Major projects special report: how the government is boosting military capability

Written by Jim Dunton on 20 September 2018 in Feature

In a special report looking at the Government Major Projects Portfolio, CSW brings you a snapshot of progress across four categories: infrastructure and construction, transformation and service delivery, information and communications technology, and military capability. This section looks at three MoD projects to boost military capability

Wildcat The AgustaWestland AW159 Lynx Wildcat entered service with the Army in 2014 and with the RN in 2015 Photo MoD

32 projects | £134bn whole life cost

5 Red | 9 Amber/Red | 11 Amber | 4 Amber/Green | 3 Exempt

Military capability makes up the second largest group in the GMPP, and it’s also the second most expensive – the whole life costs of those projects total £134bn. These are, according to the IPA’s annual report “some of the most complex and strategically important projects government delivers” ranging from building warships and drones to cyber security and communications infrastructures. Many of the projects are long-running – this category includes the oldest project in the GMPP, the Astute Boats 1-7.

The Ministry of Defence delivers all the military capability projects, plus five in other categories, meaning that it is this year responsible for over a quarter of the GMPP by number –  the largest proportion of projects on the GMPP delivered by any single department since 2015/16.

Three of the projects in this category are exempt from publication – two due to security and one due to commercial sensitivity.

Project case studies

Astute Boats 1-7 | Ministry of Defence | Whole life cost £9.94bn

Rated Red

The Ministry of Defence confirmed its order for a fleet of seven nuclear-powered submarines – Astute boats 1-7, replacing the Trafalgar class vessels –  in March 1997 under prime minister John Major, but the programme’s roots go back to the 1980s.  Studies – influenced by the end of the Cold War – and bid processes with industry players took up much of the early 1990s before a contract was signed with GEC-Marconi in 1997. Two years later the business was bought out by BAE Systems.

The first of the boats did not begin construction until 2001 and the project has suffered from historic delays which the MoD ascribes to “industrial performance” and the late provision of essential components. The first three Astute boats – HMS Astute, HMS Ambush and HMS Artful – are now in service, while the fourth, HMS Audacious, was launched at the end of April and is due to undergo sea trials next year.

The IPA’s project profile for Astute gives an end-date for the programme of 31 March 2024, but departmental commentary on the project indicates it intends to deliver boats five to seven at “revised but realistic schedules” underpinned by risk assessments to be outlined in a whole-programme review.

In May, defence secretary Gavin Williamson announced that the MoD had agreed a £1.5bn “whole boat contract” for a seventh and final Astute Class submarine, which he said would be named HMS Agincourt. Williamson said the boat was expected to come into service in the “mid-2020s”.

The whole life cost of the project has been pushed up by “schedule delays, increased labour rates and by an increase of Barrow build infrastructure overheads”, according to IPA data, referring to the BAE Systems shipyard in Barrow-in-Furness, Cumbria, where the submarines are built.

Trevor Taylor, professorial research fellow at think-tank the Royal United Services Institute, said on Astute and other new-generation submarine projects the nation was still in the position of “having to build up industrial capability to replace skills that were let go” at Barrow.

BAE Systems employs around 8,000 people in its submarine-building business. While the figure is higher than the 3,000 who worked at Barrow around a decade ago, it is still significantly lower than the 14,000 employed there in the 1990s when it was owned by VSEL.

Queen Elizabeth Programme | Ministry of Defence | Whole life cost £6.70bn

Rated Amber

The programme to deliver the two new aircraft carriers – the Navy’s largest-ever warships – has been rated amber for the past three years after being amber-red in 2015 and red in 2014 and 2013.

Described as the nation’s flagship vessels, the carriers are projected to be in service for up to 50 years. Each will have a permanent crew of 679 and will be equipped with F-35B Lightning Strike Fighters and a range of helicopters. The project’s official start date was 1998, when the then-Labour government decided to replace its three Invincible Class aircraft carriers and Harrier jump-jets with two new carriers and jets. 

HMS Queen Elizabeth was formally commissioned into service by the Queen in December last year after the 65,000 tonne vessel underwent sea trials in the summer of 2017. The second carrier, HMS Prince of Wales, was launched at Babcock International’s Rosyth shipyard in the Firth of Forth in October and was fitted out with its BAE Systems-designed radar system over the summer ahead of sea trials. It is due to join HMS Queen Elizabeth at the vessels’ home base of Portsmouth next year.

According to the Aircraft Carrier Alliance – which brings together the MoD, Babcock, Thales UK and BAE Systems to deliver the project – the carriers will each have the capacity for a maximum of 36 F-35Bs and four Merlin helicopters equipped with the Crowsnest radar and surveillance system. Alternatively, they can also carry up to 12 Chinook or Merlin helicopters, and eight Apache attack helicopters.

Commentary that accompanies the IPA data lists the target completion date of the project as 31 March 2023, and did not indicate any deviation from that schedule, which has a whole-life cost of £6.70bn. The target cost of the carriers was re-baselined to £6.21bn, from initial estimates of £3.5bn, in 2013 following the coalition government’s decision not to proceed with proposals to equip HMS Prince of Wales with a different version of the F-35 to its sister ship.

Each of the aircraft carriers is key to the government’s “Carrier Strike” operational ambitions, which refer to a single deployable carrier with jets and Crowsnest-equipped helicopters. The over-arching delivery of the programme is Carrier Enabled Power Projection (CEPP) project, itself amber-rated by the IPA. The MoD is targeting the delivery of the initial phase of Carrier Strike – with HMS Queen Elizabeth in operational mode – by the end of 2020. 

In its most recent report on Carrier Strike, the National Audit Office said that while good progress was being made with the programme, bringing together the equipment, trained crews, infrastructure and support that was needed for the first carrier to be fully operational was a significant effort. The report, published last year, said full operating capability for both carriers under the terms of CEPP was expected by the end of 2026.

Royal United Services Institute’s professorial fellow Trevor Taylor said: “There are still issues about crewing and there are issues about the aircraft, so you can see why it wouldn’t get a green rating.”

Wildcat Programme | Ministry of Defence | Whole life cost: £1.61bn

Rated Amber/Green

Lynx in flight Compter generated image of a Wildcat helicopter fitted with Future Anti-Surface Guided Weapons Light missilesThe Wildcat Programme covers the delivery of a new generation of 62 helicopters to replace existing Westland Lynx variants operated by the British Army and the Royal Navy. Discussions about the replacement aircraft date back to the 1990s but the commencement date of the programme is officially 2001.

The MoD eventually settled on an updated version of the Lynx – known at different times as the “Future Lynx” and the “Lynx Wildcat”, and commissioned 70 from AugustaWestland, as the company was then known, in 2006 with an option to buy an additional 10. In 2008 the government scaled back its order to 62 – 34 for the Army and 28 for the Navy – as part of a programme to save £194m in capital costs and more via crewing and flying-time savings.

AugustaWestland rebranded as Leonardo Helicopters in 2016 to reflect the firm’s ownership by the Italian defence giant. At the end of the year the company announced it had delivered the 62nd and final Wildcat AW159 helicopter.

The IPA’s amber-green rating reflects the projects status in September last year, but the MoD’s commentary on the programme as of July described it as “all but complete”.

“The programme is on track to achieve full training capability for both Army and Navy Wildcat variants within planned timescales and good progress continues to be made towards delivery of the full operating capabilities,” it said.

Lynx in flight: Compter generated image of a Wildcat helicopter fitted with Future Anti-Surface Guided Weapons Light missiles

The MoD gave the project’s whole life cost total baseline as £1.61bn, which is around £62m less than had been projected in a 2009 NAO report. However it noted that spending on the project in 2016-17 had been 47% higher than the projected baseline for the year, at £9.16m rather than £6.22m.

“Reconciliation of contract prior to closure required minor adjustment to overall project costs including an incentivisation payment,” the MoD said. “The programme as a whole remains significantly under approval.”

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Submitted on 21 September, 2018 - 08:38
In a previous report, the Infrastructure and Projects Authority found that on the Astute submarines programme, the MoD’s reduced oversight led to a lack of visibility of problems when they arose which was compounded by the low level of design maturity when construction started. Whereas in recent years the Ministry of Defence has made some amends for its past failings, it still keeps making the same mistakes again and again – like believing what it is told by private sector suppliers when approached to provide goods and services for the benefit of the public. Take for example, military equipment acquired by MoD, which is the largest contributor to the Government Major Projects Portfolio examined by the IPA – in terms of the number of projects and their combined whole life cost. It is not about the level of experience of managing large-scale projects that counts, but the honesty with which the Contractor conducts his relationship with MoD that is even more important. When it comes to procuring new equipment for the Armed Forces, the first and foremost question politicians always ask is, how much is it going to cost? Any meaningful attempt at answering this question is hampered by the fact that, very few people in Whitehall understand and appreciate that the single most important factor that determines the ultimate whole life cost of any defence equipment programme is the maturity of the existing starting-point for the Technical Solution in the possession of Defence Contractors – the closer the developmental status of the starting-point to the Requirement, as described in the technical specification, the lower the cost the Exchequer will have to bear associated with completing the remaining work to bridge the shortfall. Even more worryingly, those who do know, are not in decision-making or leadership positions. The maturity of a starting-point for the Technical Solution can fall anywhere between two extremes, as shown in this illustration At one end, starting from a ‘blank sheet of paper’ amounts to a non-existent solution whereas at the other end, an off-the-shelf equipment corresponds to a readily available, fully engineered and supported Technical Solution which satisfies the totality of the Requirement at no additional cost or risk to MoD, that is to say, it does not require any development work laden with risk to be performed upon it. Additionally, MoD does not possess the capability in the form of intelligent and experienced procurement officials who have an adequate understanding of what it takes (in terms of skill types, funding, tools, processes, materials, scheduled work plan, inter-business contractual agreements etc.) to advance an immature Technical Solution from its existing condition, to a point where it will satisfy the technical specification requirement, within a Private Sector setting driven by the profit motive and people who instinctively employ unethical business practices – leaving them susceptible to exploitation and manipulation by Defence Contractors. Consequently, they are not able to establish what the true status of the evolving technical solution is, based upon claims made by Contractors. The harsh truth is that, these people have no business acumen at all – on account of not having spent a single day of their lives in the Private Sector, which means that they have no idea what it is like to ‘feel the heat’ of competitive market forces. So instead of simply telling the truth, Defence Contractors are consciously engaged in an exercise in subterfuge to take advantage of the ignorance of procurement officials, by making exaggerated claims (see illustration about the maturity of their starting points for the Technical Solution – a scam which has led directly to initial programme costs being grossly underestimated by MoD – a condition referred to as the conspiracy of optimism. To add to this wanton act of deception, Defence Contractors have also been deploying the old favourite of touting the so-called, minimal development solution – a commonly used ploy advanced to con procurement officials into believing that they have a nearly-ready Technical Solution on offer, when in reality, they probably have something in hand which is closer to starting from a ‘blank sheet of paper’! This deceitful behaviour is a common trait in the defence manufacturing industry, beginning with the Select Few at the top, and extending right down the entire supply chain. @JagPatel3

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