12 September 2003
MPs have criticised a £314m cost overrun on the construction of nuclear submarine refitting facilities at Devonport as 'unacceptable'.
A Public Accounts Committee report published on September 10 concluded that late and ineffectual co-operation between the Ministry of Defence and the main contractor Devonport Management Ltd hampered the project's smooth implementation, resulting in extra delay and costs.
Facilities had to be ready by February 2002 in time for the refit of the first of the Vanguard class of submarines, which provide the UK's strategic nuclear deterrent.
Estimates put the final costs at £933m, almost twice as much as the original projected cost of £576m. Of this, the MoD contributed £890m – £314m more than it said it would in previous assurances to the PAC.
The committee singled out the MoD's 'hands-off' attitude to the project's management as a key factor in the cost overrun.
The ministry presumed that prime risks had been transferred to DML and failed to consider the likelihood of these risks returning. It was then forced to pick up extra costs incurred by DML's poor performance and the need to comply with complex nuclear safety regulations.
PAC chair Edward Leigh said: 'From a position where the great majority of risk was supposed to have been transferred to the private sector, it is unacceptable that the taxpayer is now picking up most of the bill for overruns – over £300m more than expected.'
The PAC urged the MoD to take a closer interest in the remaining stages of the project, due to be completed at the end of 2003 in time for the refit of the second nuclear submarine next year.
Leigh added: 'It is vital that the department gets a proper grip on the final phase of the project to avoid further cost escalation, working more closely with the contractor, completing design and safety cases before construction and assessing fully the risks it retains.'
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