Examination of Witnesses (Questions 20-39)
MR MURRAY
EASTON, MR
STEVE LUDLAM
AND MR
PETER WHITEHOUSE
7 NOVEMBER 2006
Q20 Mr Hamilton: Could you give us
an estimate of how many people that would require? If you cannot,
could that information be passed across: present workforce to
what would be required if that was to come about.
Mr Whitehouse: Indeed.[3]
Q21 Willie Rennie: I get a sense that
the excitement in this area is all around building new vessels
and that decommissioning would not be that attractive for those
that you require to do the job. How much is that the case and
what would be required in order to attract those individuals?
Mr Whitehouse: It is not particularly
about excitement, it is about the scale of the operation that
would be carried out. The numbers of people would be markedly
reduced from where we are today as a maintenance and refit site.
I think the key issue would be the tension, perhaps, that we would
see with the ramp-up of the NDA work within the civil sector.
In fact, as a business ourselves we are looking at NDA activity
to actually help mitigate the variability of workload that we
see from the submarine programme; we are looking at the NDA sector
to deploy some of our skills and keep people that we need in the
long term effectively and productively employed during lulls in
their military workload streams. At the end of the day, things
would have to be done; we would be in there in a common pool looking
for common skills with the NDA programme, and that is something
we would have to address at the time.
Q22 Willie Rennie: Is there the kind
of kudos, though, attached to that in the same way as the kudos
to building new vessels? Are people attracted to that? Where do
the best people go?
Mr Whitehouse: As it stands at
the moment, we have very little difficulty in attracting young
men and women, graduates and apprentices, as Murray has described,
into our business to carry out the maintenance work. In many respects
it is every bit as complex as the build programme but with the
complexity focused in different areas. There is a lot of challenge
for both our non-industrial and our industrial workforces in what
we do as the refit site. If the submarine programme were to wind
down at some point in the future then the skill mix, the numbers
of people, would change markedly, and that is something we would
have to address at the time. It is a different type of activity;
it is one that does still have very, very significant challenges
in it and requires some very specialised skills.
Mr Ludlam: I could perhaps take
a slightly different view? If a decision were to be taken not
to build any more submarines and we were into an in-service support
and decommissioning phase, I think inevitably a decision would
also be taken to freeze the level of knowledge that we have and
certainly freeze the level of skill that we have got with that
knowledge. That then probably affects engineers because if they
are not growing in their knowledge it is less exciting for them.
It also probably affects the military capability, too, because
we may face, in service support, some issue that we have not developed
the knowledge to address immediately, and therefore the availability
of the submarine could be affected. It is a slightly different
view, I think.
Robert Key: Can I ask Mr Whitehouse
this: as you know, there is a Royal Naval base review going on.
If the Government decided to close the Devonport Royal Naval base,
could your operation at DML move to any of the other bases which
might be kept open?
Q23 Chairman: Could you see if you
could answer that on the very narrow basis that Robert Key has
asked it, because we will come on to the base review later.
Mr Whitehouse: In terms of the
physical infrastructure that we have at Devonport it is highly
specialised, it is just being extensively modernised and extended
and I think the key issue would be the affordability of the re-creation
of that infrastructure. That would, in practical terms, preclude
moving the irradiated fuel-handling capability, the refuelling
capability anywhere else. Those docks, the fuel-handling infrastructure,
the cross-site services are just so extensive I find it inconceivable
that it could be affordable to move it anywhere else.
Q24 Robert Key: Could DML continue
to operate if the Naval base was closed?
Mr Whitehouse: There is the issue
that I outlined to your colleague of the very significant peaks
and troughs in our load going forward, as we drop to a single
SSBN refit stream. I said a ratio of about 4:1, peak to trough,
in terms of industrial throughput. The key to actually keeping
submarine maintenance affordable, in my view, hinges on a decision
to actually sustain the current programme and move to a successor
SSBN. If that is the decision, then I believe that decision to
maintain the programme, to build a successor system, should be
a pivot point around which decisions on the Naval Bases, base
porting, should actually revolve. If that is not the case and
if decisions on where surface ships are base-ported and, hence,
their in-service maintenance are taken out-with that submarine
context then both the affordability of the submarines and the
affordability of the surface ships will suffer because of the
integrated nature of our site.
Q25 Chairman: You are talking about
the decision to build a successor SSBN as though it were a decision
that had been taken, which of course it has not. Can we consider
for a moment the consequences of there being no Vanguard successor?
What would happen to the skills base then?
Mr Whitehouse: So far as our site
is concerned, if the existing system were run on for its projected
full service life, which in parallel throws up the requirement
for a number of SSNs to operate with the SSBNs, then irrespective
of a successor decision being positive the affordability of the
submarine flotilla in that run-out phase would suffer just as
badly as I have just described. The costs of in-service support,
the deep maintenance, the long overhaul periods would escalate
overall across multi-year periods if we are unable to actually
deploy the industrial workforce on other work streams at Devonport
during the troughs in the workload.
Mr Jenkins: The point there—I
am going off a little bit—is the assumption that we are
going to maintain the existing fleet. If we are not going to have
a replacement the next question is: why have we got the fleet?
So how much will it cost to decommission them in the shortest
time possible and wrap it all up? I thought you were going down
that road, but you probably were not.
Q26 Chairman: I was going to ask
if we were not to have a Vanguard replacement would we be able
to build nuclear powered submarines—SSNs rather than SSBNs?
Murray Easton, would you like to answer that?
Mr Easton: Absolutely we would
be able to build them, yes. Our designers, as I mentioned earlier,
Chairman, will be available in number increasingly throughout
next year, 2007, and 2008. Clearly they are available then and
very experienced at what they do; they can apply themselves to
any other nuclear submarine demand. I am not aware that there
is one, with the possible exception of the potential successor
programme. If the successor programme does not go ahead then,
obviously, depending on how many Astute submarines there are,
our production facility at Barrow will grind to a halt.
Chairman: Thank you. Moving on to the
Astute and the potential successor, as it still is, Willie Rennie.
Q27 Willie Rennie: One of the reasons,
I understand, for the early problems with the Astute programme
was the extended gap between the Vanguard and the Astute programmes
and, therefore, the loss of construction and design skills. What
happened to those skills after completion of Vanguard, and which
skills were hardest to reconstitute back at Barrow?
Mr Easton: What happened to the
skills? If we look to some 14,000 people and how did we get to
3,500 and where did they go, effectively they dissipated into
the rest of the manufacturing community in Britain. I faced a
similar problem, actually, when I was in your constituency when
we looked to British shipbuilders who employed 110,000 people
and thought: "They don't now so where must they be and can
we attract them?" They literally dissolved into the manufacturing
and industrial community. However, they also lose their skills;
so they are not match fit, they do not keep up that skill capability.
That is the crucial thing for us. Where have people gone? I really
could not tell you. A lot of the manual employees, the skilled
dexterous people that we have, go offshore; they go offshore and
then, depending on the fluctuations of demand in that industry,
could come back. They would not have practised what they need
to for our business but they may come back. The problem is much
more acute in terms of the white collar; when they move away they
do not tend to come back. So, whether it is designers, whether
it is draughtsmen, whether it is supervisors, planners—all
those key skills—nuclear safety experts, they go away, and
we do not attract them.
Q28 Willie Rennie: Why is that then?
Surely, if they can easily transfer somewhere else they can easily
transfer back again. What is stopping them?
Mr Easton: Stability of employment,
I think, generally. Most of us like to know the mortgage is going
to keep getting paid, and they go for that stability. They try
and avoid fluctuating demand, as naturally we do in business as
well.
Q29 Willie Rennie: Have you learnt
any special lessons during that period then, about how to handle
that change and those gaps?
Mr Easton: The lesson learned—and
I think one of my colleagues mentioned this already in the hearing—is
that we try and employ as much flexibility as we can, but recognising
the demand for quality is such that you need people often to be
practising their particular skill—white collar or blue.
There is a lot of flexibility and there is a lot of co-operation—I
mentioned earlier even between the companies. I think, arguably,
when you have got 14,000 people there is a lot more opportunity
for people to move around, but when you are down to 3,500 then,
frankly, it is very difficult often to identify those opportunities.
Stimulating work for people and making it attractive, Barrow-in-Furness,
for example, has a particular geography about it—naturally
it is in a 33-mile cul-de-sac—we have to make it, you said,
exciting earlier. It is exciting; it is very enjoyable and the
employees that we have enjoy working there—the majority
of them; I dare say not all—but it has got to be challenging
work, and that more than anything—people want to be valued.
Q30 Mr Jenkins: Going on from that
constant nature and how you would like to have a constant nature
of work—we all would—as an industry have you come
together and developed a timeline as to what is now proposed or
planned, whether carriers, submarines, 45s, etc, and what would
be the optimum arrangements, for those orders to give you some
constant work across industry, therefore lowering the price and
not returning to the old boom and bust scenario? Have you done
that?
Mr Easton: We are motivated by
the customer, certainly, to come together often, and we do, and
we share resource plans with them as to how we can, with the Ministry
of Defence, obviate the, as you say, "boom and bust".
The fact of the matter is that some of those projects, like the
carrier, are so high in their resource demand and often with dissimilar
skills, as we have talked about earlier, that that can create
difficulty. If I look to Steve Ludlam and Rolls-Royce, unfortunately
they do not want nuclear reactors in the carriers, so that is
not going to be too helpful. We have, in the rest of the industry,
certainly, got an opportunity to be flexible in terms of what
work goes where, and we try to co-operate just on the grounds
of affordability or the projects will never happen.
Q31 Mr Jenkins: So the answer is
no, you have not got a timeline with the industry?
Mr Easton: We have a timeline
for ourselves, and I can furnish the Committee with what our resource
plots are.[4]
Q32 Mr Jenkins: Yes, please.
Mr Ludlam: If we look at what
we have discussed in the submarines business overall, as a collaborative
issue, we have looked at, really, some simple points: a 22-month
manufacturing drumbeat, an eight-year design cycle, a new class
of two years, seven years, seven years and two years—the
first two years being the concept, seven years of design, seven
years of manufacturing and two years of commissioning. Those are
the sort of lines of time we have put down to start to think about
how the size of our businesses should look and what investments
we can make to keep that size to meet that demand. It is not something
that we have been given it is something we have discussed as,
probably, an optimum position.
Q33 Chairman: Do you believe that
the Ministry of Defence has the capacity and the skills base within
it to manage that, and do they understand the sorts of things
that they ought to be talking to you about? Do they have that
skills base themselves?
Mr Easton: In a word, yes. They
have fewer people who understand it than they used to have—they
have reduced the number—but I have to say we co-operate
very, very closely with them, and it is a very constructive dialogue
with the Ministry of Defence, in terms of resources, demands and,
therefore, programme timing.
Mr Ludlam: A number of the new
contracts that each of us are looking at involve a great deal
of collaboration with the MoD: the joining together of teams,
the collocation of teams, the secondment of MoD personnel into
particular jobs within our industries, all to make sure that together,
as an industry, including the MoD, we retain the skill that is
necessary to take this forward.
Q34 Chairman: When people are seconded
from the Ministry of Defence into your industries, do they ever
return to the Ministry of Defence?
Mr Ludlam: Yes, they do.
Q35 Chairman: Just checking. Let
us assume, for the purposes of this question, we are going down
the line of a new SSBN. Would it need a new design of nuclear
reactor, and if so why?
Mr Ludlam: The current design
of nuclear reactor was designed in the late-70s/early-80s and
whilst it is very safe and it has the power that is necessary
for the current military capability that we are looking for it
is likely that the safety regime as we go forward will get tighter
and tighter. Without going into some of the more secure areas
of conversation, a new design of reactor would be quite important
to make it what we might call a "passive" plant. So
the biggest issue with a nuclear reactor is when you are not using
the power to move around or for electricity it is still generating
heat and you need to take that heat away. Largely speaking, you
would do that using a pumped flow system and electricity is required
for that. If you lost the electricity the pump flow is not there
and it is much harder to take the heat away. So a new design of
reactor would aim to avoid pumped flow systems and a more natural
process of taking the heat away and, hence, it would be much safer.
Also, the amount of fuel, so to speak, we have got in the tank
is becoming more and more important for the military operations
that are going on. So we probably might choose to look at the
reactor core and see just how many more miles per gallon we could
get from that reactor core. I think a new reactor is possible;
it is possible on safety grounds. In doing all that, the affordability
changes, too, so when we have looked at a new reactor design compared
to the old reactor design, we are looking at something like, perhaps,
10 or 20% improvements in affordability through a new reactor
design too, because of the way that we would remove some of the
components on the plant that we could basically design out and,
again, make the plant better to operate and safer to operate.
Q36 Chairman: So a new design would
be not only safer but it would be cheaper?
Mr Ludlam: We would be aiming
to make it safer and cheaper, and within that new design sustaining
the industry as well.
Q37 Mr Borrow: It is an eccentric
question. In the early-90s the United States Government commissioned
an inquiry into the possibility of closing down the Electric Boat
company to see was it possible, if you did not need to manufacture
any nuclear submarines for a while, to shut the whole facility
down and then several years later start it all up again and what
the implications would be. The result of their study was that
it was not a good idea and they did not pursue it. Has any thought
been given to that as an option in the UK by the industry?
Mr Easton: I am aware that many
people contemplate a wide range of scenarios, some of them practical
and some of them not. Most people depend on that (as I understand
it, the study you refer to is a Rand Corporation study) as one
indicating the catastrophic effect that would be inevitable. Looking
even at the delay, they did actually cancel one Seawolf boat—one
of the class—and then terminated that class. The class was
expensive, but it was made a lot more expensive by cancelling
a boat, because obviously the overheads just went exponential.
It could be one reason why the American boats are significantly
more expensive than the ones that we produce in this country.
So, no, I do not think it is a good idea either.
Q38 Linda Gilroy: The Defence Industrial
Strategy identified affordability as a key consideration in the
decision over the potential Vanguard and Trident successor. In
earlier answers to various questions you have given us some insight
into what industry is doing to reduce costs, including the through-life
costs. Are there any things that we have not touched on in those
earlier questions that you would like to set before us as to what
industry is doing in that respect?
Mr Easton: Indeed. Affordability,
I mentioned earlier, is a massive issue which we recognise fully
and proactively, certainly, in BAE Systems Submarines. In 2005
we took 31% out of our overheads; in 2006, this year, we set ourselves
a target of taking 10% out of the cost base—so overheads,
materials, labour, right across the base—and we will achieve
that. That has been generated by a number of lean design studies,
lean manufacture, even a lean office study. So we have involved
people from outside industry—for example, car manufacturers,
technologies that would not normally be seen as associated with
our business but from whom we can learn. We also worked very closely
with the Ministry of Defence, but I think most importantly I would
highlight that affordability has been assisted when you look at
the materials component of the price of a submarine. Up until
very recently, certainly in both one to three of the Astute class,
materials would comprise about 50% of the value. It has, in fact,
now gone up to about 60% simply because our overheads and our
productivity have gone in the opposite direction. What do we do?
We proposed change to the whole supply base by our initiative
of getting together (I believe you are going to take evidence
today from several of our colleagues in Strachan & Henshaw,
Alstom and MacTaggart Scott) with a group of 10 companies in a
key supplier forum who have looked at what we actually need rather
than what we ask for. Often, the Navy or even ourselves, as designers,
say we want something but to ask the supplier what you need, often,
you get a different answer. That has been a hugely constructive
forum, it has met five times already—the sixth occasion
is imminent—but we have invited the DPA, the DLO and the
DTI, so we are trying to get government bodies to co-operatively
work with us, and of course they are. We have had exceptionally
good results from that, and I think it is an example of the submarine
enterprise working very well together as a team to tackle the
affordability issue.
Q39 Linda Gilroy: As far as through-life
costs are concerned, I appreciate one of the things from the Devonport
point of view is that, like cars, submarines are requiring a lot
less attention in the mid-life. Have you been building in further
potential savings for through-life costs? I must admit I was a
little worried when I saw some of the amazing things you were
doing, as far as the modular vertical ways that you brought over
from Electric Boat and some of the very long pipe runs that were
being done, as to how accessible these were going to be when it
comes to through-life support. I suppose my general question is:
to what extent have you been co-operating to make sure that these
things do not build in difficulties but actually make additional
savings of through-life cost support?
Mr Easton: You make an extremely
good point but we do actually have a very active engagement between
the three companies here, to be honest. The supply chain is a
fairly small family but, in particular, the three companies giving
evidence work exceptionally closely together, very co-operatively.
In particular, if you look at through-life maintenance, to take
the example that you used yourself, long pipe runs, you can tend
to look at that and say: "Well, that is maybe not the best
for getting each section of pipe out in the future", but
quite clearly what it does is reduce our UPC because we are reducing
the number of joints; it is simplifying the operation because
the number of leaked parts are reduced significantly and if come
the day they need to get a section out then, of course, they can
cut the pipe and put in couplings. That is how we would have designed
it in the past, with far, far too many couplings. So as a repair
procedure (I am sure Peter will better explain than myself) they
are very resourceful at taking out sections of a system that we
may have put in in a larger piece.
3 See Ev 113 Back
4
See Ev 114 Back
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