Defence Secretary Dr Liam Fox has, for the first time, announced that a major ongoing defence project is considered to be underperforming and has been placed on the Projects of Concern list.
The Valiant Jetty project, awarded to AMEC plc in 2003, is nearly four years late, and some estimates put it running at £92m over cost.
The move to identify it as a project of concern comes after it was reviewed during the second meeting of the Major Projects Review Board (MPRB) that holds the top 50 equipment projects, with a total value of more than £100bn, to account.
The MPRB was established by the Defence Secretary last June to deliver tighter financial controls across the Department.
This week, the committee reviewed the Falcon communications system, the Watchkeeper surveillance system, and the Valiant Jetty project, which will serve the new Astute Class submarines at HM Naval Base Clyde.
Dr Fox said: "It is clear that the additional rigour and scrutiny being applied through the Major Projects Review Board is having a beneficial effect on the behaviours of our suppliers.
"I am pleased that both Falcon and Watchkeeper have made progress since the Board's first meeting. However, I am not satisfied with the progress of the Valiant Jetty project. It is almost four years late and over budget.
"We must learn from the mistakes of the past and move away from the culture of optimism. Too frequently projects ran over-budget and over-time, without any meaningful remedial action. Real budgetary discipline can only be achieved through the effective real-time control of project budgets. Our Armed Forces and our country simply cannot afford anything less."
The Valiant Jetty project will deliver base porting facilities for the UK submarine fleet for the next 50 years. Its contract states that the project should have been completed in October 2008. AMEC's estimate of earliest completion is now nearly four years after then, and their latest cost estimate is almost 70 per cent more than the contractual maximum price of £134m, though this is subject to ongoing negotiation.
The project will therefore be reviewed again at the next MPRB meeting in December. It will continue to remain under close scrutiny until sufficient progress has been made and this important capability is delivered.
The purpose of the MPRB is to provide rigorous senior oversight of the Department's major projects, to identify those that are in danger of failing, and to take decisive action either to get a project back on track or, if necessary, to terminate it. Its membership comprises the Secretary of State, the Minister for Defence Equipment, Support and Technology, the Chief of Defence Materiel, and the Deputy Chief of Defence Staff (Capability).
The MPRB has met twice. So far it has considered three projects in detail, of which one has been identified as a project of concern. Other projects will be considered at future meetings.
The Falcon project recently passed an important milestone and, while there is still work to be done, the Board is satisfied that it can be kept under review below the level of the MPRB.
Watchkeeper has made some progress since the last MPRB, but, given the importance of delivering this capability to Afghanistan and the residual risk, the MPRB will look at it again around the turn of the year.