MPs criticise PFI value for money and the MoD’s failure to invest in effective logistics systems

By David Bicknell

Two parliamentary committees, the Treasury Select Committee and the Public Accounts Committee, have today made strong criticisms about the use of private finance initiatives (PFI) and of IT systems for defence logisitics.

In its report, the Treasury Select Committee suggested that PFI funding for new infrastructure, such as schools and hospitals, does not provide taxpayers with good value for money and stricter criteria should be introduced to govern its use.

The Committee’s chairman, Andrew Tyrie MP, said:

“PFI means getting something now and paying later. Any Whitehall department could be excused for becoming addicted to that. We can’t carry on as we are, expecting the next generation of taxpayers to pick up the tab. PFI should only be used where we can show clear benefits for the taxpayer. We must first acknowledge we’ve got a problem. This will be tough in the short term but it should benefit the economy and public finances in the longer term.

“PFI should be brought on balance sheet. The Treasury should remove any perverse incentives unrelated to value for money by ensuring that PFI is not used to circumvent departmental budget limits. It should also ask the OBR to include PFI liabilities in future assessments of the fiscal rules. 

We must also impose much more robust criteria on projects that can be eligible for PFI by ensuring that as much as possible of the risk associated with PFI projects is transferred to the private sector and is seen to have been transferred.”

In its report on the defence logistics supply chain, the Public Accounts Committee was critical that the MoD had made little progress in resolving long-standing problems with its supply chain information, despite giving previous assurances to the Committee.

Its recommendations for improving future performance include the following comments:

The Department accepts that historic underinvestment has meant its management information systems and the underlying IT systems are not up to the task. In particular, its spending on IT systems has not kept pace with the need to upgrade those systems.

 “The Department has made investments in new data systems – for example £66 million has been spent on the Management of the Joint Deployed Inventory system which tracks equipment in theatre – and more is planned.

“In 2010, the Department signed an £803 million, 11-year contract with Boeing for the provision of the Future Logistics Information Services project. Under this contract, Boeing is required to bring together 270 different data systems operated by 50 different contractors, which should provide a complete and coherent set of data for managers to use.

“Separately, the Department has now approved an additional £75 million to upgrade some of the defence base inventory management systems that are now at critical risk of failure.

“The implementation of the Future Logistics Information Services project, including the additional upgrade to the warehouse inventory management IT system, will not be complete until 2014. The Department told us it would take a long time to upgrade systems and data, in part because of the need to ‘cleanse’ the data – otherwise the poor quality information the Department currently holds would simply be transferred onto a better IT system.

“We are very concerned that, until the systems are fully rolled out in 2014, the high risk of system failure will remain in systems that are critical to supporting front line troops. To ensure that there is no further slippage in this critical area, the Department has provided us with a plan of the scheduled projects for improving data systems and has promised to report back in six and twelve months on how it is performing against its milestones.”

(Tony Collins is away this week.  But he’ll be back shortly to offer his unique insight on Government and public sector IT projects)

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