House of Commons - Defence

Select Committee on Defence First Report

5 Progress on four smaller-size projects

Examination of four smaller-size projects

84. The MoD provided us with a list of equipment projects with a current forecast cost of between £50 million and £100 million. We selected four projects to examine in detail, covering different capabilities. The MoD provided us with project summary sheets for each of these projects which provided a description of the project, and information on performance against approved cost, approved in-service date, and approved Key User Requirements.[101] The total approved cost at Main Gate, the main investment decision, for the four projects was £282 million. A description of the four projects is provided at Table 3 and details of the progress of the four projects as at the end of October 2006 is provided at Table 4.

Table 3: Description of the four projects

Project Description

General Service Respirator (GSR) A replacement for the in-service respirator. The new respirator is to provide "more appropriate levels of protection, equipment compatibility and reduced user burden". Some 310,000 respirators are being procured.
The contractor is Scott Health and Safety Ltd.

Anti Surface Warfare (ASUW) Littoral Defensive Anti Surface Warfare Weapons for the Type 23 Frigate, Type 42 Destroyer and Royal Fleet Auxiliary ships to counter the threat posed by fast attack craft. Some 42 units are being procured.
The contractors are MSI Defence Systems Limited and Dockyard Management Limited.

Maritime Composite Training System Phase I Shore based Warfare Operator Training capability for legacy platforms and the Type 45 Destroyer. The Prime Contractor is BAE Systems Insyte.

Thermal Sighting System (TSS) for the Self Propelled High Velocity Weapon system (SP HVM) A Thermal Sighting System for the Self Propelled High Velocity Missile Weapon system. SP HVM provides close air defence. The contractor is Thales Air Defence Ltd

Source: Ministry of Defence[102]

Table 4: Progress of the four projects as at end of October 2006

Project

(Main Gate approval)
Current forecast cost variation against approved cost

(approved cost)
Current forecast in-service date variation against approved in-service date (ISD)

(current forecast ISD)
Percentage of Key User Requirements expected to be achieved

General Service Respirator (GSR)

(October 2004)
£12.5 million underrun

(£65 million)
10 months delay

(October 2007)
100%

Anti Surface Warfare (ASUW) Littoral Defensive Anti Surface Warfare

(September 2005)
£6 million underrun

(£66 million)
4 months early

(July 2008)
100%

Maritime Composite Training System Phase I

(August 2005)
£2 million underrun

(£79 million)
On time

(July 2009)
100%

Thermal Sighting System (TSS) for the Self Propelled High Velocity Weapon system (SP HVM)

(February 2001)
£2 million underrun

(£72 million)
5 months delay

(December 2006)
100%

Source: Ministry of Defence[103]

85. Overall, as at the end of October 2006, all four projects were forecast to come in under the approved cost, two of the projects were forecast to be either early or on time against the approved in service date, and all four projects were forecast to meet their Key Use Requirements.

GENERAL SERVICE RESPIRATOR

86. The General Service Respirator (GSR) will replace the in-service, personal issue, S10 respirator, and provide more appropriate levels of protection, equipment compatibility and reduce user burden. Some 310,000 units are to be procured. The approved cost for the project was £65 million and the forecast cost at 31 March 2006 was £52 million, some £13 million (20%) under the approved cost. The in-service date was expected to be October 2006, two months earlier than the approved in-service date of December 2006. The in-service date is defined as the provision of sufficient GSR to support an operational deployment of 26,215 personnel.[104] As at the end of October 2006, the forecast cost was £52.5 million an increase of £0.5 million over the forecast cost at 31 March 2006, but still £12.5 million under the approved cost. The forecast in-service date at the end of October 2006 was October 2007, ten months later than the approved in-service date.[105]

87. The GSR will be used by all Service personnel across the Armed Forces.[106] There are some 200,000 Service personnel, so we wondered why 310,000 respirators were being procured. According to Lieutenant General Andrew Figgures, Deputy Chief of Staff, (Equipment Capability), MoD, the additional 110,000 respirators are for:

the Reserves, plus one needs a range to fit the shape of all faces. You could not buy one for one, you would have to fit them, and indeed, one of the reasons why this is particularly good is that you get a very close fit and there is lots of variation in it, so it is a very effective protection which can be suited to the individual.[107]

88. 500 pre-production GSRs have been manufactured for User Trials, including a hot weather trial in Australia to confirm the GSR design against specific climatic categories.[108] We asked about the progress with the User Trials and were told that while there had been good user feedback, a fault had been discovered in the last of the User Trials. In the Australian trials, sweat had built up at the bottom of the respirator.[109] This will require money to be spent on some design changes and modifications, and a re-trialling of the respirator, and some delays in the programme with a revised forecast in-service date of Spring 2007.[110] The MoD has subsequently informed us that the forecast in-service date is now October 2007.[111]

89. It is disappointing that modifications are required to the General Service Respirator which will result in a ten month delay in getting the respirator into service. We look to the MoD to ensure that the necessary investment is made, and the required re-trialling undertaken, to ensure that the General Service Respirator is fit for purpose when it enters service.

90. We were told that there was no indication that police and ambulance services will be procuring the GSR, but there was no reason why it could not be used by these services in due course.[112] Given that UK Armed Forces personnel, and police and ambulance personnel, are likely to be working together in the future, we look to the Home Office and the Department of Health to consider the benefits of procuring the same General Service Respirator as is being procured for UK Armed Forces.

ASUW LITTORAL DEFENSIVE ANTI SURFACE WARFARE

91. The ASUW Littoral Defensive Anti Surface Warfare is intended to counter the threat posed by the emerging and proliferating Fast Attack Craft / Fast Inshore Attack Craft. An automated small calibre gun (ASCG) is being procured to meet the requirement for the Type 23 Frigate and an upgrade of the Phalanx 1A Close In Weapon System to the 1B standard is being procured to meet the requirements of the Type 42 Destroyer and priority Royal Fleet Auxiliary ships.[113] The approved cost for the project was £66 million and the forecast cost at 31 March 2006 was £63 million, some £3 million (5%) under the approved cost. The in-service date was expected to be July 2008, four months earlier than the approved in-service date of November 2008. The in-service date is defined as "when one of each selected solution is available to be deployed on RN platforms for operations".[114] As at the end of October 2006, the forecast cost was £60 million, some £6 million (9%) under the approved cost.[115]

92. Mr Jonathan Lyle, Operations Director, Air and Weapon Systems, DPA, told us that this project is:

essentially countering the threat that emerged posed by fast attack craft and fast inshore attack craft, which could be rigid inflatable boats or even jet-skis armed with weaponry, and that is a particular threat to our ships when they are operating close to land in littoral waters or when they are at check points.[116]

Both systems were to provide better accuracy and better target identification.[117]

93. The Type 42 Destroyer is to be replaced by the Type 45 Destroyer.[118] We asked why the Phalanx system on the Type 42 Destroyer needed upgrading if it was going to be replaced. Mr Lyle outlined the MoD's future plans:

The Type 42 currently has Phalanx 1A systems. A certain number of Type 42s, five in fact, will be upgraded to the Phalanx 1B system and will carry that until they are paid out of Royal Navy service. When that happens, the Phalanx 1B mounts that we have will be refitted to other ships in the Royal Navy's fleet and a decision will be taken at that time as to which are the priority to receive it. A number of RFAs are receiving modifications to enable them to receive this system. We will take a decision at the time. We will recycle the mounts, as we currently do, on to those ships that are best judged to need the capability at the time. So the assets will be reused.[119]

94. Mr Lyle said that upgrade to the Phalanx 1A system was an off-the-shelf procurement as the modification kit was already in service with the United States.[120]

95. The ASUW Littoral Defensive Anti Surface Warfare project will protect Royal Navy ships from emerging threats posed by fast attack craft. We are pleased to see that the project is progressing well and that the MoD is procuring one of the systems off-the-shelf which has already been proven and is in-service with the United States.

MARITIME COMPOSITE TRAINING SYSTEM PHASE I

96. The Maritime Composite Training System (MCTS) system is an incremental programme to enable a coherent approach to future warfare operator training. Phase 1 will deliver the short training capability and provide a central hub to facilitate training through a common synthetic environment. The approved cost for the project was £79 million and the forecast cost at 31 March 2006 was £77 million, some £2 million (3%) under the approved cost. The in-service date was expected to be July 2009, which is the approved in-service date. As at the end of October 2006, the forecast cost and in-service date remained the same. The in-service date is defined as "when all aspects of the throughput have been achieved for each role trained at the Individual Career, Warfare Team (Sub Team, Command Direction Team and Platform Warfare Team) and Continuation level". At 31 March 2006, the project was 3.5 months into a 43 month contract for Demonstration and Manufacture.[121]

97. Dr Andrew Tyler, Director, Land and Maritime, DPA, outlined the project to us as follows, "They basically build the entire operations suite that you would find on board a ship at a land-based training centre".[122]

98. The MoD is taking advantage of commercial off-the-shelf technologies for the hardware for the system. The system will provide flexibility: a classroom can be configured with radars to provide radar training, or can be configured to simulate a Type 23 Frigate or a Type 42 Destroyer. The MCTS should also result in a reduction in the number of instruction and training staff and the amount of real estate used.[123]

99. Dr Tyler told us that the project was seven month behind schedule: "originally it was January 2009 for our most probable [in-service date] and it has now slipped to July 2009".[124] One reason for the slippage was that there were more protracted contract negotiations following Main Gate approval.[125] However, Dr Tyler considered that this project could be held up as a good example of the technique called Earned Value Management which forces those overseeing the project to be extremely rigorous about understanding very early on in a project about how it is likely to develop. Dr Tyler told us that understanding issues on the project very early on had allowed the MoD to do two things:

first of all, it is allowing us to obviously look within the project itself as to how we can get some of that time back, and I think there is a real prospect of doing that.... The second thing it allows us to look at is what contingency plans we might need to have in place in order to ensure that the customer is not going to be without their capability.[126]

100. We asked whether the MoD had built into the MCTS project the training for the Future Carriers. Dr Tyler told us "not at this stage", but that the system could be reconfigured to replicate the floor space of the operations room of the Future Carriers, or any other ship. There would be no need to build a separate training building.[127]

101. The Maritime Composite Training System has the potential to provide flexible and efficient training for Royal Navy personnel. We look to the MoD to claw back some of the slippage that this project has experienced and to ensure that the lessons learned from the use of Earned Value Management techniques on this project are promulgated to other project teams in the Defence Procurement Agency.

THERMAL SIGHTING SYSTEM FOR THE SP HVM

102. The Self Propelled High Velocity Missile system (SP HVM) provides close air defence for manoeuvre forces. SP HVM does not currently have the capability to operate at night, through cloud or in poor visibility. The Thermal Sighting System (TSS) is being procured to address this significant capability gap. The approved cost for the project was £72 million and the forecast cost at 31 March 2006 was £70 million, £2 million (3%) under the approved cost. The forecast in-service date at 31 March 2006 was December 2006, five months later than the approved in-service date of July 2006. As at the end of October 2006, the forecast cost and in-service date remained the same. The in-service date is defined as "one troop (SP HVM), trained, supported and equipped with TSS". In 2005, the requirement was reduced from 135 to 84. However, because of the advanced stage in manufacture, 135 were still being procured. The MoD was investigating options to make efficient use of the excess sights, including using the equipment in an alternative role or as spares.[128]

103. We asked why a Thermal Sighting System had not been fitted to the SP HVM when it was originally procured. Dr Iain Watson, Operations Director for Information Superiority, DPA, explained that the technology was not mature enough and the risk, both technical and financial, was "excessive for that original project".[129] The in-service date slippage on the programme had been nine months, but some of this had been recovered. However, the current in-service date slippage of five months had resulted in a delay in operational capability.[130]

104. We asked why the TSS requirement had been reduced from 135 to 84. General Figgures said that since the requirement had been set the threat had changed with a diminished air threat from the former Soviet Union.[131] For the 51 Thermal Sighting Systems which were surplus to requirements, General Figgures set out the options being considered:

there are three things we can do.... we are looking at opportunities to deploy this very capable sight in other roles. We could use the 51 items to enhance the spares and repair pool so that we could reduce our ongoing support cost.... we could decide to dispose of them from the inventory to avoid the storage and handling charges and perhaps get some recovery from another source. But we have not made up our minds yet which we will adopt.[132]

105. In addition to the 51 sights which are surplus to requirement, there are also 51 vehicles with the existing SP HVM fitted to them, which are now surplus to requirement.[133] We asked whether these vehicles and their SP HVM systems could be used in another role, for example against vehicles or other targets. General Figgures confirmed that this was something which the MoD was exploring, but that it was at an exploratory stage rather than a conclusion stage.[134]

106. The Thermal Sighting System being procured by the MoD will allow the Self Propelled High Velocity Missile system to be operated at night, through cloud or in poor visibility and address a significant capability gap. Changes in the threat mean that 51 of the 134 Thermal Sighting Systems being procured are no longer required. We expect the MoD to identify how these surplus systems might be best used to ensure value for money for the money spent. We also look to the MoD to find an alternative use for the surplus 51 vehicles fitted with the Self Propelled High Velocity Missile system.

LESSONS FOR LARGER EQUIPMENT PROJECTS

107. The four projects we selected to examine have generally performed well, particularly against their cost and performance targets. The MoD told us that smaller-size projects are not managed differently to larger projects and that the principles of Smart Acquisition are applied in the same way. However, the smaller-size projects tend to be shorter in duration "so they do tend to be fresher and, therefore, more immediately affected by changes in... [DPA] policies".[135]

108. We were interested in identifying why the smaller-size projects we selected were experiencing different outcomes compared to larger projects. For example the smaller-size projects we selected had experienced cost underruns, yet larger projects often experienced cost overruns. Dr Watson considered that "the shorter projects do tend to be slightly more successful, but we do not have that kind of separation".[136] Mr Lyle added that "the larger and more complex projects are larger and more complex".[137] This is self-evident, but it is unclear why the level of complexity could not be built into the estimates for cost and time. The MoD told us:

There are a variety of reasons why smaller projects could be deemed more successful than some of the larger projects, particularly from an in year cost variation position. Smaller projects, that is, the Category C projects between £20m-£100m may involve less risk, be less technically demanding, be of shorter duration, have less integration issues, are unlikely to involve collaboration and have fewer stakeholders....By contrast the level of technical difficulty is often greater in the larger projects because there is a much greater element of development to meet more demanding performance criteria. The Department has recognised that the degree of complexity in a project is an important factor in assessing how it should be managed. We are working closely with the Australian DMO [Defence Materiel Organisation] defining project complexity and pulling together a skills competence framework that will improve the Department's ability to manage large, complex projects.[138]

109. The MoD told us that "Learning From Experience" is required for all projects, regardless of their size and the lessons from all size projects are shared. The DPA is also working with the NAO to implement the NAO's Gold Standard for effective project control in order to standardise good practice in controlling all projects. The NAO Gold Standard defines the drivers for successful project delivery which are applicable to projects of all sizes. In the Defence Industrial Strategy (DIS), the MoD recognised the benefit of adopting more flexible and agile approaches to procurement. The MoD's written evidence states that "a particular facet of small projects is the ability for the project stakeholders, including the front-line users to work as a small, effective team in delivering the project. DIS recognised the importance of better team behaviours and relationship management as part of the core business of all our acquisition". The MoD is seeking to ensure that these and other initiatives shape the project management and control processes in the new Defence Equipment & Support organisation, which is to be formed following the merger of the DPA and the DLO (see paragraphs 21-38).[139]

110. There are lessons to be learned from the successful management of smaller-size equipment projects which can usefully be applied to larger equipment projects, and we look to the MoD to ensure that such lessons are promulgated. We are pleased to hear that the MoD is working with the Australian Defence Materiel Organisation and the National Audit Office to identify better ways of defining project complexity and better ways of controlling projects. It is vital that what is learned is fully embedded in the new Defence Equipment & Support organisation, which will be formed following the merger of the Defence Procurement Agency and the Defence Logistics Organisation.

101 Ev 33-48 Back

102 Ibid. Back

103 Ev 33-48, 52 Back

104 Ev 33-35 Back

105 Ev 52 Back

106 Q 48 Back

107 Qq 52-53 Back

108 Ev 33 Back

109 Q 54 Back

110 Qq 55-56 Back

111 Ev 52 Back

112 Qq 48-50 Back