THE MINISTRY of Defence's £3 billion prime contracting programme to upgrade its £15 billion estate is facing delays, underfunding and cost overruns.
The fears are raised by its own revamped management division Defence Estates in a report published by spending watchdogs at the National Audit Office yesterday (Wednesday).
Managing the Defence Estate said funding was central to Defence Estate's problems and warned that its proposals were being hampered by a stop-start approach to giving projects the go-ahead and finding the money to pay for them.
Defence Estates rates as 'high risk'possible delays to rolling-out prime contracting and the failure to implement key estate improvements of a high enough quality.
It is also seriously concerned it could be left with below-par building at the end of the exercise due to fragmented investment.
The Major Contractors Group has thrown its weight behind the NAO's findings.
A spokesman said: 'Overall this report is positive and welcome and picks up on some of the key points industry has been making.'
Two out of three prime contracts let so far were hampered because the MoD could not commit enough money when other defence needs took priority.
Its massive housing upgrade deal, the £1.3 billion Single Living Accommodation Modernisation, has fallen foul of the same difficulties, the NAO said (see below right).
On the £460 million Scottish Regional Prime, 13 potential core projects were up for grabs but only five have been let.
The NAO said down-scaling projects hampered the contractors' ability to deliver what Defence Estates was looking for and delays disrupted the supply chain.
An MCG spokesman said: 'Contractors have long maintained that the way to encourage innovation, efficiency and value in public sector procurement is through consistent, secure, funding and effective long-term relationships with suppliers.'
The MoD spends £1.3 billion a year on its estates and the new programme has so far been successful, but more needs to be done to keep it on track, the watchdog said.
Defence Estates is struggling to implement the cultural changes on the MoD and its contractors.
Switching to prime contracting has not been smooth.MoD clients, with Defence Estates in the lead, are reluctant to be demoted to the role of specifier.
If Defence Estates is to succeed, the MoD must draw up a coherent long-tern funding plan with a clear work timetable, the NAO recommended.