Ministry of Defence: Acquisition and support of defence equipment Contents

2Support arrangements and cannibalisation of naval equipment

12.On the basis of a report and memorandum from the Comptroller and Auditor General, we also took evidence from the Ministry of Defence (the Department) and the Royal Navy on support arrangements and cannibalisation of naval equipment.33

13.In 2016–17, the Royal Navy spent £9 billion on the equipment, people and support needed to meet its commitments. This includes procuring new vessels such as the HMS Queen Elizabeth aircraft carrier, and the Astute-class nuclear submarines. To keep its fleet operational, the Navy also spent £1.8 billion supporting its ships and boats, including on spare parts, fuel, and maintenance.34 Since 2000, the Navy’s fleet size has reduced by almost a third from 123 to 84 vessels, including a reduction in the number of destroyers and frigates from 32 to 19.35 This reduction has affected the Navy’s flexibility, with it having to quickly fix problems to keep vessels operational, rather than being able to replace a defective ship with another one while it is being fixed. In 2017, the Government announced its commitment to halt the decline in ship and submarine numbers, and increase the size of the Royal Navy Fleet by the 2030s.36

14.The Navy’s ships and submarines are highly complex engineering systems. For each type of vessel, the Department needs to identify and put in place appropriate maintenance and support for vessels to remain operational. This involves predicting the required type and quantities of spare parts, as well as the frequency and scope of maintenance periods. Where the Department does not have the spare part required for either maintenance or where an unexpected defect has arisen, it may choose to take the required part from other ships and submarines. Each instance—termed ‘cannibalisation’ or ‘store robbing’—can increase costs and technical risks and divert resources.37 Over the last five years, there have been 3,230 instances of ship and submarine cannibalisation involving 6,378 parts.38

Support arrangements for Type 45 Destroyers and Astute-class submarines

15.The Department acknowledged that when the Type 45 Destroyer and Astute-class submarines were brought into service, the support arrangements had not been as good as expected.39 For example, the National Audit Office (NAO) found the increased Astute-class equipment cannibalisation (107% increase in the last five years) resulted, in part, from a critical shortage of spares given ‘poor inventory management and an incorrectly defined, managed and resourced’ support approach. The NAO also reported that the Navy had decided to make savings by not cataloguing or labelling some parts of the Type 45 Destroyers. This had then made it harder to identify the parts needed or where they might be available.40

16.It can be more difficult to predict support requirements for new ships and submarines given the uncertainty of how this equipment will perform and the limited information available on which to make decisions. In 2016–17, in an effort to improve support, the Navy invested an additional £8 million on Astute submarine spare parts and spent £1.5 million improving technical documentation for the Type 45s.41 The Department told us it had learnt lessons about introducing new equipment, which it had put into practice with the new Queen Elizabeth aircraft carrier, where it expects to have 95% of the spares available.42

Availability of spare parts

17.Alongside improving the support for new equipment being brought into service, the Department also recognised the need to improve its planning of scheduled maintenance to ensure spare parts always available when required.43 The NAO reported that in the last five years, 60% of the recipient ships and submarines that needed parts were in maintenance or low readiness.44 In September 2017, only 67% of parts ordered by the Ships team in Defence Equipment and Support (DE&S), and 58% by the Submarine team, were delivered on time (against targets of 95%). In 2014, the Department introduced a programme designed to improve the availability of spare parts for ships and submarines. This involved building inventory management skills, better planning of maintenance, and ensuring the supply chain delivered parts on time.45 The Department told us it now required all teams to look two years ahead to examine each planned maintenance period and the associated spare part requirements.46

18.We questioned the Department on its ability to ensure adequate funds would be available to support its in-service ships and submarines given the well-recognised budgetary challenges it faced. The Department acknowledged these financial challenges, but explained that, as the Navy had received funding reprioritised from across the Department, it felt the service had sufficient resources to deliver its commitments.47 However, we note that despite this, in 2016–17, the Navy reduced its maritime support budget by 6% (£271 million), and the Department expected the Navy to make savings of £1.6 billion from its support budget over the next 10 years.48 The Department told us that it expected to be able to make the necessary savings without a disproportionate impact on vessels’ ability to operate.49

Reliance on cannibalisation

19.Previous Committees have recognised equipment cannibalisation can be acceptable and necessary in some cases. However, they have also warned that the Department needs to ensure cannibalisation is the most effective solution and that there is a clear threshold for when it becomes unacceptable.50 This is line with the Department’s own guidance that cannibalisation will only be “used if no other solution is available due to the risk of damage to equipment components”.51 The Department reiterated that there was no policy to increase the use of cannibalisation, which would only be conducted to ensure high-priority ships and submarines remained operational.52

20.Despite this, the NAO reported that cannibalisation has become a routine part of equipment support, with a 49% increase in the instances of cannibalisation between April 2012 and March 2017. In 2016–17, there were 795 instances of cannibalisation, equating to 66 instances per month, compared to 30 instances per month in 2005, at a time when the Navy was larger. In particular, the Department had relied on cannibalised parts to resolve 28% of Astute-class submarine defects during 2016–17. This contributed to 110 parts being taken from the Astute-class production line in 2016–17, a 43% increase from 2012–13. The NAO also reported that cannibalisations have resulted in a 42-day delay to, and £4.9 million cost impact to, Boat 3, and a further estimated £40 million cost increase for those submarines in production.53 The Department acknowledged that in some areas the use of cannibalisation had become systemic rather than one-off, and it would need to take some action. This was particularly the case with the Type 45 Destroyers and the Astute-class submarines, where it was ‘more problematic’.54

21.The Permanent Secretary told us he was “not uncomfortable” with the routine levels of cannibalisation being conducted at present. The witnesses expressed concern that some parts were being repeatedly cannibalised, and the Permanent Secretary told us this was an area on which the Department would now focus as a matter of urgency.55 The NAO found that 26% of the instances of cannibalisation, where data were available, involved parts which had been cannibalised on three or more occasions. Parts most often cannibalised included non-safety critical valves (costing an average of £2,541 each) and control and surveillance machinery (average cost £8,115).56 The Department stated that of the repeated parts identified by the NAO, 64% were now either on the shelf or had been ordered.57

Plans to reduce cannibalisation

22.The Department does not routinely monitor the use, causes and impact of cannibalisation across the Navy. The NAO found that without information, and a strategic oversight of cannibalisation, the Department had not determined a threshold beyond which cannibalisation was unacceptable. The Navy does, however, use a metric to assess cannibalisation across the Merlin helicopter fleet: the average number of cannibalisations per 100 flying hours.58 When we challenged the Department, it could not say what an appropriate level of cannibalisation for ships and submarines would be. It also told us that it expected cannibalisation rates to fall as the Navy gained experience operating the ships and submarines more recently brought into service, but could not say by how much or by when.59

23.The NAO also found that the Department did not routinely assess the costs, either engineering or administrative, of cannibalisation. The Department told us that it is refreshing its cannibalisation policy so teams must assess and provide the wider cost implications of cannibalisations and refer cannibalisation decisions to a more senior officer if they may have significant wider cost implications.60

24.The Department acknowledged that cannibalisation occurred across all the Armed Forces.61 It described cannibalisation as a recognised practice for both the Army and the Royal Air Force when all other supply options had been exhausted. However, the Department was unable to provide the Committee with authoritative information for the other Commands to the same level of detail as the NAO report on the Navy. It committed to looking at the data available to make sure the lessons learnt from the report on the Navy were applied to the same level of rigour across the other Commands.62

33 Report by the Comptroller and Auditor General, Investigation into equipment cannibalisation in the Royal Navy, Session 2017–19, HC 525, 1 November 2017; National Audit Office RUC0001

34 Q 56, NAO (RUC0001), para 4, figure 2, p 5

35 Ibid, para 7, figure 4

36 Ibid, para 16

37 C&AG’s Report, paras 3, 7

38 C&AG’s Report, para 2.3

39 Qq 24–25, 32

40 C&AG’s Report, para 3.14, figure 3

41 Q 33; C&AG’s Report, para 3.14

42 Q 25

43 Qq 35–36

44 C&AG’s Report, para 2.8

45 NAO (RUC0001), para 14, figure 7

46 Q 36; C&AG’s Report, para 3.8

47 Q 11

48 C&AG’s Report, para. 3.13; NAO (RUC0001), para 5

49 Q 15

50 House of Commons Committee of Public Accounts: Management of the Typhoon project, Thirtieth Report of Session 2010–12, HC 860, 20 April 2011; Assessing and reporting military readiness, Twenty–sixth Report of Session 2005–06, HC 667, 28 February 2006

51 C&AG’s Report, para. 1.5

52 Q 31

53 C&AG’s Report, paras 2.3, 2.17, figure 10

54 Qq 45, 48

55 Qq 24, 34, 36

56 C&AG’s Report, paras 2.4, 2.11

57 Q 26

58 C&AG’s Report, paras 2.6, 3.2–3.4

59 Qq 24, 33–34

60 Q 17

61 Q 48; C&AG’s Report, para 5

62 Qq 48–50; Correspondence with Ministry of Defence, 22 January 2018, paras 9–14

23 March 2018