Conclusions and recommendations |
Carrier Strike programme comprises two new aircraft carriers,
the aircraft that will operate from them, and a new helicopter-based
early warning radar system (known as 'Crowsnest'). As part of
the 2010 Strategic Defence and Security Review, the Department
decided to change the type of aircraft to be flown from the carriers
from the Short Take-Off and Vertical Landing (STOVL) variant of
the Joint Strike Fighter to the carrier variant. In 2010 the decision
was justified by claiming the alternative aircraft would both
save money and enhance capability. Yet 18 months on the Department
yet again changed its mind. In May 2012, the Department asserted
that the benefits expected from switching to the carrier variant
of the aircraft would not be achieved, the costs of switching
would be significantly higher than projected, and it would delay
the operation of the new carriers. Accordingly, the Department
decided to revert to the original aircraft type and announced
that it would once again be buying the STOVL variant. That change
of mind will cost the taxpayer at least £74 million more,
though final costs will only be known in 2014.
2. The Department has a history of making
poor decisions, based on inadequate information. In
this case, the Department provided decision makers with deeply
flawed information on the benefits of changing the type of aircraft
which included basic errors, such as omitting VAT and inflation
from the costs of converting the carriers. The Department attributed
these mistakes, which have cost taxpayers at least £74 million,
to the process being rushed and secret.
For the 2015 Strategic Defence and Security Review, the
Department must plan now to provide decision makers with improved
information, sufficient time to consider options rationally and
avoid repeating the mistakes of the 2010 decision.
3. In justifying its further changes the Department
said it had altered its view on the urgency of securing the new
capability in service and on how it was going to operate with
our allies in deploying the aircraft carriers.
It does not make for good planning to have a constant change of
view which results in changes to specification and requirements.
Recommendation: The Department
must determine its needs and requirements thoroughly and transparently
and then do all it can to stick to these over time.
4. The component elements of the programme
will be delivered piecemeal, reducing the benefits from the sums
invested. There is a
two year gap between the planned delivery and initial operation
of the first carrier and aircraft in 2020, and the early warning
radar system Crowsnest in 2022, which is essential to protecting
the carrier and its crew. In addition, some support shipping will
be 30 years old when the carrier comes into service but the Department
does not yet have funding to replace them.
The Department needs to align the delivery of the various
component projects of Carrier Strike to make the most effective
use of its significant investment. It must provide decision makers
with the necessary information to prioritise and allocate appropriate
funding for the programme and the support shipping to operate
the carriers, as part of the 2015 Strategic Defence and Security
5. Carrier Strike remains a high risk programme
as the Department has little control over the technical risks
and costs involved in acquiring the aircraft.
Despite assurances from the Department, we are not convinced that
it has the aircraft contract under control. Although Carrier Strike
is over five years from planned operation, significant technical
issues, costs and delivery dates for the aircraft are not resolved.
There are also significant cost risks associated with in-service
contracts for maintenance which have yet to be resolved.
The Department must seek to minimise outstanding risks as
soon as possible and it should, drawing on its experience of other
aircraft programmes such as Tornado and Typhoon, exert its influence
with international partners to ensure that the support arrangements
take full account of UK requirements.
6. The Department has not yet completed crucial
negotiations with industry over the carriers. The
current carriers' contract is not fit for purpose as it fails
to provide industry with any real incentive to control costs.
The Department has not been able to transfer delivery risks to
contractors and has struggled to manage its relationship with
The Department must establish clear cost and time baselines
for the completion of the carriers, which the Department must
use to monitor progress.
7. Despite having some 400 staff working on
Carrier Strike there is a risk the Department is not managing
the programme effectively.
Although the Department employs some 400 people on this programme,
it may not have the right procurement skills to manage the risks
in delivering Carrier Strike effectively. We recognise there have
been cuts to this function, but question whether the team is now
the right size or if further significant reductions are possible.
We are concerned that the Department's staff are wasting their
time with bureaucracy and duplicated effort in having to make
detailed checks on the operations of contractors, raising a question
as to the quality of the contracting process.
The NAO should examine whether the Department has the appropriate
mix of staff, skills and capability in procuring equipment and
support from industry and whether the Department's processes for
managing contracts are fit for purpose.