Question to the Ministry of Defence:

To ask the Secretary of State for Defence, what requirement there is for companies funded by his Department to pay financial penalties if they under-estimate the cost of projects awarded to them and fail a National Audit Office inspection.

The National Audit Office (NAO) audits the Ministry of Defence (MOD) financial accounts and conducts investigations on MOD programmes and activities. It does not inspect or audit defence industry companies and, as such, companies do not fail NAO audit inspections.

The MOD regularly scrutinises the performance of its suppliers, holding them to account for performance against the terms and conditions of their contracts. This includes monitoring costs and progress against delivery milestones and taking action as appropriate in the event of an over or underrun. As a general principle, the MOD would seek to resolve issues of under or overestimation of cost through the terms and conditions of the contract, rather than through financial penalties.