| 1. | Given that the original target date for Main Gate approval on the CVF programme was two years ago, it seems to us extraordinary that there is now no target date at all. MoD should have a target date, even while accepting that it may not be achieved because work to clarify programme timescale, costs and risks is still being undertaken. (Paragraph 22)
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| 2. | It is disappointing that design definition work on the CVF programme has not progressed much in the last year, even though it is a key objective of the Assessment Phase. (Paragraph 25)
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| 3. | We welcome MoD's decision to commission an independent analysis by the RAND Corporation to identify options for reducing costs on the CVF programme. We acknowledge that the cost reduction options have been considered and are mostly being implemented. The CVF programme is likely to be very costly, both in terms of procurement and construction costs, and through-life costs. It is essential that MoD and the other Alliance partners continue to identify ways to drive down costs. If costs are not constrained, there is a very real risk that the CVF programme could become unaffordable. (Paragraph 35)
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| 4. | We remain to be convinced that the date for Main Gate approval and the In-Service Date are not directly related. While we acknowledge that some slippage of the Main Gate date can be contained, there must be a point at which the lack of Demonstration and Manufacture phase funding, including the purchase of long lead items, impinges on the In-Service Date. (Paragraph 39)
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| 5. | We welcome the frankness of the new Minister for Defence Procurement with regard to the target In-Service Dates for the CVF programme. But, while we agree that the programme needs to be fully de-risked and understood before proceeding to the Main Gate decision, we are concerned that further delays to the main investment decision will lead to slippage to the In-Service Dates well beyond those which MoD originally set itself. (Paragraph 40)
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| 6. | If the In-Service Dates for the CVF programme are substantially later than 2012, there is a serious risk of a capability gap emerging which would impact upon the ability of the Royal Navy to undertake its role effectively. If there is a serious risk of slippage, MoD and the Royal Navy must make plans for bridging this gap, which might include extending the lives of the current aircraft carriers and the aircraft which operate from them. This could be at substantial additional cost, particularly if the current carriers require major refits. We expect MoD to demonstrate that appropriate contingency plans are in place to address any potential capability gap. (Paragraph 41)
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| 7. | It is disappointing that the Alliance Agreement has still to be finalised, eighteen months after our predecessors were told that there were only "one or two loose ends" to tidy up. We remain unclear as to what the precise role of the Physical Integrator is and will be. If the Alliance partners continue to be unable to finalise the Alliance Agreement, we consider that this might indicate that the Alliance approach is not suited to this particular programme, or that there are issues with the individual partners which cannot be resolved. (Paragraph 49)
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| 8. | There continues to be uncertainty about the precise roles and responsibilities of each of the Alliance partners. The proposed risk-sharing on the CVF programme will be different to the risk-sharing arrangements on previous defence equipment projects and the contractual arrangements between the Alliance partners have still to finalised. Sharing risks should incentivise the Alliance partners to deliver a positive result on the programme, but we were concerned by talk of 'sink or swim together'. If the Alliance approach does not deliver the expected results, the real losers will be the British taxpayers and the Royal Navy. (Paragraph 55)
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| 9. | We have some concerns about potential conflicts of interest for Alliance partners and expect MoD to have in place appropriate arrangements to ensure that these are properly managed. (Paragraph 56)
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| 10. | The Alliance approach is a novel approach for MoD and we consider it too early to assess whether the Alliance approach on the CVF programme has been successful. We expect MoD to identify lessons from the experience of using an Alliance approach on the CVF programme, and to ensure that such lessons are implemented if an Alliance approach is to be used on other equipment procurement programmes. (Paragraph 57)
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| 11. | MoD has yet to reach a view on the optimum shipbuild strategy for the CVF programme. We note that MoD's plan is to build the two carriers in the United Kingdom but it has yet to decide on which shipyards will be involved in the construction of the two carriers. (Paragraph 63)
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| 12. | We welcome MoD's decision to produce a Defence Industrial Strategy, which will include a Maritime Industrial Strategy. The CVF programme is vital to the future of the UK's military shipbuilding industry and its importance will need to be reflected in the Maritime Industrial Strategy. We plan to examine the Defence Industrial Strategy in the New Year. (Paragraph 70)
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| 13. | We note that MoD considers that there is enough national capacity to manufacture and assemble the two aircraft carriers. However, we are concerned that delays to Main Gate approval and the letting of Demonstration and Manufacture contracts are impacting upon UK shipyards, jobs are at risk and some potential contractors have gone into administration. (Paragraph 71)
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| 14. | If there are delays to the CVF programme, there is a risk that the construction of the two carriers will come at a time when a number of naval shipbuilding programmes will also be in the Demonstration and Manufacture phase. This is likely to put pressure on the UK's naval shipbuilding capacity and could lead to work going overseas. We recommend that MoD identify ways to manage the potential peaks in demand for naval shipbuilding programmes over the next ten years or so. (Paragraph 72)
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| 15. | We are concerned that, once the busy period for the UK's naval shipbuilding industry ends in 2013 or so, that there will be another gap in work for UK naval shipyards. We expect MoD's Maritime Industrial Strategy to set out how the peaks and troughs seen in the UK naval shipbuilding industry in the past will be managed in the future. (Paragraph 73)
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| 16. | There could be potentially substantial benefits if France became involved in the CVF programme. These include the possibility of real cost savings, both procurement and support cost savings, and closer relations between the British and French navies. But international collaborative projects have in the past experienced problems, such as time slippage. If France decides to become involved in the CVF programme, we expect MoD to ensure that the UK programme would not suffer delays to the In-Service Date for the UK carriers. (Paragraph 80)
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| 17. | We are concerned that the In-Service Date for the JSF has slipped from 2012 to 2014, some two years after the first carrier was originally expected to come into service. It is essential that the In-Service Dates for the CVF and JCA programmes match. If not, the UK could be left with new carriers without new aircraft to operate from them, or new aircraft with no new carriers to operate from. (Paragraph 90)
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| 18. | We note that the weight problems on the STOVL variant of the JSF have been mitigated but we expect MoD to continue to monitor closely weight and other risks on the JSF programme. (Paragraph 95)
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| 19. | We have been assured that the STOVL variant of the JSF aircraft being procured by the UK and US are identical and are being designed to the same set of requirements, though, once delivered, the aircraft will be fitted with different weapons. (Paragraph 97)
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| 20. | We fully support MoD's position that the ability to maintain and upgrade the JSF independently is vital. We would consider it unacceptable for the UK to get substantially into the JSF programme and then find out that it was not going to get all the technology and information transfer it required to ensure 'sovereign capability'. This needs to be sorted out before further contracts are signed and we expect MoD to set a deadline by which the assurances need to be obtained. If the UK does not receive assurances that it will get all it requires to ensure sovereign capability, we would question whether the UK should continue to participate in the JSF programme. (Paragraph 107)
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| 21. | We note that production and support of the JSF will be allocated on the basis of global best value. Achieving best value is important but, if this resulted in all future support of the aircraft being undertaken overseas, then achieving sovereign capability could be put at risk. We expect MoD to demonstrate that achieving global best value and ensuring sovereign capability are compatible. (Paragraph 108)
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| 22. | We note that good progress with the release of information and technological exchange on the JSF programme has been made to date, but concerns remain. MoD has focussed its efforts on the US Administration to ensure that all the information and technology it requires on the JSF programme for the future is obtained in a timely fashion. In our view, dialogue with the US Administration is not sufficient given the key role played by the US Congress. We will support MoD on this issue where we can. We intend to visit Washington in the New Year and plan to raise this issue with the US Administration and with Members of Congress. (Paragraph 113)
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| 23. | We are concerned by press reports suggesting that the US might cut back on the STOVL variant of the JSF as this could have serious implications for the UK JSF programme. While we note the recent assurance given by the US Defense Secretary that the US JSF programme would be 'funded robustly', we expect MoD to keep a close watch on this issue and to assess the likely impact on the UK JSF programme. (Paragraph 120)
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