Risks Ahoy on Carrier Strike

Artist's impression of one of the Royal Navy's super aircraft carriers Image copyright Other
Image caption The National Audit Office is concerned the carriers could go further over budget than currently projected

A new broom was promised last year, to end the long, ignoble history of vast Ministry of Defence procurement overspends.

It has taken only 14 months for the coalition government to create a fiasco for which it has to take a lot of the responsibility.

It has got a long way to run yet, but the official public spending watchdog, the National Audit Office, has stacked up a range of risks arising from changes to the aircraft carrier contract that the ministry is still "trying to understand".

It has expressed its concern that the huge ships Queen Elizabeth and the Prince of Wales - currently under construction at several locations, the main one at Govan, then to be bolted together at Rosyth - carry the risk of going even further over budget than currently projected.

Strong criticism

Progress on the so-called 'Carrier Strike' programme is not doing too badly for now. Some 98% of work so far has been completed on schedule, and 48 out of 53 milestones were reached on time over the past year. But there's a lot of change under way.

As a reminder, the original sign-off, only four years ago, put the price at £3.65bn for two ships.

There is strong criticism of the Labour government for lengthening the building process and pushing the bill up to £5.24bn. The Public Accounts Commission at Westminster said this was "a new benchmark in poor corporate decision-making".

Image copyright Other
Image caption The defence secretary got the construction process under way in Glasgow

In comes the coalition government, with its Strategic Defence and Security Review, taking another look at the carrier contract.

With the project currently £219m over budget, changes to the specification will cost between £800m and £1,200m more, taking the best estimate to £6.24bn.

This follows from David Cameron's announcement last October that it was more expensive to stop building the carriers than to continue. The Prime Minister made it sound like a poison legacy left by Labour ministers.

The NAO report shows it is a bit more complex than that - that there were "significant medium-term savings", but the government is more interested in its short-term deficit-cutting target, and the plan would have higher costs in the short term.

Shipbuilding sunk

The first year would have seen a £2.4bn penalty, but after ten years, £6.3bn could be saved.

The long-term costs are kept high because of a deal struck between the former Labour government and BAE Systems, to help the company slim down shipbuilding capacity in Britain and then to guarantee at least £230m of orders per year to sustain the lower capacity over 15 years.

Without export orders, the deal means that at least one large shipyard will have to close, and most of the BAE Systems shipbuilding exports concern design in Britain with construction in yards overseas.

If the government had decided to cancel the carriers, it would have been paying out that money in return for no ships at all.

In 2015, there would be no shipbuilding in Britain. As it is, between 2014 and 2017, the report makes clear that there will be a shortfall of work, until the next orders are expected to come on stream.

And even to finish and equip the carriers, it is clear that there will have to be an uplift in MoD budget after 2015, which will then mean a tension between completion and the scheduled new Surface Combatant Ship.

Without that 15-year deal, it is probable British shipbuilding would have been sunk completely. So it looks like the carriers are being built for industrial and strategic capacity reasons rather than any military priority.

Cat and Trap

Indeed, the report makes clear that the carriers are seen by the military as being "of secondary priority to other maritime capabilities".

The paper trail examined by the NAO points to the way the coalition government changed the order, so that different planes will be deployed on only one of the two carriers, requiring a very different deck, and 'cats and traps' - catapults and arrestors for the US-built Joint Strike Fighter.

The other ship will be held in extended readiness, which appears to mean it could be prepared for action but only if there is a year to spare.

Image copyright AP
Image caption It is 30 years since the Royal Navy was operating a cat and trap system

One of the more imaginative uses for the first of the ships is as a very expensive test deck for the designers of the cat and trap system, to make sure they work on the operational ship.

And that is one indication of the extraordinary level of risk that makes the carrier contract such a concern for the NAO.

It is pointing out that the electro-magnetic cat and trap system is not operational anywhere in the world. With very high voltages, it is not clear that it will be safe.

The US Navy is testing one, but it has a different spec from the UK plan, and it is not clear that the Ministry of Defence will have access to all the data it needs to import such a system.

There is only one supplier for the electro-magnetic cat and trap, which puts the MoD in a weak negotiating position on price.

Obsolete steam

The new carriers could depend on proven technology of steam-powered cats and traps, but that's not the preferred option as it could become obsolete over the lifespan of the ships. And unlike their nuclear-powered US and French counterparts, their engines don't generate steam.

It is also being pointed out the use of the Joint Strike Fighter aircraft is entirely dependent on a training agreement with US companies and the Pentagon. There is still no firm price for the aircraft.

And all that is before the operational capacity of the carriers is considered. The NAO points out two ships were meant to provide at-sea cover at all times, totalling 435 days per year. However, only one ship can be at sea for only 150 to 200 days per year.

Having cat and trap systems on deck, instead of vertical take-off aircraft, means far less flexibility on use of deck space. You can't have a deck crowded with kit.

So it seems planes will have to be kept airborne for longer, with a knock-on requirement for air-to-air refuelling capacity. That is not costed yet either.

Paper trail

Then, the one carrier will not be operational until late 2020, by which time the Royal Navy could have lost the skills it requires to operate aircraft carriers. It is already 30 years since it was operating a cat and trap system.

That is what the NAO reckons so far. It's a damning report. And on the day David Cameron has written about the importance of transparency for his government, the NAO complains that it has not been given access to the documents it needs.

Without that paper trail, it is not able to say if or how the government can claim to be getting value for more than £6bn of spending - and possibly (probably?) a lot more.