Aircraft Carriers – a shining example of Defence procurement (how NOT to do it, that is)

We’ve reached the position now with Ministry of Defence procurement where the latest cost overrun is greeted with a shrug of the shoulders and a “what do you expect” rather than any great public indignation.

The latest news is that the Royal Navy’s two new aircraft carriers are going to cost at least £6.2 billion, some £800m more than the last estimate. Well, let’s face it, that’s only £15 more or so for every man, woman and child in the UK. Hardly worth bothering with.

And the price has risen now from the initial estimates of £3.5 billion, so that’s an increase of almost £3 billion. Well, that’s only £50 for every... etc etc.  A decent night out in a London bar, that’s all. Philip Hammond, the current defence Minister, and pretty blameless actually for all of this*, is trying to re-negotiate the contract so that the shipbuilders (BAE Systems) take more for the risk for any further cost overruns.

But then there are the planes to actually fly from the carrier. And they’re coming from the US, or should we say they should be coming from the US, as the Guardian reports:

“.. the American F-35B aircraft ....  the most expensive weapons system in history, are currently estimated to cost £100m each, but the project continues to be hit by technical and labour problems in the US. The MoD has said it wants to buy at least 48 – at a cost of £4.8bn – but no final decision will be taken until after the general election in 2015”.

And it is not just the cost. The second ship will be built, but incredibly may never be put into operation. And there’s a two year projected gap between commissioning and the availability of the early warning radar system for the carrier... It’s all a bit of a shambles unfortunately.

When I became a civil servant way back in the 1990s I regularly told people to imagine the money we were talking about as £20 notes stuffed in a briefcase. Or many briefcases. Otherwise, you don’t translate into something people can relate to, the size of it just becomes meaningless if we’re not careful. And the aircraft carriers story is a national disgrace, with politicians of various persuasions probably culpable alongside certain military folk and civil servants.

It’s also giving ammunition to those who support the GoCo idea (government owned, contractor operated) for the MOD’s Defence Equipment and Support organisation. But the question is – would a GoCo have avoided these problems, which from what I've heard were mainly politician-driven in the first place?

Or would we the taxpayer just have been paying penalties or additional margin to Bechtel (or whoever),  given I’m sure they’re commercially savvy enough to avoid the risk themselves if and when things go wrong. No doubt it would have been “changes in client-driven specifications” that caused overruns, nothing to do with the GoCo operator of course.

Anyway, back to the issues here - what we need is a full and frank National Audit Office investigation. How did this happen? Who was responsible? For instance, who actually signed the contracts for the Carriers? Surely that person should be interviewed and interrogated by the most senior NAO staff?

That would be interesting...

* As are many of the current senior commercial executives in MOD...

Voices (6)

  1. Final Furlong:

    To put the £3 billion increase into perspective, that’s twice the £1.5 billion savings target that the NHS needs to achieve over the next two and half years to protect thousands of front-line jobs. Sloshed down the pan on a single project in the MOD.

  2. Gin & Tonic feeling supersonic:

    @ intrepid, perhaps you would be inclined to offer your view on the subject of the Register article linked in David Orr’s post, please?

  3. intrepid:

    I have read some ignorant drivel from many over the years especially those who have not served and have no idea of armed forces, how they work and operate and that includes some Generals who pass odd comments. The 2 carriers are estimated to cost £6bn but most of that is for the electronic systems and equipment, the , at only 60,000 tones,propulsions systems and mechanical engineering and all the communications equipment. Meanwhile the USA has just launched its latest nuclear-powered carrier weighing in at 112,000 tons and costing US13 billion and 22 per cent over budget, but, not a bleat. Oh, and just to correct the comment by Orr, we do NOT have more admirals than ships; there are 36 admirals and major-generals Royal Marine and half of them fill NATO appointments that are open to competition from all NATO armed forces, and/or tri-service defence appointments that are open to all 3 services. And, if you just gave a pot of gold to contractors the costs would be astronomical!

    1. bitter and twisted:

      Intrepid:

      The US have gone 22% over budget and have a versatile state of the art carrier.

      We’ve gone 100% over budget for a compromised design that is tied into the F35B – which is massively over budget and problematic.

      If the bulk of the cost is the electronics, that’s an even stronger case for building a full size nuclear carrier.

  4. Dave Orr:

    Why not simply give the contractors the money up front, without the tedious part of making something that is on time, on budget and actually works!

    We just need a trendy, dynamic name to disguise the underlying concept……Got it! “GoCo”.

    Or “PieSci” – “Profit in excess, Stuff for Combat In-service (eventually)”

    We have more Admirals than ships; more Generals than tanks; more Air Marshalls than planes.

    http://www.theregister.co.uk/Print/2009/06/23/type_45_cpac_slammage/

    “Plus ca change, plus c’est la meme chose” or “the more it changes the more it stays the same”….

  5. bitter and twisted:

    Lets not miss the woods for the trees. The specification was wrong from the beginning.

    We should have full size nuclear carriers – or abandon the bluewater navy. These cut-down abortions with magic STOL planes were always bullshit.

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