The Ministry of Defence has come under fire for failing to pump enough money into its regional prime contracts, leaving it unable to achieve its efficiency objectives.

A National Audit Office report said there was a £100m shortfall that needed to be filled if the ministry was “to achieve optimum value for money”.

Regional prime contracts were brought in last year to move the industry away from a job-by-job approach and towards continuous programmes of improvement.

One of the claimed benefits of the move was to shift the emphasis from the government telling contractors what to do to “output based” systems in which the contractor came up with its own innovations.

Because of the cost in setting up the system, only three of the five prime contracts are fully output based. The MoD estimates it will need £100m over seven years to rectify the problem.