Key Ministry of Defence procurement projects have seen costs rise by £1.7 billion over the last year, the National Audit Office has said.

The spending watchdog also revealed the 20 biggest projects have on average been delayed by three months each.

Auditor general Sir John Bourn warned the department was failing to apply its own "smart acquisition" principles.

The criticisms will raise further questions about the MoD's ability to manage major projects.

Conservatives said the conclusions were "damning", while the Liberal Democrats accused the department of "incompetence".

But defence procurement minister Lord Bach said a "huge amount" of work was being done to identify and deal with any remaining problems.

More delays

Adding to the grim news, the NAO said it was now expecting to see more problems with the 20 key projects in future.

Last month, Lord Bach angrily rejected claims from the Commons defence select committee the defence procurement agency's (DPA) performance had been "woeful".

But the latest findings from the NAO will reinforce fears the department is failing to manage its key projects to successful completion.

One ray of light for ministers was that the increase over the last 12 months is less than the £3.1 billion which the NAO found in a similar report published last year.

The total cost of the 20 projects is now expected to be £50 billion, some 14 per cent higher than originally planned.

"There is little evidence that acquisition has been improving," said the NAO.

"Many problems can be traced to the fact that the MoD has not spent enough time and resources in the assessment phase.

"Projects less than halfway through their procurement are already expected to be delivered later or to cost more than approved.

"The 15 most recent projects are moving rapidly towards their 'not to be exceeded' approvals and six have already breached them."

Sir John called for "greater certainty as to when equipment will be ready for service and... greater control of costs".

"If not, some capabilities may have to be foregone or delayed to compensate for rising costs," he warned.

"It is of particular concern that newer projects are already showing increases.

"We are working with the MoD and industry to identify wider good practice, and I fully support the renewed efforts by the MoD to improve their performance.

"These efforts are as important as ever."

Improvements ahead

Lord Bach said he was "disappointed with the cost and time increases" highlighted in the report.

"I am satisfied we have now established a credible baseline which will better allow us to track the progress of procurement programmes," he said.

"I am determined that the changes made as a result of the review of smart acquisition will make a significant impact on the performance of the DPA and the department as a whole."

He added that the defence industry "continues to have a significant role to play in improving the performance of our major projects".

But Edward Leigh, the chairman of the Commons public accounts committee, said he was "alarmed" by the latest revelations.

"The MoD has not broken its wasteful mould," he said.

"The new procedures and approaches of recent years are not working. This is a terrible way to plan for the defence of our country."

Damning verdict

The Conservatives said the NAO's conclusions were "damning".

Defence spokesman Gerald Howarth said ministers were trying to blame older projects for the failings despite being in power for seven years.

"Of the five projects which have suffered the largest cost over-runs, four are projects started by Labour under 'smart acquisition'," he said.

"This is a severe indictment of the Labour government's management of defence procurement and the gloom is not relieved by the NAO's expectation that these problems will not go away."

Liberal Democrat defence spokesman Paul Keetch said the report was "yet more evidence of incompetence at the MoD".

"An overstretched defence budget is being tested even further. As we place increasing demands on our forces, we owe it to them to ensure that they have all the equipment they need, on time and on budget," he added.