Select Committee on Defence Minutes of Evidence

Examination of Witnesses (Questions 20-39)



  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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