1The performance of the three infrastructure projects
1.On the basis of a report by the Comptroller and Auditor General, we took evidence from the Ministry of Defence (the Department) about three crucial nuclear infrastructure projects.1
Nuclear-licensed sites
2.The Ministry of Defence (the Department) maintains a submarine-based nuclear deterrent, operating four nuclear-armed submarines to support the government’s national security policy. This is made up of a network of programmes, equipment and people, often referred to as the Nuclear Enterprise (the Enterprise). Within the Enterprise are eight locations critical to producing, installing, operating, maintaining and disposing of nuclear reactor cores and weapons. These are the naval bases at HM Naval Base Clyde (comprising Coulport and Faslane) and Devonport, the AWE plc sites at Burghfield and Aldermaston, the BAE Systems-owned Barrow shipyard, and the two Rolls Royce owned/operated areas at Raynesway.2
3.A number of major infrastructure projects are under way to modernise facilities on some of these sites, some of which were built in the 1950s when the UK first invested in a nuclear deterrent. Three of the most significant under construction are Project MENSA at Burghfield (forecast cost £1.8 billion, completion 2023), where the Department is building a new nuclear warhead assembly and disassembly facility; the Core Production Capability facilities at Raynesway (forecast cost £474 million, completion 2026), where the Department is replacing facilities so it can produce the latest nuclear reactor core designs; and the Primary Build Facility in Barrow (forecast cost £240 million, completion 2022) to allow a modular-build approach for the Dreadnought-class submarines.3
4.The sites are subject to oversight by one or both regulators—the Office for Nuclear Regulation (ONR) and the Defence Nuclear Safety Regulator (DNSR)—depending on who owns the sites. The ONR licenses defence sites operated by third parties, whilst the DNSR oversees sites owned and operated by the Ministry of Defence. The Department has committed to applying the same standards, and the two regulators work together at times. Site operators must demonstrate that they meet specific nuclear safety standards and, for example, that their sites can withstand explosions and earthquakes.4
Progress to date
5.The three major infrastructure projects examined by the National Audit Office represented around a quarter (by initial value) of the Ministry of Defence’s 52 nuclear projects.5 These projects will not be delivered to the original plans, and will be delayed by between 1.7 and 6.3 years, and cost a total of £1.35 billion more than originally planned. In particular, MENSA has experienced a cost increase of £1.07 billion. The Department stated that it immensely regretted the amount of taxpayers’ money lost, and pointed out that these figures could still go up as the figures were points in a possible range. It noted that nuclear projects in other countries had also gone over budget, arguing that this was due to their common complexity and scale, and the safety standards to which all are subject.6
6.Since 2016, some progress has been made with delivery of the projects. At Barrow, the first building of the primary build facility is complete and being fitted out, and foundations are being dug for the second. Similarly, at Raynesway the first building is being fitted out, and the second building is being planned. The latest forecast delivery dates were between 2022 (Barrow) and 2026 (Raynesway).7 The facilities at MENSA are currently being fitted out and we asked the Department whether we should be concerned if the site was not completed to its revised forecast date of 2023. It advised us that the facilities that MENSA will replace have regulator approval until 2026. The Department did not believe there was a threat to the maintenance of the existing warhead, or the development of a new one.8
Starting projects without mature designs
7.The Department told us that the big lesson from the experiences set out in the National Audit Office report was the crucial necessity for proper planning before starting to build. We understand the need to make early progress given the interdependencies between the infrastructure programmes and the requirements of the Dreadnought programme, but the Department did not anticipate and manage the risks effectively or provide contingency in the budgets. As a result, 48% of the total increased costs, including nearly £400 million for MENSA, were due to construction starting before requirements or designs were clear.9
8.The Department told us that it had learned from these experiences. It was very clear now that it needed to identify the big infrastructure requirements early and must not start building until it had a design.10 We asked for an example of such learning and the Department advised that it had paused another Atomic Weapons Establishment project—Project Pegasus—the construction of a manufacturing facility for enriched uranium—in order to ensure that the design was mature and requirements clear for the future warhead.11
The current funding regime
9.The Department told us that its nuclear budget is around 18–19% of the total UK defence budget, whereas the nuclear component of the defence budget of the United States is about 6% or 7%.12 The Department said it currently had the funding available but would negotiate future funding with the Treasury as part of the Spending Review later this year. It was keen to place some form of ring-fence around the nuclear budget given that it is the Department’s top priority and must be funded. Under current arrangements, it remained subject to the same pressures as other expenditure.13
10.We asked the Department about whether any progress was being made with Treasury about establishing longer-term funding plans for the nuclear work. It told us that it did discuss a 10-year planning horizon with Treasury, which was unusual in government, but funding was not guaranteed over this period. It said that the demands of Treasury annularity expectations and managing to a 31 March deadline are very difficult for long-running major capital programmes.14 The need to achieve in-year affordability savings has also led to increased costs. For example, the deferral of work on MENSA to secure savings led to AWE receiving additional fees as the deferred costs were classed as a saving. The Department also continued to pay management fees to AWE during the delay, contributing to a £97 million cost increase.15 We made a similar point about the value of longer-term budgeting arrangements in our report on the Department’s Equipment Plan 2018–28.16
11.The Department explained that it had embarked on a huge programme of recapitalisation across the whole nuclear enterprise, involving new nuclear submarines, new propulsion systems and warheads, and new infrastructure. Many of these programmes are individually in the top 10 largest overseen by the Department. As a result, there are peaks of spending in the coming years, at a time when, as the Committee has repeatedly reported, the overall defence budget is stretched. This emphasises the importance of overseeing the portfolio of programmes as a whole, trying to smooth spending and managing the overall risk profile.17
1 C&AG’s Report, Managing infrastructure projects on nuclear-regulated sites, Session 2019–20, HC19, 10 January 2020
2 C&AG’s Report, para 1.3, Figure 1
3 C&AG’s Report, Figure 1
4 C&AG’s Report, para 1.2
5 C&AG’s Report, para 1.11
6 Q 58; C&AG’s Report, para 1.16
7 C&AG’s Report, para 1.19, Key Facts
8 Q 62
9 C&AG’s Report, Figure 6
10 Qq 48, 59
11 Q 69
12 Qq 50, 108
13 Qq 49–51
14 Qq 95–96, 98
15 Q79; C&AG’s Report, para 3.6
16 Q 98, Committee of Public Accounts, Defence Equipment Plan 2018–28, Session 2017–19, HC1519, 1 February 2019, p7
17 Q 97
Published: 13 May 2020