Government report casts doubt over delivery of Trident replacement programme

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The programme to construct four new submarines to carry the UK's Trident nuclear weapons is “in doubt” and faces “major risks”, according to a new government report.

Newly published data from the Infrastructure and Projects Authority (IPA) paints a bleak picture for government's aspirations to replace the Trident submarines by the mid 2030s, with “issues apparent in a number of key areas”  among major projects which are crucial for delivery of the Trident programme.

According to the IPA's annual report for 2015-16, published just days before Parliament voted to support continuation of the Trident replacement programme, two key projects – the 'Successor' submarine construction project and the 'Core Production Capability' project to design and build new reactor cores for the submarines – are both facing significant risks.  The related Astute class submarine programme, which has struggled with delays and cost over-runs since construction commenced in 1997, continues to face challenges.  Information on progress with a fourth project - the Nuclear Warhead Capability Sustainment Programme, which is intended to rebuild the Atomic Weapons Establishment (AWE) and refurbish Trident warheads – has been withheld from publication, but the programme has long been known to be in difficulty.

The IPA, an agency of the Cabinet Office and HM Treasury, was set up in January 2016 to oversee progress on major government-funded projects.  Its annual report rates progress on delivering 143 government projects into five colour coded categories ranging from green to red.  One of the Trident replacement projects, the Successor submarine project, was given the IPA's second worst rating, amber-red, alongside the Astute construction programme, indicating that successful delivery of the programme “is in doubt”, with “major risks or issues apparent in a number of key areas”.  “Urgent action” is needed to address the problems.  Both the Successor and Astute projects have been rated as amber-red for the past two years, demonstrating no improvement in performance and a deterioration since 2013.

The report says that an “incremental approval approach” will be taken to the £31 billion programme to design and build four Successor submarines “in order to maintain better control of cost”.  The 2015 Strategic Defence and Security Review announced the government's intention “to improve delivery performance and confidence” in the project, but the IPA report gives no details as to how this will be achieved, and no delivery date for the project is given.

The Core Production Capability project, which aims to regenerate facilities at the Rolls-Royce site at Raynesway in Derby where reactor cores are built for the Royal Navy's nuclear-powered submarines and develop and manufacture cores for Astute and Successor submarines, has been given an amber rating by the IPA.  Development of the new PWR3 reactor design that will be used to power Successor submarines appears to be facing considerable uncertainty as a result of the discovery in 2012 of radioactivity in the coolant of a test reactor at the Naval Reactor Test Establishment at Dounreay in Scotland.  The Dounreay discovery has necessitated an unscheduled £200 million refit for Trident submarine HMS Vanguard, and the Core Production Capability project “remains sensitive” to the results of inspections to the Dounreay prototype.  

Cost increases to reactor core production at Raynesway have occurred as the result of “enhancements that ensure product quality is maximised”,and the report states that “significant risks” remain for core production and the procurement of equipment for the new facilities at the site.

Information on the Nuclear Warhead Capability Sustainment Programme has been largely withheld from the IPA report, although an underspend of just under 7% was predicted for the programme over the 2015-16 financial year, consistent with programme delays.  The Office for Nuclear Regulation, the government watchdog responsible for overseeing nuclear safety, reported concerns over delays to delivery of new facilities at the AWE in its annual report for 2015-16 and the consequent need to rely on ageing production facilities to continue with warhead related work.

Following concerns over performance of the £1 billion per year programme, the NWCSP was subject to a major review by the Ministry of Defence (MoD) in late 2015 / early 2016, culminating in an announcement that MoD had reviewed the terms of its contract with AWE Management Ltd, the commercial consortium responsible for managing and operating the AWE sites.  At the same time, at MoD's insistence, the AWEML consortium was restructured and new senior management appointments were made at AWE.  

The Astute submarine programme is given an amber-red status by the IPA, with the prospect of “some programme cost growth” over the next 18 months.  The report warns that the availability of resources, “particularly in areas of highly skilled manufacturing staff”, remains “challenging” - a worrying portent for construction of Successor submarines, which will require the same calibre of skilled personnel.

In order to tackle the challenge of managing the Successor submarine programme, MoD is reported to have approached former civil servant Sir Peter Gershon, who also chairs the boards of the National Grid and Tate and Lyle companies, to run the programme.  The 2015 Strategic Defence and Security Review pledged to introduce a number of measures to improve management of the programme, including setting up a new team in the MoD headed by an experienced, commercial specialist to act as the single sponsor for all aspects of the MoD's nuclear enterprise, establishing a new delivery body for the procurement and support of nuclear submarines, and putting in place new industrial and commercial arrangements between government and industry.

Details remain sketchy about the shape of the proposed new delivery body, but MoD sources say it is likely to either be a new agency, or a collaborative partnership between all the contractors and government, with independent oversight included.

It is understood that Sir Peter has received informal approaches to see if he would consider managing the programme, but has been non-committal and is likely only to come to a decision once the final contract structure has been determined.

Comments

Financial risks don’t come any bigger than the £41bn officially set aside for the initial cost of the new Trident nuclear submarines – £180bn if one takes into account the whole-life sustainment costs – given the fact that, the cost of acquiring and re-provisioning Support Assets associated with military equipment over the whole life cycle can be in the order of four to five times the prime equipment costs.

MoD’s publicly declared approach to dealing with programme risks is to identify, reduce and (desirably) eliminate risk progressively to a level where they are considered to be manageable, and therefore, acceptable at the time of committing substantive funding at Main Gate.

This is to be achieved by taking Contractors from one product development phase to another, specifically to compel them to progressively undertake and conclude work with attendant higher risks as early in the acquisition programme as is practicable – leaving only unfinished, low risk work for completion by the Prime Contractor until after Main Gate, to increase the likelihood of the project being brought-in within strict performance, schedule and through-life budget constraints set at Main Gate.

So to inform the debate on the Trident renewal programme, it is incumbent upon the Government to be upfront and transparent about the following key issues:

(a) What measures has it put in place to deal with technical risks? Given that the single biggest concern expressed by MoD’s top most civil servant is the likelihood that technical risks will suddenly morph into 'show stopping' risks (as they have done so spectacularly on the Type 45 destroyers with total power blackouts) and come to the fore immediately after the main investment decision has been taken, imposing a budget-busting burden on MoD. In the event that ‘show stopping’ risks were to materialise sometime soon, any remedial work to address them should be done at nil cost to the public purse.

(b) How has it gone about making sure that Trident Contractors comply with the Government’s policy of increasing the proportion of MoD spend with small and medium-sized enterprises to 25%? Whereas it is completely improper for MoD to require Prime Contractors to select specifically named first-tier subcontractors, it is very much the business of MoD to direct Contractors on how they should go about choosing their subcontractors – that is to say, through first-tier competitions which are advertised publicly, genuinely open to all-comers including non-domiciled suppliers, with the rules of the contest declared at the outset, and run on the basis of a level playing field – for each outsourced dissected part of the Technical Solution. Not through the use of the old boys’ network or during a gathering at the 19th Hole limited to the great-and-the-good from subsidiary companies wholly-owned by the Contractor, or some other favoured, old school-tie chums – as has been happening hitherto, which has in itself, allowed the continuance of corrupt practices!

(c) How it will satisfy itself that Trident Contractors employ talented engineers, problem-solvers and innovators for the express purpose of tackling technical risks as they emerge, during the design and development phase – not simply allow them to hire expensive parliamentary lobbyists instead, and deploy them surreptitiously to swing the decision on down-selection in their favour, where it matters most, in the corridors of power.

Only an honest examination of these and other related issues discussed in open forum (not secretly behind closed doors), can form the basis for allowing this Trident renewal programme to proceed to the manufacture and build phase.
@JagPatel3 on twitter

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