‘Spectacular mistakes’ in MoD contracting system led to increased costs of £1.35bn on nuclear projects

Ministry failed to learn from past mistakes and left taxpayer to pick up bill, new report says

The MoD said it ‘immensely regretted’ the huge waste of taxpayers’ money (Wikimedia Commons)

“Spectacular mistakes” in the Ministry of Defence’s contracting system on nuclear infrastructure projects has led to costs being increased by £1.35bn and one programme being delayed by more than six years, according to the Parliamentary Accounts Committee.

The report states that the government has admitted that the costs could actually keep rising as the lack of adequate penalty clauses in the contracts to make the companies involved improve their performance.

The committee charges that the MoD has “utterly failed” to learn from past mistakes, leaving the taxpayer “to pick up the huge bill” while inflicting a major blow to the “confidence in our defence capabilities”.

The MoD now acknowledges, say the MPs, that the risk associated with nuclear programmes, whether military or civil, are too large to be left to private concerns and must be managed by the state, whether or not the sites are publicly owned.

The ministry was “unable to explain why it has repeated past mistakes – many of which have been repeatedly commented on by the National Audit Office and Public Accounts Committee for more than 30 years – and has failed to learn lessons from comparable projects in the civil nuclear sector and in the United States”, says the report. “The MoD accepted that it must not operate in the same way in the future.”

The Committee looked at three projects in its investigation. One at Burghfield, where the MoD is building a new nuclear warhead assembly and disassembly facility with a forecast cost of £1.8bn and completion date of 2023. The Rolls Royce owned and operated Core Production Capability facilities at Raynesway, where the department is replacing facilities so it can produce the latest nuclear reactor core designs at a forecast cost £474m, and completion in 2026. And the BAE Systems owned Barros shipyard where work is taking place on the modular build of Dreadnought-class submarines at a cost of £240m and completion date of 2022.

“The MoD said it ‘immensely regretted’ the huge waste of taxpayers’ money, which was caused by poor management of three nuclear infrastructure projects, resulting in a combined cost increase of £1.35bn and with delays of between 1.7 and 6.3 years,” the report states.

“The contracts for the three infrastructure projects did not allow the department to share the financial risk. This means the taxpayer has borne the full cost of budget overruns, including those of its subcontractors.

“The department accepts the National Audit Office’s criticism that its contracts were not well designed and says it would not operate in this way in the future”, said the committee.

Meg Hillier, chairperson of the committee, said: “To utterly fail to learn from mistakes over decades, to spectacularly repeat the same mistakes at a huge cost to the taxpayer – and at a huge cost to confidence in our defence capabilities – is completely unacceptable. 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.”

“We expect the MoD to report to us later this year, in its 2020 update on the Dreadnought nuclear submarine programme. We also expect a detailed assessment, of whether the current ownership arrangements for nuclear-regulated sites are in the best interests of the taxpayer, to be provided to us by the end of this year.”