MPs: MoD spends £1.5bn on supplies it does not need

Between 2009 and 2011, the MoD bought £1.5 billion worth of raw materials and consumable supplies, including uniforms and ammunition – more than it used – the Commons public accounts committee found.

In a report published today, the cross-party committee of MPs found that the department was “wasting significant amounts of public money” and urged it to sell off supplies with a total value of £3.4bn which it has identified as appropriate for disposal.

By the start of last year, the department had built up an inventory of supplies with a gross value of £40.3bn and a net value of £16.8bn, and it was running out of storage space for equipment due to come back from Afghanistan and Germany, found the report.

The MoD does not always dispose of items it no longer needs, the MPs found. More than £4.2bn worth of non-explosive supplies had not moved for at least two years, and storehouses held other items in sufficient quantities to last for five years.

The massive stockpile has grown up over a number of years, despite warnings as far back as 1991 by spending watchdog the National Audit Office (NAO) of the need for action.

The MPs said they were “disappointed” that the MoD had failed to act over the past 20 years and “surprised” that it had only recently developed a strategy to tackle the problem.

Committee member Richard Bacon said: “It is unacceptable that the Ministry of Defence is wasting significant amounts of public money buying equipment and supplies that it doesn’t need. It is particularly galling at a time when funding is tight and when one considers that the National Audit Office has been warning about these issues for over 20 years.”

The MoD purchases, holds and uses more than 710 million items of 900,000 different types, from bullets and missiles to medical supplies, clothing and spare parts for vehicles, ships and aircraft.

But the report found that, for years, the department’s purchasing system had focused on ensuring it had enough supplies to meet demand, rather than preventing over-ordering. Project teams had no incentive to limit purchasing because they were only billed for equipment when they used it.

The department is now introducing internal controls which are expected to reduce spending on inventory by £300 million in 2012-13 and £500m a year by 2015.

It also plans to reduce the volume of stock held by 35 per cent in order to make room for equipment returning from Afghanistan and Germany in central depots, some of which are already at 90 per cent capacity.

The MoD estimates that the equivalent of almost 7,000 20ft containers of material will be brought back to the UK when troops leave Afghanistan at the end of 2014, and the department is hoping to free up 83,000 cubic metres of space to receive it.

The MoD is investing £1.1bn in an information system from Boeing designed to improve its inventory management.

But today’s report warned that the department does not have the information it needs to manage the system effectively, in part because 20 per cent of inventory management posts are vacant and 13 per cent of those in post do not hold appropriate qualifications.