£235m overspend highlights problems in major nuclear projects

HMS Astute on the ship lift in Barrow-in-Furness. The first four Astute class submarines were £1.5 billion over budget

An annual government report has highlighted serious problems in several large projects related to the UK’s nuclear weapons programme. The Core Production Capability (CPC) project, which involves building new facilities to produce reactor cores for submarines, is predicted to cost £235m more than planned and is given a ‘Red’ rating, meaning that successful delivery “appears to be unachievable”.

The programme to deliver seven nuclear powered Astute class submarines and the programme to build four Dreadnought class submarines to replace the Trident fleet, are both given an ‘Amber/Red’ rating. This is the second most unfavourable rating and indicates that “successful delivery of the project is in doubt, with major risks or issues apparent in a number of key areas”.

The Major Projects Report, which has been published every year since 2013, monitors the progress in all the government’s large-scale projects. The Ministry of Defence (MoD) has a greater number of projects than any other government department, and it also has the portfolio of projects with the largest overall cost. Each project is assessed on the likelihood of successful delivery on a five point scale running from green to red.

The Nuclear Warhead Capability Sustainment Project (NWCSP), which includes major building programmes at AWE Aldermaston and AWE Burghfield, is listed in the report but most of the information is redacted. However, the report does show that spending on the NWCSP in 2016/17 was predicted to be £33 million higher than planned, and that budget for the whole lifetime of the NWCSP now sits at £20.31 billion, a sharp increase from the £12.14 billion envisaged in 2013.

 

Core Production Capability

The troubled CPC programme involves work to replace the facilities at the Rolls-Royce Raynesway factory in Derby, which produces cores for the reactors in all the UK’s nuclear-powered submarines, as well as including the production of cores for the remaining Astute submarines and the four Dreadnought submarines. The construction element of the CPC includes demolishing and rebuilding key buildings such as a new manufacturing facility.

Earlier generations of nuclear-powered submarines needed to be fitted with new reactor cores several times during their operating lifespan, meaning that the Raynesway factory would be guaranteed ongoing work producing the cores. The cores on the Astute and Dreadnought submarines are designed to last 25 years or more, meaning there is little prospect of ongoing contractual work producing cores. As a consequence, a decision was taken that the MoD would directly fund the building of new facilities at Raynesway through the CPC programme.

The CPC programme was rated ‘Green’ in the Major Project Reports from 2013 and 2014, but was downgraded to ‘Amber’ for 2015 and 2016, before this year’s ‘Red’ rating. Meanwhile, budgeted whole lifetime costs for the whole project increased from £1.27 billion in 2014 to £1.7 billion. As the programme is now predicted to cost a further £235 million it will undergo a ‘re-baselining’ process to devise a realistic budget and timetable for the programme.

The downgrading of the delivery confidence rating on the CPC to ‘Amber’ was caused by a decision in 2014 to refuel HMS Vanguard. Radioactivity had been discovered in the coolant of the prototype PWR2 reactor at the Naval Reactor Test Establishment in Dounreay. As this may indicate a flaw in the PWR reactor design, it was decided to change the core in the PWR2 reactor in Vanguard, the oldest Trident submarine as a precaution. The CPC was altered to include production of the an extra PWR2 core and provision was also made for refuelling HMS Victory, the second oldest submarine, although no firm decision has been taken on this.

At the time changes were predicted to extend the CPC by 52 months and add £192 million to the cost of the programme. Instead of demolishing the old facilities at Raynesway before production began on the Dreadnought cores, the intention was for the old and new production lines to run in parallel for some time. However the 2016 Major Projects Report spoke of “significant risks” to the project and specifically mentioned the potential for the ‘Post-Irradiated Examination inspections’ of the prototype PWR2 core to impact on the delivery of the CPC programme.

The cost increases that have earned the CPC a ‘Red’ rating are a predicted overspend of £250 million on the original scope of the CPC. The production of the extra core is predicted to cost slightly less than anticipated, giving the overall predicted overspend on the project of £235 million. It is not clear whether the cost overruns are related to to the PWR2 reactor issues, but if these issues had meant that changes needed to be made to the PWR3 reactors for the Dreadnought submarines there would be cost implications, as all major design issues for these reactors were said to have been settled in 2013.

 

Astute Class Submarines

The core that will be put into HMS Vanguard was originally planned to be fitted into HMS Audacious, the fourth Astute class submarine to be built. However, the Astute programme was sufficiently behind schedule that the core could  be diverted to refuel Vanguard without causing additional delays to the programme.

The Astute programme has been rated ‘Amber/Red’ since 2015 and is currently estimated to cost £9.869 billion, slightly below the estimate of £9.947 billion from 2013. The Major Projects Report states that affordability is still considered a challenge for the programme. Since the data for the report was compiled the MoD has announced a contract of £1.4 billion to build HMS Agamemnon, the sixth Astute boat. The contract for the seventh Astute submarine is yet to be finalised, but the MoD hopes that some savings can be made on the submarines currently being built to partially offset the overruns on the first four Astute boats, which were £1.5 billion over budget.

 

Dreadnought Class Submarines

The programme to build four nuclear-armed Dreadnought class submarines is at a much earlier stage in its development, and the MoD is in the process of setting up the organisational structures it hopes will be able to deliver the programme. A ‘Submarine Delivery Agency’ (SDA) will be established as an Executive Agency of the MoD, and Robert Holden has been recruited as chair of the board. In answer to a recent parliamentary question the government announced that the SDA already has 1,300 staff in place.

The problems affecting the CPC are said not to threaten the delivery of the Dreadnought programme, as they are not on the ‘critical path’ for the programme. An earlier Major Projects Report stated that the MoD and BAE Systems intend to learn from the problems with the Astute programme when building the Dreadnought submarines. However, it is not clear whether further delays in the CPC would impact on the delivery of the Dreadnought submarines. The Major Projects Report estimates that the whole life cost of the Dreadnought programme will be £31.614 billion. The planned date for completion of the project is redacted.

 

Further reading:

The Sunday Times: ‘Red alert’ over Trident reactor costs

The Sunday Herald: Plans to replace Trident slammed as “unachievable” by Westminster watchdog