A litany of management weaknesses was to blame for the waste of £120m of taxpayers' money on a failed inventory project, the Ministry of Defence (MoD) has admitted.

The suspension of the £130m Defence Stores Management Solution (DSMS) was made public by Computing in November last year.

The MoD's annual report and accounts, published this week, say hardware valued at £12.2m has been salvaged from the project, but the remaining £118.3m investment was written off as a loss.

DSMS was to intended to create a common inventory and asset management system for the armed forces using predictive intelligence to streamline stock holdings.

The project started in 2000 as part of the Defence Logistics Organisation's (DLO's) wider Business Change Programme (BCP) and was expected to save £650m over 10 years.

The internal review at the end of 2002 to investigate the project's failure identifies management weaknesses at every level, comptroller and auditor general John Bourn says in the notes accompanying the MoD accounts.

Bourns's notes reveal: The MoD had no framework to assess and manage deliverability once projects were launched; the DLO lacked effective change management support and co-ordination; and the BCP suffered from poor financial governance, weak benefits management, poor communications and a failure to establish an effective programme management organisation.

'The review also noted weaknesses in the scrutiny and approvals process. Although BCP projects, including the DSMS, did not meet the Department's requirements in important areas - especially on affordability and benefits management - the projects were not rejected,' says Bourn.

The MoD says it has learned from the experience.

'We acknowledge that had better systems of change management been in place, with a tighter security and approvals process, then the programme might have been suspended earlier,' said a DLO spokesman.

'The DLO has moved to address these management system shortcomings with much tighter controls of proposed expenditure and predicted benefits.'