The union has now urged the MOD to refer the scandal surrounding the misuse of funds, originally intended for external technical assistance, to the Defence Fraud Analysis Unit.

The scheme – Framework Agreement for Technical Support, known as FATS – was originally intended for use by MOD project teams that required niche support that could not be supplied by in-house specialists.

In 2006 MOD spent £6m on this kind of support but in the last two years the figure has ballooned to £564m. Worse, the scheme's protocol for awarding contracts has broken down.

The scheme should exclude management consultants and work should be subject to open competition. However, the department's internal audit of the scheme shows that guidelines were ignored and contracts awarded without competition to some of the UK's biggest defence manufacturers rather than the niche companies it was intended for.

Worse still, the scheme was used to award contracts to legal firms. National secretary Steve Jary said: "The rules require the business case to provide evidence of knowledge transfer – so that MOD learns from experience and doesn't have to go outside again. Yet ongoing legal support for procurement of the Astute submarine boat 4, which is not yet built, was £500,000 for five months' work.

"Who else buys submarines and has direct experience of buying three of this particular submarine? Certainly not a city law firm. And why haven't they learnt what to do from the previous three?"

All the money used on the FATS scheme comes from the department's equipment programme budget, already overstretched from cuts arising from the strategic defence and security review and the comprehensive spending review.
Jary said the union would be pressing MOD to keep its promise earlier this year that any savings identified by unions could be used to offset the planned reduction of 33,000 civilian staff.

MOD had been cutting its in-house capability without cutting its outputs, Jary said. "It had no choice but to get this work done elsewhere at huge additional cost. And it has been dishonest: ministers were not told what would happen if they cut specialist staff and FATS was designed to keep the real costs out of sight.

"Faced with swingeing, across-the-board cuts the last thing the department needs is a bill for £600m for outside technical assistance. The tragedy is that MOD is busy making its specialist staff, who would normally undertake that technical work, redundant. It is madness," said Jary.