Posted: 21st May 2020
‘The department knows it can’t go on like this,’ says PAC chair
The Ministry of Defence’s poor management of contracts has left taxpayers picking up the bill after nuclear infrastructure projects have swelled beyond their planned time and budget, a public spending watchdog has found.
The Public Accounts Committee found three nuclear infrastructure projects had together gone £1.45bn over budget and were each between 1.7 and 6.3 years because of problems with their contracts’ design and management.
The committee’s inquiry examined three projects: the building of a nuclear warhead assembly and disassembly facility, known as MENSA, at AWE Burghfield; the Rolls Royce-owned and operated Core Production Capability facilities at Raynesway, where the department is upgrading facilities for nuclear reactor core production; and the BAE Systems-owned Barrow shipyard facility to allow modular build of Dreadnought-class submarines.
The MoD was unable to explain why it had made repeated mistakes designing and managing the contracts – which represent the three biggest nuclear infrastructure projects it is managing – despite being warned about the same issues in the past, PAC said in a report last week.
The MPs said that both PAC and the National Audit Office had been warning of similar contracting mistakes for more than 30 years. The MoD had also “failed to learn lessons from comparable projects in the civil nuclear sector and in the United States”, they added.
The PAC report followed a NAO finding in January that “inherent uncertainties of early designs [in the three contracts] do not incentivise site operators, or their sub-contractors, to negotiate and share risks, increasing risks for the department”.
“It is therefore disappointing to see that in their early days the department made the same mistakes, also experienced by others, as were made more than 30 years ago,” the NAO report said.
The ministry said it “immensely regretted” the waste of money but admitted costs could keep rising because the contracts had left the government to assume financial risk.
In its report, the PAC said the contracts did little to incentivise contractors to improve their performance.
The risks associated with either military or civilian nuclear programmes “are too large for private companies, and must be managed by the department, regardless of whether it owns the relevant sites or not”, according to the report.
The MPs said the MoD must report back in its 2020 update on the Dreadnought submarine programme on how it had worked with industry and other departments to develop the skills needed to continue with its nuclear projects.
PAC chair Meg Hillier said: “To utterly fail to learn from mistakes over decades, to spectacularly repeat the same mistakes at huge cost to the taxpayer – and at huge cost to confidence in our defence capabilities – is completely unacceptable. We see too often these same mistakes repeated.
“The department knows it can’t go on like this, it knows it must change and operate differently. The test now is to see how it will do that, and soon.”
In a statement, an MoD spokesperson said the ministry continues “to work closely with the regulators and our industry partners”.
“Together, we are committed to strengthening the management of nuclear programs, including significant investments in infrastructure to store and update weapons.”