The United Kingdom's Future Nuclear Deterrent Capability - Public Accounts Committee Contents


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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