Examination of Witnesses (Questions 60-79)
MINISTRY OF
DEFENCE
WEDNESDAY 19 NOVEMBER
2008
Q60 Mr Burstow: How typical would
that be for the projects that colleagues have mentioned so far
as exemplars of non-best practice? How many of those have had
that sort of overlap?
Rear Admiral Mathews: Most of
them have had a far bigger overlap than that.
Q61 Mr Burstow: What was the planned
overlap in the past?
Rear Admiral Mathews: They are
different projects and therefore I could not give you an exact
answer on each of those.
Q62 Mr Burstow: Could I give notice
and ask for a note on that so that we can get some sense of how
much planning there had been of overlap and how much it overran?
[3]
Mr Lester: Yes.
Rear Admiral Mathews: We are planning
a concept phase of two years. The White Paper did an awful lot
of clarifying the concept phase. It narrowed down the options
base before we started. We knew it was a submarine. We knew it
was nuclear powered. We knew it had to fit existing infrastructure.
The options base is considerably narrower than where we typically
start the concept phase from. That is why we are quite confident
about delivering an outline design: a set of options for the Investment
Approvals Board to take at Initial Gate in the autumn of next
year.
Q63 Mr Burstow: One of the decisions
that is potentially not required until 2014 is the decision about
how many boats to buy, whether it is three or four submarines.
That does not come until the Main Gate investment decision. Why
is it that that decision can be left until that point?
Sir Bill Jeffrey: Our intention
is to take that decision when we feel we have enough information
on which to take it. It goes back to whether the reliability of
the new generation can be confidently predicted to be sufficient
to provide continuous at sea deterrence with three rather than
four. There is an element of circularity in this because there
are choices to be made about how much reliability to design into
these boats. We may conceivably take that decision a little earlier
than Main Gate. It depends on the moment at which we feel we know
enough to make the judgment.
Dr Hollinshead: It is part of
the concept phase that both my team and the Admiral's combined
are doing a three versus four boat study in detail. We already
have half of that done. We are quite well into the groove in terms
of understanding the issues there.
Q64 Mr Burstow: Can I move to the
governance arrangements, risk area three? Can I draw attention
to paragraph 3.12 where it talks about the Health and Safety Executive's
Nuclear Installations Inspectorate? It goes on to say that whilst
they do not have a legal responsibility for licensing in this
area they have indicated to the NAO that the Department could
make better use of its cross sector expertise. Why has that not
happened so far? Are there plans to have such discussions to make
better use of their expertise?
Sir Bill Jeffrey: As a general
issue, one of the lessons we have learned from the Astute experience
is the importance of docking at a high level with stakeholders
such as the HSE, so we will certainly do that. Why were we not
doing it earlier?
Rear Admiral Mathews: I do not
think that is quite the message in my view that the HSE and particularly
the Nuclear Installation Inspectorate were getting over. We have
civil elements of this programme—i.e., dockyards and Aldermaston—which
are licensed by the Nuclear Installations Act. We also have military
elements of this programme where we have our own Defence Nuclear
Safety Regulator who authorises—a slightly different term
but a very similar process in terms of underwriting the way we
conduct nuclear safety in our business. The HSE are engaged in
our programme. From their perspective, the message is that we
went through a very difficult journey with them on the D154 project,
that big project in Devonport, to upgrade the nuclear facilities
there. It was a learning experience for both parties. There was
a very clear message from the NAO Report back in 2002 into D154
that we needed to work together in a better way. We are continuing
on that journey. I think relationships are much, much better than
they were. We have frequent meetings with them. They are brought
into what we are doing. They know where the programme is going
and they know where the engagement will be in this programme as
we go through time.
Q65 Mr Burstow: In response to the
phrase in here that the Department could make better use of its
cross-sector expertise, you are saying it is already doing so?
Rear Admiral Mathews: I believe
it is, yes.
Q66 Mr Burstow: Therefore, when this
Report was signed off, that point somewhere along the line was
not flagged up in signing it off with the NAO presumably?
Sir Bill Jeffrey: The NAO were
reporting what the HSE had said. What we are saying is that we
now feel the relationship is stronger.
Q67 Mr Burstow: May I move on to
3.13? "The Department recognises that there are critical
interdependencies at a high level between programme strands and
between this and other programmes ... ". It goes on to say,
"Although these interdependencies have been considered, they
have not all been mapped out in detail ... ". Is there a
timetable for that mapping? When will all of the interdependencies
have been mapped?
Sir Bill Jeffrey: The short answer
is that this is an essential part of what the concept phase is
doing.
Dr Hollinshead: We have now had
for the last couple of months on a large sheet of A zero paper
all of the lines of development—the submarine, the missiles,
the people, the infrastructure—mapped out. We now understand
the milestones and how they interact. We are now looking further
at interaction with other programmes. It is part of what we set
up the programme support office to do. On our score card we now
have one of the metrics as dependencies and are there any risks
in there that need flagging up and looking at. I think we are
making quite good progress and again I would have thought, within
the next few months—the NAO said by next September, but
I would have thought more quickly than that—we will have
something where we can understand the dependencies and, if there
are any risks between them, flag them up to the Programme Board
for decision.
Q68 Mr Burstow: Can I pick up on
something in risk area four? It says in paragraph 4.5, "The
Department accepts that the White Paper cost estimates are not
sufficiently robust to provide an accurate baseline against which
progress can be measured and budgetary control exercised ... ".
In terms of the work that has been done to date, when will such
baseline data be available to allow that budgetary control?
Sir Bill Jeffrey: As I said earlier,
we included in the White Paper the best ballpark estimate we could
offer of the overall cost. This phase, which we are describing
as the concept phase, is refining that and developing costs in
greater detail. When we come to Initial Gate in the autumn of
next year, we will have better costings and the intention is to
make some sort of—
Q69 Mr Burstow: At the first gate,
you would have an accurate baseline against which progress can
be measured and budgetary control exercised and sufficiently detailed
cost models which can be used to manage cash flow?
Sir Bill Jeffrey: That is the
intention.
Dr Hollinshead: The cost models
should have a design in them by which we can cost in some detail.
We will also understand the infrastructure and manning implications
because we will know for example for which designs how many people
there are on them or how much infrastructure they require. At
that stage we will have a much better feel for how the different
designs look and cost.
Q70 Mr Burstow: Can I draw your attention
to box eight on page 26? It refers to the tax treatment of the
programme and says that the tax treatment of the programme as
a whole is yet to be determined. Has it, since this Report has
been written, been determined and, if so, what is the result?
Sir Bill Jeffrey: The situation
has not changed but the situation is a little simpler than the
Report may have led you to believe. We will follow the Astute
model which, for all practical purposes, is zero rated for VAT.
There are some surrounding issues about elements which have to
be worked out in more detail.
Q71 Mr Burstow: Our nuclear deterrent
is not VAT rated at all?
Mr Lester: It depends which elements
you are talking about. Elements of it are and elements of it are
not.
Q72 Mr Davidson: In the paper you
mentioned that the Initial Gate decision will be taken by September
2009. Parliament is not sitting then. Will we be given the opportunity
to approve it before the summer, which means you have to take
a decision earlier, or will it wait until October or November,
in which case there will be a delay?
Sir Bill Jeffrey: Initial Gate
is an internal point at which we essentially decide that the concept
phase has been completed such that—
Q73 Mr Davidson: I understand what
it is.
Sir Bill Jeffrey: We would be
reporting to Parliament as soon as Parliament returned on the
key elements.
Q74 Mr Davidson: Dr Hollinshead is
nodding saying you would be reporting what you had done but obviously
it would be for our approval.
Sir Bill Jeffrey: I think these
would normally be decisions taken by ministers.
Q75 Mr Davidson: That is to be pursued
somewhere else. Can I clarify whether or not any decisions have
been taken about whether the new reactor will be two or three?
Rear Admiral Mathews: No decision
has been taken. This is part of exactly what we go through, the
option phase at the moment, and we are looking at three options
effectively.
Q76 Mr Davidson: Have you any idea
on when a decision on which reactor will be taken?
Rear Admiral Mathews: By Initial
Gate.
Q77 Mr Davidson: Can I ask Mr Lester
or, to give you your official title, the fall guy—since
presumably, when pass the parcel has finished, you will be "it"—I
understand that you are only part time on this. Can we be reassured
that your other duties are not going to lead you to neglect your
responsibilities in this area?
Mr Lester: This is arguably the
most important responsibility I have. How much time on it I spend
depends on the issues which have arisen at the time. I expect
it will become a bigger part of my job in the run up to the Initial
Gate decision. I have more full time support than probably any
other SRO in the Department. I have Dr Hollinshead and the division
working for him and also the programme support office in Abbey
Wood. I have quite a big infrastructure underpinning me.
Sir Bill Jeffrey: There are other
very senior full timers on this case, including the two star.
Q78 Mr Davidson: You can understand
the anxiety when we hear that various people are being rotated
out of this and the person who is "it" is only part
time. Can you assure us that that will not cause any possible
difficulties?
Sir Bill Jeffrey: As I said earlier,
the location of the Senior Responsible Owner in Guy Lester's post
is the right place for it to be at the moment for the reasons
I gave to do with the wide view of the Department. The programme
director is a full time post and he is responsible for nothing
but driving this programme forward. I think it is sufficient but
we need to keep it under review because, as you move from policy
to concept to delivery, the nature of the SRO ought to evolve.
I think that is one of the points I take from the NAO Report.
Q79 Mr Davidson: Can I ask a number
of questions about our relationship with the United States? I
am a bit anxious that, on a number of these areas, we do seem
to be pretty beholden to the United States. If there are delays
in the United States programme, is that irrevocably going to damage
your other timetable?
Sir Bill Jeffrey: First of all,
I would not use the word "beholden" myself. I think
it is a strong, mutually supportive relationship. One of the side
effects of the fact that, because the Ohio class submarine has
a longer projected life than the Vanguard has, is that in some
respects we are moving earlier than they are. Therefore, it is
genuinely mutually dependent.
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