The Ministry of Defence (MoD) has admitted that the full cost of a suspended project to create a single asset management system across the armed forces has spiralled to £140m, vnunet.com can reveal.
The Defence Stores Management Solution (DSMS), which was expected to save the MoD £650m over 10 years, was suspended in January this year due to pressure on resources.
But in a written Parliamentary answer, armed forces minister Andrew Ingram has revealed that expenditure to date on DSMS is £140m, not the £20m the MoD first claimed.
"The project was suspended on grounds of affordability at the time," Ingram said. "The requirement, including the continuing need for a deployed inventory management capability, will be addressed as part of a wider end-to-end review of the logistic process."
DSMS is being managed by the MoD's Defence Logistics Organisation (DLO), which was set up following the government's strategic defence review in 1998 to cut 20 per cent from the MoD's £4.6bn annual purchasing and logistics budget by 2005.
The future of DSMS is now under discussion and its continuation depends on the outcome of an MoD-wide review, which is due to be completed by spring next year, a spokesman for the DLO confirmed.
"DSMS is on suspend and we are not in a position to say what will come of it. The DLO is currently going through a review of major programmes called the 'Change Programme Review', which will take three to six months," the spokesman said.
The DLO selected IBM Global Services to lead a consortium of systems integrators, including KPMG and EDS, to implement DSMS.
But a DLO spokesman denied DSMS cost £120m more than originally estimated: "In May 2000 when MoD assessed the project, the whole-life costs were estimated to be between £470m and £620m, which would include developing and running the system for 10 years.
"MoD approved funding of £104m for the initial stages of the project in the year 2000, and a further £35m in 2001. At the end of 2001 a decision was made to suspend the project on the grounds of affordability. MoD is reviewing the requirements as part of the DLO Change Programme, and long term decisions based on that review are expected next year."
DSMS would have saved the MoD money by providing a single inventory and logistics system for the Royal Air Force, Navy and Army, covering 88 systems and 40,000 users.
The Conservative party shadow defence minister Keith Simpson said the project raised again the issue of the government's poor record on big IT projects.
"This is a generic problem across British government, which has a history of being unable to set up and manage computer programmes," he said. "Until we get a grip of this it will be like flushing money down the loo. Equally, I'm concerned the private sector frequently is unable to deliver."
Liberal democrat defence spokesman Paul Keetch said the government should be called to account for the costs.
"The spiralling cost on a suspended project gives serious cause for concern. Cock-ups like this could cut directly into the muscle and bone of the armed forces.
"The government must give an explanation of how this project got so out of control," Keetch said.
IBM Global Services declined to comment on the specifics of DSMS, but a spokesman for the company said it is still "fully supportive of the DLO's business plan execution".
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