A plan to save £263m and create 4,500 high-tech jobs at an MoD plant to service Tornado jets was branded a disaster today as auditors found it actually cost £113m and created just 45 new jobs.

A joint report by the National Audit Office and the Wales Audit Office blamed the Ministry of Defence and the Welsh government for failing to liaise over the project at St Athan in south Wales.

The venture fell apart when the MOD closed down the brand new facility with the loss of 1,900 jobs just five years after it was opened. Plans to attract high-tech industries round the plant then collapsed – and the Welsh authorities could only get four companies, employing 45 people, to move on to the giant site.

The audit investigation found that competing strategies between the MoD and the Welsh government meant the scheme – named Red Dragon – never got off the ground properly. Instead the MoD found it could save up to £1bn over 10 years if it closed down St Athan and serviced the jets instead at RAF Marham in Norfolk and RAF Cottesmore in Rutland.

The Welsh government was not told of the change of plan, which undermined its plans for developing the area.

The decision to close the fast jets and engines business of Dara, the Defence Aviation Repair Agency, provoked a huge row in 2005. Trade unions, MPs and the all-party Commons defence committee condemned the move. The committee concluded it was "perverse and wasteful for the MoD to invest large amounts of public money to renovate the facilities at RAF Marham when it has at its disposal a state-of-the-art facility at St Athan". The committee said: "It is doubtful that the facilities at RAF Marham will ever match those at Dara St Athan."

The 'super-hanger' at St Athan is, according to the auditor, now largely empty.

Tim Burr, head of the National Audit Office, said today: "Both the Ministry of Defence and the Welsh authorities have invested a considerable amount of time, effort and money in creating modern aviation repair facilities in south Wales, with a super-hangar which is now sitting almost empty."

Jeremy Colman, Wales's auditor general, added: "The Ministry of Defence and the Welsh authorities failed to collaborate sufficiently throughout the project. Although for much of the time both had complementary objectives, they did not establish a common purpose for the project or a common understanding of their respective assumptions about the future of the site. The Red Dragon project highlights the danger in large and complex projects that involve multiple public bodies of insufficient openness and information sharing."

Politicians were more critical. Liam Fox, the shadow defence secretary, said: "What began as a flag-waving exercise in high-tech job creation has turned into a disaster for the MoD. The target of 4,500 jobs has produced only 45, costing the taxpayer £2.5m per job. It's the same old story of Labour dithering and incompetence, resulting in uncertainty and upheaval."

Richard Bacon, a member of the Commons public accounts committee, said: "It is now clear that Red Dragon was doomed from the start. The MoD and the Welsh authorities wanted different things from the deal, with the MoD looking to repair jets more efficiently and the Welsh authorities seeking to protect local jobs. What's more, when it signed Red Dragon, the MoD had apparently forgotten that it had only just commissioned a review of aircraft support, which eventually led to St Athan's closure.

"The MoD and the Welsh authorities should have made absolutely certain they understood each other's position on Red Dragon. In future, deals of this nature should be based on clear and unambiguous understanding of where all parties are coming from."

The report says the MoD and the Welsh authorities are looking at an alternative use for the site. "There are plans by the MoD to establish a defence training academy using the super-hangar, which the MoD and Welsh authorities expect to bring significant economic benefits to south Wales. The MoD and the Welsh authorities expect that the academy will bring over 5,500 jobs to the area although a third are likely to be filled by staff relocating from other parts of the UK. The Welsh authorities also expect that the academy will provide an impetus for plans for an aerospace park, potentially creating around an additional 2,000 jobs."