Analysis By Brian Wheeler BBC News Online business reporter

The Eurofighter is late and over budget

The National Audit Office report also points the finger at BAE Systems, the UK's biggest defence contractor, saying it was responsible for 90% of the cost over-runs.

So who is ultimately to blame for failing to keep a proper grip on the accounts and squandering billions of pounds of taxpayers money into the bargain?

According to Friday's Financial Times, the government has warned BAE that it will lose future contracts unless it improves its project management of big weapons programmes.

"You don't keep employing a plumber who continually floods your house," an unnamed senior MoD official is quoted as saying.

Damaging admission?

Former BAE chief executive Sir Raymond Lygo did little to dispel the cowboy-builder metaphor when he told BBC Radio Five Live the firm routinely quoted unrealistically low prices in order to ensure it won big government contracts.

We frankly owe it to the taxpayer, and above all the armed forces to do much better Lord Bach, defence procurement minister

"I think it's a well-known fact, whether anybody admits it or not, is you'll never get any programme through the government if you ever revealed the real cost," said Sir Raymond.

"Whatever you want to get through government, you have to first of all establish what is the Treasury likely to approve in terms of money?

"And then you think, what can you offer for these terms within the parameters that have been set? And pretty often it is pretty nearly impossible."

When after a year or so the cost of the contract inevitably escalated, the price would be put up accordingly, Sir Raymond, who ran BAE in the 1990s, said.

"There are always a thousand reasons because the customer will never stop mucking about with the contract so you've always the comeback of saying that is not the contract we agreed.

"And so then the price goes up and they have a decision whether they are going to continue or cancel.

"And the cancellation costs will be greater than continuing with it. So normally you say OK, we'll continue. But that's life in Whitehall, I'm afraid."

On the face of it, Sir Raymond's admission threatens to bring relations between the MoD and BAE to a new low.

Underlying reasons

But, in reality, the MoD is well aware that it must also take its share of the blame for ballooning costs.

Problem projects Astute submarine Eurofighter/Typhoon Nimrod spotter plane Brimstone missile system

Its officials have the job of keeping a close eye on the contractor and, according to the National Audit Office report, serious mistakes were made.

"If you look at some of the underlying reasons for problems on those four main projects, you can see there was underestimation of the technical and project challenges at the outset," says the NAO report's author Tim Banfield.

The MoD is attempting to get to grips with these problems with a new "smart acquisition" programme.

It is spending more cash on estimating the risks of a project at the beginning, before it is too late to turn back.

"But as this report shows they still have some way to go to rise to the challenges of that."

The proof of whether it is working or not "will come in the next few years," Mr Banfield adds.

No 'punishment'

Defence procurement minister Lord Bach has also promised that the government will "raise its game".

"We frankly owe it to the taxpayer, and above all the armed forces to do much better, and I am determined that we will," he told BBC Radio 4's Today programme.

The Eurofighter UK to get 232 Eurofighters Original predicted cost: �7bn Recent estimate: �15.9bn Made in UK, Italy, Spain and Germany Can fly twice the speed of sound Now capable of ground attack First conceived in 1983 Q&A: Eurofighter

He stopped short of directly criticising BAE, but he had harsh words for the defence industry in general.

"The industry must raise its game, along with us."

Given that BAE is by far and away the UK's biggest defence contractor, the message for the former state monopoly is clear.

Lord Bach dismissed suggestions that BAE would be "punished" for past cost over-runs by being shut out of future contracts.

No decision

He refused to comment on a report in the Financial Times that BAE is about to be snubbed in favour of Franco-German consortium EADS, for the �13bn contract to supply the RAF with a new refuelling aircraft.

The decision has yet to be made, he insisted.

BAE admits it has had strained relations with the MoD in the past, particularly over the Astute submarine and Nimrod patrol aircraft.

Both projects were singled out for criticism in the NAO's report, along with Eurofighter, run in the UK by BAE, and the Brimstone missile made by MDBA, a consortium part owned by BAE.

The company insists the problems have been ironed out and that the NAO report is retrospective.

But - as always when defence spending comes under the spotlight - there are calls for a total rethink of the procurement process.

Critics argue that it would be cheaper to buy new submarines or aircraft off-the-shelf from the United States.

Jobs threat

But handing defence contracts to foreign companies is politically controversial.

BAE is the UK's biggest manufacturing employer and a major export earner.

It is also the only defence contractor in the world that offers a "full service", from small arms and missiles, through to tanks, aircraft carriers and nuclear submarines.

But critics claim it no longer qualifies as a true "national champion" as it does more business in the US than the UK and more than half its shares are foreign owned.

Labour former defence minister Lewis Moonie says: "There is an argument to be made for subsidising British industry, but it should not come out of the defence budget."

He accused BAE of using the threat of job cuts to secure big government contracts.

"Blackmail is a strong word, but that in effect is what happens."