However the National Audit Office said that "concerted action" was now needed to get the programme back on track after it became the latest major Whitehall computer project to run into difficulties.
The system is being provided by the Atlas consortium led by the US computer giant EDS which has been involved in other controversial Government IT projects. It will eventually deliver 150,000 computer terminals at more than 2,000 locations - including on Royal Navy warships and with British forces deployed on operations overseas.
However of the 62,800 terminals which were supposed to have been installed by the end of July 2007 in the first phase of the programme, only 29,000 have so far been delivered.
In part the delays due to the dilapidated state of some of the military sites where they were being fitted, including problems with asbestos and lack of adequate power supplies.
The process initially chosen for rolling out the system was "inappropriate and unresponsive" while there were problems with the software, including "inefficient processes for software design". At the same time the NAO warned that if the cost-overruns continued the MoD could be forced to scrap some of the system's planned capabilities as funding for the programme is tight.
"It was always going to be a demanding task for the Ministry of Defence to replace its diverse information technology with a single, high quality system," said Tim Burr, the head of the NAO.
The MoD started with a clear vision of what it wanted to achieve and acted to address known risks. But the programme has run into difficulties and further concerted action will be needed to increase the rate of roll out of terminals and to deliver the remaining software."
MoD permanent under secretary Sir Bill Jeffrey said that the NAO had recognised the "essential soundness" of the case for DII, but acknowledged that there were problems. "As the report brings out, we still have some problems to overcome in rolling out the system completely, but we are working hard to overcome these, and will be helped in doing so by the NAO's recommendations," he said.
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