Carrier Strike: the 2012 reversion decision - Public Accounts Committee Contents

1  Strategic decision making on military capability

1. The Carrier Strike programme includes two new aircraft carriers, the aircraft that will operate from them, and a new helicopter-based early warning radar system (known as 'Crowsnest'). In 2007, the Ministry of Defence, (the Department) decided to procure the Short Take-Off and Vertical Landing (STOVL) variant of the Joint Strike Fighter as the aircraft to operate from the carrier. In October 2010, as part of the Strategic Defence and Security Review, the National Security Council which is chaired by the Prime Minister, decided to switch to the carrier variant of the Joint Strike Fighter arguing this was a better value option, saving money and enhancing capability including 'cross-decking' (the ability to land on another countries' aircraft carriers).[1] This required the installation of additional equipment, supplied from the USA, on the carrier to launch and land the aircraft (by catapults or 'cats' and landing recovery equipment or 'traps'). We reported on our considerable concerns in November 2011.[2]

2. In May 2012, the Department concluded that the expected benefits from switching the type of aircraft for the carriers would not be achieved as the costs involved would be significantly higher than projected and switching would delay the operation of the carriers. Within an 18 month period, the Department changed its mind again and announced that it had decided to revert to the original STOVL variant of the aircraft. On the basis of a Report by the Comptroller & Auditor General, we took evidence on this decision from the Department.[3]

3. The Department conceded that the decision taken in 2010 had been based on deeply flawed and immature information.[4] It attributed the basic mistakes that had been made to time pressures, secrecy in the way decisions were taken and a failure to prepare for all the options considered under the 2010 Strategic Defence and Security Review. The Department told us the National Security Council had not discussed the option of switching to the carrier variant of the Joint Strike Fighter until the end of the 2010 Strategic Defence and Security Review. As a result, the Department had had to generate cost estimates quickly. The Department acknowledged that it should have advised the National Security Council, at the time, that it had not had sufficient information to provide an accurate estimate of the costs of switching to the carrier variant. Instead, it had provided a rushed estimate that the cost of converting the aircraft carrier by installing 'cats and traps' would be between £500-£800 million. The Department recognised that this had not been based on a proper analysis and accepted that it had been clearly wrong.[5]

4. By February 2012, the Department's forecast of the costs of converting the aircraft carrier had risen by 150% to £2 billion. Every element of the conversion cost had increased significantly. These cost increases cannot be blamed solely on the result of a lack of information and unknown, unpredictable costs. Over half were the result of omitting predictable costs, such as the costs of planning the conversion, and basic errors which included omitting VAT and inflation from the costs of converting the carriers.[6] The Department agreed that it should have taken inflation into account at the start and believed that it missed inflation off the original estimate due to the pressure it felt rushing to give a cost estimate to the National Security Council.[7] The Department's original estimate assumed VAT on conversion items would not apply, although it did not confirm this with the suppliers in the USA. In December 2011, the Department discovered that the USA required the use of a 'Foreign Military Sale' route on conversion items. This route attracted VAT and increased costs by over £130 million.[8]

5. The original planned operating date for Carrier Strike was 2018.[9] The Department initially estimated that the conversion work for the carrier variant could be completed to allow a delivery date of 2020. The Department conceded this had been over-optimistic. It told us the delivery date slipped to 2023 once it had undertaken work to determine how long fitting the conversion equipment would take. Part of the reasoning the Department offered for its decision in 2012 to revert to the original aircraft type was its belief it would be undesirable to delay Carrier Strike beyond 2020.[10]

6. We are concerned that the Department appears to have changed its definition of 'interoperability' to suit what can be delivered. The Department admitted that while interoperability with the French and the Americans remains a priority, the ability to land the carrier variant aircraft on other nation's aircraft carriers had proven to be more technically difficult than previously thought. The emphasis now was on whether the UK could deliver its Carrier Strike capability to work alongside our allies, which does not include the ability to land aircraft on each other's carriers.[11]

7. The Department has estimated that £74 million incurred in switching to the carrier variant option will be written-off by switching back to the original aircraft type. But the Department will not be able to confirm this estimate until 2014. The Department believes that, despite writing-off this sum, reverting to the original decision will avoid £600 million across the 30 year life-cycle of the Carrier Strike programme.[12] However, the Department agreed that its cost information is still not mature.[13]

8. We were concerned that the Department has delayed investment in Crowsnest, the helicopter-based early warning radar system required to protect the carrier and its crew, which is not expected to be fully operational until late 2022. The Department confirmed that when the aircraft carrier comes into service in 2020 it will not be protected by Crowsnest and conceded that this might constrain where the carrier could operate. However, the Department noted that there would be other options for protecting the carrier including land-based airborne early warning and relying on our allies for this capability.[14]

9. Operating Carrier Strike effectively and safely will require a wide range of other enabling capabilities including frigates, destroyers, aircraft, helicopters, submarines, hydrographic vessels, mine clearance assets and amphibious units.[15] The Carrier Strike programme's capability may be limited if the Department does not upgrade or replace a range of other capabilities, including support shipping where some vessels will be over 30 years old when Carrier Strike comes into operation. The Department told us that it had not agreed funding to replace this shipping and considered that this should be a decision for the next Strategic Defence and Security Review in 2015. The Department acknowledged it could not guarantee the other support programmes would not be touched in the 2015 Strategic Defence and Security Review, or that it could completely protect the Carrier Strike capability in its decisions on funding. It recognised these are all complex and expensive programmes, which would take a long time to deliver.[16]

10. Realising value for money from the 2012 decision to revert to the STOVL variant of the aircraft will also depend on bringing the second aircraft carrier into operation. The Department told us that this change in aircraft variant provides the option to operate Carrier Strike from both carriers, as it will not have to install 'cats and traps' on the second carrier. However, it was still planning to put the second carrier into storage and would not reconsider this policy until the 2015 Strategic Defence and Security Review.[17]

1   Q11 Back

2   'Providing the UK's Carrier Strike capability', Committee of Public Accounts, HC 1427, 56th report, 2010-12, 29 November 2011 Back

3   'Carrier Strike: The 2012 reversion decision', National Audit Office, HC 63, Session 2013-14, 10 May 2013 Back

4   Qq 3-5 Back

5   Qq7-9 Back

6   C&AG's report, para 1.9, Figures 1 & 3 Back

7   Q8 Back

8   Qq 8 & 108 Back

9   C&AG's report, para 1.13 Back

10   Qq 13-15, 108 Back

11   Qq 11-13 Back

12   C&AG's report, para 1.12 and 2.9 Back

13   Q 10 Back

14   Qq 45 - 72; C&AG's report, para 3.5 Back

15   C&AG's report, Figure 12 Back

16   Qq 81 - 94 C&AG's report, para 2.13 Back

17   Qq 81, 108; C&AG's report, para 3.7 Back

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Prepared 3 September 2013