14 December 2010 | Lindsay Clark

Senior officials in the Ministry of Defence (MoD) do not challenge procurement decisions made by ministers, even when the department cannot afford them.

“There is a culture of over-optimism about the ability to meet financial commitments and senior officials do not challenge unaffordable decisions about equipment procurement,” says a report by MPs published today.

According to the Committee of Public Accounts (PAC), the government has yet to rectify this weakness – which has contributed to a £36 billion shortfall in spending - despite the recent Strategic Defence and Security Review announcing a number of key procurement programmes would be cut, suspended and postponed.

“The… Review did not explicitly set out how this long-standing gap between defence spending and funding would be resolved,” said today’s Managing the Defence Budget and Estate report by MPs. “It is imperative that the department should now do so.”

The review also found poor communication between finance and purchasing. “The failure to integrate financial planning and control into decision-making means that cuts in programmes and delays in expenditure on defence equipment are made very late in the day, leading to inefficiency, poor value for money, and longer-term additional costs.”

The MoD’s poor financial management has led to a severe shortfall of up to £36 billion in defence spending over the next 10 years, the report said. “Weaknesses in financial planning and management have resulted in poor value for money from delays, changes to project specifications and costly contract renegotiations,” it stated.

In October, Prime Minister David Cameron axed procurement plans for replacement Harrier jump jets and Nimrod reconnaissance aircraft in the defence review. He also opted to go ahead with two replacement aircraft carriers, from defence supplier BAE Systems, but said one of the warships would be mothballed.

Meanwhile, the opposition Labour Party has launched its own review of defence procurement. The review of its defence purchasing policy will involve leading military, defence and business figures in an "open and consultative" process.

Shadow defence secretary Jim Murphy admitted mistakes had been made in defence procurement, according to the BBC.