Select Committee on Environment, Transport and Regional Affairs Appendices to the Minutes of Evidence

Memorandum by the Civil Aviation Authority (NATS 01)



  1.1  The Sub-committee is to conduct an inquiry relating to National Air Traffic Services Ltd ("NATS"), including developments at both Swanwick and at Prestwick and the failure of systems at West Drayton.

  1.2  This Memorandum explains the CAA's responsibilities for NATS as a wholly owned subsidiary company of CAA, and gives some examples of the CAA's role. It follows on from an earlier Memorandum to the Sub-committee (8 October 1999), regarding NATS PPP, which inter alia set out some recent history on the modernisation of NATS.

  1.3  The essential point is that the CAA retains full responsibility for NATS and is wholly supportive of the decisions that have been taken by the company.


  2.1  Four years ago, NATS was established as a limited company—"National Air Traffic Services Ltd". It is a subsidiary of the CAA. This takes separation as far as is currently practicable within the existing legislative framework. NATS PPP will separate CAA and NATS completely. The date for this will depend on the coming into force of the Transport Bill. The CAA therefore remains accountable for NATS as a wholly owned subsidiary until the Government institutes legal separation.

  2.2  Separation is already very far advanced on the regulatory front, to ensure that the CAA has an arms length, consistent and effective relationship with NATS, as it has with the rest of the UK ATS industry. The CAA Board and management are putting into place the new arrangements needed to carry out the proposed new roles of licence management and economic regulation. Safety regulation continues to be executed in the normal, thorough, professional and robust manner. The CAA's Safety Regulation Group (SRG) has recruited additional staff to ensure that the team that is assessing the safety case for Swanwick remains at the correct strength as the approval workload increases. New arrangements for Airspace Policy to be undertaken by the CAA are set out in the Bill.

  2.3  In preparation for NATS PPP, Sir Roy McNulty, Chairman of NATS, and Mr Semple, NATS Chief Executive, have left the CAA Board. However, the CAA Board continues to execute to the full its governance role over NATS and its legal responsibilities for NATS. The CAA Board appoints/removes the Directors to the NATS Board (apart from the MoD-nominated non-executive member).

  2.4  Formal governance of NATS centres on CAA Board processes. At each monthly CAA Board meeting, the Chairman and Chief Executive of NATS attend to present the latest information on safety indicators, operational issues, financial reports, progress on major projects, full activity reports, software status of NERC, controller numbers, and a full briefing on management action plans. The CAA Board determines the nature and frequency of all these reports, not NATS.

  2.5  Indeed, the creation of NATS as a subsidiary led to a more formal approach to business reporting. Following the early signs of problems with the NERC project and the major CAA Board review of its status and procedures, NATS reporting to the CAA Board was formalised, made more understandable and expanded. The CAA Chairman has been concerned to ensure that current commercial best practice should be the norm. Thus, for example, formal presentations to the CAA Board on significant issues have been made mandatory.

  2.6  Between Board meetings, the CAA Chairman is kept fully in touch with significant operational and contractual matters. The CAA Chairman and NATS Chairman meet at least bi-weekly. When issues have arisen, NATS has been required to brief the CAA Chairman. There has therefore been no weakening by the CAA in discharging its responsibilities for NATS.

  2.7  It should also be noted that, as a public sector organisation, NATS continues to be bound by public sector budgeting and borrowing requirements. The CAA Board enforces these rules in accordance with government directions. In particular, both the NATS Business Plan and large capital expenditure items—above £5 million—require CAA Board approval.


  31.  Some examples are given below of CAA Board decisions concerning NATS investment programme and operational performance. Other aspects of NATS-related matters are not covered below. For example, it should be noted that the CAA Board has discussed the future Pensions arrangements for NATS employees (NB: the Chairman of the Pensions Trustees is appointed by the CAA).

  3.2  Appointment of Dr Nigel Horne to advise NATS on the New En Route Centre (NERC) project:  The Board's review of problems with NATS projects, coupled with the Sub-committee's earlier reports on NERC issues, led to the need to appoint independent project expertise. This was agreed jointly by the CAA Chairman and the then NATS Chairman. Dr Nigel Horne, the chosen expert, has held a wide range of senior posts in industry: he has been advising NATS for about three years. He has made regular independent reports in person to the CAA Board, on the Chairman's instruction, highlighting potential problems and identifying solutions. His objective approach, coupled with his clear and specific recommendations, has made a major contribution to putting the NERC software development onto an even keel, in comparison to previous over-optimism about timescales.

  3.3  DERA and Arthur D Little Audits of NERC:  The progress of the audits, on software and financial aspects respectively, were reviewed by the CAA Board.

  3.4  New Scottish Centre (NSC—Prestwick)/Bechtel contract approved:  The CAA Board endorsed the appointment of Bechtel as Project Manager for the NSC project, following a scrutiny of performance and incentive targets.

  3.5  Y2K:  the CAA Board monitored progress on the resolution of "Millennium bug" issues.

  3.6  EDS Oceanic Flight Data Processing System (FDPS) contract suspension approved:  The possibility of EDS defaulting on the Oceanic FDPS contract was identified some months ago. The recent termination of the EDS PFI contract for Oceanic FDPS was the final outcome of a structured process of negotiation and debate with EDS. The CAA Board was fully involved in all stages of this formal process and endorsed the recommendations of the NATS Board.

  3.7  LATCC—West Drayton—17 June 2000 failure reported and debated:  NATS will be covering this topic in more detail in their evidence. It is worth noting here that the CAA supported the commissioning of Dr Horne and Mr Martyn Thomas to undertake an independent review of the events leading to the failure. They will also make recommendations for any necessary improvements to the system or the way it is managed. [Mr Thomas is a leading independent computer consultant and Chairman of the Praxis Critical Systems company.]

  3.8  NERC O-date approved:  The Board approved the NERC plan to completion and examined the recommendation by Dr Horne and NATS that the scheduled NERC O-date should be 27 January 2002. The Plan covered the key risks and their mitigation. The risks covered all aspects of the project—from software "bugs" to computer interfaces to controller availability.


  4.1  It is the CAA's responsibility, until PPP is complete, to provide through NATS the safest and best system of UK ATC. The CAA maintains a robust safety regulatory oversight of NATS and will continue to do so post PPP, when it will take on the additional responsibility of economic regulation of NATS. In the meantime the CAA continues to take full responsibility for NATS, and is wholly supportive of the planning and operational decisions that have been taken.

Civil Aviation Authority

20 September 2000

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