The Government has been forced to spend almost £50 million on a new computer system for army recruitment because of failures in the existing IT, Philip Hammond told MPs today.
Some £6.7 million already spent on the recruitment scheme will have to be written off, the Defence Secretary admitted.
Around 1,000 Army personnel have been put back into recruiting roles as a result of the botched system and Mr Hammond acknowledged that the problems had meant some would-be soldiers "falling through the cracks".
Temporary "workaround" solutions to the problems in the recruitment partnership programme were costing £1 million a month, he told MPs.
The recruitment partnership programme with outsourcing giant Capita is worth £1.3 billion over 10 years.
But there were problems integrating the existing Atlas IT platform with Capita's system, Mr Hammond said.
The Defence Secretary made the decision to ditch Atlas in favour of a £47.7 million system produced by Capita after visiting the Army's recruitment centre at Upavon, Wiltshire, last year to see the scale of the problems.
Forced to go to the Commons to answer questions on the IT problems, he said: "It was clear to me, despite the Army putting in place measures to mitigate these problems in the near term, further long-term action was needed to fix the situation.
"It was agreed in principle at that point the Atlas system was not capable of timely delivery of the Capita-run programme and we would need to take up the option to revert to Capita to build a new IT platform specifically to run their system that will be ready early next year."
Mr Hammond said the alternative Atlas system would have cost £43 million, so the additional cost of Capita's programme was around £4.5 million.
Of the £15.5 million already spent, Mr Hammond said around £6.7 million would be written off.
Shadow defence secretary Vernon Coaker said there had been a series of "catastrophic failures costing millions of pounds of taxpayers' money" at the Ministry of Defence.
He said: "The blame for the mess we are now in lies squarely with the Government. We can't take risks with our armed forces, we can't gamble with out nation's safety and security."
He told Mr Hammond to "get a grip and sort this shambles out".
The recruitment programme is partly aimed at removing army personnel from administrative roles.
But Mr Hammond said the problems resulted in almost 1,000 personnel performing recruitment roles.
"We have just under 1,000 personnel, some of whom have been surged into front-end recruiting, acting as military recruiters on the ground, some of whom are providing manual support for administrative tasks that should be, and will ultimately be, carried out by the IT platform."
The Army is being cut from 102,000 to 82,000 by 2020 while the newly-renamed Army Reserve - formerly the Territorial Army - is being expanded from 19,000 to 30,000.
Mr Hammond accepted that potential recruits would have been put off as a result of the IT failings.
"When we talk about recruits falling through the cracks, we are talking about people who essentially have become frustrated with the delay in the process and have simply dropped out and gone away," he said.
"I know from anecdotal evidence, emails that I get in my personal email account, that there are a number of people out there who have just got fed-up of the system and given up and the Army is acutely conscious of the fact that we cannot afford to waste any potential recruits."
Tory John Baron, a former Army officer, said the "IT shambles" reinforced his view that the Government should halt the disbandment of regular units until ministers were sure the reservists could be recruited.