NATIONAL AUDIT OFFICE
REPORT BY THE COMPTROLLER AND AUDITOR GENERAL
Ministry of Defence: MajorProjectsReport1995
ORDERED BY THE HOUSE OF COMMONS TO BE PRINTED 23 JULY 1996
LONDON: HMSO HC 677 Session 1995-96 Published 9 August 1996 214.95 MINISTRY OF DEFENCE:WOR PROJECTSREPORT1995
This report has been prepared under Section 6 of the National Audit Act, 1983 for presentation to the House of Commons in accordance with Section 9 of the Act.
John Bourn National Audit Office ComptroUer and Auditor General 22 Jtiy 1996
The ComptroUer and Auditor General is the head of the National Audit Office employing some 750 staff. He, and the NAO, are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to ParUament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources. MINISTRY OF DEFENCE:MWOR PROJECTSREPORT1995
Contents
Page
Part 1: Introduction 1
Part 2: Analysis of project costs and timetables 7
Part 3: Examhation of two communications projects 21
Appendices
1: The Major Projects Report 1995 41
2: Glossary to the 25 Major Projects 135 MINISTRY OF DEFENCE:MAJORPROJECTSREPORT1995
Part 1: Introduction
Purpose and status of the Report
1.1 The Major Projects Report is intended to advise Parhament of the progress and costs of major defence equipment projects. The Major Projects Report 1995 is reproduced at Appendix 1 with a glossary of projects at Appendix 2. Facts and figures which are commercially sensitive or confidential and cannot be disclosed have been starred in Appendix 1. Disclosure of these facts and figures coufd undermine the Department’s negotiating stance or give a positive intelhgence advantage to potential enemies.
1.2 Projects are included in tbe Major Projects Report if they are in the top 25 projects in terms of forecast expenditure over the next 10 years and if at least f10 mil~on has been spent. Five projects which were included in the 1994 Major Projects Report (CWG’S Report, HC436 of Session 1994-95) no longer qoafify for the 1995 Major Projects Report. These have been replaced with 5 new projects. Table 1 summarises the changes,
C-1 30JHercules Transporf Nrcraff JTIDS Information tink SKYNET 5 Communications Sate[lte Sea Harrfer Md tife Update
Projects new to the 1995 Major Projects Report
1.3 The Batch 2 Trafalgar Class Submarine is a nuclear-powered replacement for the Swiftsure class. The programme has already been deferred by 28 months because of budgetary constraints, Invitations to Tender were issued in Jdy 1994 for an initial batch of 3 submarines with options on a further 2. Contract placement for the production prime contract is expected in mid 1996.
1.4 The Landing Platform for Helicopters (LPH) is a sea platform from which to launch airborne amphibious assatits. There have been delays building the hull, which have slipped its delivery to the prime contractor, VSEL (now part of GEC Marine), from February 1996 to June 1996. VSEL have responded by revising the production programme and expect to maintain the forecast in-Service date of March 1998.
1.5 The requirement for a range of four-wheel drive load carrying vehicles resulted in tbe proposed procurement of three vehicle types: Truck Utifity Light (TUL), Truck Utifity Medium (TUM)and Truck UtiUtyMedium (Hea~ Duty) (TUM(HD)).
1 MINISTRY OF DEFENCE:WOR PROJECTSREPORT1995
Following competitive tender, the Austrian firm Steyr Daimler Puch were awarded the contract for the TUM (HD)variant in July 1994. The cost of the TUM(HD)element of the programme has increased because tbe unit production cost of the Steyr Daimler Puch vehicle is more than twice that of the vehicle originally assumed in the costings. Steyr Daimler Puch were considered too expensive for the much larger TU~UM requirement and the Department required Land Rover to undergo repeat performance and rehahili@ trials in order to overcome shortcomings identified. The in-Service date for TUL and TUM has slipped further to September 1996 because the award of the contract to Land Rover was delayed until February 1996. The delay allowed the Department to announce the results of the TUL and TUM competition togetier with that of the medium Mobitity Ambdance, and ensured that a taut contract with important financial safeguards was agreed.
1,6 Procurement of 25 Hercules C-130J transport aircraft as roRing replacements for ear~er-model Hercules shows a cost escalation of S20 miRion. This restits mainly from the factor agreed in the contract to reflect inflation in the partictiar circumstances of this project being greater than general inflation in the United Kngdom economy as a whole. There is no slippage.
1.7 FeasibiUty studies for the sateRite communication system S~ET 5 were completed in April 1995. The project was approved in 1993 and shows a cost underrun of S4 mil~on, or 14.8 per cent, with competition resulting in lower than expected contract prices. The project has shpped by 8 months due to extra time required to explore a common requirement with potential co~aborative partners.
Overall cost
1.8 The current estimated cost of the 25 projects as presently approved and at current (1995-96) prices is over S32 bilion. Broadly, the projects will account for some 50 per cent of the annual procurement budget although expenditure can fluctuate considerably from year to year. Figure 1 opposite shows the projected total cost, including phases not yet approved, of individual projects, excludingTrident[111,8billion)and Eorofighter2000(fl 5.4billion)whichare much larger than the other 23 projects.
1.9 Figure 2 opposite shows percentage and actual cost variations for the 25 projects. The overall cost data show a net forecast reduction of El ,650 million (or 4,9 per cent) compared with the amounts ori~na~y estimated. This overall figure, however, includes a forecast reduction of E3,598 million (or 23.4 per cent) on the Trident project and a forecast increase of El ,253 milhon (or 43.7 per cent) on the Eurofigbter 2000 project. If these exceptionally large projects are excluded, a net cost increase of S695 miKlrm (or 4.4 per cent) is forecast for the other 23 projects. This compares with an increase of 4.1 per cent in the 1994 Major Projects Report indicating that there has been a slight worsening in the cost position on major projects, Trident and Eurofighter 2000 have been excluded from some suhse~ent cost analyses because of their dominant effect on the conclusions and because Trident data
2 .
MINISTRY OF DEFENCB:MMOR PROJECTSREPORT1995
3 MINISTRY OF DEFENCE:WOR PROJECTSREPORT1995
are expressed at 1994-95 prices rather than the 1995-96 prices pertaining to the other projects. This is in order to avoid conflict with the figures supphed annually on Trident to the House of Commons Defence Committee.
1.10 The following projects showed cost changes as a resdt of approval for further project stages or additional volumes of equipment
. Spearfish: the main production order for nearly S600 mi~on was placed with GEC-Marconi in December 1994 with dehveries required towards the end of the decade.
. Brid@g for the Nineties: full production approval for tbe Close Support Bridge and the General Support Bridge costing El 38 milhon was given in September 1YY4.The previous prime contractor, Thompson Defence Projects Ltd., was taken over by Vickers Defence Systems in June 1995.
. Chdenger 2: A contract amendment for the procurement of a further 259 Main Battle Tanks together with further training equipment and associated support was signed with Vickers plc in July 1994. This foUow on buy was for over S1 bilhon.
. Rapier Field Standard C: The purchase of additional ground and support equipment and spares for some E60 milhon was approved in 1994.
. Eurofighter 2000 Development Re-approval of the Eurofighter 2000 development programme at S4 bil~on to cover the reorientation of the development programme and the addition of a number of new weapons and other systems, was given in December 1994.
. Infra-red Countermeasures: A contract for fu~ development and production for f141 milhon was let to Northrop Electronic Systems International Inc. in April 1995.
Meeting in-Sertice dates
1.11 Five of the 25 projects have failed to meet their origina~y estimated in-Service dates and a further 16 are expected to fail to meet their in-Service dates in the future. For 6 of the projects, the equipment will be or has been defivered over 5 years late. One project has come in on time and a further 3 are expected so to do. Figure 3 opposite shows current projected in-Service dates and shppage by project. The average slippage is 31 months (or 2.6 years). In terms of the total number of projects reported on, this represents an improvement in the overall position since the 1994 Major Projects Report, which showed an average shppage of 37 months. The change has occurred because the 5 projects which no longer qua~fy for the Major Projects Report this year had much greater slippage, on average, than the 5 new projects. An analysis at paragraph 2.17 of the 20 projects common to both Major Projects Reports shows, however, that average slippage has increased for these projects.
4 MINISTRY OF DEFENCE:WOR PROJECTSREPORT1995
;sKYNEti4tia6ezl m
classified. (2) . = no s/ippage
Scope of the National Audit Office examination
1.12 The Major Projects Report is not a statutory account and the National Audit Office do not provide a formal audit opinion on the accuracy of the data contained in it. They do, however, perform a number of test checks on the data, which, for the 1995 Report, included:
. vahdation of the data in the draft Major Projects Report for a sample of 15 of the 25 projects reported; and
. confirmation that the projects reported were indeed those that should feature given the agreed formtia for inclusion (see paragraph 1.2).
1.13 The purpose of validation is to ensure that the pubhshed project summary sheets are accurate and reflect the established guidehnes for their preparation. The vahdation work resulted in changes to 14 of the 15 draft project summary sheets sampled. Some of these changes were minor or resulted from differing interpretations of the Department’s guidance, but 7 of the sheets required changes to the total cost figures. The National Audit Office validation also revealed that 2 of tbe Major Projects Report 1994 project summary sheets contained cost errors. The subsequent National Audit Office examination of
5 MINISTRY OF DEFENCE:WOR PROJECTSREPORT1995
certain projects showed that cost errors had also been made in 3 of the 1995 project swnnmry slmets forwarded lo the Cummiltee UC Public Aucuunts in September and in one of the 1994 summary sheets.
1.14 Preparation of the Major Projects Report is a considerable task for Procwement Executive staff as the data required are not drawn from the Department’s normal costing and management information systems. Tbe task also fa~s at the busiest time of year with staff fully engaged preparing the budget fi~es which underlie Departmental Estimates. Because of the differing requirements of these ~o exercises, there is scope for confusion by the Department’s staff. However, the Department are taking steps to reduce the confusion as much as possible by clarifying their guidance to staff, improving training and, where possible, standardizing the approach used for both tasks. The Major Projects Report is also an evolving requirement as each year the Report develops at the request of the Committee. Nevertheless, the level of errors is unacceptably high given the significance of the Major Projects Report for Parliamentary scrutiny.
1.15 The bulk of the National Audit OffIceexamination has been concerned tith an analysis of the validated data in the ptilished Repoti. Part Two explores the main causes of variations from approvals and changes from last year’s Report. Part Three focusses on 2 communications projects in more detail.
Key points
(2) The average s~ppage to approved in-Semite dates is 31 months wi~’only” 4 of the 25 projects achleting, or expected to achieve, theiT orifia~y ~ planned in-Service dates.
(3) The level of emors identified in draft project snmmary sheets by the National Audit Officeindicates that the ~ahty and consistency of the data uderlying the Major Projects Repofl shoufd be improved.
6 MINISTRY OF DEFENCE:WOR PROJECTSREPORT1995
Part 2: halysis of project costs and timetables
Causes of cost variations
2.1 The reported cost change is the difference beween the total of original cost estimates made at the first approval of each stage and the current estimate of cost. Cost increases and decreases thus reflect changes in the estimated cost of a project throughout its fife. These cost variations occur for a varie~ of reasons which are shown in Figure 4.
1 ., ..,,,,, ., ~ ,,.!..; . 1 -125 44{
-11
221
-66
-2
-110
-22 ~ j 20
116
8
Hgure 4 shows that nearly hslf of the totsl cost vsriafion by value is due to the difficulty in forecasting cost.
2.2 Excluding Trident and Eurofighter 2000, initial under or over estimates of cost prior to main contract award accounted for nearly one-third of cost variance. A further 15 per cent of cost variance resdted from contract prices turning out to be different to those expected. Hence, just under one-half of cost variance is attributed to the difficulties of forecasting cost. Over one-fifth of cost variance is due to differential inflation: the adjustment mechanisms employed on contracts escalating at a different rate to the GDP deflator, the Treasury’s measure of
7 MINISTRY OF DEFENCE: WOR PROJECTS REPORT 1995
general inflation within the economy. The remaining large contilbutors to cost variance are specification or requirement changes (11 per cent), programme delays (10 per cent) and quanti~ changes (6 per cent).
Exchange rate variations
2.3 One reason for cost variation which is not always apparent from the project summary sheet is the fluctuation in exchange rates where the Department incur expenditure in foreign currencies. There has not previously been a requirement to identify the effect of exchange rate variations in the Major Projects Report. The exchange rate risk is greatest on projects of long duration, in which foreign currency payments are required over an extended period. In such cases, exchange rates may vary significantly from the rates prevaihng at the time the project was first approved.
2.4 The Department’s current pohcy, dating from 1988, is to Hmit their exposure to adverse exchange rate movement. Wherever practicable, direct contracts involving supplies or services from overseas, whether from United Kingdom suppliers or foreign companies, shotid be priced in Sterling. Overseas supphers or their agents are normally asked to quote Sterhng prices and take their om fomard cover, wherehy their Sterhng revenues from the Department are sold at predetermined dates and exchange rates. Effectively, tbe forward rates estabhsh the Sterling price of the Overseas work. This process was followed on the SK~ET 4 Stage 2 project which, as a result, shows nil variance.
2.5 Where it is not possible to agree firm Sterhng prices with supphers, the Department’s fallback position is to estabfisb freed Sterhng prices subject to an exchange rate variation clause reflecting relative currency movements. %ere this is also not possible, the Department may agree payments in the suppher’s own national currency. For such payments in Dollars or Deutschmarks, the Department have, since 1988, bought forward their requirements 18 months in advance. This can limit the effect of currency movement over short periods but does not provide full protection against currency risks. Table 2 opposite summarises the actual position on the 8 projects involving substantial foreign cwrencyexpenditure.Themain pointto note is that Sterhnghas genera~y dechned against the Dollar and Deutschmark from project approval to date, leading to adverse variances.
Keypoints
8 . ,------...... -. ---- —.——----
Tfident +259 11.2 Snce 19B8, 18-month General decfine of the Pound against the (at 1994-95 prices) forward cover from centrally Oollar. The variance ic tikely to increase as managed MOO Dollar funds. the project nears completion,
Bowman +1 17.5 Since 19B8, 18-month Rolhng 18 month forward cover evaluated forward cover from centrally againat forward cover to be negotiated by managed MOO Oollar funds, the contractor. The former was considered to have cost and administrative advantages.
SKYN~4 Stage 2 0 0 Firm price in Sterhng. Forward The Department evaluated the prime cover for 99.6 per cent of contractor quoted foward rates against foreign currency expenditure annual average benchmark rates reflecting negotiated by prime contracfm market expectations of exchange rate movements.
MR TRIGAT +13 14.6 Since 1988, 18-month Original estimate based on spot rates forward cover from centrally applicable at Project approval. Sterhng has managed MOD Dsutcchmark since woaksnsd against ths Oeutcch mark funds French Francs bought and the French Franc. on spot market,
COBRA +2 7.7 18 month forward coverfrom Oflginal estimate based on spot rates centrally managed MOO applicable at Projecf approval. Sterhng has Oeutschmark and Oollar since weakened against all three currencies funds. French Francs bought on sDot market.
C-1 30J Hercules o 0 18-month forward cover from No variance- project approved in centrally managed MOO Oollal Oecember 1994. funds.
AMR~M +6 4.3 Snce 1988, 18-month No variance reported in project summary fomard coverfrom centrally sheet. The Department provided the variance managed MOO funds. later to the National Autit Office.
ASRMM Not available Not avsilable Spot market purchases of Now a national project. Oefails of foreign Oeutcchmarks and Nowegian currency payments associated with the Kmner. aborted collaborative programme are no longer available,
9 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1995
Recent cost changes
2.6 The National Audit Office analysed changes between the 1994 and 1995 Major Projects Reports for projects common to both in order to highhght recent cost performance on projects. The analysis showed that the overaR forecast cost reduction for the 20 common projects had decreased from 6.1 per cent to 5.2 per cent indicating a worsening of the cost position. If the two exceptionally large projects, Trident and Euofighter 2000, are excluded the forecast cost increase has risen from 4.2 per cent to 4.6 per cent. Those projects with changes in cost variance are shown in Figure 5.
2.7 The largest change has occurred on Trident where the annual comparison of the current estimate with the original estimate, revalued to current prices and exchangerates, showsa further costreductionoff143 mi~on. TheDepartment attribute El 34 million of this cost reduction to real changes on the programme. Most of the change is due to a reduction in the contingency aUocated to the programme to reflect the diminishing potential for unexpected cost increases as the programme nears completion. But there has also been a real faUin the estimated cost of the final 2 stimarines.
2.8 In addition, the National Audit Office established that a E77 mi8ion accounting adjustment was necessary in this year’s figures which related to the treatment of foreign currency expenditure. This arose because of a fadt in the computer program used to convert DoUar expenditure in 1993-94 to Sterfing. This resulted in the cost being understated by S77 milhon in some reports to Parhament. An accounting adjustment was therefore necessary to add back the 577 milhon and a revised estimate of the cost of the programme at 1995-96 prices has since been reported to Parhament by the Secretary of State. The
10 MINISTRY OF DEFENCE: WOR PROJECTS REPORT 1995
Department have assured the National Audit Officethat the accounting system has since been amended to avoid the need for simflar adjustments in future. The National Audit Office noted that no cash was lost as a result of this error.
2.9 The cost variance on Eurofighter 2000 has increased by S124 milhon and now amounts to El ,253 mi~ion, The increase restits, in the main, from the proposed purchase of a number of new weapons and other systems which wiU provide Eurofighter 2000 tith an up-to-date armaments fit. The required integration work codd not have been specified in the original contract.
2.10 The cost variance on the EH101 “Merfin” he~copter has increased by fl 19 mi~on to S351 milEon. Some 857 mi~on of the increase is due to prices on the project escalating faster than general inflation as measured by the GDP deflator. The inflation adjustment clause on the contract let in October 1991 has so far resdted in an E86 milion increase shove general inflation. Further escalation has been caused by a detailed reassessment with EH Industries of the remaining costs to completion which shows that the final outturn is fikely to be nearer to the maximum price than the Department previously expected. The need for reassessment was caused by the loss ~ Pre-Production aircraft No. 2 in an accident in 1993 which required a lengthy investigation and led to the need to re-aUocate programme tasks between the remaining Pre-Production aircraft when flying was resumed, The further loss of Pre-Production aircraft No. 4 in April 1995 is Ukely to lead to futher cost increases. A further S15 milfion escalation has been caused by the inclusion of items new to the prime contract.
2.11 There has been an increase in the cost variance on Rapier FSC of E22 milhon. A cost increase of S50 miRion occurred because the contract price for additional ground and support equipment and spares turned out to be nearly tiice the sum approved. The cost increase resulted from:
. a low initial cost estimate based on assumptions at tie time of approval;
. the degree of obsolescence snbse~ently identified, restiting in redesign, production, testing and certification of new components; and
. delays in contract placement caused by protracted negotiations.
2.12 The National Audit Ofice examined further one aspect of the Rapier programme: the transfer of missiles to the United States Air Force. This is described in detail in the Box overleaf.
11 MINISTRY OF DEFENCE: MMOR PROJECTSREPORT1995
in the United Kngdom were procured and managed by the Department in conceal with the United Kngdom’s own Rapier missiles. In 1989, the Department identified a potential shelf-tife expiry problem with the USAF stock of Mkl missiles which, assuming the then planned usage rates, could have resulted in the USAF having a surplus of tife-expimd missiles.
2 Following consideration by the USAF of a hfe eflension programme for their Mkl missiles, and futiher examination of United Mngdom requirements by the Depafiment, an arrangement waa made in 1990 whereby the USAF would “buy” 153 Mkll missilas a year (to a total of 459) from the United Kngdom and, in a “part exchange” deal, the Department would re-purchase, from the USAF 53 Mkl missiles per year (to a total of 371).
3 This arrangement offered the prospect of benefits to both the USAF and the Department. It would allow the the USAFto avoid the potential Mkl shelf-fife expi~ problem by replacing the Mkl missiles with more capable Mkll missiles, which had a longer shelf-hfe. Purchasing the Mkl missiles would also allow the United Kngdom to meet its training requirement at a lower net cost than using the more expensive Mkll missiles.
4 The coat to the Department of the Mkl miasilea was the original purchase price of the missiles to the USAh uprated for inflation. This cost includad tha 13.6 per cant R&D lavias, Dapartmantal axpansas and inspection charges, wMch the USAF hsd been charged when they originally purchased the Mkl missiles. The Depatiment effectively re-imburaed these coata (uprated for inflation) to the USAF The cost to the USAF of the Mkll missiles was the oflginal purchase pflce of the missiles plus the R&D Ieviea, Depaflmental expenses and inapecfion charges. These financial arrangements valued the Mkl missiles at roughly 80 per cent of the cost of the Mklla. The price to the Depatiment of the Mkl missiles did not make any allowance for depreciation because, although the miasilea had a shorter shelf-tife, the Department intended to use them all well within their hfe.
5 Changes in assumptions, and savings measures in 1991 and 1992, significantly reduced the United Mngdom’s requirement for Rapier missilas. A review of missile stocks in 1992 identified that the missiles transferred from the USAF would exacerbate a potential surplus of missiles in later years. The transfer of Mkls was therefore stopped in 1992. The cost to the Depatiment of the 106 Mkls transferred to the United Kngdom was f3.1 million. A review by the USAF of their Rapier requirements led to the cessation of sales of the Mkll missiles in 1992, after 306 of the intended total of 459 missiles had been transferred at a cost to the USAF of fl 1.3milfion. Due to subsequent changes in the United Kngdom’s missile requirements, a f 994 review concluded that there was then a shotiall against the United Nngdom requirement, and transfers from tha USAF have resumed.
6 The 1990 transfer agreement was not covered by Departmental or Treasury approvala at the appropriate level, and there was inadequate formal consideration of value for money. The Depaflment have acknowledged that there was a breach of proper procedure in this case, and have since taken steps to ensure that all subsequent tranafera follow the correct procedures. These procedures include full investment appraiaal at an aPPrOPflatelY seniOr level Of aPProval. The National Audit OfOce noted that subsequent transfers have been conducted within these procedures. The current purchase from the USAF of 602 Mkl and Mkll missiles at a coat of f7.61 milhon valuea the missile at approximately 25 per cent of the cost of a new missile.
12 MINISTRY OF DEFENCE:WOR PROJECTSREPORT1995
Additional costs to approved budgets
2.13 The National Audit Office looked for evidence of change in the quahty of the Department’s cost estimating by considering the percentage of costs which were additional to the approved budgets. In response to a request from the Committee of Public Accounts, the Department responded that for those projects in the 1994 Major Projects Report which had reached or passed full development stage (excluding Trident), 10.6 per cent of project costs were additional to the approved budgets at each stage of the programme. The Department took the more mature projects for the analysis because they felt that such projects gave a more representative picture of cost growth because they have progressed further through the procurement cycle, Tbe National Audit Office repeated the Department’s analysis of projects having reached full development for projects in the 1995 Major Projects Report (excluding Trident), This showed that the cost variance for such projects has remained constant indicating that improvements in the Department’s cost estimating are yet to be reflected in reduced overall variances. This is unsurprising because the initiatives of the last 5 years or so, such as 3 point costings and timings, are unhkely yet to be showing any significant benefits. However, there is some evidence that the Department’s cost and time forecasting has improved for the newer projects (see paragraphs 2,23-2,26).
Cost changes since contract award
2.14 Following a request from the Committee of Pubhc Accounts, the 1995 Major Projects Report shows, for freed and firm price contracts, cost growth after contract award. This provides an indication of the performance of these types of contract in containing cost growth, Of the 25 projects featured in this Report, 3 are not freed or firm price (Rapier FSC, AMH and Eurofighter 2000), and 5 are at too early a stage to merit analysis. Trident has been excluded because each aspect of the Trident programme is separately contracted and there is no one main contract. The analysis below therefore relates to the remaining 16 projects.
2,15 The Department have reported cost growth since contract award for 5 projects as shown in Figure 6 overleaf. Nine projects are showing nil growth. The main points arising are that:
. the Department have been able to control cost growth where they have been able to negotiate fixed price contracts;
. 2 contracts show cost reductions arising from the Department’e eearch for collaborative partners and for more cost-effective procurement mechanisms;
. changes to quantities procured have accounted for the hulk of the cost increase hy value;
13 MINISTRY OF DEFENCE:WOR PROJECTSREPORT1995
. inflation clauses have been causes of real cost growth in 2 cases, and of real cost reduction in 1.
The example of the purchase of ASH missiles illustrates many of these points (see Box opposite),
!.,!2, >.,,:, .:::;., :..:;<>; ;,:,,::,, Current co$t of: ‘Cost change since” “ ‘ :-’’’’’’””” main contract contract award Project (fro) (fro) Dateofcontract Type of contract fixed m Firm price
MR TRIGAT 122 -6 June 1988 Development Fixed COBRA 34 0 February 1990 Full Development Fixed Challenger 2 1753 1091 June 1991 Development & Production Fixed EH101 “MerKn” 2494 54 October 1991 Development & Production Hxed ASRWM 710 63 March 1992 Development & Production nxed LPH 156 -1 May 1993 Construction of hull fixed BR 90 138 2 October 1993 Production of CSB & GSB Fhm VLSW 13B 2 October 1993 2nd Batch Production Firm Sea Harrier Att. Buy 19B o January 1994 Aitirame Production firm Spearfish 594 0 December 1994 Main Production Order Fixed S & T Update 185 0 February 1994 0 &1P Sonar 2076 Hrm SWNET 4 Stage 2 312 0 February 1994 Production & Launch firm TUWUM~UM(HD) 22 0 June 1994 TUM(HD) Production Firm Tornado MLU 774 0 July 1994 Development & Production hxed/Fhm , Hercules C-130J 0 March i 995 Development & Production Fixed IRCM 141 0 Apdl 1995 Development & Production Firm
‘ MainCOfltract Cost forHerculesC- 130Jis classified
Keypoints (1) Cost increases on Eurofighter 2000 and EH101 “MerN balanced Bya. reduction on Wldent account for the bdk of the change in overa~””cost variance. . . (2) The Department have now corrected their accounting. system for:Tridetit. to: deal with the forward purchase of United States DoUars. This sho.tid .“”. ~ result in improved cost reporting to Parhament for this project.
(3) The Department’s original transfer of Rapier missfles to the United Sta$6S:”~~ Ar Force was not approved by senior management or the ~easury. ~.. There was inadequate formal consideration of value for money cfiteria in Mg the terms of the arrangement. ,
(4) The Department have taken steps to ensure that aUmissile trvsfers stisequent to Rapier foUowthe correct”procednres.
(5) The Department have been able to control cost growth where they have been able to negotiate fwed price contracts.
14 . MINISTRY OFDEFENCE WOR PROJECTSREPORT 1995
The program me started with a collaborative phase governed by the Family of Weapons agreement signed in 1980 by the United Kngdom, United States, Germany and Francs Ths agrssmsnt had the aim of avoiding costly duplication of research and development and of providing standardisation and interoperabiliw within the NATO altiance. Under the terms of the agreement, the United States would bear the cost of developing an advanced medium range air-to-air missile (AMRWM) and the European nations would share the coats of developing an advanced short range air-to-air missile (ASRMM). Each side undertook not to develop a competitor to the othets missile, but had the right to purchase, or manufacture under hcence, the other’s missile free of any Government imposed administrative charges and R&D le~.
ASRMM became a national pmgramme in 1992 following the withdrawal of partner nations in 1989 and 1990 and the Family of Weapons agreement was terminated in 1992. The United States withdrew from the agreement because of in-Semite date slippage on ASRMM and difficulties experienced in estabhshing an agreed design and configuration which met United States carriage requirements. The agreement was terminated by mutual consent when the United States agreed to awaiver of development levies on the United Kngdom’a purchase of 210 AMRWM missiles and, in the Oepartmenfs view, on any subsequent purchase of the missile. The United States continued to develop SIDEWINDER, but are now considering whether an upgraded ASRMM would meet their needs.
Causes of in-Service date slippage
2.16 Figure 7 overleaf shows the main reasons given for in-Semite date slippage. The most common reason is unforeseen technical difficulties which accounts for nearly 40 per cent of all slippage. Budgeta~ constraints, where the Department riced to match the proWamme to available resources, account for 22 per cent of shppage. The collaborative process continues to cause problems with some 16 per cent of shppage atttibutahle to procwement delays caused by the co~aborative process, for example protracted negotiations between patiners on the COBRAproject. The need for extended project definition or re-definition is also an important reason for slippage, accounting for some 14 per cent.
Recent changes in in-Service dates
2.17 The National Audit Office analysed changes between the 1994 and 1995 Major Projects Repotis for projects common to both in order to highlight the Department’s recent time performance. The analysis showed that tbe average shppage for the 20 common projects had increased by a futiher 2 months from 36 to 38 months. Those projects showing changes in their in-Sewice date are MINISTRY OF DEFENCE:WOR PROJECTSREPORT1995
shown in Fi~e 8. This shows that 7 of the 20 projects have stiered futher sfippage -2 projects have shpped by a fnrther 12 months over the 12 month period and 3 projects have shpped by a ftiher 6 months.
,. .,;., :,,. ....
Technical difficulties
Budgetary constraints
Collaborative process
Delay in associated projec
Total number of ‘miilbi’slippagi ‘. ““” “$
Hgure 7 shows that nearly 40 per cent of all in-Service date shppage is caused by technical difOcultif
Eurofighter 2000 -
RapierFSC
~.Challenger2
BR90*
‘AMRWM m: ...... - ~~:.-.:- .7.~f--.:T,-..,:.:;.,~i~: -4 ‘“ :2:;’0’. “ 2“ ‘“’4, ~,.,’6.. ::”:8 ‘:’’.::’:10;::;:::,l:;,;: Change in slippagi’(rnonlhi) ~ ~~. . ::. . ...
*A weighted average shppage across all bfldges is shown for BR90
16 MINISTRY OF DEFENCE:WOR PROJECTSREPORT1995
2,18 The in-Service date for Eurofighter 2000 has shpped by a further 12 months . . from December 2000 to December 2001. The extra delay comprises 4 months due to procurement delays reflecting the changing budgetary resources of the 4 partner nations and 8 months due to the development programme being more complex than originally anticipated by industry.
2.19 The in-Service date for Rapier Field Standard C has shpped by a further 12 months from April 1995 to April 1996 for the Army. The in-Service date for the RAF has increased by 16 months from December 1994 to April 1996. The extra shppage is due to technical diffictities in completing the design which has resulted in delays to ground equipment dehveries and deployment. Certificate of Design was finally achieved in December 1995. The contract contained a provision that if Certificate of Design was not achieved within 6 months of October 1992 then the Department wmdd ‘clawbacK some of the advances made to British Aerospace for Ground Equipment. In the event, the Department decided not to activate the clawback clause for tbe reasons given in tbe Box overleaf.
2.20 ChaHenger 2 is now expected to be in-Service in June 1996 rather than December 1995, a slippage of 6 months, This has been caused by problems with the detivery of training and pubhcations support elements. The shppage has arisen from the need for the tank to enter sewice with a full support package. Liquidated damages for late delivery, primarily in relation to training aids and support elements, have been claimed from the company, Vickers plc, in fine with the terms and conditions of the contract. Challenger 2 is currently configured to fire C~RM 1 ammunition. EventuaUy, new CHARM3 ammunition, currently being developed within the Vickers contract, will be integrated into the tank. CHARM3 system acceptance is now scheduled for 1997 rather than 1996.
2,21 COBRAhas sfipped by a further 6 months. This restits from reductions in the hkely German production requirement which has invahdated the maximum price production option, The contract has been let by BWB, tbe German Government contracting agency. The contractor, EuroArt, an international consortim registered as a German limited company, originally indicated that the Unit Production Cost wodd be substantially increased with a consequent need for further development work aimed at cost reduction. However, a Cost Reduction programme has now been agreed with EuroArt, including a revised maximum price production option, which reduces the Unit Production Cost to its original level. It is expected that main development will be completed in late 1996. A ‘late dehvery’ penalty clause is under consideration for the production phase.
2.22 Problems with warhead integration and guidance have caused a further 6 month sfippagc on the Medium Range TRIGATprogramme. Tbe in-Semite date has slipped from June 2000 to December 2000. QuaHfication trials, begun by the collaborative consortium in February 1994, and planned to complete in July 1995 are now expected to complete in january 1996. A ‘late de~very’ penalty clause exists under French law. As the Medium Range TRIGAT MINISTRYOFDEFENCE:WOR PROJECTSREPORT1995
for Ground Equipment was not achieved by 30 April 1993-6 months after the contract target date of October 1992- the Department would recover 15 percent of all advances made for Ground Equipment, a sum esumated to De f85 millon. This would be retained Until CofD Waa achieved. The clause also required BAeDD to raise a bank guarantee to cover the Clawback sum, with the cost of the guarantee being met by the Department. The cost of the guarantee was estimated at around f600,000.
2 In September 1992 achievement of CofD was projected by the company for March 1993. The Depaflment felt that there was a 40 per cent chance that it would not be achieved until April and, on a “worst case” assumption, could be delayed until June. BAeDD proposed that the bank guarantee should be deferred until January 1993, on the grounds that it would destabilize the company’s financial position and therefore be detrimental to the Rapier programme.
3 At thispoint the Department reconsidered their position. A key issue was BAeDDs argument that implementing the clause at that time could have been unlatiul becauae the sum to be recovered waa disproportionate to the work outstanding on the programme. BAeDD beleved that this would be a penalty rather than an incentive, and thus would be unenforceable in English law. The Department’s legal advice when the contract was let, and at the time of the concerns, was that the clause was legally enforceable.
4 However, the Department did not wish to enter a protracted and expensive legal dispute with BAeDD and decided that implementing Clawback could be counter productive. They considered a number of changes to the handling of the Clawback, and concluded the following:
(a) The requirement for a bank guarantee was removed because it would have had a destabihsing effect on the company. This avoided a cost of around f600,000 to the Depatiment.
(b) Implementation of the Clawback was deferred for 9 months (until Janua~ 1994) because earherimplementafion would desbbitiae BAeDD and delay the programme. Substantial financial incentive was felt already to exist in the form of f135 milhon of outstanding payments.
(c) In return for deferring the Clawback, BAeDD were required to run a series of additional retiabOh~ proving trials at a cost of f5,5 milhon, roughly equal to the nine months interest foregone by deferting the Clawback,
5 During September f 993 the Department judged that the design and the substantial majofl~ of development was complete, wth a small number of low tisk activities oufstinding, A qualfied CofD waa therefore fikely to be achievable before the revised Clawback date of January 1994, A qua[fied CofD was actieved in Dctober 1993, therefore the Clawback was not implemented. f35 miltion of retentions were withheld against the completion of the
o~fanding development activities. These were completed in December 1995 when full CofD was achieved,
6 The Departments decision to defer implementation of the Clawback clause coat them some 23.5 mil[on in interest foregone in the petiod up to the issue of a quatified CofD in October 1993 and a futiher f14.5 million had they operated Clawback until full CofD was achieved in December 1995. Offsetting this revenue foregone is the potential benefit of the reliabili~ trials in terms of forecast improvements in through fife costs.
7 The National Audt Office noted that the Clawback provision was attached to the final development milestone which had a target date of October 1992. It was, therefore, foreseeable when the contract was let in 1986 that, should the Clawback be necessary, the sum to be recovered could be large. The act of recove~ could have jeopardised the progress of the project, [n the event, the prospect of implementing the clause produced dispute between the contractor and the Department, and led to correspondence between the Department and the Treaaury on the setting aside of financial clausea in the contract. It is not possible to form a precise view on the effect of the potential operation of the Clawback clause on the contractor’s behaviour. But the National Audit Oflce noted that the Depatiment now prefer to use interim payments with retentions where progress is slow. They find this a more effectiveincentiveto the contractor to dehveron time.
18 . . MINISTRY OF DEFENCE:~OR PROJECTSREPORT1995
, development contract has been let under French law it contains provision, . under certain circumstances, for claiming penalties when contractual 9- milestones are not met. . . Effect of the Department’s reforms
2.23 The National Audit Office examined the Department’s contention that their initiatives on cost estimating and control are starting to produce restits. There are 2 components to this analysis. The Rrst component divides tbe 25 projects into those begun in or before 1985 (the ‘old’ projects) and those begun after 1985 (the ‘new’ projects) and compares cost and time performance on each. This is because many of the projects covered by the Major Projects Report were first approved in the early 1980s, or earlier, with estimates and contractual arrangements which predate the reforms in defence procurement over the past decade. The second component of the analysis focuses on the 20 projects common to the 1994 and 1995 Major Projects Reports and compares recent performance on the old and new projects. The analysis provides some evidence about the effect of the Department’s initiatives over the last decade on estimating and contracting. However, it should be borne in mind that the number of projects examined is very small although their value is high.
2.24 The cost analysis excluded Trident and Eurofigbter 2000 because their resufts dominate conclusions. It also excludes the EH101 “Merhn” hehcopter as this project has both “old” and “new” contracting procedures. Cost variances resulting from changes in requirement are also removed from the analysis since these are unrelated to the Department’s reforms.
2.25 Cost grotih is higher for the old projects, at 5.5 per cent, than for the new projects, at 0.7 per cent. The average cost growth for the old projects has remained constant at just over 5 per cent whereas tbe cost variance for the new projects has remained constant at close to zero. The zero variance for the new projects may result from these projects being relatively young, but there is some etidence of an improvement in the Department’s cost forecasting.
2.26 The analysis of in-Semite date sfippage excludes shppage due to budgetary constraints. This slippage would have occurred with or without the Department’s reforms. Average in-Service date slippage is much worse for the old projects, at 37 months than for the new projects, at 13 months. Average in-service date shppage has increased over the year by some 3 months for the old projects whereas it has remained constant for the new projects. These results also indicate an improvement in the Department’s forecasting.
19 MINISTRY OF DEFENCE:WOR PROJECTSREPORT1995
suffered futher shppage, includlng 2 projects which have sfipped by a further 12 months.
(3) The in-Service date for Rapier Field Standard C has shpped by’a @her 12 months due to technical dWlcufties in Ground E@pment, resuking in delays to dehveries and deployment.
(4) Ntbough in a position to operate Clawback provision on the Rapier programme, the Department judged that it woufd have have been counter-productive. The National Audit Ofice recommend that the Department identify any efistig e@pment contracts tith a Clawback provision with a view to learning lessons from their experience on Rapier
(5) The cost and shppage data for major projects indicate that there bas been an improvement in the Department’s cost and time forecasting.
20 . MINISTRY OF DEFENCE:MMOR PROJECTSREPORT1995 3
. Part 3: Examination of two . communications projects
3.1 The National Audit Office selected 2 communications projects, BOWMANand SK~ET 4 Stage 2, for more detailed examination. The 2 projects present the Department with different sets of challenges relating to terrestilal and sateltite communications respectively.
Project BO~
Back~ound
3.2 BO~ is a combat radio system designed to replace the CMSW family of radios, which were designed in the 1960’s and deployed in the 1970’s. Elements of the CMS W family are now obsolete and the equipment has significant operational shortfals. The most notable of these are a lack of security, vulnerabih~ to Electronic Counter Measures and the expense and difficul~ of maintenance. CMS W also has extremely Emited capabihty for data, as opposed to voice, transmission resdting in inefficient aitilme usage.
3.3 BOWMANis intended to address these deficiencies by providing a fully integrated combat radio system, rather than a family of individual radios which interface with other radios and communications equipment. BOWMANwill protide secure, rehable and robust communications for all 3 Armed Semites engaged in a land battle. The system wiU provide a number of semices: Voice message communication; Command and Control Information; Position reporting, and “User Data”. “User Data” is the transmission of messages in standard pre-programmed format which are held in an associated computer thus reducing the need for voice transmission which reduces airtime usage. Positional reporting wiUbe provided by an integral Global Positioning System, which wi~ again reduce airtime usage, improve co-ordination and control of mobile units and help prevent “friendly fire” accidents.
3.4 The BOWMANsystem wi~ comprise Personal radios, Portable radios, Manpack radios, Vehicle, Ship and Aircraft radios. Ml bar the personal radio will be fully secure; the personal radio wi~ derive its security from being lower powered and thus less hkely to be intercepted. The BOWMANsystem will be fitted into the vast majori@ of the 3 Services’ platforms. There will therefore be a substantial requirement for Government Furnished Equipment in the productiotiinstallation phase. The 2 systems under consideration by the
21 MINISTRY OF DEFENCE:WOR PROJECTSREPORT1995
Department, CROSSBOWfrom ITT Defence Ltd. and YEOH from Siemens Plessey Systems are shown in the photo~aphs opposite as used by infantry soldiers.
Procurement strate~
3.5 During the early stages of the BOW~ project it became clear that certain elements of the requirement were clearly definable and cotid be met mosfly by using existing technology. However, other areas, such as the communications requirements for future Command, Control and Information Systems (CCIS), coufd not be defined fully until further feasibility work had been undertaken. There was, therefore, the risk that defining the longer-term requirements wmdd delay the achievement of the near-term requirements.
3.6 In order to manage this risk, the BOWMANproject was spht into two stages: Stage 1 will provide the basic combat radio system to meet current needs and apprOved current CCISrequirements and interoperabi~ty standards, Stage 2 will address the balance of the requirements to provide a high capaci~ data communications system for future CCIS, an improved Management Information System and will address forward interoperabihty standards.
3.7 The BOWMANprocurement strategy has adopted the recommendations of the Department’s “Learning from Experience” study in terms of:
. use of a staged approach to ensure a manageable programme;
● identification and investigation of techncdo~ options during Feasibfity Study
● use of a Performance Requirement which specifies capabihties and performance levels rather than specific technical solutions;
. the validation of the Performance Requirement through the use of Operational Analysis;
o risk reductionby ehminatingfulldevelopmentthroughthe use ofCommercial Off-The-Shelf and Military Off-The-Shelf equipment, available technology and a programme of verification and vahdation through trials;
. maintenance of competition in all phases up to letting the production contract by having two contractors (Siemens Plessey Systems and In Defence) for Project Definition for Stage 1.
3.8 Pro.iect Definition for Stage 1 is sptit into 3 phases comprising mtilmal development followed by-verifica~on and vahdation phases. ~erification is the demonstration of the contractor’s solutions in a controled environment, in effect to “prove” the technology. Verification is now in progress. Vahdation is the demonstration of the systems in a field environment using a 6 month trial. It was intended to begin the vahdation phase in March 1996. However, the companies codd not meet this deadfine and this, together with the requirement
22 r
MINISTRY OF DEFENCE WOR PROJECTSREPORT1995
CROSSBOW (In Defence Ltd.)
.
YEOMAN (Siemens Plessey Systems) MINISTRYOFDEFENCE:MMOR PROJECTSREPORT1995
to provide troops for Bosnia, caused a delay to the start of the trials. The Department intend to reschedule the trials so as not to have an adverse impact on the timescales for the rest of the programme. The results of the trials wi~ he used to evaluate ITT and Siemens Plessey Systems’ bids for the production contract.
3.9 The early financial commitment by the Department has been reduced by requiring the contractors to contribute to the costs of the first stage of Project Definition. Risk to the Department has also been reduced by placing fm price contracts covering roughly half the total cost with the competing companies, The companies are covering the costs not borne by tbe Department these costs are larger than expected because the competing companies have, with the Department’s concurrence, lengthened their programmed which have proved more technically complex than was envisaged before contracts were placed.
Performance against approved cost estimates
3.10 The estimate of cost given in the 1995 Major Projects Report for BO~ is S101 milhon which covers tbe 2 stages of Feasibih~ Studies and the first stage of Project Definition. This represents a S9 milEon (8.9 per cent) increase against the original cost estimate, The expected increase has reduced hy S3 miRion since the 1994 Major Projects Report. The f 9 milhon cost increase is attributed to price variations resulting from final negotiations over the details of software requirements, exchange rates, Integrated Logistics Support, and the need for additional work and technical support due to the increased complexity of the project.
3.11 The current estimate of cost for the whole project is for further expendi~e of f 1.5 biltion. The Department expect to place a production contract early in 1998, subject to the necessary approvals being obtained.
, Performance against approved time estimates
3.12 Thein-Servicedate for BOMN, definedas the date bywhenthe fist brigade ‘“ group is fu~y trained, equipped and logistically supported, is forecast to be April 2000 against the original in-Service date of December 1995, a shppage of 52 months. Two years of the shppage are attributed to unforeseen technical difflcdties and the rest is deferment due to budgetary constraints. The in-Service date has slipped by a further 3 months since the 1994 Major Projects Report.
3.13 In-Service date slippage on BOWAN has operational and financial penalties. For the future of the programme there are potential risks associated tith the Government Furnished Equipment requirements of the later phases. Therefore J the National Audit Office examination of the BO~AN project focussed specifically on 4 areas:
24 MINISTRY OF DEFENCE:WOR PROJECTSREPORT1995
. ,
. a) The nature of the technical difficulties which have caused 24 months in-Service date sfippage to the programme;
. b) The budgeta~ constraints which caused 28 months in-Sewice date shppage;
c) The financial effects of in-Semite date s~ppage;
d) The potential risks caused by the Government Fornished Equipment and Information requirements of the BOWMANproject.
Unforeseen technical diffictities
3.14 The in-Sewice date sfippage caused by technical difficulties was Hmited to FeasibiEty Study Stage 1, They were not technical difficulties in terms of hardware or software problems but instead were difRcdties with the arrangements for the technical studies reqoired under Feasibihty Study Stage 1.
3.15 The original intention was to run a collaborative Feasibility Study Stage 1 where the Depatiment led a joint venture with indust~, the research and development commmity, and the user. This was intended to generate a Performance Requirement which could meet the minimum essential specification through developed technologies,
3.16 This co~aboration was not achieved, in part due to the desire of individual firms to protect their technological advantage for the later competition. This meant that a much greater burden of work for the Performance Requirement fell to the Depatient. Further work was caused by the decision to apply the principles of “Learning From Experience” (see paragraph 3.7), and the fact that BOWMAN was selected as a pilot programme for the application of Integrated Logistic Support techniques. Moreover, as a result of the changes to the fikely operational scenario brought about by the collapse of the Warsaw Pact, a much greater level of Operational Analysis was reqtired to support a robust Performance Requirement.
3.17 Due to the increase in the Depatiment’s workload, and the complexity of the work reqtired, it became clear that the original timescales for Feasibifi~ Studies could not be met and the project was s~pped by 24 months.
Budgetary constraints
3.18 As part of tbe Department’s budgeta~ processes, each project office within the Procurement Executive stimits a costing of its planned funding requirements for a 10-year foward period. These costings are then aggregated centrally to estab~sh the total Procurement Executive funding requirement.
3.19 Should the aggregated costings across the whole Depaflment exceed the budget, ways of containing the defence programme within the budget need to be identified. Options may include the deferral, descoping or cancellation of ;
25 MINISTRY OF DEFENCE:MAJORPROJECTSREPORT1995
projects. The projects selected for such action are not necessarily those which have themselves experienced shppage or budget overruns : rather the Department aim to choose those projects where the operational or financial penalties are least. BOWMANhas been delayed 4 times between 1991 and 1995 because of funding pressures. These pressures have caused the start of production to be shpped and offtake to be reduced. The slippage to BOWMAN due to budgetary pressures - totalling 28 months - has both operational and financial impacts.
Operational impact
3.20 CLANSMANhas significant operational shortfalls due to its hmited capabihties. The sfippage to BOWMANmeans that the planned improvement in capabiti~ has been delayed, leading up to a reduction in planned operational effectiveness. This capabih~ gap will become more pronounced if BO~ is delayed further and CLANSMANretained longer in-Service.
3.21 Within the budgetary process the impact of shppage on operational effectiveness is assessed by reference to military factors. The Department judged that the operational penalties of running on CNSMAN were outweighed by the benefits of deferring the BOWMANacquisition costs. They have taken measures which compensate for the most significant of CLANSMAN’soperational shortfalls. First, the requirement for a secure tactical data entry device for use by logistic and reconnaissance troops was recognised in 1988, prior to the slippage to BOWMAN.This was provided through project KIPLING,at a cost ofS12 million. Secondly, BOWMANfunding was brought forward to provide an off-the-shelf replacement for the CLANSW ground-to-air UHF radio, which no longer conforms to NATOstandards.
Financial impact
3.22 There are additional costs for supporting CLANSMANcaused by the shppage to BOWMANbecause CLANSMANhas to be run on beyond its planned service Me. Ageingequipment,such as CWSW, tends to be more expensiveto maintain than new equipment. Within the budgetary process the Dep-ent assess such additional costs against the benefits to the overa~ budget of defeming the BOWMANacquisition costs. In the decisions to shp BOWMANthe Depar@ent concluded that the additional costs of running on CLANSMANwere less than the benefits of deferring the BOWMANacquisition costs.
3.23 In the 1994 Major Projects Report, the Department estimated that it wotid cost an additional S50 million a year to run on CLANSMAN.However, more detailed examination of the project this year by the Department has revealed that this figure does not represent the net additional costs compared with supporting , BOWMAN,but an estimate of the total run on costs of CLANSW.
26 . . MINISTRY OF DEFENCE:wOR PROJECTSREPORT1995 . .
3.24 Within the budgetary process the Department have reheal on current estimates of run on costs which are much lower. They are lower because significant elements of the total run on costs for CMSMAN, such as training, will be broadly similar for BOWMAN.Akhough the BOWMANacquisition costs are substantia~y higher than the CMSMAN and BOWMANsupport costs, there is an element of uncertain~ in the data on run on costs. The uncertainty stems from the estimates being broadly based, rather than derived from a detailed and formal costing of every element associated with running on CMNSMAN,
3.25 To inform the decision on the procurement of BOWMAN,the Department are working on more detailed estimates of the total run on costs of CMNSMAN. These estimates, along with the final tender price from the winning BOWMAN contractor, should a~ow the Department to make a more fully informed assessment of the net cost of supporting CMSMAN compared with BOWMAN and shodd inform more ftiy any future judgement shodd it be necessary to consider whether to slip BOWMANfurther for budgetary reasons.
Government Furnished Equipment/Information
3.26 The National Audit Office also considered the potential risks caused by the Government Furnished E@pment and Information requirements of the BOWMANproject. The provision of equipment and information places a dependency on the Department and therefore places them under the risk of being held hable by the contractor for delays and extra costs on the programme caused by the failure to supply equipment and information on time and to the required standard. The Department’s pohcy is to avoid the use of Government Furnished Equipment wherever possible. Government Furnished Equipment is sup pEed only where it is cost-effective, taking account of whether or not the Department or the contractor are better placed to manage the associated risks.
3.27 Problems in the first stage of Project Definition have been concentrated on the supply of Government information. In order to produce a comphant design the contractors require information about the platforms, such as warships, aircraft, tanks and utihty vehicles, in which the BOWMANsystem will operate. Where the Department are not the Design Authority for the platform, they have to obtain the information from the relevant Design Authority (usually a commercial firm) and paes it on.
3.28 This has presented the Department with WO problems. First, many Design Authorities are nntiMng to release proprietary information to other contractors and this has caused some sma~ delays. Secondly, the Department usually have to bear the costs of the Design Authority assembhng the information. These costs are relatively sma~, and represent, on average, a few thousand pounds for each Design Authority. This problem should not occur in the productioti installation phase because the Department plan to pass the responsibility for obtaining information, as far as possible, to the BOWMANprime contractor.
27 MINISTRY OF DEFENCE:WOR PROJECTSREPORT1995
3.29 The major risks relating to Government Fnrnished Eqoipment he in the production and installation phase. The contractor will be reqnired to instati BOWMANsystems in the vast majority of platforms which the 3 Sertices have. For instance, for the &my, this will mean installation into 25,000 platforms of - various types. To allow the contractor to fulfil his contractual obhgations the Depatiment will have to supply the required platforms on time to a specified location and to an agreed build state.
3,30 The problem of supplying platforms on time, aside from ships, is manageable. The most significant risk stems from the requirement to supply platforms to an agreed build state. Duing use, most platforms receive minor modifications to meet unforeseen circumstances, which are sometimes not reflected in the standard Design Authori@ drawings. For example, the build states of the Army’s Land Rover fleet will be many and various. If the Depatiment does not supply the platforms at the agreed build state the contractor can le~timately reject the platform. with the Department Eable for any extra costs. The risks arising from Government Furnished Equipment dependencies are we~ known and were highlighted in the CMG’S Report “Equipment and Spares Held by Contractors” (HC636, Session 1993-94). In this case they are nevertheless unavoidable.
3.31 To manage the risk on Army vehicles the Department are proposing the use of Conversion Management Teams which will “trailblazer” in front of the contractor and ensure that all platforms are at the correct, agreed bnild state. The total estimated 10 year cost for the Teams is S15 milhon. The National Audh Office are encouraged that the Department are giving early attention to managing the risks presented by tbe Government Furnished Equipment re@rements of the BOWMANprogramme.
3.32 It is hkely that there will be a side agreement for installation of BOWMANto ships. ‘Thisis because the installation timetable wi~ have to fit armrnd ship deployments and the ship refit pro~amme. The insta~ation pro~amme ti~ consequently have to be flexible enough to reflect any changes to either deployment or refit schedules and the timescale risks that this presents are Hkelyto be unacceptable to the contractor.
3.33 The solution under consideration by the Department is to have the BOWMAN contractor deliver the kits under the normal production timetable along with an installation guide. The contractor building or refitting the ship wmdd then install the kh following the insta~ation guide. Providing the guide was followed, the BOWMANcontractor would be responsible for the klt delivering the contracted insta~ed performance. The Department believe that this approach minimises their exposure to risk.
28 . . MINISTRY OF DEFENCE:WOR PROJECTSREPORT1995
.
(2) Greater than anticipated technicalco’rnplexity has led to shppage in the companies’ programmed and to.them bearing a higher than expected share of costs.
(3) The shppage to BOWMAN,which has restited from unforeseen technical difficdties and deferment due to budgetary constraints, gives rise to an operational penalty. me Department have taken measures to remedy the most signtilcant of CLANSMAN’soperational shortfa~s.
(4) The Department are working on more detailed estimates of the total run on costs of C~SMAN to inform the future decision on the procurement of BOWM~. It is essential that au relevant cost factors be ftiy taken into account in any future decisions to shp BOWMANfor budgetary reasons.
(5) The Department face a significant challenge to ensnre that Government Furnished Equipment is dehvered at the right time and in the right condition to the contractor. The problem is particularly acute for ships where tiere cotid be changes to deployment and refit schedules.
(6) The National Audit Office are encouraged that the Department have begun to assess the best way of managing the Government Furnished Equipment risks in the ProductiotiInstaHatimr phase.
SKYNET 4 Stage 2
Back~ound
3.34 SateUte communications are the core of the United Kingdom’s military command, control and inte~gence communications networks. The United Kingdom’s sate~ite communications requirements are currently met by 3 SK~ET 4 Stage 1 satelhtes launched between December 1988 and August 1990. Two SK~ET 4 Stage 2 satellites were approved by tbe Department in 1994 as a replacement for the Stage 1 satellites. An artist’s impression of a Stage 2 satellite is shown overleaf.
3.35 The SK~ET requirement originated before the end of the Cold War. The need to maintain such communications at a high level of availability is still central, but the requirement is fast expanding and now includes a range of tactical applications in Sea, Land and Air environments in the international arena. The United Kingdom has 4 fixed geostationary orbit positions a~ocated to it under
29 MINISTRYOFDEFENCE:WOR PROJECTSREPORT1995
30 MINISTRY OF DEFENCE: WOR PROJECTS REPORT 1995 - . . . international agreement, 3 of which are occupied by the Stage 1 constellation The positions secure a pattern of overlapping footprints covering areas of tbe world where United Kingdom forces are most hkely to he deployed.
Procurement strate~ .
. 3.36 Prior to Project Definition, the Department considered and rejected the option of proceeding on a competitive basis with a new spacecraft design to meet the . . Stage 2 requirements, on the grounds that this would not be cost-effective. The implementation phase proceeded on a non-competitive NAPNOC(No Acceptable Price No Contract) basis with the Stage 1 spacecraft builder, British Aerospace. Agreement was reached with British Aerospace Space Systems Ltd. (BAeSSL), . the Prime Contractor, on a “fair and reasonable” price which reflected the . programme risk involved. Competition for some 45 per cent of the agreed , contract price has been estabhshed for sub-contracts. In April 1994, Matra Marconi purchased BAeSSL and, as Matra Marconi Space UK Ltd., are now the Prime Contractor,
3.37 British Aerospace invited bids for the provision of tbe launch vehicle. Bids were received from McDonnell Douglas (the Delta Launch vehicle) and from Arianespace (the Ariane 4 Launch vehicle). The United Kingdom is a signatory to the European Space Agency Launcher Production Agreement which requires preference to be given to Ariane except where it is “unreasonably disadvantageous with regard to cost, rehabih~ or mission compatibihty”. In the event, in order to reduce the risk of launch delay and to enable the benefits of Delta to be exploited for the first launch, 1 Delta and 1 Mlane launcher were selected.
Performance against approved cost estimates
3.38 The estimate of cost given in the 1995 Major Projects Report for SKYNET4 Stage 2 is S346 miRion. This represents an S8 milhon reduction against the original cost estimate. The size of the reduction has remained constant since the 1994 Major Projects Report. It is attributed by the Department to a refinement of figures on final contract negotiations (E4 mi~ion) and to a reassessment of Defence Research Agency costs following an accounting change (S4 million). At the time of the 1995 Major Projects Report there was no further expenditure in clear prospect, but the recent decision to procure a third satellite will increase the overa~ costs of meeting the United Kingdom’s satelhte communications requirement (see paragraph 3.53).
Performance against approved time estimates
3.39 The in-Service date for SKYNET4 Stage 2, defined as the acceptance of the first satelhte in orbit, is forecast to be May 1998 against the original in-Service date of May 1997, a shppage of one year. The shppage is attributed by the Department to: late commencement and completion of the Project Definition
31 MINISTRY OF DEFENCE:WOR PROJECTSREPORT1995
phase (6 months), an under-estimate of satelhte build time (3 months), and extra time required in negotiating the production contract (3 months). There has been no further slippage since the 1994 Major Projects Report.
3.40 The Stage 2 programme builds on existing investment in Stage 1 sate~tes and, at a technical level, involves enhancement rather than redesign, The level of risk is not, therefore, comparable to that associated with major new development work. Inherent risks remain, however, and in seeking to contain these, the Department have had to take a view on the feasibih~ and cost-effectiveness of possible risk reduction measures. In this context, the National Audit Office examined:
a) the Department’s evaluation of options to insure against satelhte launch or deployment failure;
b) the responsibility for procuring Launch and Early Orbit Phase (LEOP) faciEties and;
c) tbe provision of Ground Segment facihties as Government Furnished Facihties,
Cost-effectiveness of insurance options
3.41 The operational requirement for SK~ET 4 Stage 2 is for thereto be a high probabih~ of the equivalent of 1 fully functional satelhte being available for communications access throughout the planned life of the programme. This ‘availability’ requirement is made up of 2 main factors: first, the probabihty of satellites being successfully launched and deployed, and secondly if deployed - their reliability and fife expectancy, Advice received from the Defeuce Research Agency in 1993 suggested that the overall requirement cotid be met with the successful and timely launch and deployment of 2 satelhtes, Given the known risks of launch and deployment, and their impact on achieving the requirement, ‘. the Department considered the merits of insuring against launch failure, The commercial insurance market is generally wilhng and able to underwrite the ‘. risk of whole or partial failure.
3.42 The available options are variations or combinations of 3 basic insurance approaches:
a) SeE insurance by the Department by part-building, bnildlng, or launching a third spacecraft to cover the possibihty of failure by the tirst or second;
b) ‘Full Phase’ commercial insurance, covering both the launch and in-orbit deployment of the first anWor second sate~lte;
c) ‘Launch Phase’ commercial insurance, covering only the event of launch failure by the first antior second sate~ite.
32 .
MINISTRY OF DEFENCE:WOR PROJECTSREPORT1995
. 3.43 The Department selected for appraisal 5 options with contrasting risticostitimescale trade-offs and, consequently, different implications in terms of meeting the operational requirement . . a) A low-risk, Klgh cost option involving the fdest degree of self insurance (ie the procurement and launch of a third sateMte);
b) A low-risk option with time penalties involving Full Phase commercial insurance of both plannqd satelhtes but no action on self insurance: . c) A medium-risk option with some time penalties, involving Full Phase
. commercial insurance for the first planned sate~ite and part build of a . replacement satelhte by the Department
d) A medium-risk option with some cost penalties, involving Launch Phase commercial insurance on both planned satelhtes but also investment in a ftily built replacement satelhte by the Departmenfi and
e) The ‘No insurance’ option clearly the strategy with the highest risk.
3.44 The Department estabhshed that there is a 7 per cent probabih~ of launch failure and a further 7 per cent probabihty of unsuccessful post-launch deployment. These probabihties were used to calculate both the overall hkefihood for each option of 2 (or more) satehtes being successfully deployed and of no satellites being deployed. However, it should be noted thati
a) The probability of launch failure related to an average derived from those launch vehicles considered to be suitable for the deployment of SKYNET. Differentiation between individual launch vehicles’ respective track records became important after 2 failures of the Ariane launcher in 1994; this is reflected in the use of separate probabihties for Delta and tilane launchers in the Department’s risk assessment for a third Stage 4 satelhte (see paragraph 3.53);
, b) The probability of successfti in-launch deployment was defined as the probabtity of the satellite achieving full communications performance, on a strict interpretation of the operational requirement. If the sate~ite achieves only partial communications performance, and therefore does not meet the stated requirement, it was assumed to make no contribution to system availabihty.
Delays caused by launch or sateltite failures
3.45 The principal determinant of the delay caused by having to launch a replacement satelhte is the degree to which it might already have been offset by its prior procurement under one of the risk management options. With fdl prior build of a standby satelfite and the guarantee of a launch window, the
33 MINISTRY OF DEFENCE:WOR PROJECTSREPORT1995
Department estimated the delay to be around 15 months, after a failed launch attempt, rising to some 66 months if there had been no advance procurement of a replacement spacecraft,
Insurance costs
3.46 The Department requested British Aerospace to include in their proposals for Stage 2 implementation a listing of inswance options and costs, Costings were based on a tendering exercise involving 5 insurance brokers, from which commercial rates were derived for both Full Phase and Launch Phase insurance. Howeve~
a) The range of commercial insurance quotes was not disclosed by British Aerospace, and the premia calculated from the average rates were caveatted as indicative only;
b) The rates for Full Phase insurance were based on commercial compensation practices where, typically, the fdl sum insured is only refunded if a sate~te loses more than half its operating capacity, From the Department’s perspective, a satellite with less than ftil operating capaci~ wotid seriously compromise the availability requirement.
The Department’s assessment
3.47 The Department’s assessment of the 5 options was essentially judgmental, involving a view being taken on the acceptabihty, in turn, of the risk, cost, and timescale implications of each alternative, This led to the ehmination of 3 of the 5 identified strate~es: both low-risk options (paragraph 3.43a and b), on the grounds of cost and timescale respectively, and the medium-risk option involving a fully-built replacement satelhte (paragraph 3,43d), on the grounds of the high like~hood of considerable nugatory expenditure.
3.48 The final decision on whether to adopt an insurance option (that identified at paragraph 3.43c), or whethernotto insure at all,involveda viewon the acceptabihty, in operational terms, of the degree of risk associated with the no-insurance option. The Department’s analysis showed that, without insurance, the risk to system availabihty was shghtly in excess of the level laid down in the operational requirement. Despite this, the option was considered operationally acceptable on the grounds that the analysis was based on pessimistic assumptions which tended to produce ‘worst case’ scenarios,
3.49 The contrasting with-insurance option was assessed as affording an 85.5 per cent prohahih~ of 2 sate~ites being successfu~y launched and deployed, at an additional cost of S30 million for insurance and S25 m~on for long-lead items. This was unaffordable in terms of the project fnndlng then available. These cost estimates were very approximate and the Department dld not express a view as to their likely accuracy. Neither did they evaluate the
34 - . MINISTRY OF DEFENCE:MAJORPROJECTSREPORT1995 . ,
. possibih~ of part-recovering their investment in long-lead items. However, this would have made no difference to the restit of the investment appraisal as the no-insurance option was considerably cheaper.
3.50 Since funding constraints presented an absolute bar to adoption of this strategy, . SKYNET4 Stage 2 was approved for production in February 1994 as a . 2-satelhte only programme with no supporting insurance cover. However, the - . marginal non-compliance of this option against the operational requirement was highhghted by the Department. . - , Subsequent developments . 3.51 The operational requirement on which approval for production was based . pre-dates recent si~ificant developments. Operational analysis has since . indicated the increasing importance of effective mitita~ satelhte communications, as was significantly demonstrated in the Gulf War.
3.52 Two other factors were also important to final decisions on the programme. First, a re-examination of the demand for satelhte communications, carried out by the Defence Research Agency, indicated that a 2-satelhte Stage 2 programme would not ensure sufficient capacity for future planned requirements. Secondly, shppage to the SKYNET5 programme, due originally to supersede SKYNET4 in 2003, eroded the safe~ margin for degraded performance by the 2 Stage 2 sate~ites at the end of their intended period in service. Athough SKYNET4 Stage 2 has itsef shpped, there is still a capabihty gap before SKYNET5 comes in.
3.53 These considerations were recognised at the time that SKYNET4 Stage 2 was approved for production, but it was considered that a formal enhancement of the requirement would have delayed the proWamme for the 2 sate~ites then planned, Accordingly, the requirement for a third satelfite was raised separately later in 1994 and incorporated as an amendment to the programme. The extra sateRite was accorded a high priority and was forma~y approved by the Department in November 1995. The contract for a third satelute was placed with Matra Marconi Space UK Ltd in February 1996 at a cost off 130 mil~on.
Procurement of Launch and Early Orbit Phase facilities
3.54 As Prime Contractor, Matra Marconi have taken overall responsibihty for all aspects of the satellite build and lauuch activities until acceptance in orbit. This includes responsibility for the launch vehicle procurement and placing the Defence Research Agency under sub-contract to conduct In-Orbit Testing against the acceptance specification. However, it has not proved possible to pass to Matra Marconi procurement responsibility for the United States Air Force services and facilities needed to support the Launch and Early Orbit Phase (LEOP).
35 MINISTRY OF DEFENCE: MOR PROJECTS REPORT 1995
3.55 The issue of procuring LEOPfacilities as part of a prime contractorshlp package was raised early in 1990. To this end, the Department made enquiries with the United States authorities as to whether a commercial company, appointed as SK~ET prime contractor, could subcontract for use of United States launch and tracking facilities, including the satelhte control ne~ork at SunnWale.
3.56 In July 1991, the United States&r Force advised the Department that, under the terms of the United States Commercial Space Launch Act, such facihties coufd only be subcontracted for by a United States cmnpauy, and then only to the point where a satelhte was installed in its final orbit, typica~y 6 to 8 hours after lift-off. This definition ruled out the vital period between insta~ation and earth acquisition in drift orbit, typically 3 to 4 days after hft-off. Non-inclusion of this period in the responsibihties to be overseen by a prime contractor wmdd largely have negated the purpose of the Department’s proposed procurement strategy.
3.57 Additionally, by March 1992, the Department had chosen a United Kingdom company, British Aerospace, as their prime contractor, Even though a United States company, McDonnell Douglas, were subsequently subcontracted for one of the satellite launch vehicles, this was not sufficient qualification for them to have provided technical support for LEOP.
3.58 The Department then explored the feasibiE@ of using a United Kingdom control faci~ty in preference to that at Sunn~ale. It was concluded that it might be technically viable to use a United Kingdom control facihty either the BAF’s at Oakhanger or British Aerospace’s at Stevenage - finked up to United States Air Force tracking stations, However, it was recognised that there would he a risk in scheduhng the services required from United States tracking stations, given potential conflicts with United States mihtary requirements.
3.59 In the event, the Department and British Aerospace were unsuccessfd in securing United States Alr Force backing for any option other than the provision of United States launch and tracking facihties on a government-to-government basis. By 1993, the Department had concluded that further attempts to secure inclusion of LEOP under prime contractorship responsihihties shotid be discontinued and that, to preserve the integrity of the programme timetable, action should he initiated to raise a Foreign Military Sales case.
Costs of LEOP
3.60 Final indicative costs were provided by the United States in their Letter of Offer and Acceptance of November 1994, Being part of a ForeiW Mihtary Sales arrangement, the estimate, which was accepted hy the Department, attracted United States Government administrative oncosts.
3.61 The Department’s budget in 1995 contains an excess of some 52 per cent over the figures quoted in the ForeiW Mihtary Sales Letter of Offer and Acceptance. The Department acknowledge that funding for LEOPhas been calctiated more on the basis of their original provision than of United States estimated costs,
36 - MINISTRY OF DEFENCE:MMOR PROJECTSREPORT1995 . , . Though the United States estimate turned out to be substantial lower than the funding approved by tbe Department in 1993, the latter were retained as the benchmark against which future assessments were to be made. This provides a margin against the robustness of Foreign MiHtary Sales cost estimates, and reflects the fact that they are based on a LEOP scenario which may be optimistic. In particular, the Foreign Military Sales estimate does not include any contingencies caused by launch delay and assumes launch dates of December 1996 and September 1997.
Since final pricing of Foreign Military Sales facilities is carried out on a costs as incurred basis, the Department’s total Habihty will not be known until some . point in the future, estimated as December 2001 in the Letter of Offer and Acceptance. . Protision of wound se~ent facilities
. 3.63 The contract placed with industry includes modifications to the existing satelfite operations facihty at RAF Oakhanger. This is to provide for control of Stage 2 satelhtes, with their enhanced design. The modifications involve upgrade and expansion of commercial computer hardware , and its installation with newly developed software.
3.64 The contract also makes the prime contractor responsible for all aspects of build and launch activity until satelhtes are accepted in orbit. This includes pre- and in-orbit testing of satelhtes, to be carried out by the prime contractor using ground terminals and testing facihties at Defford.
3.65 Access to RAF faci~ties was therefore required for both ground segment implementation and satelhte testing. This could only be brought in under the scope of the prime contract if the facihties were designated as Government Furnished Facilities.
3.66 Agreed Government Furnished Facihties were incorporated in the contractual Statement OfWork drawn up by British Aerospace. The Statement of Work was supported by a Facihties Plan, defining contractor’s site access and requirements such as electricity and accommodation.
3.67 It was accepted that occasions might arise where, because of operational emergencies or higher priorities, facilities might have to be held back from use on the project. This was taken into account as part of a risk analysis exercise carried out by the Department, on tie basis of data supplied by British Aerospace, before the contract was let. The exercise concluded that the probabihty of such an occasion arising was ‘Medium’ (defined as being between 20 per cent and 50 per cent), with a tikely impact, if it did occur, of delaying the overa~ project timetable by between 6 and 18 months and causing project costs to rise by between 10 per cent and 30 per cent. MINISTRY OF DEFENCE:WOR PROJECTSREPORT1995
3.68 Wile accepting timt such a risk had to be borne, the Department acted to ensure that project requirements would be ftiy taken into accomt when deciding the availability of WF facihties. Au Inteflace Conmol Docnrnent was drawn up to estabhsh procedures for authorizing the use of such facihties, as and when these were required by the contractor. Provision was also made for informal a~eement on use of facihties, if this cotid be locaUy wranged, The document, sigued by ati relevant parties, stressed the importance of avoiding delay in supplying Government Furnished Facilities, since this could jeopardise a claim for liquidated damages against the contractor if they failed to keep to their timetable, and could give rise to a counter-claim being lodged by the contractor against the Department.
3.69 Au additional risk associated with Gromd Segment modifications arose from the necessity of maintaining continuous control of existing SK~ET 4 Stage 1 satelhtes while upgrading Oakbanger to Stage 2 standard, Problems in guaranteeing control might have impacted adversely on the Stage 2 programme. This risk was hkewise assessed as hating a ‘Medium’ (20 per cent to 50 per cent) probability of occurrence and a potential to delay the project by be~een 6 and 18 months, although the hkely impact on cost was judged minimal.
3.70 The contract with British Aerospace provided for a high de~ee of off-site development work so as to minimise the requirement for facihties at Oakhanger. In particular, funding was made available for a SofWare Development Facihty to be supphed to the sof~are subcontractor. The Facih@ was configured to the same specifications as the control consoles used at Oakbanger, one of which would othewise have bad to have been released to the subcon&actor.
3.71 The unavoidable risks associated with up~ading operational consoles and transferring Stage 1 satellite channels were managed by means of a detded cutover plan. The plan was drawn up so that consoles were up~aded on a step-by-step basis according to an aWeed sequence that minimised the impact on operations. Periods of access to consoles were limited to WO weeks, and operations were only interrupted dting transition.
3.72 Asa resdt ofthese risk managementmeasures,GroundSegmentMotihcation has proceeded satisfactorily to date and the programme is cmently on schedule. Computer hardware at Oakhanger was upgraded dting late 1994, leadlng to technical kansfer in January 1995. Softiare development, inteWation and testing is now undemay, with a scheduled date of December 1996 for technical transfer.
38 .
MINISTRY OF DEPENCE:MNOR PROJECTSREPORT1995
.
, , Keypoints
with launch’ failure.
(2) The Depa~ent’s’ eval~atio;, ~volved identifying alternative insurance strategies with contrasting ris~costitimescale trade-offs. On the basis of this assessment, a no-insurance strategy was selected.
(3] Mthough an investment appraisal was carried out, there is scope to improve the Wafity of analysis informing decisions such as the need for insurance by drawing on methods stisequently introduced by the Depwtment to eqlore trade-offs between cost and operational effectiveness.
(4) The Department have made financial provision for the cost uncertainties inherent in the United States ~ Force provision of launch facihties.
(5) Government Furnished Facfities re@red by the prime contractor have been careftiy defied, and risk reduction measures drawn up in case of their being subject to operational priorities. Off-site development and testing has minimised the requirement for access to operational hardware.
39 MINISTRY OF DEFENCE WOR PROJECTSREPORT1995
40 Appendix 1
MINISTRY OF DEFENCE
MAJOR PROJECTS REPORT 1995
(AS AT 31 WRCH 1995)
.“’”}i
Septetier 1995
41 MINISTRYOFDEFENCE: WOR PROJECTSREPORT1995 .
M~ISTRY OF DEFENCE
- MOR PROJECTS REPORT 1995
Contents
Page
Preface 44
Common New Generation Frigate (CNGF) 45 Batch 2 Trafalgar Class Submarines (B2TC) 49 Landing Platform Dock (Replacement) - LPD(R) 52 Landing Platform Hehcopter LPH 55 Spearfish Heavyweight Torpedo 58 Swiftsure & Trafalgar Class Nuclear Submarines (SSN) Update 61 Trident 65 GWS 26 Mod 1 Vertical Launch Seawolf WLSW 68
) BOWMAN 72 BR90 (Bridging for tie Nineties) 75 -. Challenger 2 (including Challenger Armament (CHARM3)) 80 Counter Battery Radar (COBRA) 85 Medlm Range TRIGAT 88 Rapier Field Standard C (FSC) 92 Truck Utih@Ughtifiuck Utiti@Meditiruck Utih@Medim (HeaWDu~) -TU~UMflUM(HD) 96
AMRAAM(Advanced Medium Range Air to Air Missile) 100 ASRAAM(Advanced Shoti Range Air to Air Missile) 103 EH101 “Merhn’’AntiSubmarineW arfareHehcopter 107 Eurofighter 2000 114 Hercties C-130J 117 Infra-red Countermeasmes (IRCM) 119 Sea Harrier Attrition Buy 122 Skynet 4 Stage 2 UK Mfitary SateMte Communication System 125 Skynet 5 UK Mifitary SateMte Communication System 128 Tornado GRl Mid Life Update 131
.
43 MINISTRYOFDEFENCE: WOR PROJECTSREPORT1995
MINISTRYOFDEFENCE
WOR PROJECTSREPORT1995
Preface
The 1995 Major Projects Report, produced by the Ministry of Defence, sets out the position on the Department’s twenty five largest defence equipment projects as at
31 March 1995. Events since then, however important, are not reported.
r Project summary Sheets have been prepared for each project being reported upon. Changes have been made since MPR 94 to improve the clarity and uniformity of information provided. MINISTRYOFDEFENCE: WOR PROJECTSREPORT1995
PROJECT: Common New Generation Frigate (CNGF)
GENERAL INFOR~TION
Director General Responsible: Director General Surface Shipe (DGSS)
Associated Project(s):
Title ISD
EH101 1998
PURCHASE ARRANGEMENTS
A number of feasibih~ type studies are undemay for the SKIPand associated combat systems. The most significant are Hsted below
Contractor Contract Type Procurement Route
BMT Ltd Fixed Price Competitive UK Warship Initial Design Plan Study)
EUROSAM Fixed Price Non competitive (Project Definition)
Quantities Re@ed: Quantity yet to be approved.
PROJECT DESCRIPTION, PROGRESS TO DATE AND =Y FUTURE EWNTS
The Common New Generation Frigate (CNGF)is a co~aborative programme beween the UK, France and Italy to procure a new class of Anti Air Warfare (AAW frigate to enter semice in *. It will replace the UKS existing Type 42 AAWdestroyer. It comprises 2 distinct programmed: the Ship and its systems (HORIZON) and the Principal Anti Air Missile System (PAAMS).Both are derived from a single Tripartite Staff Re~irement.
For HORIZON,collaboration wi~ start with an initial design and vaudation phase (phase 1) and then proceed to the detailed design and build of three First of Class (FOC)ships (Phase 2). Industry will be encouraged to identify satings arising from common support. Development of the whole ship, including construction of the three FOC ships and the physical integration of the combat system will be contracted to a French Itafian UK joint venture company (WC). A consortium led by GEC Marconi Naval Systems Ltd (with BAe and others) was selected in January 1994 as the UK member of the NC. For PAAMS,the Prime Contractor will be established as the consotilum EUROPAAMSfrom the existing EUROSAM,for France and Italy, and UKAMSfor UK. Full Scale Engineering Development is expected to commence in 1996.
45 “‘‘“* MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1995
HORIZONjoint development costs wi~ be shared equally. Production coste wiDbe shared on the basis of offtake. Afthough every effort will be made to attain reasonably equal work shares, the prime criteria M be to select eWipments to meet the operational requirement at the best price, taking into account through hfe costs and operational performance. For PAAMS,the arrangements for cost and work sharing are sti~ to be agreed.
Under the terms of the HORIZONProgramme MOUsigned in July 1994, a Joint Project Officefor HORIZON has been estabhshed in London with delegated authority for technical, financial and contractual functions. As host nation, the UK provides the necessary contractual and financial infrastructure. A PAAMSProject Office wi~ be estabhshed in Paris on signature of the PAAMSProgramme MOU.
Key milestones are as fo~ows:
HORIZONMOUSupplement No 1 (Phase 1); PAAMSProgramme MOU;PAAMSSupplement 1 (FuR Scale Engineering Development (FSED) and Initial Production),
The am is to make progress towards the signature of the PAAMSProgramme MOUand HORIZONand PAAMSMOUSupplements during the course of summer 1995, although this is under review subject to progress of contractual and international negotiations. ~.
PROJECT COSTS (at 1995/96 average forecast of outturn prices to the nearest EM) ,.
EM Production Development Totab ,_
Current Estimate of Cost 99 99 Estiated Cost at MODApproval 102 102
Difference -3 -3
Expenditure to date (31 March 1995): E91M
Warship
First approval: 1991- Initial Studies comprising:
Ship First of Class Initial Design Combat Management System Feasibih@ Study FURYIntegrated Communications System Project Definition (Phase 1) Electronic Warfare System Project Definition (Phase 1) Medium Cahbre Gmr System Project Definition Other Associated E@pments Feasibih@ Studies
Latest approval: 1994- comprising
Inner Layer Missfle System Feasibihty Studies Proptision System Developments testing of ICR gas turbtie
46 MINISTRYOFDEFENCE: WOR PROJECTSREPORT1995
Principal Anti-Air Missfle System
Ftist approval: 1989- Project Defiition
Reasons for Cost Variations:
Factor EM Increase Decrease
Revised procwement strategy 3
Total -3
Explanation of Cost Variation:
Retised procwement strate~ Changes in the nature of the programme due to revised procurement strate~ (from national to international coUaborative).
Estimated Cost of project at Main Contract Award: N/A (Study Contracts only)
Cwrent Cost of Main Contracti N/A
Cost Change since Contract Award: N/A
Year(s) of Peak Expendi~e: 2003/04 - 2004/05 (Reflecting assmned timescale of SKIPprocwement not yet approved) unit Production Cost *
Further Expenditie in Clear Prospect (at 1995/96 average forecast of outin prices to the nearest E1OM):
At this stage, there is only a fimited view of possible further expenditure.
IN SERWCE DATES
ISD Definition: Completion of Part W trials, fit to enter fti service.
Achievement of ISD:
Original ISD (MontWyear) December 2002 Cmrent ForecastiActual ISD (mont~ear) * Variation (month(s)) *
47 ,..,
MINISTRY OF DEFENCE: WOR PROJECTSREPORT1995
Reasons for ISD Variations:
Factor Month(s) Increase Decrease
ProWamme adjustments *
*
Explanation of ISD Variations:
Programme adjustments The main reason for the * shppage h ISD is the need to synchronise the programmed related to the combat systems with that of the warship. In particular, the need to achieve a reahstic and well developed programme for PWMS, which is a determining factor for the Frigate ISD. MINISTRYOFDEFENCE: WOR PROJECTSREPORT1995 r PROJECT: Batch 2 Trafalgar Class Sdmartie (B2TC)
. . GENEN INFORMATION
Director General Responsible: Director General Submarines (DGSM) .
Associated Project (s):
. Title ISD
. * . S&T Update Final Phase
PURC~SE ~GEMENTS 3 Contractor Contract ~pe Procurement Route
GEC-Marconi ) Responses are awaited to UK Competitive. ., VSEL ) incitations to tender. It is the intention to place a fied price contract.
Quantities Re@ed: 5.
PROJECT DESCRIPTION, PROGRESS TO DATE AND REY FUTURE EVENTS
The Batch 2 Trafalgar Class (B2TC)submarine is the planned replacement for the Swiftsure Class SSNSwhich WMbecome Me-expired in the early 2000s.
The Feasibihty - Risk Reduction contract was placed on 15 AuWst 1994. . Incitations to Tender were issued on 14 Jtiy 1994 for an initial batch of 3 nuclear powered submarines with . options onafurther 2. Responses areduefor retnrnon29 June 1995. Itisintended that tbecontracts fortbe S&T Update Final Phase will be transferred to the B2TC prime contractor (when selected), wbo will then . assume contract responsibihty for the achievement of the Final Phase re@rement. . \ Contract placement for the B2TC Prime Contract is expected mid 1996.
, 49 MINISTN OF DEFENCE: WOR PROJECTSREPORT1995
PROJECT COSTS (at 1995/96 average forecast of outtnrn prices to the nearest EM)
EM Production Development Totals
Current Estimate of Cost 21 21 Estiated Cost at MODApproval 21 21
Difference NIL NIL NIL
Expenditure to date (31 March 1995): E16M
First approval: April 1991 (Feasibihty Studies) Latest approval: July 1994 (Feasibih~ -Risk Reduction) [.
Reasons for Cost Variations: N/A
Explanation of Cost Variations: N/A
Estimated Cost of Project at Main Contract Award: N/A (Study Contracts only) .
Current Cost of Main Contract NIA
Cost Change since Main Contract Award: NIL
Reasons for Cost Variations since last Contract Award: N[A
Explanation of Cost Variations since last Contract Award: N/A
Year (s) of Peak Expenditure: 2002/03 2003/04 (Reflecting assmned timescales of submarine procurement - not yet approved).
Unit Production Cost *
Ftiher Expendi~e in Clear Prospect: (at 1995/96 average forecast of outin prices to the nearest El OM):
*
50 ,, , MINISTRYOFDEFENCE: WOR PROJECTSREPORT1995
. IN SERWCE DATES
ISD Defmitiom ISD is the date on which the first submarine contributed to the operational capabihty of the Royal Nav.
Achievement of ISD:
Original ISD (MontWyear) * . . Current ForecastiActual ISD (monWear) * - Vafiation (month (s)) +28 . Reasons for ISD Variations: P
Factor Month (s) Increase Decrease
. Budgetary constraints 28
Total 28 g
. Explanation of ISD Variations:
Budgetary constraints The need to match the programme to the available resources.
,
.
.
51 ,,.
MINISTRYOFDEFENCE: MOR PROJECTSREPORT1995
PROJECR Landing Platform Dock (Replacement) - LPD(R)
GENERAL INFOR~TION
Director General Responsible: Director General Surface Ships (DGSS)
Associated Project(s):
Title ISD
Generic Command Support System 1997
PURCWSE ARRANGEMENTS
Contractor Contract me Procurement Route
Ferranti GEC Naval Systems Ltd. Fixed Price UK Competitive Command System Fti Development
Redifon SPT Ltd Fked Price UK Competitive Integrated Communications System Fd Development
Quantities re@ed: 2
PROJECT DESCRIPTION, PROGRESS TO DATE AND KEY FUTURE EVENTS
The proposed vessels are replacements for the current amphibious assault ships Fearless and Intrepid which wi~ be 30 years old in 1995. An initial Feasibihty Study showed that the procurement of two new ships offered best value for money. In 1991 approval was given for a range of Project Definition studies to be undertaken for both the overall SKIPdesign and the elements of the Combat Management System that would be fitted. In 1993 a further round of PD studies was approved to identi~ a ship that was both affordable and stiU provided mihtary capabihty. These additional studies have confirmed that it shmdd still be possible to procure two effective ships without compromising critical operational and safety requkements.
Approval was obtained in June 1994 to invite tenders for the detailed design and build of the ships and to award the Integrated Communications System (ICS)development and production contract, within an initial financial limit of flOM. The current programme envisages approval to place the warship design and build contract in December 1995, but the abihty to hold this programme will depend on the degree of comphance of VSEUSsingle tender response negotiated under the MOD’sNAPNOCarrangements. MODwil proceed as fast as is prudent, but wi~ not seek approval to place an order until acceptable contract terms have been negotiated.
52 f,
& - MINISTRYOF DEFENCE WOR PROJECTSREPORT1995 . .
. PROJECT COSTS (at 1995/96 average forecast of outturn prices to the nearest EM)
flM Production Development Totak
Current Estimate of Cost 35 35 Estimated Cost at MODApproval 35 35
. Difference NIL NIL .
Expendi~e to date (31 March 1995): E24M
First approval: 1987 (FeasibiRty Studies) Latest approval: 1994 (Release of the Warship D & B ITT and placement of the ICS contract, with an initial
..* financial threshold of S1OM).
. Reasons for Cost Variations: N/A
Explanation of Cost Variations: N/A
. . Estimated Cost of Project at Main Contract Award: N/A (Study Contracts only)
. Current Cost of Main Contracti N/A
. Cost Change since Main Contract Award: N/A
Year(s) of Peak Expenditure: 1999/2000 2000/2001
* , Unit Production Cost:
Further Expenditure in Clear Prospect (at 1995/96 average forecast of outturn prices to the nearest 51OM)
*
IN SERWCE DATES
. ISD Definition The date when the first ship becomes ftiy operational.
Achievement of ISD:
LPD(R)O1 LPD(R)02
Original ISD (MontWyear) September 1997 January 2001 Current ForecastiActual ISD (mont~ear) August 2000 October 2002 Variation (month(s)) + 35 + 21
.
. 53
. MINISTRYOFDEFENCE: WOR PROJECTSREPORT1995
Reasons for ISD Variations:
Factor LPD(R)O1 LPDm)02
Month(s) Month(s) Increase Decrease Increase Decrease
Unforeseen technical d~lctities 4 4 Need for project redefinition 14 Budgetary constraints 17 17
Total 35 21
Explanation of ISD Variations:
The delays to the LPD(R)programme are due to the fo~owing reasons:
Unforeseen technicti difRcdties Reassessment of the ship build period (LPD(R)O1&02 -4 months).
Need for project redeftitiom The need to undertake essential Project Definition work to ensure that the programme was affordable (LDP(R)O1-14 months),
Budgetary constrtits: The need to match the programme to the available resources.
54 - . MINISTRYOFDEFENCE: MOR PROJECTSREPORT1995 .
PROJECT: Lantig Platform HeEcopter - LPH P
. GENERAL INFORMATION . Director General Responsible: Director General Surface Ships (DGSS) .
Associated Project(s): None
.
. w PURCHASE ARRANGEMENTS
Contractor Contract ~pe Procurement Route . . Warship Design and Build Fixed with a small firm Design and Build. Vlckers Shipbuilding and element for spares Competitive UK only with a sub Engineering Ltd. WSEL) procurement (EIM) contract on Kvaerner Govan Ltd for construction of the hull.
Support Contract. A mixture of freed and fwm Non competitive, Up to Vickers Shipbtiding and 7570 of contract by value subject . Engineering Ltd. WSEL) to competitive sub contracts. , Quantities Required: One ship.
PROJECT DESCRIPTION, PROGRESS TO DATE AND KEY FUTURE EWNTS . The Landing Platform for Hehcopters (LPH)wiU provide accommodation for 12 medium support and 6 fight hehcopters, up to 800 Royal Marines, their vehicles and other equipment, and a platform from which to launch simtitaneous air and sea assadts.
Construction of the hti commenced in May 1994 at Kvaerner Govan Ltd (KGL)under a sub contract placed by VSEL, the Prime Contractor. Subse~ent delays at KGLhave meant that the forecast detivery date to VSEL has shpped from Februa~ 1996 to June 1996. However VSEL have responded by retising tbe production programme and expect to maintain the forecast acceptance and in service date. . PROJECT COSTS (at 1995/96 average forecast of outturn prices to the nearest fM) . EM Production & Development Tot*
Current Estimate of Cost 201 201 Estimated Cost at MODApproval 209 209
Difference -8 -8
. , 55 .,.
MINISTRYOFDEFENCE: WOR PROJECTSREPORT1995
Expenditure to date (31 March 1995): E75M
First approval: April 1993) Latest approval: Apti 1993) (Design and Btid)
Reasons for Cost Variations:
Factor EM Increaee Decrease
Reassessment of costs 8
Total -8
Explanation of Cost Variations:
Reassessment of cost The Ship design is proving to be more mature than expected.
Estimated Cost of Project at Main Contract Award: S209M (May 1993)
Cmrent Cost of Main Contracti E156M (HuHContract)
Cost Change since Main Contract Award: - EIM
Reasons for Cost Variations since last Contract Award:
Factor SM hcrease Decrease
QuantityNolnme variations 3 Other spec~led factors 2
Total 2 3
Total Balance -1
Explanation of Cost Variations since last contract award:
Quantityfiolnme variation: The contract price was reduced by S3M in respect of a Type 996 Radar which is now to be supphed as Government Furnished E~ipment,
Other specWled factors Eesential amendments to the contract. (The need for such changes was foreseen and specific provision was made in the overa~ project approval).
Neither of these contract cost variations has impacted on the overall project cost,
56 MINISTRY OF DEFENCE: WOR PROJECTSREPORT1995
Year(s) of Peak Expenditure: 1994/5 1996/7
Unit Production Cost E178M
Further expenditie in Clear Prospect (at 1995/96 average forecast of outturn prices to the nearest S1OM):
None
IN SERWCE DATES
ISD Definition: The date when the ship becomes ffly operational.
Achievement of ISD:
Original ISD (MontWyear) March 1998 Current Forecast (mont~ear) March 1998 Variation (month(s)) Nfl
Reasons for ISD Variations: N/A
Explanation of ISD Variations: NIA MINISTRY OF DEFENCE: WOR PROJECTSREPORT1995
2076 suite and provides the associated e@pment and SMCS changes which constitute the fuUyintegrated tactical weapon system and protide the required capabili~ to take the stimarines into the next century.
Fd Development md Initial Production commenced in February 1994. The programme is progresstig weff on a broad front wd early milestones are being achieved. System design md interface requirements whlcb set the parameters of the equipment programme have been freed.
The intention of the present procurement strategy is to continue, initia~y, with the current pohcy of MODmanagement of aU contracts. However, following endorsement of the proposed Batch 2 Trafafgar Class, it is intended that the contracts for Final Phase wi~ be transferred to the B2TC prime contractor (when selected), who wi~ then assme contract responsibility for the achievement of the Final Phase requirement. Accordingly, requirements have been included in the B2TC prime contract 1~.
PROJECT COSTS (at 1995/96 average forecast of outturn prices to the nearest fM)
fM Production Development Totafs
Current Estimate of Cost 330 305 635 Estimated Cost at MODApproval 327 293 620
Difference +3 +12 +15
Expendl~e to date (31 March 1995): f156M
First approval: 1988 (Fti Development and Initial Production of Initial Phase fo~owing completion of Feasibfity Studies for final Phase).
Latest approval: 1994 (Procurement of a further 3 Initial Phase sets and FuU Development& Initial Production of 4 Fhd Phase sets).
Reasons for Cost Variations:
Factor EM fncrease Decrease
Price variations 20 5
Total 20 5
Total Balance +15
62 . MINISTRY OF DEFENCE: . WOR PROJECTSREPORT1995
PROJECT: Stitsme & Trafalgar Class Nuclear Submarine (SSN) Update P
.
GENE~ INFORMATION
Director General Responsible: Director General Submarines (DGSM)
Associated Project (s): :
. Title ISD
Submarine Command System (SMCS) 1994 . Batch 2 Trafalgar Class (B2TC) *
.
PURCWSE ARRANGEMENTS .
Contractor Contract ~pe Procurement Route
b Major Contractors Initial Phase - Development and Production
GEC Marconi Naval Systems Firm Price Competitive UK Sonar Systems Division
BAe SEMA Firm Price Non-Competitive
Major Contractors Final Phase - Development and Production
. Ferranti Thomson Firm Price Competitive UK Sonar Systems (Sonar 2076)
Quantities Required: Initial Phase (Previously Stages 1&2): Production of 7 boat sets. Final Phase (Previously Stages 3&4): Initial Production of 4 boat sets and supporting shore equipment.
. PROJECT DESCRIPTION, PROGRESS TO DATE AND KEY FUTURE E~NTS . Initial Phase The Initial Phase replaces obsolescent sonar equipment and interfaces the new sonars with the new Submarine Command System (SMCS),provided separately, to achieve an important interim improvement in operational effectiveness. The first boats to receive the Initial Phase have completed insta~ation, and integration testing of the Tactical Weapons System is well advanced. Contractors Sea Trials of the Initial Phase are due to start towards the end of 1995.
Find Phase The Final Phase implements acoustic signature reduction measures to reduce counter detection and enhances the submarine’s own sonar performance, replaces a number of individual sonar sets with the Sonar
61 MINISTRY OF DEFENCE: MAJORPROJECTSREPORT1995
2076 suite and provides the associated equipment and SMCS changes which constitute the f~y integrated tactical weapon system and provide the required capabih~ to take tbe submarines into the next century.
Fti Development and Initial Production commenced in February 1994. The programme is progressing weU on a broad front and early milestones are being achieved. System design and interface requirements wtich set the parameters of the equipment programme have been freed.
The intention of the present procurement strategy is to continue, initia~y, with the current pohcy of MODmanagement of aU contracts. However, fo~owing endorsement of the proposed Batch 2 Trafalgar Class, it is intended that the contracts for Final Phase will be transferred to the B2TC prime contractor (when selected), who wiU then assume contract responsibi~ty for the achievement of the Final Phase re@rement. Accordingly, requirements have been included in the B2TC prime contract ITT,
PROJECT COSTS (at 1995/96 average forecast of outturn prices to the nearest EM)
EM Production Development Totals
Cmrent Estimate of Cost 330 305 635 Estimated Cost at MODApproval 327 293 620
Difference +3 +12 +15
Expendi~e to date (31 March 1995): S156M
First approval: 1988 (Ful Development and Initial Production of Initial Phase following completion of FeasibiEty Studies for Rnd Phase).
Latest approval: 1994 (Procmement of a further 3 Initial Phase sets and Fdl Development& Initial Production of 4 Final Phase sets).
Reasons for Cost Variations:
Factor EM Increase Decrease
Price variations 20 5
Total 20 5
Total Balance +15
62 . MINISTRY OF DEFENCE: . WOR PROJECTSREPORT1995 .
. Explanation of Cost Variations:
. Price vwiations: Differences in annual price uphfts between speci~c indices and GDP deflator (+S15M) and variations between MOD estimates and prices . achieved fo~owing competitive tendering (+S5M and -S5M).
Estimated Cost of Project at Main Contract Award: E648M (Feb 94)
. Current Cost of Main Contract E185M (D&IPSonar 2076)
Cost Change since Main Contract Award: NIL
. Reasons for Cost Variations since last Contract Award: NIA . Explanation of Cost Variations since last Contract Award: N/A “
Year(s) of Peak Expenditure: 1995/96 1996/97
. Unit Production Cost Initial Phase-E 4.3M Final Phase -E28.OM
. Further Expenditure in Clear Prospect (at 1995/96 average forecast of outturn prices to the nearest E1OM):
r S70M (Procurement of 3 Final Phase sets in addition to the 4 recorded under Quantities Required). .
IN SERWCE DATES
ISD Definition: ISD is defined as the date by which the first Initial Phase or Final Phase Tactical Weapon System is fitted and operationa~y effective on a submarine.
. Achievement of ISD:
Initial Phase Final Phase
Original ISD (Montiear) October 1994 * Current ForecastiActual ISD (Mont~ear) AuWst 1996 . Variation (Month(s)) +22 +41
.
\
.
. * ‘. 63 Reasons for ISD Variations: Initial Phase Find Phase Month (s) Month (s) Factor Increase Decrease Increase Decrease
Procurement delays 12 5 Delays in associated projects 12 27 Other specified factors 9 ?. Total 22 41
(Overlap between factors of 2 months on Initial Phase)
Explanation of ISD Variations:
Initial Phase
Procurement delayw Impact of procurement delays due to a period of financial constraint which delayed the placement of contracts (+12).
Delays in associated projects: Changes to fit opportunities resulting from changes to the Submarine Refit PrOgramme (+12).
Final Phase
Procurement delays Impact of procurement delays due to a period of financial constraint which delayed the placement of contracts (+5).
Delays in associated projects: Changes to fit opportunities restiting from changes to SAmarine Refit Programme and extended Development (+27).
Other speciRed factors Delay to start of Full Development and Initial Production as a result of the extension to Project Definition (+9).
64 MINISTW OF DEFENCE: WOR PROJECTSREPORT1995
PROJECT: fiident
.
. GENERAL INFORMATION
Director General Responsible: Chief Strategic Systems Executive (CSSE)
Associated Projects:
Title ISD
Trident Strategic Weapon System 1994 Sonar 2054 1994 . .. Submarine Command System 1994 . Vanguard Weapon Handhng and ) 1994 . .. Discharge System ) Vanguard Self Protection Mast 1994
PURC~SE ARRANGEMENTS WanWard class Trident missile submarine ody.)
Prime Contractor Contract Type Procurement Ronte
Vickers Shipbtiding Fixed Price Non-competitive but target and Engineering Ltd Incentive Fee price includes 40% by value for materials and sub-contracts, of which about half has been competed at sub-contract level.
. Quantities Required: 4 Submarines
. . PROJECT DESCRIPTION, PROGRESS TO DATE AND =Y FUTURE E~NTS
The Trident II D-5 Strategic Weapon System wi~ be carried aboard four Vanguard class nuclear powered submarines replacing Polaris progressively as the UKS nuclear strategic deterrent. The first submarine, HMS VANGUARD,entered service on schedde in December 1994. The second submarine, HMS VICTORIOUS, successfully completed contractor’s sea trials in August 1994 and, following acceptance by the Royal Navy and commissioning in January 1995, is now undergoing post acceptance trials prior to deployment towards the end of the year. Construction of the other two submarines is progressing we~ with VIGILANT,the third of class, duetobe launched later this year. Thesubmarines' Tactical and Strate~c Weapon Systems were cleared for HMS VANGUARD’sdeployment. The nuclear warhead programme at the Atomic Weapons Estabhshment remains on schedule. The facihties at the Clyde Submarine Base Faslane and Royal Naval Armament Depot Coulport are providing support to the Trident submarines.
The Trident project non-hybrid cost estimate of El 1682M announced to the House of Commons on 26 January 1995 has since been revised to El 1759M to reflect an accounting adjustment.
.
65 TOT~PROJECTCOSTS (At 199W95 average forecast of outturn prices to the nearest SM, El = $1.48).
EM (Development & Production) Total
Current Estimate of Cost 11759 11759 Estimated Cost at MODApproval 15357 15357
Difference -3598 -3598
Expenditure to Date(31 March 1995): S9809M
First Approval: 1982 (Development and Production of the programme as a whole). ,- Latest Approval: 1994 (Update of the project cost estimate).
Reasons for Cost Variation
Factor EM Increaee Decrease
Decision to process missiles in the USA 1164 Submarine 1336 Strategic Weapon System 1455 Tactical Weapon System 292 Shore Construction 822 Dockyard Projects 79 Contingency 915 Accounting Adjustment 77
Total 1270 4870
Total Balance -3598
(Note: Individual elements ofthe abouefigures rounded to& hence any apparent imbalances).
Explanation of Cost Variations:
The red cost changes shown above reflect principa~y the refiement of early cost estimates and the success of both the UK and US projects in containing costs (-E2836M); programme requirement changes (+E325M); andthedecision toprocess missiles at Kngs Bay(-flll64M), ~hesefigures provide only abroad indication of the net red cost change). The increase in the Tactical Weapon System programme has been due primarily to tbe need to develop the various sti-systems to provide the re@red performance to integrate them into a coherent system. The increase in the Dockyard areas is due to a change in the attribution of costs to Trident (not total costs of the facih~ which will be used by other vessels). The increase in the Shore Construction programme continues to reflect the significant under-estimation of the costs and requirements, in particdar to meet the stilngent nuclear safe~ standards.
66 .
.
. - Estimated Cost of project at Main Contract Award: N/A (See Note) . “ Current Cost of Main Contract N/A
Cost Change since last Contract Award: N/A
. Reasons for Cost Variation since last Contract Award: N/A
.
- Explanation of Cost Variations since last Contract Award: N/A
Note: Each aspect of the Trident Programme is separately contracted, hence there is no one main contract
: that could be usetiy reported here.
. Years of Peak Expenditure: 1990/91 - 1993/94
. Unit Production Cost (of the Vanguard Class Submarines includlng Strategic Weapon System and Tactical Weapon System Elements): . . Submarke Original UPC at Curreut UPC at Percentage real current prices current prices cost difference EM SM Y.
‘. HMS VANGUARD(1) 1682.3 1705.3 + 1,4 HMS WCTORIOUS 1091.0 974.9 -10.6 VIGIMT 1022.2 929.0 - 9.1 VENGEANCE 1041.4 962.6 7.6
NOTES: (l). Includes First of Class costs .
Further Expenditure in Clear Prospect (at 1994/95 average forecast of outturn prices to the nearest E1OM): . None
IN SERWCE DATE
ISD definition: ISD is defined as the date on which the first submarine contributes to the . operational capabi~ty of the Royal Navy. . Achievement of ISD
Original ISD December 1994 Actual ISD December 1994 Variation Nd .
. . .
67 PROJECT: GWS 26 Mod 1- Vertical Launch Seawolf mSw
GENEU INFORMATION
Director General Responsible: Director General Surface Ships (DGSS)
Associated Project(s):
Title ISD
Type 23 Frigate 1989 T~e 23 Command System 1998
PURC~SE ARRANGEMENTS
Contractor Contract ~pe Procurement Route
BAe Dynamics Ltd Fixed Price UK Non competitive with no appreciable competition for sub contracts.
Prime Contract for system and missile development and production of the f~st buy of launcher sub systems . and associated missiles,
BAe Dynamics Ltd Fked Price UK Non competitive tith approximately one third of value subject to sub contract competition,
Contract for second buy of missiles.
BAe Dynamics Ltd Firm Price UK Non competitive with no appreciable competition for sub contracts.
Contracts for second and third buys of launcher sub systems, including work necessary on lanncber sub systems wtich became available from the AORprogramme as a restit of an LTCSavings Measure. (See abo Note below.) \. \ “\. GEC Marconi Radar Firm Price UK Non competitive with no appreciable competition for sub contracts.
First buy of Tracker Guidance Sub systems
6S GEC Marconi Radar Firm Price UK Non competitive with no appreciable competition for sub contracts.
Protision of second batch of Tracker Guidance Sub systems by conversion of tracking radars available from the cance~ed GWS 26 Model 2 (Lightweight SEAWOLF)programme.
Note: 2 sets of trackers also became available from the AOR programme as a resnk of the savings measure. The approval and cost for these are included in the Project Costs section of this Statement.
Quantities Required SMp Systems Miesfles
18 Tracker Sub-systems 950 15 Launcher Sub-systems (includes 2 of each for training programme)
PROJECT DESCRIPTION, PROGRESS TO DATE ND =Y FUTURE EVENTS
GWS 26 Mod 1 Vertical Launch SEAWOLFWLSW is a surface to air Point Defence Missile System fitted to Type 23 Frigates to provide autonomous 24 hour hard ki~ protection against anti ship missiles and aircraft. BAe Dynamics Ltd are the system design authori~ and supply the missiles and some elements of the ship system. GECMarconi Radar protide the fore andafttracking radars. Target indication isprovidedbytbe Type 996 survei~ance radar.
VLSW is to be fu~y integrated with the Type 23 Command System; however, until the Command System equipment enters service in 1998, peacetime f~ings of VLSW are contro~ed by a stand alone unit (STAC- SEAWOLFTrials Autonomous Controller). For GWS 26 Mod 1WLSW, STACis an accurate representation of the command system, and since there bas been much data exchange and message traffic proving, successfully completed using this facihty, there is a high degree of confidence that fully successful integration will he achieved. Contractual Acceptance for GWS 26 Mod 1 WLSW was agreed with BAe in December 1994.
The evidence for Provisional Fleet Weapon Acceptance (FWA)is being prepared by the Project for submission in Summer 1995. Fti FWA has been delayed until 1999 because of the need to prove integration with the Type 23 Command System and modifications from the Type 911 tracker radar performance improvements programme (being catied out under the GWS 25 Model 3/ Conventional Launch Seawolf programmed).
PROJECT COSTS (At 1995/96 average forecast of outturn prices to the nearest EM)
EM Production Development Total
Current Estimate of Cost 552 231 783 Estimated Cost at MODApproval 579 148 727
Difference -27 +83 +56
69 MINISTRYOFDEFENCE: - MOR PROJECTSREPORT1995
Expendi~e to date (31 March 1995): E637M
First approval: 1984 (FuR Development and Initial Production) Latest approval: 1994 (2nd Batch of Tracker Guidance Sub-systems)
Reasons for Cost Variations:
,- Factor SM Increase Decrease
Price Variations 2 27 Other Specfied Factors 81
Total 83 27
Total Balance +56
Explanation of Cost Variations:
Pfice variatiom Lower than expected prices for production eWipments from contract negotiations (-S27M) and difference in annual price uphfts between specfic indices and GDP deflator (+S2M).
Other spec~led factors: Underestimation of costs due to insufficiently detailed specifications: (+S81M).
Note: The development cost overrun reflected above was mainly attributable to difflcdties experienced during software development and inte~ation up to 1985. There have been no further real cost increases since 1986.
Estimated Cost of Project at Main Contract Award: E780M (October 1993)
Current Cost of Main Contract E138M (2nd Batch production)
Cost Change Since Main Contract-Award: +S2M
Reasons for Cost Variations since last Contract-Award:
SM Increase Decrease
Price Variations 2
Total 2
70 :. MINISTRY OF DEFENCE: . WOR PROJECTSREPORT1995 . .
. Explanation of Cost Variations since last contract-award:
. , Price variations: Dtiference in annual price upfifts between specific indices and GDP inflation factor. . . Year(s) of Peak Expenditure: 1988/89 1990/91.
,. ;/ Unit Production Cost ..
System: 1st Batch f12.lM 2nd Batch S13.lM 3rd Batch E12.9M
. Missile: 1st and 2nd Buys E0,3M
Further Expenditure h Clear Prospect (At 1995/96 average forecast of outturn prices to the nearest S1OM):
, Less than S1OM. Nertical launch sub-system e@pment for up to 3 Type 23 Frigates)
IN SERVICE DATES
ISD Definition: The ISD is defined as the date at which the VLSWsystem has completed First of Class trials and is at sea in an Operational Type 23 Frigate.
Achievement of ISD:
Original ISD (Mont~ear) May 1990 Actual ISD (MontMear) October 1991 Variation (Month(s)) +17
Reasons for ISD Variations: , . Factor Month(s) Increase Decrease
Unforeseen Technical D~lctities 17
Total 17 .
Explanation of ISD Variations:
Unforeseen technical difficdties: Diffictities with the tracking and @dance sti-system software and system integration.
.
71 . PROJECT: BO~
GENERAL INFORWTION
Directorate General Responsible: Director General Command Information Systems (DGCIS) .4 Associated Project
Title ISD
Vehicle Integrated Communications and 2000 Information Distilbution System WICDS)
PURCWSE ARRANGEMENTS
Contractor Contract me Procurement Route
Data Sciences Ltd ~echnical Firm Manhour Rate UK Competition support)
In Defence (UK)Ltd PD1 Firm Price } In Defence (UK)Ltd FS2 Firm Task Rate } International Siemens Plessey Systems Ltd PD1 Firm Price } Competition Siemens Plessey Systems Ltd FS2 Firm Task Rate } Racal Communications Ltd PD1 Sub-contractor
Quantities Required: Nil (Eventual Production Requirement of about 56,000 radios)
PROJECT DESCRIPTION, PROGRESS TO DATE AND KEY FUTURE EVENTS
BO~ ti provide the Armed Forces with a combat radio system to replace the Clansman family of radios which has been insemice since themid-70's andwhlch is becoming increasingly obsolescent. ISD stippage and cost increase were experienced early in the project’s life when its complexity required the Feasibility Study to be extended and sp~t into WO stages. FS1 was completed in August 1993. The procwement strategy for BOWW is based on the maximum use of existing equipment and technology currently available to industry, with minimum sofWare development activi~to inteWatetie Wo. In 1993, foUowing international competition, contracts were placed with Siemens Plessey Systems Ltd and ITT Defence (UK)Ltd for both PD1 and FS2. A single production contract is expected to be placed in early 1998.
72 MINISTRY OF DEFENCE: MMORPROJECTSREPORT1995
PROJECT COSTS (At 1995/96 average forecast of outturn prices to the nearest EM)
EM Production Development Tot*
Cment Estimate of cost 101 101 Estimated Cost at MODApproval 92 92
Difference +9 +9
Expenditure to Date (31 March 1995): E46M
First Approval: 1988 (FS1) Latest Approval: 1993 (PD1/Fs2)
Reasons for cost Variations:
Factor EM Increase Decrease
Price variations 3 Increased complexi~ of project 6
Total +9
Explanation of cost variations:
Price Variation: Final negotiations on software re@rements, exchange rates and ILS for PD1 increased costs.
Increased Complexity of Projecti Greater complexity and volume of work associated with assessing options to meet the re@rement. The need for additional support to the project to define the performance re~irement. Greater than expected scope of operational analysis work and the need for work to define the proposal to split BO~ into wo stages.
Estimated Cost of Project at Main Contiact Award: N/A (Study contracts only)
Curent Cost of Main Contract N/A
Cost Change siuce Main Contract Award: N/A
Reasons for Cost Variations since last Contract Award: N/A
Explanation of Cost Variations since last Contract Award: NIA
Years of Peak Expenditure: 2001/02, 2002/03
73 Unit Production Cost *
Further Expenditie in Clear Prospect (at 1995/96 average forecast of outtwn prices to the nearest E1OM):
*
IN SERWCE DATES -. ISDDeftition: Theofi@al ISDwas1995. No ISDdefinition wasstated at first approval, Thecurent ISDof April 2000 is defined as the date by when the first brigade woup is fu~y &ained, equipped and logistically supported.
Achievement of ISD:
Otiginal ISD (Mont~ear) 1995 (December assumed) Curent ForecastiActual ISD (Mont~ear) April 2000 Variation (Month(s)) +52
Reasons for ISD Variations:
Factor Month(s)
Increase Decrease
Unforeseen technical Difficdties 24 Budgeta~ constraints 28
Total 52
Explanation of ISD Variations:
Unforeseen technical ~lctitie% Greater complexity and volume of work in suppofi of the objectives of the Feasibihty Study phase, which were to define the essential \$ re~irements of the radio system and to evaluate options for meeting the requirement.
Budgetary constraiut~ The need to match the pro~amme to available resouces in the overa~ pattern of MODpriorities. . MINISTRY OF DEFENCE: MOR PROJECrS REPORT1995 - .
. PROJECT: BR 90 (Brid@ng for the Ntieties)
.
. GENEU INFORMATION . Director General Responsible: Director General Land Systems (DGLS)
Associated Project(s): None -
PURC~SE ARRANGEMENTS
Contractor Contract me Procurement Route
. Thompson Defence Firm Price UK Competition Projects Ltd (Design & Development)
Thompson Defence Firm Price Non-Competitive Projects Ltd (Production) . . Some 30%, by value, of the major sub contracts ie those valued at SO.5M and above have been competed.
(Note: Thompson Defence Projects Ltd were acquired by Vickers Defence Systems on 19 June 1995)
Quantities Required:
Close Support Bridge - 48 sets each comprising 1 modification to an Armoured Vehicle Launched . Bridge (AVLB),1 Tank Bridge Transporter, 1 No.1O bridge, 2 No.12 bridges.
General Support Bridge - 29 sets each comprising 1 Automotive Bridge Launching Equipment . (ABLE),2 Bridging Vehicles, 1 32M Bridge.
. Long Span Bfidge Qty 9 . Two Span Bridge - Qty 9
-. PROJECT DESCRIPTION, PROGRESS TO DATE AND REY FUTURE EVENTS
BR90 is a family of four complementary bridge systems designed as common modular sections to be combined in several ways, It includes purpose designed common chassis dedicated bridge carrying and laying vehicles and modifications to the in-service bridge-laying tank, The four systems comprise:
The Close Support Bridge (CSB): A bridge of up to 24.5m span, which is launched hy bridge laying tanks (Armoured Vehicle Launched Bridge AVLB)in the forward areas of a batie zone.
The General Support Bridge (GSB): A bridge of up to 30m span, used in other battie areas and launched using Automotive Bridge Launching Equipment (ABLE)mounted upon a . , common Unipower chassis.
75
, MINISTRYOFDEFENCE: WOR PROJECTSREPORT1995
The Long Span Bridge (LSB): Reinforcing equipment, again launched by ABLE, which ti increase the span of the GSB to at least 44m.
The Two Span Bridge (TSB): Equipment which enable mtiti-span GSB or LSB to be constructed over floating pontoons or freed piers.
The bridges are designed to carry the British Army’s vehicles, including Main Battle Tanks and WY laden tank trwsporters. across rivers, canals and dry gaps. They wi~ supersede several types of efisting bridges, some of which have been in service for up to 30 years. FoUowing a feasibihty study in 1982/83 a procurement strategy of national development hy means of Prime Contractorship determined by competition was approved in 1984. The development contract was placed in November 1987 and included production options. However, fo~owing the Options for Change review, quantities were reduced to a level outside these options. As a consequence firm price production prices were re-negotiated under NAPNOCarrangements in 1993.
CSB and GSB were accepted in August 94 and fu~ production approval was Qven in September 1994. First deliveries of production equipments has commenced. Development of LSB and TSB is continuing.
PROJECT COSTS (at 1995/96 average forecast of outturn prices to the nearest SM)
EM Production Development Totals
Current Estimate of Cost 138 49 187 Estimated Cost at MODApproval 136 45 181
Difference +2 +4 +6
Expenditure to date (31 March 1995): E54M
First approval: 1982 (Feasibih~) Latest approval: 1994 (Approval for Production of CSB and GSB)
Reasons for Cost Variations:
Factor SM Increase Decrease
Engineering Changes 8 Shppage in Firm Price Payments 2
Total 8 2
Total Balance +6
76 MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1995
Explanation of Cost Vafiatiom
En@eetig changes: Increase in costs relating to en~eering changes identified during the development (E6M)and production (E2M)programmed.
SHppage in Firm Price Payments The decrease is due to shppage mainly in the development programme, and subsequently to the firm price payments, which has led to a cost
Estiated Cost of Project at Main Contract Award E185M (October 1993)
Current Cost of Main Contract E138M (Production CSB and GSB)
Cost Change since Main Contract Award +E2M
Reasons for Cost Variations since last Contract Award: Engineering changes.
Explanation of Cost Variations since last Contract Award:
The application of metal spraying techniques to bridge components to reduce the risk of stress corrosion cracking and to ensure component hfe span meets specified requirements.
Year(s) of Peak Expenditure: 1995/96 1996/97
Unit Production Cost Because of the diversi~ of equipments comprising BR90 a single unit production cost is not apphcable. The individual UPC’sof the major components have therefore been fisted separately:
Tank Bridge Transporter E540K No.1O Bridge 5476K No.12 Bridge E181K ABLE E1031K Bridging Vehicle E341K 32M Bridge E512K Long Span Btidge E595K Two Span Bridge E218K
Further Expenditure in Clear Prospeck (at 1995/96 average forecast of outturn prices to the nearest tlOM)
E7M (fd production approval for TSB and LSB).
IN SERVfCE DATES
Original ISD Definition: CSB, GSB and TSB - men ha~ of the equipment has been deployed to BAOR.LSB men 7 equipments have been deployed to BAOR.
77 MINISTRYOFDEFENCE: MOR PROJECTSREPORT1995
FoUowing Options For Change and subsequent reviews of Army deployment commitments the latest ISD defiition, issued in March 1994, is as fo~ows:
CSB: Afl equipment dehvered and supported in service to meet peace holdlngs of the ATOand 22 Engr Regt complete. Quantities as follows:
12 AVLBmodifications, 13 TBTs, 11 No.10 Bridges, 22 No.12 Bridges.
GSB: N equipment dehvered and supported in service to meet peace holdings of the ATOand the UK Foward Support Squadron, Quantities as fo~ows:
6 ABLE, 10 BV,5 x 32m GSB
TSB and LSB: M equipment dehvered and supported in service to meet peace holtings of the ATOand UK Forward Support Squadron, Quantities as foUows:
3 Two span equipments and 3 Long Span equipments,
Achievement of ISD: CSB GSB TSB LSB Original ISD (MonWyear) 93/94 1992 1992 1992 (Assume 9/93) (Assume Jtiy as fid-point) Current ForecastiActual ISD (mont~ear) Dec 96 May 96 Nov 97 Ott 97 Variation (month(s)) +39 +46 +64 +63
Reasons for ISD Variations: CSB GSB TSB LSB Factor (I = Increase, D = Decrease) I D 1 D I D I D
Prioritisation of Development Programme: 12 12 7 36 24 Budgetary Constraints: 6 6 6 6 Unforeseen Technical D~lctities: 19 22 17 30 Procurement Delays: 27 13 5 3
Totals 52 12
Balance 4V
‘Note: CSB:A proportion ofthe dela.qs due to Technical Difficulties and those due to Procurement Dela.vs acted concurrently thus the Total Variation and Balance figures do not reconcile.
Explanation of ISD Variations:
Pfiofitiation of the development programmw Revision to the priorities for the introduction of CSB/GSB.
Budgetary Constraints: The need to match the programme to the available resources.
78 - L - MINISTRYOFDEFENCE: ~OR PROJECTSREPORT1995 .
- Unforeseen Technical D~lctities: Technical problems with the machinery used to produce the large bridge panels and problems with the vehicle . sub-conhactor involving some redesign work. Increases to - lead times for large section aluminium extrusions.
. Procurement Delayx Delays resdting from re-negotiation of the initial production contract fo~owing a reduction in planned quantities as a restit of the Options for Change review. Revision of priorities for the introduction of CSB/GSB and finahsing . essential initial spares requirements for GSB.
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79 MINISTRY OF DEFENCE: WOR PROJECTSREPORT1995
PROJEC~ ChaUenger 2 (including ChaUenger Amament (CMM 3))
GENEM ~FORMATION
Dtiector GeneraJ Responsible: Director General Land Systems (DGLS)
Associated Project(s): None
PURCHASE ARRANGEMENTS
Last year’s report was divided into WO entries, the initial buy(127 Main Battle Tanks) and the fo~ow-on buy (up to 259 Main Battle Tanks) respectively, Project costs for the follow-on huy consisted of nominal CHARM1 costs only because, as at 31 March 1994, a contract existed only for the procurement of 127 ChaUenger 2 (CR2)Main Battle Tanks (MBTs)together with a training and suppoti package; decisions bad yet to be taken on the foUow-on buy, for which contract negotiation (assumed at tbe time to be non-competitive NAPNOC) had not even begun. On 14 July 1994, however, a contract amendment was signed for the procwement of a ftiher 259 CR2 MBTs together with further haining equipment and associated support. Accordingly, this report combines the WO separate procurements and includes project costs for the FoUow-on buy. The CHARM1 proWamme, although now complete, is still included as an early stage of CR2 development for consistency with MPR 94.
Contractor Contract ~pe Procurement Route
Vlckers plc Fixed price Initial Buy - International competition
Vlckers plc Fixed price FoUow-On Buy - Competitive
Quantities Re@ed: Main Battle Tank: 386 Driver Training Tank: 22
PROJECT DESCRIPTION, PROGRESS TO DATE AND ~Y FUTURE EVENTS
CR2was selectedas fie replacementfor the &my’s remaining @o regiments of Chieftain MBTs after an international competition. A contact was placed with Vickers plc in June 1991 for the completion of development and the production of 127 MBTs. At the same time, it was recognised that there was a need to upwade tie remainder of the MBT fleet (CR1s). After consideration of a range of options, it was decided that the most cost-effective solution was the purchase of further CR2S, giving a smaller single-me fleet of more capable MBTs; options in the original contract were taken up for the production of an additional 259 CR2S, The Demonstration phase and the development proWamme (including Rehabihty Grotih and User Trials) are both complete. Production of the MBTs is well underway, with ten delivered to date. The In-service Date for Chatienger 2 is now June 1996.
CR2 is cnrrentiy confi~ed to fire CHARM1 ammunition, The new CHARM3 ammunition round is being developed titbin the Vickers contract, with eight of the sixteen development stages akeady completed. CHARM3 system acceptance is scheduled for 1997, Approval for the inte~ation of CHARM3 ammunition into the tank and for the production of CHARM3 ammunition was secured in September 1993.
80 ,, ,
: MINISTWOFDEFENCE: UOR PROJECTSREPORT1995 .
. The CR1 Upgrade programme ticluded the cost of the earher CWM 1 programme, from which the Upgrade programme was, in part, derived. This programme is now complete. The CHARM1 programme cost, which . was reported in MPR94, has been retained in this report as an early development stage of CR2. . . PROJECT COSTS . (at 1995/96 average forecast of outturn prices to the nearest EM) . CWM 1 only EM . - Production Development Total
Current Estimate of Cost 34 185 219 . Estimated Cost at MODApproval 35 161 196
Difference -1 +24 +23 .
Expenditme to date (31 March 1995): E206M . Ftist approval: 1980 Development Phase Latest approval: 1987 Development and Production
. Reasons for Cost Variations: . . Factor SM . ., Increase Decrease . Price variations 3 3 - Specification changes 23
Total 26 3
Total Balance +23
. Explanation of Cost Variations:
.= Price variation A reduction of S3M restitig from the final pricing of CHARM1 contract being less than previously estimated and an increase of E3M due to increase in rate of VATfrom 15Y. to 17.5Y..
SpecWlcation changes: Increases of E23M due to change in ammunition specification w
.
.
. . -
51 CR2 (Qty 386) including CMM 3:
SM Production & Development Totafs
Current Estimate of Cost 2096 2096 Estimated Cost at MODApproval 2118 2118
DHerence -22 -22
Note: There is no split between Development and Production.
Expenditie to date (31 March 1995): C565M
First approval: 1988 Demonstration Phase Latest approval: 1994 CR2 Follow-on Buy . Reasons for Cost Variations:
Factor EM Increaee Decrease
Price variations 6 28
Total 6 28
Total Balance -22
Explanation of Cost Variations:
Price variation: Difference in annual price uphfts between spec~lc indices and GDP deflator +E6M and lower contract prices achieved &an eartier estimates for Demonstration Phase Equipment -f14M and FOUOWon Buy contract amendment-t14M.
Estimated Cost of Project at Main Contract Award: S662M (September 1990)
Current Cost of Main Contract: f1753M (D&PContract)
Cost Change since Ma~ Contract Award: f1091M
82 i MINISTRYOFDEFENCE: MOR PROJECTSREPORT1995 .
. . Reasons for Cost Variations stice last Contract Award: . Factor EM Increase Decrease - . Changes in requirement 73 Quanti~Wohune variations 1018 - Total 1091
Explanation of Cost Variation etice last Contract Award:
. Changes h reqtiemenk Increase of f53M due to change in ammunition specification (CWM 1 to C~RM 3) and procurement of tranche 2 of the CR2 Repair Pool, plus E20M increase relating to a number of sma~ changes to the contract.
“ QnantityNolnme variation Due to contract amendment to procure an additional 259 Main Battle Tanks and 9 Driver Training Tanks. ,
Year of Peak Expenditure: 1996/97 .
Unit Production Costi S3.lM
. Further Expenditure in Clear Prospect (at 1995/96 average forecast of outturn prices to the nearest E1OM):
None
IN SERWCE DATES
ISD Definition
Delivery of a propofion of Individual Training Organisation vehicles plus one regiment’s estabhshment.
.
Achievement of ISD: . . Y Original ISD (montWyear) December 1995 Current ForecastiActual ISD (montWyear) June 1996 Variation (month(s)) +6
.,
.
. 83 WOR PROJECTSREPORT1995
Reasons for ISD Variation
Factor Month(s) . Increase Decrease
Unforeseen technical difficulties 6
Total 6
Explanation of ISD Variation: Problems with the dehvery of certain essential support elements (tratiing and pubhcations). The sk month shp was implemented solely to ensure that the tank should enter service with a fu~ support package.
84 . . .
. PROJECT: Comter Battery Radar (COBW)
, . GENEW INFORWTION .
. Director General Responsible : Director General Land Systems (DGLS)
Associated Project(s):
Title ISD
BATES 1996
. PURC~SE ARRANGEMENTS
Contractor Contract ~pe Procurement Route
EuroArt Advanced Radar F&ed Price CoHaborative International Technology GmbH Competition
Sub-contractors:
. . Siemens AG (Germany) 29% Thomson-CSF (France) 29% Racal Radar Defence Systems (UK) 167. Lockheed Martin (USA) 26%
Quantities Required: NIL
. In clear prospect 9
PROJECT DESCRIPTION, PROGRESS TO DATE AND REY FUTURE E~NTS
COBRAis a co~aborative project for a Long Range Weapon locating Radar under development for UK, France and Germany. A Trilateral MilitaW Requirement was used as the basis of a joint Project Definition Phase. . Contracts were placed with three competing consortia in July 1986, with the resulting proposals for Full Development submitted to the three nations at the end of 1986. Extended negotiations led to the award of a development contract, with a maximum price production option, to EuroArt in February 1990. This is . covered by a development phase MOU.
The development contract was programmed to take sk years to complete. Nthough the completion of integration testing and the start of five fire trials have been delayed by some eight months, tie development programme is progressing weU. The system is currently undergoing Live Firing Trials and resdts to date are very encoura~ng. A period of Troop Trials will lead to completion of the main development in late 1996.
A reduction in the hkely German production requirement has invahdated the maximum price production
. option andthecontractor hasindicated that the Unit Production CostwiU be substantially increased. Further development work aimed at reducing production costs (Cost Reduction Programme) is currently under negotiation. .
. MINISTRYOFDEFENCE: MOR PROJECTSREPORT1995
A Memorandum OfUnderstanding (MOU)for the production phase has not yet been agreed. The three partner nations are formdating plans for production and an EAC submission is planned for ewly 1997,
PROJECT COSTS (at 1995/96 average forecast of outturn prices to the nearest EM)
EM Production Development Totals (BATESequipment only)
Current Estimate of Cost 5 61 66 Estimated Cost at MODApproval 6 64 70
DHerence -1 -3 -4
Expendi~e to date (31 March 1995): E42M
First approval: 1985 (Project Definition Phase) Latest approval: 1989 (Full Development Phase and Limited Production for BATES),
Reasons for Cost Variations:
Factor SM Increase Decrease
Changes in requirement 3 Quanti@~ohune variations 5 5 Price variations 2 3
Total 7 11
Total Balance -A
Explanation of Cost Variations:
Changes in requirement LTC95 Mternative Assumption - Complementary systems now to be addressed under a separate requirement -f3M
QuantityNolume variations Further development work aimed at reducing production costs +E5M. Reduced requirement for communications, technical and trials support during development -E5M
Price Vmiatious: BATESequipment priced lower than anticipated -fllM, differences in annual price uphfts betieen spec~lc indices and GDP deflator (-f2M) and cost increases due to exchange rate variations (+E2M),
Estiated Costof Project at Main Contract Award: E70M(February 1990)
86 MINISTRY OF DEFENCE: WOR PROJECTSREPORT1995
Current Cost of Main Contract E34M (Fti Development)
Cost Change since Main Contract Award: NIL
Reasons for Cost Variations since last Contract Award: N/A
Explanation of Cost Variations since last Con&act Award: N/A
Year(s) of Peak Expenditure: 1999/00 2000/01
Unit Production Cost *
Further Expenditure in Clear Prospect (at forecast 1995/96 average outturn prices to the nearest E1OM):
*
IN SERWCE DATES
ISD Definition First COBRAtroop deployed. (COBRAtroop = 3 systems)
Achievement of ISD :
Original ISD (MontMyear) ● Current ForecastiActual ISD(mont~ear) * Variation (month(s)) +77
Reasons for ISD Variations:
Factor Month(s) Increase Decrease
Procurement delays 54 Other specified factors 23
Total 77
Explanation of ISD Variations:
Procurement delays: Protracted negotiations for letting the development contract between the three collaborative partners and between the four companies forming the industrial consortium (EuroArt). (+36 months). Reductions inhkely German requirements and the consequent need for further development work aimed at cost reduction. (+18 months). (Contractual negotiations for tbe cost reduction programme including a revised Maximum Price Production Option have yet to be concluded.)
Other spectiled factors: Reassessment of original ISD fo~owing completion of PD phase. (+23 Months).
87 MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1995
PROJECT: Medium Range TRIGAT
GENEW ~FORMATION
Director General Responsible: Director-General Weapons and Electronic Systems (DG~S)
Associated Projects: None
PURC~SE ARRANGEMENTS
Contractor Contract ~pe Procurement Route
Euromissile Dynamics Fixed Price Single Source, Non competitive Group (EMDG) (French MODme Contracting (BAe Def, Aerospatiale DASA) Authori@)
Quantities Required: Nil
In clear prospect *
PROJECT DESCRIPTION, PROGRESS TO DATE AND ~Y FUTURE E~NTS
Medium Range TRIGATis a crew-portable anti-tank guided weapon system which WN he capable of defeating improved enemy armonr at a maximum range of 2000m. Medium Range TRIGATwi~ incorporate a missile with a tandem charge warhead supported by a laser guidance system with a thermal sight. The latter wiU a~ow its effective operation at night and in adverse weather conditions. Medium Range TRIGATis a mtitilateral defence programme with the United Wngdom, France and Germany participating as Pilot Nations and Belgium and the Netherlands as Associate Nations. It is currently in full development.
QuaHfication trials by industry began in February 1994 and are planned to be complete in January 1996, They wiUbe followed by multilateral official services evaluatiotiuser trials and national trials in 1996. The purpose of these trials is to test the performance of tie total missile system in order to demonstrate achievement of the design specification prior to formal national acceptance. Whilst the programme is hehlnd schedule and some minor areas of technical difficul~ remain there is high confidence that the final developed system will meet the requirement.
8S -
- MINISTRYOFDEFENCE: WOR PROJECTSREPORT1995 .
. PROJECT COSTS (at 1995/96 average forecast of outturn prices to the nearest EM) . . Costs reflect Fti Development (FD) Phase only. (See note below).
EM , Development
Current Estimate of Cost 126 Estiated Cost at MODApproval 111 . Difference +15
. Note: The FS and PD phases were combined for both Medium Range and Long Range TRIGAT projects and meaningful separation of costs is not possible.
Expenditure to date (31 March 1995): E76M
., First approval: 1979 (Feasibfi& Study) Latest approval: 1988 (FuUDevelopment)
Reasons for Cost Variations: .
. Factor ZM Increase Decrease
Reduced number of Partner Nations 20 Reduction in National costs 9 Minor changes in contractual requirements 1 . Price variations 8 Exchange rate variation 13 . Total 33 18
,. Total Balance +15
Explanation of Cost Variations:
. Rednction in number of partners: Italy, Greece & Spain dld not join the programme as expected, prior to main contract let.
Reduction in national costs: Outside of the main contract (eg. Government Furnished Facihties (GFF)). .
Minor cmstractnal changes This relates, in the main, to the cance~ation of a small simulator,
. Price variation Difference in annual price uphfts between specific indices and GDP deflator.
. .
89 MINISTRY OF DEFENCE: WOR PROJECTSREPORT1995
Exchange rate variation Payments are made in three currencies SterEng, Deutchmarks and French Francs.
Estimated Cost of Project at Main Contract Award: E120M (June 1988)
Current Cost of Main Contract: S122M (Development)
Cost Change since Main Contract Award -E6M
Reasons for Cost Variations since last Contract Award
Factor EM Increase Decrease
Increased number of Partner Nations 5 Minor changes in contractual requirements 1
Total -6
Explanation of Cost Variations since last contract-award:
Increase number of Partner Nations: The original contract was let with only the three Pflot Nations included. The subse~ent inclusion of Belgium and the Netherlands led to a reduction in the UK contractual costs.
~or contractual changes This relates, in the main, to the cancellation of a sma~ simulator.
Year(s) of Peak Expenditme: 2003/4 & 2004/5
Unit Production Cost Missfles - E16K Firing Posts - E216K
Further Expendi~e in ClearProspect (at 1995/96averageforecastofoutturnpricesto the nearest S1OM)
S820M (Industriahsation and Production of missiles, firing posts, training equipment etc.)
IN SERVfCE DATES
ISD Definition: First Battahon ftiy equipped with aUits Firing Posts and first he missfie stocks
Achievement of ISD:
Original ISD (monttiyear) December 1995 Current Forecast ISD (monttiyear) December 2000 Variation Month(s)) +60
90 MINISTRYOFDEFENCE: MOR PROJECTSREPORT1995
‘ Reasons for ISD Validations:
. Factor Months . Increase Decrease
Unforeseen technical diffictities 12 . Procurement delays 24 Budgetary constraints 24 . . Total 60
Explanation of ISD Variations:
Technical tilctities due to problems with warhead, integration and guidance
Procurement delays an under estimation of the time each partner Nation would require to achieve the necessa~ internal financial approvals to move to production,
Budgetary constr~ts The need to match the programme to available resouces.
.
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91 MINISTRYOFDEFENCE: MOR PROJECTSREPORT1995
PROJECT: Rapier Field Standard C (FSC)
. GENERAL INFORMATION
Director General Responsible: Director General Weapons and Electronic Systems (DGWES)
Associated Project(s): None .
PURCRASE ARRANGEMENTS
Contractor Contract ~pe Procurement Route
British Aerospace Target Cost plus Non-competitive Contract (s~- Defence Ltd. Dynamics Incentive Fee tith a contracting was not subject to Division, Maximum price. competition).
Fire Units and SurveiUance Radars: 57 Tracker Radars: 43 MK 11Missfles: *
PROJECT DESCRIPTION, PROGRESS TO DATE AND KEY FUTURE EWNTS
Rapier FSC is a completely new Short Range Air Defence system for the Army and WF. Currently in Production and newing the end of FuU Development, it will have a 24 hour, all weather capabfi~ and offer significant improvements over current Rapier systems. These include an improved tracking and missile guidance system, an 8 rail missile launcher, improved electronic counter measures, an upgraded Tracker Radar and a new (MK II) surface to air missile.
A qua~led Certificate of Design (C of D) for Ground Equipment was achieved in October 1993. This acknowledged that a number of residual development activities remained to be completed. Progress on these, particularly on rehabihty proving, has been slower than expected, resdting in delays to Ground Equipment deliveries. Full C of D is expected to be achieved in November 1995. Ground Equipment dehveries are expected to be completed in 1996/97.
Approval of Tranche 1A (a buy of additional ground and support eqtipment and spares) was given in 1994. Afso in 1994 retised ISDSwere notified to the EACwho ageed to the replacement of the dual RAF/Army ISD arrangement with a single ISD (the RAF ISD).
92 MINISTRYOFDEFENCE: MOR PROJECTSREPORT1995
PROJECT COSTS (at 1995/6 average forecast of outtirn prices to the nearest fM)
EM Production Development Totak
Current Estimate of Cost 976 1104 2080 Estimated Cost at MODApproval 985 1178 2163
Difference -9 -74 -83
Expenditure to date (31 March 1995): S1738M
First approval: 1977 (Feasibihty Study) Latest approval: 1994 (Re-endorsement against retised ISDSand approval of Trancbe 1A).
Reasons for Cost Variations:
Factor EM Increase Decreaee
Changes in requirement 45 Price variations 50 Variation of indices 29 Re-assessment of Costs 117
Total 79 162
Total Balance -83
Explanation of Cost Variations:
Changes ti requirement These are the resdt of deletions of promammes which Rapier FSC Part funded - Infra-Red SurveiRance Sys~em-/ Passive Aircraft SmeiUarice System (S8M FSC element) and NATOIdentification System programme (E37M). Decisions were taken in 1989 and 1991 respectively.
Price variations: This is due to the increased costs of Tranche 1A reflecting the very consemative initial estimate provided by the company, the degree of obsolescence subsequently identified and delays in contract placement caused by protracted price negotiations.
Variation of indices: This is due to the difference in annual price uphft between specific indices and GDP deflator.
Re-assessment of Costs: At the orignal 1986 approval, the cost estimate was based on an initial maximum price for the main contract, plus an assessment of a range of activities which codd not be defined and costed until development was
93 MINISTRYOFDEPENCE: WOR PROJECTSREPORT1995
fmther advanced ~lals, Government Furnished Equipment, Base Workshops factory test equipment, contingency and spares). A reassessment of sunk and future costs has shown that the the cost of these activities is less than the original estimate.
Estimated Cost of Project at Main Contract Award: N/A (Target Cost Contract)
Current Cost of Main Contracti N/A . Cost Change since last Contract Award: N/A
Reasons for Cost Variations since last Contract Award: N/A
Explanation of Cost Variations since last Contract Award: N/A
Year(s) of Peak Expenditure: 1991/92 1993/94
Unit Production Cost
Fire Unit &SurveiUance Radar ‘ Tracker Radan * MK IIB Missile: *
Further Expendi~e in Clew Prospect (at 1995/6 average forecast of outturn prices to the nearest EIOm:
None
IN SERWCE DATES mm: The time at which the first Battery is due to have received aUits prime and support equipment and declared operational readiness. w: The time at which the first Squadron is due to have received W its prime and support equipment and declwed at operational readiness. (The ISD for the RAF was ori@nally “The time at which the first FSC system is dehvered to a squadron”. The RAF ISD was rede8ned to make the ISD definitions for the two services more consistent].
Achievement of ISD:
0ri8inal ISD (MonWyear) Army 1990 RAF 1989 (assumed to be Jan 1990) (assumed to be Oct1989) Current ForecastiActual ISD (montWyear) Army April 1996 RAF April 1996 Variation (month(s)) +75 +78
94 . . MINISTRYOFDEFENCE WOR PROJECTSREPORT1995 . ‘-
. - Reasons for ISD Variations: - . Factor hmy RAF . Month(s) Increase Increase
Unforeseen techical diffictities 51 48 . 12 . Need for project redefinition 12 . Budgetary constraints 12 12
. Change in ISD definition 12*
Total 75 78
. *6 of these months were concurrent with technical difficulties so only 6 months have been included in the total. -
.- Explanation of ISD Variations:
Technical DifRcdties: Prior to iucentitised contract placement in 198624 months of shppage . occurred due to tectical Wccdties. These arose iR the areas of signal . processbrg software and computing; there was also a delay iu protidmg . Govermnent developed processors. These ~cukies have now been overcome. Since 1986 tiher s~ppage of 24 months (RAF)aud 27 months ., (Army)have occurred due to ~cdties h Ceficate of Design completion . which has resuked in delays to ground e@pment dehveries and deployment.
Need for project redefmitiom Dining the early fti development phase of the programme much work was done to assess and reduce technical risks. This work enabled the development programme to become sufficiently mature to be incentivised. .
Budgetary crmstratits: Funding restrictions were apphed prior to 1986 to keep tight control on this large and technically complex project which, during its early stages, was , subject to a cost plus contract. These restilctions were successful in inhibiting cost increases but contributed to delays in the programme,
Change in ISD defmitiom This fo~owed the incentivisation of the contract and was in response to , NAOcriticism about inconsistent definitions of ISD within the MOD,The . RAF ISD was redefined as the point at which the first Squadron is due to receive au its prime and support equipment and is declared operational; preciously the definition was the time at which the first system was to be de~vered. This change means the &my and M definitions of Rapier FSC ISD are now consistent. 6 months of this delay was concurrent with technical difficulties.
Note: In 1994 it was decided for internal MODpurposes to replace the dual Army/RAF ISD arrangements with a single ISD that for the first RAF sub-uuit to be equipped, trained and supportable. This fo~owed the operational decision to convert Army sub-units to FSC after those of the RAF,rather than being interspersed between them. This extended the interval between WF and &my ISDS,reducing the value of the dual ISD . arrangement as a project performance indicator. To assist in comparison with MPR 94 the two ISDSare ,- repotied in MPR 95, hut future MPRs will only report against the one (RAF)ISD.
.
. 95 PROJECE muck Utility Light/fiuck Uttiity Mediutiuck UtMty Medium (Heavy Duty) (TUL/TU~UM(HD))
GENEW INFORWTION
Director General Responsfile: Director General Land Systems (DGLS)
Associated Project(s): None
PURCRASE ARRANGEMENTS
Contractor Contract ~pe Procurement Route
Land Rover Ltd mU~UM) Fixed Price with VOP International Competition
Steyr Daimler Puch (TUM(HD)) Firm Price (in S sterling) International Competition
Quantities Required: 394 Truck Utihty Medium (Heavy Duty), 5986 Truck UtiEty Light~uck Utihty Medium,
PROJECT DESCRIPTION, PROGRESS TO DATE AND KEY FUTURE EVENTS
The requirement is for a range of four wheeled drive load carrying utility vehicles, which are used in a varie~ of roles such as fitted for radio, command, front line and echelon support, The Staff Re~irement proposed the procurement of three vehicle types, Truck Utility Light (TUL),Truck Utihty Medium (TUM)and Truck Utfity Medium (Heavy Duty)(TUM(HD)).
Bids were received in June 1992 from three companies Land Rover, Iveco Ford and Steyr Daimler Puch (SDP). Iveco Ford were excluded as their hid did not meet the technical requirement. SDP were excluded from the TU~UM element on cost grounds but were selected for trial for the TUM(HD)element. Land Rover were selected for trial for au three variants.
The Land Rover trials were suspended to allow the company time to undertake a rectification programme. In December 1993, the SDP vehcles successfully completed trials for TUM(HD)and it was decided to effectively spht Wls element from the other wo, to secure timely placement of a contract. An EACsubmission was prepared seeking approval for the procurement of 394 TUM(HD)vehicles from SDP,production is in progress.
The TU~UM element of the programme is still undergoing repeat performance and rehabi~~ trials to prove that the company has overcome the original reliability and design shortcomings identified. Completion of the trial was expected end April with future milestones of:
EACApprovaf June 1995 Contract Award Jtiy 1995 ISD January 1996
96 -, . MINISTRYOFDEFENCE: MOR PROJECTSREPORT1995
. Note As a resdt of the retrial, Land Rover have been reWested to protide further rehabihty guarantees to - overcome some residual concerns that remain with their vehicles. Action is sti~ with the company and no . . further action, towards seeHng approval or contract placement, wi~ be undertaken until satisfactory . contractual guarantees have been provided.
.? PROJECT COSTS (at 1995/96 average forecast of outturn prices to nearest EM) . . - Note: The original approval was for competitive evaluation only with approval for production in principle . only.
. EM Production Development Total - . Current Estimate of Cost 155 3 158 Estimated Cost at MODApproval 122 3 125 . Difference +33 +33
Expenditwe to date (31 March 1995) E13M
First approval: 1991 (Endorsement of re@rement & trials) Latest approval: 1994 (TUM(HD)Production)
Reason for Cost Variations: TUM(HD)element
. Factor EM Increase Decrease
Quantity/volume variations 7 . Price variations 10
. Total 17
Explanation of Cost Variations:
Quantity~olnme variations:- Quanti~of TUM(HD)increased from 193t0394when production approval gained in 1994.
Price Variations - Contract Price some E32K per unit more than original estimate.
.
97 ,:, .:: .. .’ .:
MINISTRYOFDEFENCE: . MOR PROJECTSREPORT1995
Reason for Cost Variations: TU~UM element
Factor EM . Increase Decrease
QuantityNolme Variations 5 Price Variations 21 - Total 21 5 .
Total Balance +16
Explanation of Cost Variations:
Quantityfiolnme Variations- Quanti@ has been reduced from 627 0t05986, duetothe needto match programme with available resources.
Price Variation - Latest average tender prices identify an increase of some S3.6K per unit.
Estimated Cost of Project at Main Contract Award: E25M (June 1994) TUM(HD)only ~UUTUM main contract yet to be awarded)
Estimated Cost of Main Contract: E22M ~UM(HD) Production)
Cost Change since Main Contract Award: NIL
Reasons for Cost Variations since last Contract Award: N/A
Explanation of Cost Variation since last Contract Award: N/A
Year(s) of Pew Expenditure: 1996/97 1997/98
Unh Production Cost: *
F~her Expentiwe in ClearProspect (at 1995/96averageforecastofouttnrnpricesto the nearest E1OM)
f90M - Further buy of TU~UM.
IN SERWCE DATES
ISD Definition: Due to split of project, individual ISDSare defined as, 50 TUM(HD)vehicles delivered, and 50 TU~UM vehicles dehvered.
98 . . MINISTRYOFDEFENCE WOR PROJECTSREPORT1995 -
Achievement of ISD:
. Original ISD (Month/year) December 1994 - . - Current ForecastiActual ISD TUM(HD)May 95 TU~TUM January 96
- Variation (month(s)) TUM(HD) TU~TUM
- . +5 +13 . Reasons for ISD Variations: . Factor Month(s) Increase Decrease
. . Unforeseen technical dlffictities TU~TUM 7 Procurement delays TUVTUMflUM(HD) 6 . 13 . Total - TU~UM TUM(HD) 5 ~.
. . Explanation of ISD Variations: .- . Unforeseen techtical Mficdties TU~UM vehicle faihng rehabfi~ trials, and the sobse~ent “get we~ programme which is sti~ under way (13 months). . . Procwement delays: Delay in EAC endorsement and the need to extend tender period
“ (6 Months).
.
.
!)
,.
99 MINISTRY OF DEFENCE: .- WOR PROJECTSREPORT1995
PROJECT: AMRAAM (Advanced Medium Range Air to Air Missile)
GENERAL INFORMATION
Director General Responsible: Director General Weapons & Electronic Systems (DG~S)
Associated Project(s):
Title ISD
Sea Harrier F/A2 MLU 1993 Sea Harrier F/A2 Attrition 1996
PURCHASE ARRANGEMENTS
Contractor Contract me Procurement Route
US Govt Foreign Military Sales US Govt placed contract with Hughes Missfle Systems Company & Raytheon fo~owing competition,
Quantities Reqoired: 210 Operational Missiles plus associated equipment.
PROJECT DESCRIPTION, PROGRESS TO DATE AND KEY FUTURE EVENTS
AMRAAM(Advanced Medium Range Air to Air Missile) wi~ be carried on the Navy’s Sea Harrier F/AZ. The purchase order for the Navy requirement was entered into with the US DoD under Foreign Mihtary Sales terms and signed in 1992, First bdk deliveries were made in March 1995 and are expected to complete in AuWst 1996.
PROJECT COSTS (at 1995/96 average forecast of outturn prices to the nearest SM) --
Production Development Totals
Current Estimate of Cost 110 36 146 Estimated Cost at MODApproval 150 48 198
Dtiference -40 -12 -52
Expenditure to date (31 March 1995): E47M.
First approval : 1984 (Development) Latest approval: 1991 (Production)
100 ~
MINISTRYOFDEFENCE: WOR PROJECTSREPORT1995 -
‘- Reasons for Cost Variations:
- Factor EM Increase Decrease
Changes in requirement 7 ~ Price variation 59
.
. Total 7 59
. Total Balance -52
,
. Explanation of Cost Variations:
,-
- . Change in Reqtiementi Requirement to fit the HiPPAG(High Pressure Pure Air Generator) unit to . the Sea Harrier Common Rail Launcher. The HiPPAGprovides a coolant air supply for the Infra Red missile seeker head.
J Price variation: Reductions in the UPC of the missile as a resuft of the US led annual competitions between tie two US manufacturers of the missile and the . . effects of the APREP (AMRW Producibih~ Enhancement Programme) . modification. Reduction in the estimated cost of range hire and targets in ,- support of the development firing trials and a lower than expected cost to support test assets procured under FMS arrangements.
Estimated Cost of Project at Main Contract Award: N/A (See Note) .
Current Cost of Main Contracti NIA
Cost Change since Main Contract Award: N/A ,.
Reasons for Cost Variations since last Contract Award: NIA
. Explanation of Cost Variations since last Contract Award: N/A
Note: No costs are protided in this section. AMRAAMis being procured under FMS arrangements: the prices are neither firm nor freed and we have no direct control over cost growth.
,- Year(s) of Peak Expenditure: 1995/96 1996/97
Unit Production Cost EO.4M
.
‘. Further Expenditure in Clear Prospect (at 1995/96 average forecast of outturn prices to the nearest E1OM)
. None Foreseen
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.
.
101 IN SERWCE DATES
ISD Definition: There is no formal separate definition of ISD for AMH as it is tied to the upgrade of the Sea Harrier. The dates below reflect the estimated dates for first dehvery of missiles and associated equipment.
Achievement of ISD:
Original ISD (montWyear) December 1994 . Current ForecastiActual ISD (monttiyear) March 1995 Variation (month(s)) +3
Reasons for ISD Variation:
Factor Month(s) Increase Decreaee
Procurement delays 3
Total 3
Explanation of ISD Variations:
Procurement delays: Dehveries were delayed due to the need to cla@ issues relating to the termination of the Family of Weapons MOUand a possible royalty claim by the Hughes Missile Systems Company.
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102 . - MINISTRYOFDEFENCE: WOR PROJECTSREPORT1995 - . PROJECT: AS~ (Advanced Short Range Air to Air ~ssile) -
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- GENERAL INFORMATION - - Director General Responsible: Director General Weapons & Electronic Systems (DGWES)
Associated Project(s):
Title lSD
., Hatier GR7 1988 Eurofighter 2000 2001 . .
. PURCHASE ARRANGEMENTS . Contractor Contract Type Procurement Ronte
. BAe Ftied Price International Competition (Fti Development and . Production Package) . Quantities Re@red: * Operational Missiles plus associated e~pment. . .. PROJECT DESCRIPTION, PROGRESS TO DATE AND ~Y FUTURE E~NTS
ASRAAMwi~ be carried on the RAF’s Harrier GR7 and, eventua~y, Enrofighter 2000 aircraft. It is a replacement for the Sidewinders AIM 9L missile currently in service. ASRAAMwas originally a collaborative project under the Family of Weapons MOU, signed in 1980, but the programme encountered difficulties in the agreement of tbe missile configuration, tie establishment of effective collaborative arrangements in industry andtheidentification ofan affordable solution. Ourpartner nations finally withdrew from the programme during 1989 and 1990. These diffictities caused significant delays in the procurement process, to which was . added the need for WO re-definition phases. -. Once ASMM had become a national project, a competition was held. Three missile systems were considered before a contract for fti development and production of* missiles was placed with British Aerospace Defence Ltd in March 1992, with deliveries scheduled to take place in 1997-2000. An order for a second tranche of* missiles was placed in March 1994. The first dispersion firing is scheduled for June 1995 . with the first homing firing duein December 1995. First production dehveries aredueto startin December 1997. .
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103 MINISTRY OF DEFENCE: MOR PROJECTS REPORT 1995
PROJECT COSTS (at 1995/96 average forecast of outturn prices to the nearest SM)
EM Production Development Totals (D&P Package)
Current Estimate of Cost 711 94 805 Estiiated Cost at MODApproval 754 104 858
Dfierence -43 -lo -53
Expendime to date (31 March 1995): E316M
First approval: 1981 (Pre feasibili~) Latest approval: 1994 (Second Tranche Production)
Reasons for cost Variation:
Factor SM Increase Decrease
Changes in re@rement 1 Price variations 44 Other specified factors 10
Total 1 54
Total Balance -53
Explanation of Cost Variations:
Changes in Re@ementi An increase to accommodate the re~irement to pmchase btier connectors providing an interface between the missile and the airframe electronics (+f lM).
Price Variations: Lower prices achieved in contractual negotiations for the development production package (-S35M); differences in annual price uphft between specific indices and GDP deflator (-ElM); and a reduction in the cost for the rocket motor fo~owing the decision to purchase a cheaper alternative to that ori~nally envisaged (-f8M).
Other Specfied Factors The collaborative development programme was curtailed fo~owing the withdrawal of our partner nations (-E1OM).
104 - MINISTRYOFDEFENCE: MOR PROJECTSREPORT1995 -
. Estimated Cost of Project at Main Con&act Award: S651M (March 1992)
- . Cmrent Cost of Main Contract E71OM (Production (D&P)) . Cost Change since Main Contract Award: +E63M
- (The fi~es provided relate to the D&P Package contract and the DRA only, and exclude au costs associated . with the shorted co~aborative development phase of the programmed).
Reasons for Cost Variations since last Contract Award:
Factor SM Increase Decrease - -.. . Quanti@Wolume variations 72 . Price Variation 9
Total 72 9
., . Total Balance +63 ,
, Explanation of Cost Variations since last contract award:
Qnantity~olnme variations An increase foUowing the award of a contract for a second tranche of . missfles to BAe (+ E72M).
(Note: No change to project costs as variation included in second tranche project approval). . Price Variation A reduction in the cost for the rocket motor following the decision to replace the rocket motor originally envisaged with a cheaper alternative (-S8M), Price variation due to the difference in annual price uphfts between specific indices and GDP deflator (-ElM).
. . Year(s) of Peak Expenditwe: 1996/97 1997/98
Unit Production Cost * , Further Expenditure in Clear Prospect (at 1995/96 average forecast of outturn prices to the nearest f 10M):
NIL ,
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-r 105 - MINISTRY OF DEFENCE: MAJORPROJECTSREPORT1995
-
IN SERWCE DATES
ISD Defiition: ISD is defined as acceptance of the Certificate of Design and the . Performance Statement, with the subseWent dehvery of 60 missiles that are fit for purpose,
Achievement of ISD:
Original ISD (montWyear) December 1994 Current ForecastiActnal ISD (montWyear) December 1998 Variation (month(s)) +48
Factor Month(s) Increase Decrease ,<
1. Need for project redefinition 12 Procurement delays 24 Budgetary constraints 12
Total 48
Explanation of ISD Variations:
Need for project redefinition: Two redefinition phases were re@red as result of problems encountered during the collaborative stage of the project. .
Procurement delays: Delays caused by difficulties in agreeing the specification with our partner nations.
Budgetary coustratit~ The need to match the programme to available resources,
106 MINISTRY OF DEFENCE: WOR PROJECTSREPORT1995
. r PROJECT: EH101 “MerHn” hti Submarine Warfare HeHcopter
.- . GENERAL INFORMATION - . Director General Responsible: Director General Aircraft Systems 2 (DGAS2) . . . . Associated Project(s):
. Title ISD
Passive Search Sonobuoy 1998 Common New Generation Frigate (Horizon) *
PURCHASE ARRANGEMENTS
Contractor Contract me Procurement Route Phase
EH Industries Target Cost + Non competitive, D (EH101) , (EHI) Incentive Fee with with no competition PI(EH101) . a Maximm Price for suh contracts reflecting 50:50 , workshare agreement between Weetland and Agusta.
Loral ASIC Fixed Price International D&P . (formerly IBM ASIC) Competition (Merfin)
Loral-ASIC Fked Price International D&P Competition at sub Merfin Training contract level System
. Principal Sub contractors
Westland EHI sub contract As workshare D (EH101) Hehcopters agreement PI (EH101) Limited WHL)
.. EHI Loral sub contract MODdesignated D&P sub contract (Merhn)
D = Development . D&P = Development and Production; PI = Production Investment
. Quantities Re@ed: 44
107 MINISTRY OF DEFENCE: WOR PROJECTSREPORT1995
. PROJECT DESCRIPTION, PROGRESS TO DATE AND ~Y FUTURE EWNTS
The Royal Na~EHIOl ''MerEn'' ~ti Stimarine Warfare (ASWheficopter isavariant 0f~eco~aborative . Anglo Itahan EH101 hehcopter. It is due to enter setice in 1998 and will form an essential part of the RNs
ASW capability, replacing the ASW Sea Mng, The project was begun in 1979 and was initidy carried out . under a co~aborative development contract on EHI, a company jointly owned by Agusta of Italy and Westiand. Development flying is now over two thirds complete.
As a restit of delays and cost increases, it was decided in 1990 that the project reWired a prime contractor if itwasto be completed satisfactorily. IBMASIC(now Loral ASIC)won aPrimecOn~actc 0mPetitioninlggl . and are responsible for the completion of development work specific to the RN variant, the integration of mission systems eWipment, and the production and delivery of 44 aircraft, fully operational and to an overa~ performance specification.
The co~aborative Production Investment (PI) contract was placed on EHI in March 1992
The contract for the MerHn Training system was placed with Loral-ASIC in Jtiy 1994.
The first Merhn is due off the production fine in 1996.
PROJECT COSTS (at 1995/96 average forecast of outturn prices to the nearest EM)
The original approval for development in 1982 envisaged a phased procurement route, with EHI as the main contractor throughout. (A fwtherapproval was~anted in1990covering thecontinuation of development andinitial work onintegration oftbe RTM322 engine pending fieletiing of the Prime Contiact.) Bycon&ast, thel YYl approval stisumed allprevious approvals andadded both (coUaborativel Production Invesment, andapackage consisting ofcompletion of RN specific development, mission systems integration and production, i.e. the Merlin Prime Contract on Loral. There are therefore two basehnes for comparison of approvals and costs.
(1) 0ri@a11982 EPCApproval for Development
EM Production Development Totals
Current Estimate of Cost 1322 1322 Estimated Cost at MODApproval 971 971
D~erence +351 +351
108 MINISTRY OF DEFENCE: -. MOR PROJECTSREPORT1995 .
Reason for Cost Variations — . Factor EM hcrease Decrease ,-
. Delays and reassessment of costs 271 . . Price Variation 80 . . Total +351 . . - . Explanation of Cost Variations . . . Delays andreassessment of costs: Duetoan increase titietime andeffort necessa~to complete the - colaborative development programme, dueinturn toaninitia~y . - optimistic assessment of thehkely rate oftechnical progress, specific technical problems and tbe loss of Pre Production aircraft No.2 in an accident in 1993. - . Price Variation: Due to tbe difference in annual price uphfts between specific indices and GDP deflator. . . 1990 Equipment Poficy Committee Approval for Development to mid 1991 and initial RTM 322 en@e Integration work. . MODApproval E273M . . Note: This additional approvaI isshown forcompleteness, although itwas@cUy subsmed bythe approval . . below.
(2) 1991 Equipment PoUcy Comittee Approval (s~smtig aUprevious approvals) for RN EHlOl “MerBn” programme - completion of co~aborative and RN specific development, PI, integration of mission systems equipment and the production and delivery of 44 aircraft. A D&P package.
EM . Development & Production Totak
Current Estimate of Cost 4089 4089 Estimated Cost at MODApproval 3844 3844
Difference +245 +245
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109 MINISTRY OF DEFENCE: WOR PROJECTSREPORT1995
Reason for Cost Variations
Factor EM Increase Decrease . —- Delays and reassessment of costs 140 53 Items new to the Prime Contract 15 Price Variation 143
Total 298 53
Total Balance +245
Explanation of Cost Variations
Delay and Reassessment of costs. Prior to MPR 94 successive reports had assumed that the co~aborative development programme would outturn at or shghtiy above its target cost. However, theprogramme had been subject to delays and consequential cost increases, some ofwhich were recoWised and reported in MPR 94. Tbe need to estabhsh a detailed cost to completion in view of continued shppage was brought to a bead largely by the loss of Pre Productirm aircraft No.2inan accident in 1993. There has beena detailed reassessment with EHI of the estimated cost to completion, taking into account both the direct costs of investigation and solution of the cause of the accident, and further direct and indirect programme delay. This latest estimate, much closer to the maximum price, has been reflected here. The E53Mdecrease relates totbe EH101 Merhn project as a whole.
The cost reduction restiting from contract price negotiations on the Merhn Prime Contract has been used as an offset for the increased cost of the Merhn Training System. The Merhn Training System contract has been let separately from the Merhn Prime Contract.
Items new to Prime Contrack E9Mhas been addedto the PrimeContractin respectoftwosafe~ enhancements - Emergency Lighting and an Accident Data Recorder. In addition, some S6M worth of Aircraft Special Servicing Equipment and Ground Support Equipment for which RAF Logistics Command formerly made provision has been transferred to D~aritime as an addition to existing ASSE/GSE provision.
Price Variation Due to the difference in annual price up~fts between specific indices ud GDP deflator since 1991.
Expenditie to date (31 March 1995): E1935M
First approval: 1982 (Development) Latest approval: 1991 (D&PPackage)
110 ,: . . -. MINISTRY OF DEFENCE: WOR PROJECTSREPORT1995
Estimated Cost of Merfin Prime Contract at Placement S2440M ,,
. Current Cost of Merk Ptie Contract E2494M
. Cost Change since 1991 Approval +E54M
,- Note: The figures above refer only to the freed price Merhn Prime Contract, and do not include the continuing . Collaborative Development Programme, Production Investment or the Merlin Training System Contract. .
? Reason for Cost Variations since last Contract Award .— . Factor EM Increase Decrease - . Items new to the Prime Contract 15 Price Variation 86 Reassessment of Costs 47
. Total 101 47 r ‘, Difference: +54 . ,- . . Note: The Merb Training System Contract has been let separately from the Merlin Prime Contract.
Explanation of Cost Variations since last Contract Award:
Items new to Prime COntrack E9M has been added to the Prime Contract in respect of two safety - . enhancements -Emergency Lighting andan Accident Data Recorder. In addition, some E6Mworth of Aircraft Special Servicing Equipment and Ground Support EWipment for which RAF Logistics Command formerly made provision has been transferred to D/Maritime as an addition to existing ASSE/GSE provision.
Ptice Variation: Due to the difference in annual price uphfts between specific indices and GDP deflator since 1991.
Reassessment of costs. The decrease of 247M relates only to the Merhn Prime Contract. The volume reduction restiting from contract price negotiations on the Merhn Prime Contract has been used as an offset for the increased cost of the Mertin Training System, as noted with the NAOduring vahdation of MPR 94. The Merhn Training System contract has been let separately from the MerHn Prime Contract.
Year(s) of Peak Expenditure: 1996/97 1997/98
Unit Production Cost The D&P package makes the calcdation of a UPC impossible.
.
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111 . MINISTRY OF DEFENCE: WOR PROJECTSREPORT1995
Further ExpendiWe in Clear Prospect (at 1995/96 average forecast of outturn prices to the nearest S1OM): ,. None
_. IN SERWCE DATES
ISD definition The date by which the 12th hehcopter is dehvered to the RN . Achievement of ISD:
Original ISD December 1993 Current Forecast ISD* December 1998 Variation (months) +60
* This revised ISD was approved in 1991, at the time of the selection of the Prime Contractor.
Reasons for ISD Variation
Factor Months Increase Decrease
Unforeseen technical difflcdties 29 Need for project redefinition 24 Redefinition of ISD 5 Budgetary constraints 12
Total 65 5
Total bafance 60
Explanation of ISD Variatiom
Unforeseen tec~lcal Wlctities A number of separate technical problems in the early stages of the co~aborative programme.
Need for project redeftition: Reworting of the collaborative development programme to correct unwieldy collaborative contractual and management arrangements. And, the need to specify, setup and run an international competition to select a Prime Contractor to complete work specific to Merhn, integrate its mission systems and produce and deliver operational aircrti to an overa~ petiormance specification.
Approval of the Merhn Prime Contract was for 44 aircraft rather than the 50 initially envisaged. The conseWent reprofihng of aircraft deliveries meant that only 12 hehcopters would be dehvered by the ISD of December 1998, rather than the 17 originally planned. Nevertheless,
112 - . MINISTRY OF DEFENCE: WOR PROJECTSREPORT1995 -
it was agreed that the ISD shmdd stand. After constipation with the NAO dting the validation of MPR94 this was reflected both in MPR94 and here as an ISD variation decrease in the table above.
. . Budgeta~ constratit% me need to match the programme to the available resources
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. . 113 MINISTRY OF DEFENCE: WOR PROJECTSREPORT1995
PROJECT: Eurofighter 2000
GENEM INFORWTION . . . Directorate General Responsible Director General Aircraft Systems 1 (DGAS1)
Associated Project(s):
Title ISD
ASRAAM 1998
. PURCWSE ARRANGEMENTS
Contractor Contract me Procurement Route
Eurofighter Max Price Non Competitive but with (Comprising Menia (Plan to convert to freed International sub contract BAe, CASA& DASA) as soon as possible). competitive elements the value of which amount to some 307. of overa~ value of the prime contract.
Eurojet Max Price Non Competitive but with (Comprising FIAT, (Plan to conveti to freed International suh conkact ITP,MTU & as soon as possible) competitive elements the value of ROUSRoyce) which amount to 10Y. of overall value of prime contract
Quatities Re@ed: Quantity yet to be approved
PROJECT DESCWPTION, PROGRESS TO DATE AND KEY FUTURE EVENTS
The Eurofighter 2000 (EF2000) is to be an agile fighter aircraft with an offensive support capabih~ and is bekg developedin a collaborativeprogrammewithGermany,Italyand Spain,Mrcraftand enginesare at an advancedstageofdevelopment.First fllghtoccurredon 27 March1994in Germany.
114 MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1995 . . PROJECT COSTS (at 1995/96 average forecast of outturn prices to the nearest EM)
. . EM Production Development Totals . . - Current Estimate of Cost 4123 4123 Estimated Cost at MODApproval 2870 2870 . Difference +1253 +1253 ..-
. Expenditie to date (31 March 1995): E1881M
First approval: 1984 (Feasibfity Study) Latest approval: 1994 (Reorientate Development)
P Reasons for Cost Variations since first MODapproval:
Factor EM Increase Decrease , Price variations 143 Other specified factors 1110
Total +1253
Explanation of Cost Variations since first MODapproval:
Price variations. Due to difference in annual price upfifts between specific indices and GDP deflator. b Other spec~ed factors:
Changes in accounting rties for intramural costs - E208M German withdrawal from certain eWipments E92M Higher than expected development costs, most notably for e@pments - E273M Additional tasks and integration of new weapons not specified in original contract 563M , Cost of reorientation - S407M Additional finds included to cover new tasks not included in original approval - E67M (FoUowing EAC approval in November 94) . Estimated Cost of Project at Main Contract Award: N/A (Max Price Contract)
Current Cost of Main Contract N/A
Cost Change since Main Contract Award: N/A
Reasons for Cost Variation since last Contract Award: N/A .
115 MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1995
Explanations of Cost Variation since Contact Award N/A
Year(s) of Peak Expenditme: 2002/03 2003/04 .. Unit Production Cosk E38.5M
Further Expenditure in Clear Prospect: (at 1995/6 average forecast of outin prices to the nearest S1OM)
El 1300M (Production of 250 Aircraft, Inte~ated Logistic Support, Simdators and Training Aids).
IN SERWCE DATES
ISD Definition: ISD is defined as the date by which the first aircrafi is dehvered to the RAF.
Achievement of ISD:
Original ISD December 1998 .- Current ForecastiActual ISD December 2001 Variation (month(s)) +36
Reasons for ISD Variations:
Factor Month(s) Increase Decrease
Procurement delays 16 Technical dtificulties 20
Total 36
Explanation of ISD Variations; 4 Procurement delays Includes delay to meet changed international situation and revised budgetary resources of the four partner nations.
Techtical difRcdtiew Mainly due to the development programme being more complex than originally anticipated hy industry,
116 MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1995
PROJECT: Hercties C-130J
GENE~ ~FORWTION
Director General Responsible: Director General Aircraft Systems 2 (DGAS2)
Associated Project(s): None
PURC~SE ARMGEMENTS
Contractor Contract me Procurement Route
Lockheed Corporation Fixed Price International Competitive
Quantities Required: 25 Aircraft
PROJECT DESCRIPTION, PROGRESS TO DATE AND ~Y FUTURE EVENTS
With the existing RAF Hercdes transport fleet being nearly 30 years old, aircraft availability was dechning and maintenance costs rising. The decision was therefore taken to replace that part of the fleet that is nearing the end of its operationa~y usefti hfe. The contract was placed with Lockheed on 3 March 1995 for an off the shelf purchase that covers 25 C-130J aircraft, asuiteof Synthetic Training Equipment (STE) anda comprehensive Contractor Run Interim Logistic Support package (CRILS).On current plans, the first aircraft wi~ be dehvered off contract to DERA Boscombe Down on 30 November 1996 with the first aircraft delivered to the RAF in mid 1997.
PROJECT COSTS (At 1995/96 average forecast of outturn prices to the nearest EM)
EM Development & Prodnctims Totals
Current Estimate of Cost * * Estimated Cost at MODApproval * *
Difference +20 +20
Expenditure to date (31 March 1995): Z53M
First approval: 1994 (D&Ppackage) Latest approval: 1994 (D&Ppackage) MINISTRYOFDEFENCE: MOR PROJECTSREPORT1995
Reasons for Cost Variations:
Factor SM Increase Decrease
Price variation 22 Other specfied factors 2
Total 22 2 .
Total Balance +20
Explanation of Cost Variations:
Price Vmiatiom Difference in annual price uptit between specific indices and GDP deflator
Other specfiled factors: Commercial milestone payment on signature of contiact enabled the contractor to reduce his overa~ price,
Estimated Cost of Project at Main Contract Award: * (March 1995)
Current Cost of Main Conmacti * (D&PContact)
Cost Change since Main Contiact Award: NIL
Reasons for Cost Variations since last Contract Award: N/A
Explanation of Cost Variations since last Contiact Award: N/A
Year(s) of Peak Expenditme: 1997/98 - 1999/00
Unit Production Cost *
Fwtier Expendi~e in Clear Prospect (at 1995/96 average forecast of outin prices to the nearest E1OM): NIL
IN SERVfCE DATES
ISD DeRnition Defivery of first 12 Aircraft off contiact
Achievement of ISD:
Ori~nal ISD Wontmear) July 1998 Current ForecastiActual ISD (MonWear) July 1998 Variation (Month(s)) Nil
Reasons for ISD Variations : N/A
Explanation of ISD Variation: N/A
11s MINISTRY OF DEFENCE: WOR PROJECTSREPORT1995
PROJECT: Infra-red Countermeasures (IRCM)
GENERAL INFORMATION
Director General Responsible: Director General Weapons & Electronic Systems (DGWES)
Associated Project(s): None
PURCWSE ARRANGEMENTS
Contractor Contract ~pe Procurement Route
Project DeW1tion: Loral Systems Company Firm Price International Competition Northrop DSD International Inc, Lockheed Sanders Inc.
Development & Production: Northrop Electronic Systems Firm Price International Competition International Inc.
GEC Marconi Avionics Sub Contractor
Quantities Required: *
PROJECT DESCRIPTION, PROGRESS TO DATE AND KEY FUTURE EWNTS
The provision of an advanced infra-red countermeasme system to counter the increased threat to aircraft from more advanced heat seeking missiles.
Con&acts for the Project Definition phase of the programme were awarded to 3 companies on 12 Febmary 1993, and the PD stidies were completed by the end of 1993.
The dossier paper seeking approval for fu~ development and production received EAC endorsement and Ministerial and Treasury approval during July/August 1994.
The developmentiproduction phase of the project is being conducted as a collaborative programme with the US DoD. A Memorandum of Understanding between the two parties was signed on 21 June 1994.
The Invitation to Tender (ITT)was issued in Jtiy 1994, and tenders returned on 3 November 1994. A contract for fuR development, production and initial support was let to Northrop on 3 April 1995. Tbe project will be managed by the US~K Joint Project Office in London, with the UK leading the programme. The next project milestone is the Design Review in the autumn of 1995.
119 MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1995
PROJECT COSTS (at 1995/96 average forecast of outturn prices to the nearest SM)
SM Development & Production Totals
Current Estimate of Cost 181 181 Estiiated Cost at MODApproval 172 172
DMerence +9 +9
Expendi~e to date (31 March 1995): f16M .
First approval: 1990 (Feasibihty Stidy) Latest approval: 1994 (Development & Production)
Reasons for Cost Variations: .
Factor EM Increase Decrease
Price Variations 9
+9
Explanation of Cost Variations since MODapproval:
Price variations: Cnrrent estimates are based on actual firm contract prices. Previous fignres were in house estimates only, prior to contract negotiation and award.
Estimated Cost of Project at Main Contract Award: S181M (April 1995)
Current Cost of Main Contract: S141M (D&P)
Cost Change since Contract Award NIL
Reasons for Cost Variation since last Contract Award: N/A
Explanation of Cost Variation since last Contract Award: N/A
Year(s) of Pe* Expenditure: 1995/96 1997/98
Unit Production Costi Variable according to aircraft type
Range: SO.422M to S1.242M
120 MINISTRYOFDEFENCE: NOR PROJECTSREPORT1995 . -
. . Further Expenditure in Clear Prospect (at 1995/6 average forecast of OU- prices to the nearest S1OM):
. . None
i IN SERVICE DAmS ,. .. ISD Definition: DeEveW of tie fial system. , Achievement of ISD:
-, Ori@nal ISD (MontMyear): * Current ForecastiActual ISD: * Variation (month(s)) Nfl . I
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121 . . .. ,..Y . . .. MINISTRYOFDEFENCE: . WOR PROJECTSREPORT1995
PROJECT: Sea Harrier Attrition Buy
GENEK INFORMATION
Directorate-General Responsible Director General Aircraft Systems 1 (DGAS1)
Associated Project(s):
Title ISD
Advanced Medium Range Air 1995 to Air Missile (AMRAAM)
PURCRASE ARRANGEMENTS
Contractor Contract~pe Procurement Route
BAe Firm Price Contract Non Competitive (Airframe and aircraft integration)
GEC Marconi Ationics Target Cost Incentive Non Competitive (Blue V&en Radar) with Mafimum Price
ROUSRoyce To be determined Non Competitive (Engine Conversion)
Quantity Rewed: 23 (18 new build plus 5 addltiond FRS1 to FA2 conversions)
Note: 1 FRS1 aircraft lost, leaving 4 conversions and final attrition reserve total of 22.
PROJECT DESCRIPTION, PROGRESS TO DATE AND REY FUTURE EVENTS
Aprocurement of additional Sea Harrier FA2 to maintah the Front Line Aircraft Estabhshment throughout the operational hfe of the aircraft.
PROJECT COSTS (at 1995/96 average forecast of outturn prices to the nearest EM)
SM Production Development Totab
Current Estimate of Cost 337 337 Estimated Cost at MODApproval 337 337
Dfierence NIL NIL
122 -.:, -. . MINISTRY OF DEFENCE: - WOR PROJECTSREPORT1995 . . - . . Expenditure to date (31 March 1995): E107M - . First approval: 1993- Approval for 18 new btid Sea Harrier FA2 aircraft and radars and for the . 5additional MLUcon”ersions and radars 1993. (See note abo”e). . . Latest approval: 1993 - Reasons for Cost Variations: N/A . Explanation of Cost Variations: N/A
Estimated Cost of Project at Main Contract Award: S337M (January 1994)
Current Cost of Main Contract S198M (Airframe Production Contract)
. . Cost Change since Main Contract Award NIL
:. Reasons for Cost Variation since last Contract Award: N/A . Explanation of Cost Variation since last Contract Award: N/A
. Year(s) of Peak Expenditure: 1994/95 1996/97 . ~. Unit Production Costi New Build aircraft: C17.2M ., Conversion a&craft E6.5M .
Further Expenditure in Clear Prospect (at 1995/96 average forecast of outturn prices to the nearest S1OM). .
, None
.
. IN SERWCE DATES
ISD Definition: Dehve~ of first aircraft
. Achievement of ISD:
Ori~nal ISD (MontMyear): December 1995 . Current ForecastiActial ISD (mont~ear) January 1996 . Variation (month(s)): +1
. ‘r
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-. . 123 MINISTRY OF DEFENCE: WOR PROJECTSREPORT1995 .
Reasons for ISD Vwiations: . Factor Month(s) . Increase Decrease . Procwement delays 1
Total 1
, Explanation of ISD Variations:
Procurement delays Approval delayed pending PES 93 settlement
. .,
. MINISTRY OF DEFENCE: MAJORPROJECTSREPORT1995 . .
. . PROJECT: Skynet 4 Stage 2 UK MWtary SateRite Commmication System .
., . GENEW WFORMATION .
. Director General Responsible: Director General Command and Information Systems (DGCIS)
, Associated Project(s) None
PURCWSE ARUGEMENTS
. Contractor Contract Type Procurement Route
Matra Marconi Space Systems Ltd Firm Price Non competitive but with . (Formerly BAeSSL) competition for sub contracts, tbe value of which amount to 45Y. of the overall value of the .. prime contract,
Sfi-Contractor
Matra Marconi Firm Price
Quantities Required: Two SateWtes and related ground equipment.
PROJECT DESCRIPTION, PROGRESS TO DATE AND KEY FUTURE E~NTS
. The project wiU enable continued use of sateMte communications hy the UK armed services, at least until the early part of the next decade. This is necessary in order to meet their inter and intra theatre requirements hy ensuring that mobile operations eg ships, submarines and ground troops are not constrained hy the need of those forces to remain within rehable terrestrial radio communications range of their headquarters and bases.
. In order to meet the required capacity and availabihty, two satewtes wi~ be launched, The first wi~ be . launched in 1997, and wi~ be in service in 1998. The second wi~ be launched and will be in service in 1998, . . The prime contractor wi~ have overall responsibi~ty for au aspects of the satelhte build and launch activities up until acceptance is achieved in orbit.
. The project definition stage was completed early in 1993. A contract was placed at the end of February 1994 . for production and launch.
In April 1994 Matra Marconi purchased British Aerospace Space Systems Ltd to form Matra Marconi Space Systems Ltd who are now the Prime Contractor, .
125 MINISTRY OF DEFENCE: WOR PROJECTSREPORT1995 .
. Major project milestones and the various design reviews are:
SnfJ System Design Reviews: Feb 95 . Critical SateMte Design Review: Ott 95 . Protofight Model System Evaluation Review NOV 96 System Evaluation Review of 2nd SateRite: Sep 97 In Orbit Acceptance First SateMte: Apr 98 In Orbit Acceptance Second SateWte: NOV 98 System Acceptance: Dec 98
PROJECT COSTS (at 1995/96 average forecast of outturn prices to the nearest CM)
EM Production Development Totals . 333 13 346 Cmrent Estimate of Cost . Estimated Cost at MODApproval 341 13 354
Difference -8 -8
ExpendiWe to date (31 March 1995): S130M
First approval: 1991 (Development) Latest approval: 1994 (Production)
Reasons for Cost Variations: . Factor EM Increase Decrease
Price change 4 Otier specfied factors 4
Total -8
Explanation of Cost Variations:
Pfice chauge Refinement of figures on final contract negotiations
Other specfiled factors: Reassessment of DRAtastig.
126 .
. MINISTRY OF DEFENCE: WOR PROJECTSREPORT1995 . .
Estimated Cost of Project at Main Contract Award: f350M (February 1994) -
. . Current Cost of Main Contract E312M (Production and I.aunch)
. Cost Change since Main Contract Award: NIL . . Reasons for Cost Variations since last Contract Award: NIA
Explanation of Cost Variation since last Contract Award: N/A . .. , Year(s) of Peak Expendltme: 1994/95 1995/96
. Unit Production Cost E149.2M for SateMte and Launcher only.
. ... Further Expenditure in Clear Prospect (at 1995/96 average forecast of outturn prices to the nearest E1OM): . . None
IN SERVICE DATES
ISD Defmitiom The acceptance of the first satelhte in orbit
. Achievement of ISD:
Original ISD (MontWyear) May 1997 Current ForecastiActual ISD (montMyear) May 1998 . (lst SateWte) Variation (month(s)) +12
Reasons for ISD Variations: .
Factor Month(s) . Increase Decrease . . Procmement delays 12 ,
Total 12
, Explanation of ISD Variations:
Procurement delays Under estimate of 3 months in satefite build time, 6 months extra in ,. , commencement andcompletion of PD phase, and3 months extra in , negotiating production contract.
,
. 127 MINISTRY OF DEFENCE: WOR PROJECTSREPORT1995
PROJECT: Skynet 5 UK Military SateRite Communication System
.
GENERAL ~FORMATION . . . Dtiector General Responsible: Director General Command and Information Systems (DGCIS)
Associated Project(s): None
,. PURCWSE ARRANGEMENTS
Contractor Contract ~pe Procurement Route .
Matra Marconi Space Systems Ltd Fixed Price Competitive in UK (Formerly BAeSSL) Feasibility Studies.
Matra Marconi Fixed Price Competitive in UK Feasibfity Studies.
Qumtities Required: NIL
PROJECT DESCNPTION, PROGRESS TO DATE AND KEY FUTURE EWNTS
The project wiUprovide for the continued use of satelhte communications by the UK armed setices, h the early part of the next century, replacing the existing Skynet 4 constellation. This is necessary in order to meet . their inter and intra theatre operational requirements by ensuring that mobile operations eg ships, submarines and ~ound troops are not constrained by tie need of those forces to remain within rehable terrestrial radio communications range of their headquarters and bases.
In order to meet capacity and avaflabi~~, the ISD for the first satelhte is 2004. In addition to a whoUy national procurement three collaborative options are being considered: BIMILSATCOM(UWFR), INMILSAT (UWFR~S) and EUMILSATCOM(UWFWGE~USP/IT/BE).
FeasibilityStudiesare in progressand are expectedto completemid 1995.Assessmentofoptionsti~ be completedby the end ofthe year.
In April 1994 Matra Marconi purchased British Aerospace Space Systems Ltd to form Matra Marconi Space Systems Ltd who are now the Pfime Contractor.
Major project milestones and the various design reviews are:
PD Phase start January 1997 PD Phase complete end 1998 Production start Early 2000 Launch of 1st sate~te January 2004
12s .
“
. MINIST~ OF DEFENCE: . WOR PROJECTSREPORT1995
.
PROJECT COSTS (at 1995/96 average forecast of outturn prices to the nearest EM)
.
.
. EM . . Production Development Totals
. Current Estimate of Cost 23 23 Estimated Cost at MODApproval 27 27
.- Difference -4 -4
Expenditie to date (31 March 1995): E12M
First approval: 1993 (Feasibih&) ,-. Latest approval: 1993 (Feasibihty)
, Reasons for Cost Variations:
Factor EM Increase Decrease
Price change 4
.
Total -4
. Explanation of Cost Variations:
? Price change: Competition restited in lower than expected contract prices.
Estimated Cost of Project at Main Contract Award: N/A
. Current Cost of Main Contract: N/A (Study Contracts Only)
Cost Change since Main Contract Award: N/A
.
Reasons for Cost Variations since last Contract Award: N/A
Explanation of Cost Variation since last Contract Award: N/A
Year(s) of Peak Expendltme: 2002/03 2003/04
Unit Production Cost Quanti@ not yet hewn as this is dependent on the procurement option chosen and the degree of resource sharing (coUaboration) that maybe possible.
Further Expenditure in Clear Prospect: (at 1995/96 average forecast of outturn prices to the nearest El OM)
S840M Ffl re~rement yet to be defined MINISTRY OF DEFENCE: WOR PROJECTSREPORT1995
IN SERWCE DATES
ISD Definition: The lamch of the first sate~te, . .
AcMevement of ISD:
Ori@nal ISD (MonWyear) May 2003 . Cwrent ForecastiActoal ISD (montWyear) January 2004 (1st SateWte lamch) Variation (month(s)) +8 .-. Reasons for ISD Variations:
Factor Month(s) Increase Decrease
Procurement delays 8
Total 8
Explanation of ISD Variations:
Procurement delays: Extra time rewired to explore a common re@rement tith potential co~aborative partners.
. -, . . . MINISTRVOF DEFENCE: WOR PROJECTSREPORT1995
. PROJECT: Tornado GR1 Mid Lfie Update
. . GENEW INFORMATION . . . Dkector General Responsible: Director General Aircraft Systems 1 (DGAS1) .
. Associated Project(s): F
,- Title ISD
Forward Looking Infra Red (FLIR) 1991 Night Vision Goggles (NVG) 1993 Thermal Imating Laser Desimator WMLD) 1993 Defensive Ai~s S-ti System (~ASS) 1994 SimtiatOrs 1997
. PURCWSE AR~GEMENTS
Contractor Contract ~pe Procurement Route
Panavia Firm Prices Dev/Production Prime contract
. (BAe,DASA,Menia) non competitive but with Competition for e~ipments.
BAe Fked Price Production - Prime contract under NAPNOCconditions for production . of mod kits & for their embodiment.
Quantities Required: 142 aircraft
PROJECT DESCRIPTION, PROGRESS TO DATE AND KEY FUTURE EVENTS
The MLU programme ti enhance tbe capabihties of the Tornado GR1 aircraft to find and successftiy attack . its target in au weathers, and reduce its vdnerabihty to counter attack. Revised development and production planning contracts have been placed through the Tornado tri-national arrangements and a national production contract placed with BAe, au in Jtiy 1994.
Following substantial shppage to ISD and significant cost growth, the Department reviewed the programme and concluded that a reduced scope programme, designated MLU93, represented the most cost effective way forward, preserving the essential features of the fu~ MLU, striking a balance between capabih@ and quantity on the one hand and affordabihty on the other. MLU93 was endorsed in Jtiy 1994.
.
131 ,.,
MINISTRY OF DEFENCE: . MOR PROJECTS REPORT1995 .
PROJECT COSTS . (at 1995/96 average forecast of outturn prices to the nearest SM) . .
. EM . Production Development Totals
Current Estimate of Cost 496 387 Estimated Cost at MODApproval 397 160 557 .
Dflerence +99 +227 +326
Expenditure to date (31 March 1995): S295M
First approval: 1984 (FeasibiEtv studv) Latest ~pproval: 1993 (Re appro~al of ~uUdevelopment & production for MLU93 programme)
. Reasons for Cost Variations:
Factor fiM Increase Decrease . SpecKlcatioticontract changes 83 Quanti& variations 105 cost groti 309 Price change 39
Total 431 105
Total Balance +326
Explanation of Cost Variations:
Specficatioticontract changes: Tasks originally excluded from the contract spectilcation as they cotid not be adequately defined and costed at the time; additional Government Furnished Equipment and later additions to the Operational Requirement ~IALD and a Digital Geographic Processing& Preparation Station) plus additional trials support required as a resub of the cance~ation of 8tb batch production aircraft, Increases shorn are net of au changes made.
Qumtity variation% The total of 161 aircraft envisaged in the ffi MLUprogramme gave rise to affordabihty problems. Because of attrition during Operation Granby, tils number could only be met by bringing up to a suitable standard early (lst batch) production aircraft that were not ftiy operational. The costing figure shown above relates to a reduced number of 142 aircraft,
132 MINISTRY OF DEFBNCE: WOR PROJECTSREPORT1995
Cost growth: a. cancellation of the 8tb Tornado production batch which resufted in additional desiW and trials work falfing to the development contract b. Initial underestimates of the technical and financial complexi@ of the programme
Price change: Is due to the difference in annual price up~fts between specific indices and GDP deflator.
Note: Ml the cost variations under Items 1-3 above occurred before the MLUprogramme was re-approved, the procurement strategy changed in 1993 and f~ed price contracts placed in Jdy 1994.
Es~ated Cost of Project at Main Contract Award: S807M (Jtiy 1994)
Current Cost of Mati Contract E774M (See Note)
Cost Change stice Contract Award: NIL
Note: The figures presented, cover the mati development and production contracts placed during 1994 to meet the revised MLU 93 programme package. me programme costs to completion estimate also includes other minor contract commi~ents that have been made, some completed others sti~ running, and some yet to be placed.
Reasons for Cost Variations since last Contract Award: N/A
Explanation of Cost Variation since last Contract Award: N/A
Year(s) of Peak Expenditure: 1996/97 1998/99
Unit Production Costs: E2.628M
Further Expenditure in Clear Prospecti (at 1995/96 average forecast of outturn prices to the nearest E1OM):
None foreseen
IN SERWCE DATES
ISD Definition DeEvery of fist aircraft
AcMevement of ISD:
Original ISD (MontMyear) Mid 1993 (original approval did not specfi a month) Current Forecast ISD (MonWyear) September 1998 Variation (month(s)) +63
133 MINISTRY OF DEFENCE: . WOR PROJECTSREPORT1995 . . . Reasons for ISD Variations: .
Factor Month(s) Increase Decrease . .. Unforeseen technical dtifictities 24 Need for project redefinition 11 Procurement delays 28 . Total +63 . . .
Explanation of ISD Variations:
Unforeseen technicti Mlctities: Shppage of the ISD occurred initia~y because of technical dlfflctities . emer~ng during initial development, and because of the time taken in competitive tendering for the MLUequipments.
. Need for project redeftition Due to the need to redefine and agree the revised scope WLU 93) of the programme be~een MODand Industry. .
Procurement delays More recentiy significant time has been lost due to funding constraints and the need to seek re approval in view of cost escalation and the . resultant need for project redefinition.
134 MINISTRY OF DEFENCE WOR PROJECTSREPORT1995
Appendix 2: Glossary Glossary
COMMONNEWGENEWTIONFRIGATE(CNGFk New class of hti-Air Warfare frigate to replace the Type 42 class hti-Air Wxfxe destroyer. BATCH 2 TBAFALGAR CLASS SUBMARINE (B2TC): New nuclear-powered attack submarines to replace tbe Stiftsure class LANDING PLATFORM DOCK (REPLACEMENT) (LPD(R)k Replacements for the amphibious assa~t ships Fearless and Intiepid. LPD(R)s @ he used to Iauncb and co-ordinate amphibious operations. LANDING PLATFORM FOR HELICOPTERS (LPH): Sea platform to protide accommodation for 12 mediw support and 6 Eght hehcopters, up to 800 Royal Marines and their vehicles and equipment, and the platform from which to launch airborne amphibious assaults. SPEARFISH: A stimarine-lamched hea~weight torpedo with both anti-submarine and anti-surface ship capabilities. SW~SURE AND THAFALGAR CLASS NUCLEAR SUBMARINE UPDATE: Update to Stiftsure and Trafalgar class submarkes to protide improvements to sonar command and tactical weapons systems. TRIDENT: The fiident system consists of 4 VanWard class submarines and tbe Trident R D-5 strategic weapons system. It til replace Polaris as the United Kngdom’s strategic nuclear deterrent. VERTICAL LAUNCH SEAWOLF mSW): VLSW is a surface-to-air self-defence missile system fitted to ~pe 23 frigates to protide protection against anti-ship missiles and aircraft. BO~: BOWMAN til provide the Amed Forces tith a combat radio system to replace CLANSMAN BR 90 (BRIDGING FOR THE NINETIES): BR 90 is a family of 4 complementary bridge systems, including purpose desi~ed bridge-carr~ng and laying vehicles, and modifications to the in-Service bridge-laying tank. CHALLENGER 2: Challenger 2 is the replacement for the Amy’s Chieftain and Challenger 1 Main Battle Tanks. COBRA (COUNTER BATTERY RADAR) Development of a radar for locating long range weapons. MEDIUM NGE TRIGAT A crew-portable anti-tank guided weapons system, incorporating a missile tith tandem charge warhead supported by a laser ~idance system tith a thermal sight. HAPIER FIELD STANDARD C: New short range air defence missile system for the Mmy and RAF. It has a 24 hour dl-weather capability and offers si~ificant improvements over the current Bapier systems. TRUCK UTILfTY LIGHT, MEDIUM AND MEDIUM HEAVY DUTY (TU~UM~UM(HD)): Four wheel drive load carrying utility vehicles to be used in a variety of roles. AMW (ADVANCED MEDIUM RANGE MR-TO-MR MISSILE): Missile to be carried on the Nay’s Sea Harrier FA2 fleet. It has a “launch and leave” capability allowing the pilot to engage other targets immediately after launch. ASHAAM (ADVANCED SHORT RANGE AIR-TO-AfR MISSILE): Missile equipped tith an infra-red seeker. It till replace the AfM-9L Sidetider missile and be carried by Harrier GR7 and Eurofighter 2000.
EH101 “MERLIN: hti-Submarine Warfare helicopter. A variant of the hglo-[talian EH 101 helicopter, it till operate from Type 23 frigates and Invincible Class aircraft carriers. EUROFIGHTER 2000: Agile fighter aircraft with an offensive support capability, HERCULES C-130J: Replacement fleet of transport aircraft for part of the existing fleet of Hercules aircraft, whlcb is nearing the end of its operationally useful life. INFRA-RED COUNTERMEASURES (IRCM): Advanced infra-red countermeasure system to protect tircraft from advanced heat seeking missiles. SEA HAHRfER ATTRITION RUY: A procurement of additional Sea Harrier FA2 aircraft to maintain the Front-Line Aircraft Estahlisbment throughout the operational life of the aircraft. SKYNET 4 STAGE 2: SatelEte communications system to provide satellite communications into the next decade. SKYNET 5: SateMte communications system to replace the etisting SKYNET 4 constellation. TORNADO GR1 MID-LIFE UPDATE: Tbe update will provide improvements to the multi-role combat aircraft’s aviotics and armaent to enhance its ability to find and attack targets in all weathers while reducing vulnerability to counter attack.