APPENDIX 1
MAJOR PROJECTS REPORT 1997 (PAC 97-98/353)
Supplementary Memorandum from MoD Procurement
Executive
Question 51
An explanation of the difficulties in determining
the cost of the delays on the ASW Merlin.
To calculate the net cost to the Department
of the 63 month slippage of Merlin's In Service Date (ISD) it
is necessary to establish the costs incurred in running on the
Sea King ASW fleet since the original Merlin ISD of December 1993
and the costs that would have been incurred if Merlin had met
the original ISD.
The full cost of ownership of the Sea King ASW
fleet—including such items as the cost of employing crews
and support personnel, fuel, spares, training, ship operating
costs and overheads—are spread over several budgets.
The Department is working towards introducing
output costing, although it will be some time before the full
costs of individual equipment becomes available under RAB. The
Department does, however, have an estimate of the costs of spares
and minor modifications to the entire Sea King fleet since 1993
and this has been used to generate the cost of £150 million
shown at in the Project Summary Sheet.
Estimates of the cost of running the Merlin
fleet, in terms of spares support are based on computer models
and limited experience with non-standard aircraft running under
trial conditions. The system now planned to be used to support
Merlin as a contractor logistics system known as the Merlin Spares
and Support Availability System (MSSAS), a key feature of which
is the transfer to the private sector of the risk of supporting
immature equipment. This system was not envisaged prior to Merlin's
original ISD, so extrapolating from MSSAS costs would not give
an accurate figure for the cost of spares support had Merlin met
its original ISD. As costing systems improve, we will provide
fuller information in future MPRs.
Question 55/56
Mistakes to project summary sheets.
I have had the opportunity to reflect further
on this issue raised by the Committee and I have also spoken to
those involved with completing the project summary sheets. There
is no doubt in my mind of their commitment to produce a full and
accurate report to the Committee. I would like to reiterate what
I said to the Committee that underneath each page of the Report
lies a large number of costs often aggregated across a great many
subsystems. As I also explained, the data on the projects sheets
has to be researched back for many years and is, in general, generated
purely for the purposes of this Report. Notwithstanding these
factors, I realise that the level of changes required to the initial
draft project summary sheets must be significantly reduced and
I have therefore set the following actions in hand:
(a) a reassessment of the training requirements
and arrangements for those involved, with particular attention
to helping staff facing the task for the first time;
(b) an improvement to the guidance notes
(in consultation with the National Audit Office);
(c) a review of the timetable for production
of the initial draft project summary sheets.
MoD Procurement Executive
24 June 1998
| 
