to ensure that the programme is installed as quickly as possible, without any further cost increases. This system is needed now, so the MoD must pull out all the stops to get the programme back on track."
When complete, the programme will incorporate 150,000 terminals for 300,000 users at more than 2,000 sites. It will allow access to around 1,000 applications. A 10-year contract was signed in March 2005.
The parts of the programme which the MoD has on contract are estimated to cost £4.9bn. If the entire planned programmed is contracted out, the total cost is expected to be £7.1bn.
Contractor EDS is leading a consortium of suppliers, which includes Fujitsu and Logica CMG.