NATIONAL AUDIT OFFICE
REPORTBYTHE COMPTROLLERAND AUDITORGENERAL
Ministry of Defence: Major ProjectsReport 1994
ORDEREDBY THEHOUSEOFCOMMONS TOBEPRINTED 22 MAY1995
LONDON:HMSO HC 436 Session 1994-95 Published 24 May 1995 f13.25 NET MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994
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 Comptroller and Auditor General 16 May 1995
The Comptroller 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 Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources. IvRMSTRYOFDEFENCE: MAJORPROJECTSREPORT1994 Contents
Page
Part 1: Introduction 1
Part 2: Analysis of the 1994 Major Projects Report 3
Part 3: Examination of three missile projects 20
Appendix
Major Projects Report 1994 39 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 Part 1: Introduction
Origin of the report
1.1 The 1994 Major Projects Report is the twelfth to be produced by the Ministry of Defence (the Department). The Report was introduced at the request of the Committee of Public Accounts and stemmed from their 9th Report, Session 1981-82, which noted the absence of any requirement for the Department to inform Parliament about the costs of its major defence projects. The Report is intended to advise Parliament of the progress and costs of major defence equipment projects.
Examination by the National Audit Office
1.2 The Major Projects Report is not an accountable document and the National Audit Office do not verify that it is complete and accurate in every respect. In the main, they seek to highlight aspects that arise from the Report. In their examination of the Report, the National Audit Office carried out a validation of data within a sample of 12 of the 25 draft project summary sheets forwarded to them in late June 1994. The National Audit Office also confirmed from the Department’s records that the 25 projects reported are, indeed, the 25 projects which are currently projected to have the largest expenditure over the next 10 years. After themselves validating the 13 summary sheets not validated by the National Audit Office, the Department submitted the Major Projects Report to the Committee of Public Accounts at the end of July 1994.
1.3 The Major Projects Report is reproduced at the Appendix. Inaccuracies which have been identified since the Report was submitted have been corrected in the Appendix. Facts and figures which are commercially sensitive or coniidential and cannot be disclosed have been starred in the Appendix and omitted from the National Audit Office report. Disclosure of these facts and figures could undermine the Department’s negotiating stance or give a positive intelligence advantage to potential enemies. The National Audit Office have provided the Committee with a separate memorandum covering these areas of the report.
1.4 The main areas examined by the National Audit Office in relation to the 1994 Major Projects Report were:
al an analysis of the Report including consideration of those projects appearing to show the greatest additional cost variances and in-Service date slippages since the 1993 Major Projects Report (Part 2):
b) the lessons that can be drawn from a more detailed examination of three missile projects: Vertical Launch Seawolf (VLSWJ, High Velocity Missile
1 MINISTRY OF DEFENCE: WOR PROJECTS REPORT 1994
HVM) and the Advanced Medium-Range Air-to-Air missile system LmmAAM) (Part 3).
S-ties of the main points arising from the National Audit Office examination are contained within each individual section under the headings “Key Points” and “Lessons to be Learned”. MlNlSTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 Part 2: Analysis of the 1994 Major Projects Report
Introduction
2.1 This part of the report:
a) summarises the overall position on the cost of the 25 projects in the Major Projects Report and analyses the main reasons for any cost underruns and overruns;
b) summarises the position as regards in-Service dates and analyses the reasons for any variation from original plans;
c) examines recent trends in the time and cost position of projects by comparing the 1994 position with the 1993 position:
d) analyses cost variance by stage of project: and
e) compares performance on competitive and non-competitive contracts and on collaborative and non-collaborative projects.
cost
2.2 The 25 projects in the Major Projects Report are expected to cost a total of around g30 billion by completion at 1994-95 prices. Broadly they will account for about 30 per cent of the annual procurement budget although expenditure can fluctuate considerably horn year to year.
2.3 Overall, the 25 projects are likely to cost El.680 million (or 5.3 per cent) less than origlnrdly forecast. This figure includes a forecast reduction of g3,455 mIllion on the Trident project and a forecast cost increase of 21,129 million on the Eurofighter 2000 project. If these exceptionally large by value projects are excluded, a net forecast increase of E645 mIllion (or 4.6 per cent) is shown for the remaining projects (Figure 1). Cost change as reported is the difference between the total of original cost estimates made at the i&t approval of each stage, and current cost estimate. Therefore, cost “increases” are changes In the estimated cost of a project throughout its life. Some changes are due to decisions taken by the Department and other changes are due to external factors. MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994
Forecastcost variance(f millions) -200 0 100
TornadoMLU Eurofighter2000 Actual variation (fm) Spearfish BR 90 Bowman SeaHarrier MLU MR TRIGAT VLSW AS 90 Howitier High Velocity Missile EH101 “Merlin” Challenger2 RapierFSC LPD (R) S&T Update IRCM SeaHarrier Att. Buy COBRA Skynet4 Stage2 JTIOS ASRAAM CNGF T23 CommandSystem Trident AMRAAM I -40 -20 0 20 40 60 Percentagevariance Source: NAOanalysis of Major ProjectsRepoti 1994data
Figure1 shows percentageand actual cost variances. Actual variancesfor Trident (-f3,454million) and Eurofighter2000 (tf1,129 million) are omittedfor presentationalpurposes.
2.4 The cost variances reported for some projects do not correspond to those given in response to recent Parliamentary Questions (Hansard, 1 February 1995). This is because the Major Projects Report primarily reflects the approved equipmentprogramme and does not report forecast variances for expenditure which has not yet been approved. For example, a cost overrun of 22.2 billion was reported in an answer on Eurofighter 2000 which is double the Sl.l billion cost overrun reported in the Major Projects Report. The extra overrun has occurred on future phases of the programme which have not yet been approved. In the case of Bowman, the costs of an associated project were included in the answer to the Parliamentary Question. MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994
Causes of cost variations
2.5 As noted above, the current estimates of the cost of Trident and Eurofighter 2000 vary greatly from those made originally, demonstrating the inherent difficulty of accurate forecasting so far ahead for projects embodying a great deal of technology being developed for the Rrst time in the project. For Trident, the net forecast reduction of f3,455 million is a result of savings from the decision to process missiles in the United States (f1,138 million) and savings resulting from the “refinement of earlier cost estimates” (E2.317 million). The E2,317 million net saving arising from refinements to earlier cost estimates includes an increase of E830 million in the cost of shore construction and dockyard projects (the former was examined in the Comptroller and Auditor General’s Report on the Management of the Trident Works Programme, HC 621, July 1994) and an increase of E.241 million resulting from programme requirement changes.
2.6 On Eurofighter 2000, the Department attribute 5232 million of the forecast increase in expenditure of El,129 million to changes in accounting rules for intra-mural costs. These changes have not resulted in additional expenditure on the project. A further increase of E772 million is attributed to:
. German withdrawal from certain equipments;
. an under-estimate of development costs;
. additional tasks and integration of new weapons not specified in the original contract; and
. re-orientation.
The remaining X125 million increase results from estimated costs on the project escalating at a faster rate than general inflation. The National Audit Office are currently examining the Eurofighter 2000 project as part of a separate study.
2.7 Figure 2 shows, in aggregate, the reasons given for cost overruns for the other 23 projects in the Major Projects Report. Over one quarter of the total cost variation by value is attributed by the Department to an overly optimistic initial estimate of cost. The Department have introduced three-point estimating for future project submissions which will contribute to a reduction in overly optimistic estimates by translating the identified risks into upper and lower costs (with confidence limits) about an expected figure. This tolerance band will provide an indication of the uncertainty present in the estimate of future costs. A further one fifth of cost variation is a result of inflation adjustment mechanisms, the purpose of which is to reflect cost pressures facing the industries undertaking the work, escalating at a faster rate than inflation in the economy as a whole. The Department closely monitors the progress of projects against agreed costs, and overruns beyond set limits are automatically the subject of resubmission for re-endorsement.
5 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994
Estimatesincorrect
Inflation adjustment
Volumevariations
Specificationchanges
Pricevariations
Technicalproblems
Programmedelays
Other
-400 0 200 400
Valueof variation (f million) SDurce: Major ProjectsRepoft 1994
Note: Datafor Tridentand Eurofighter2000 omitted from figure
Figure2 shows that over half of the total cost variation by value is due to incorrectinitial cost estimatesor the inflation adjustment mechanismadooted on the contract.
(a) Cost estimation 2.8 The total E327 million net under-estimate of cost comprised some E.60million in underspends and 5387 million in overspends. Two projects accounted for the bulk of the increase: the Tornado mid-life update (E297 million) and Vertical Launch Seawolf (E55 million net). A further six projects have also identified inaccurate initial estimates as the cause of cost variations.
(b) Inflation 2.9 The method of inilation adjustment adopted on a contract can have a sign&ant impact on cost variance. In the 1994 Major Projects Report, the original project cost estimates are uprated for the first time by the GDP deflator, the Treasury’s measure of general inflation within the economy and the basis on which real changes in total defence expenditure are measured. As a consequence,there are differences between the costs for certain projects uprated in this way and the amounts actually paid where actual costs are escalating at a faster or slower rate than the GDP deflator. Original project cost estimates for Trident have not MINISTRY OF DEFENCE: hUJOR PROJECTS REPORT 1994
been escalated by the GDP deflator (and are shown at 1993-94 prices) In order to avoid conilict with the figures supplied annually to the House of Commons Defence Committee.
2.10 Costs for eight projects had escalated at a faster rate than the GDP deflator (+E439 millIon) and costs for three projects had escalated at a slower rate (-529 million). Table 1 shows those projects where cost variances have resulted from project costs escalating at a faster rate than the GDP deflator. Three of the projects (Spear&h, EHlOl and Rapier FSC)were highlighted in the National Audit Office report “Accounting for Inilation In Defence Procurement” (HC 54, December 1993) as having intlation adjustment clauses in the contracts which did not conform to the Depe&nent’s own guidance. The inilation adjustment clauses used by the Department are generally based on industry specific inflation indices rather than the GDP deflator In order to avoid the effects of inflation in unrelated industries (eg agriculture and tourism). The Department have since issued revised instructions which took account of the Endings of “Accounting for Inilation in Defence Procurement”. Discussions with Industry continue to improve and simplified inflation adjustment arrangements and feller guidance is planned to be issued in 1995. In the case of Eurofighter 2000, the prices paid to industry are based on charging rates periodically agreed with the main British partner companies. These rates reflect costs applicable to the companies concerned which, taken overall, have escalated faster than general inflation.
T7~-r”~~~-;,~~~-~. - tibn”iitirrb,@d- “,S”? f,‘, ‘- ^ ,,il h$hr ~ // Project Costvariance due to inflation adjustment (Em) Spearfish + 138 Eurofighter2000 + 125 EHlOl “Merlin” + 86 RapierFSC + 52 SeaHarrier MLU + 19 TornadoMLU + 9 Challenger2 + 6 High VelocityMissile + 4
2.11 The analysis shows that the net effect of inilation adjustment clauses for the 11 projects is to escalate contract prices by over E400 million faster than the GDP deflator. This represents an average increase of E31 million per year across the 11 projects or three per cent of the project costs originally estimated. These increases have to be accommodated within the overall Defence Budget. MMISTRYOFDEFENCE: MAJORPROJECTSREPORT1994
Explanation of cost variances
2.12 Some of the explanations for cost variations still do not convey adequately the nature of the factor leading to variance despite a review of explanations conducted by the Department after the 1993 Major Projects Report (in response to a concern raised at paragraph 2.6 of the Comptroller and Auditor Generals Report on “Major Projects Report 1993”, HC 356, April 1994). For example, on the ASRAAM project the curtailment of the collaborative development programme following the withdrawal of partner nations is classified as a “qnantitylvolume variation”. Similarly, delay and consequent cost increases on the development contract for the EHlOl “Merlin” project are classified as “quantity/volume variations”. The explanations are considerably improved since the 1993 Major Projects Report, but more work still needs to be done to ensure that, in future, the explanations are adequate.
2.13 Following a Committee of Public Accounts recommendation on the 1993 Major Projects Report, the Department are planning to break down cost growth before and after contract award on futed price contracts in the 1995 Major Projects Report. This will enable cost growth to be more accurately categorised in future.
Meeting in-Service Dates
2.14 Over one half of the 25 projects failed to meet their originally estimated in-Service date and a further 40 per cent are expected to fail to meet their in-Service date in the future. The average slippage is 37 months (3.1 years), representing over one-third of the average project length. For five of the projects, as Figure 3 shows, the equipment will be or has been delivered over five years late.
2.15 Over one-third of all slippage is accounted for by unforeseen technical difficulties in the contractors performing the work (Figure 4). This was quoted as the reason for slippage for 70 per cent of all projects. Procurement delays and budgetary constraints taken together are given as the reason for 40 per cent of all slippage. One or other of these reasons for slippage is cited by the Deparnrmnt for two-thirds of all projects. The two reasons are often linked in causing slippage, for example on the Swiftsure and Trafalgar Class Nuclear Submarine Update (12 months), Rapier FSC (12 months), Eurofighter 2000 (12 months), and the Tornado mid-life update (28 months). A procurement delay or budgetary constraint usually reflects a carefully reasoned assessment by the Department that, within the resources available and the state of the project, the priority of the project. in terms of its military consequences is such that slippage of the in-Service date is preferable to diverting resources from other projects or taking higher risks, for example in accepting a lower level of performance. The Department closely monitors the progress of projects against agreed timescales, and overruns beyond set limits are automatically the subject of resubmission for re-endorsement. MINISTRY OF DEFENCE: MklOR PROJECTS REPORT 1994
Actual slippage(months) 0 40 60 80
Spearfish SeaHarrier MLU COBRA High Velocity Missile TornadoMLU Bowman JTIDS EHlOl “Merlin” RapierFSC AS90 Howitzer BR 90 S&T Update Type 23 CommandSystem ASRAAM LPD (R) MR Trigat VLSW Skynet4 Stage2 Eurofighter2000 Actual slippage(months) CNGF 0 AMRAAM Sea HarrierAtt. Buy Percentageslippage (months) Trident Challenger2
0 20 40 60 80 100 120 Slippageas a percentageof expectedduration at project approval
Source: NAOanalysis of Major ProjectsReport 1994data
Note: Excludesdata far threeprojects wherein-Service date dataare classified
Figure3 shows percentageand actual slippagesfor all projectswith in-Servicedates
9 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994
““yj$saa ,,.,, ‘i :: ,;;,; a* ,: ““x :,; r TechnicalDifficulties - :,“:” ” 319
Procurementdelays ,, “i 189
” *, i, ;, / 1 ,“;?f& Budgetaryconstraints L,*,,,” * ,/ *‘^ ,; .,. ,,:;+ 163
Projectredefinition
Reliabilityproblems
Other
0 50 100 150 200 250 300 350 Total numberof monthsslippage Source: Major ProjectsReport 1994
Figure4 shows that over one-third of all in-Servicedate slippage is causedby unforeseentechnical difficulties,
Key Points
2.16 a) Overall cost data for the 25 projects shows a net forecast reduction of El,680 million. But if the exceptionally large by value projects (Trident and Eurofighter 2000) are excluded, there is a forecast increase of 2645 million for the remaining 23 projects (paragraph 2.3). b) Aboutone half of the total cost variation by value (excluding Trident and Eurofighter 2000) is due to over optimistic initial cost estimates or the inflation adjustment mechanism adopted on the contract (paragraph 2.7).
cl The Department need to improve the clarity of the explanations provided for cost variations (paragraph 2.12).
d) Over 90 per cent of projects have failed or are likely to fail to meet their originally estimated in-Service dates (paragraph 2.14).
e) Over one-third of all in-Service date slippage results from unforeseen technical diftkulties in contractors. A further 40 per cent of slippage is due to procurement delays and budgetary constraints (paragraph 2.15). MINISTRY OF DEFENCE: MAJORPROJECTSREPORT1994
Changes since the 1993 Major Projects Report
(a) Change in cost variations 2.17 For those 20 projects that feature in both the 1994 and 1993 Major Projects Reports the overall forecast cost variance has increased from a 6.1 per cent overrun in 1993 to a 7.2 per cent overrun in 1994 (excluding Trident). Eurofighter 2000 has been exceptionally Included in the analysis in order to demonstrate that the Increased overrun is mainly due to this project. If it is excluded the forecast cost overrun has increased from 2.8 per cent to 2.9 per cent over the year to 31 March 1994. The impact of the change to the GDP deflator and the change in accounting rules for intra-mural costs (see paragraph 2.6) has been removed from the figures to ensure a like-for-like comparison.
2.18 Some projects show large changes in cost variance between 1993 and 1994. These are shown in Figure 5. In the case of the EHlOl “Merlin” helicopter, there were several reasons for the net cost increase of E40 million:
. the simulator training contract will cost 247 million more than estimated in 1991:
. the crash of the PP2 prototype helicopter led to delays in the development programme and a consequent cost increase of X.25 million; and
. other factors, including an increase on the sonics programme and production investment. led to an increase of El1 million.
The increases are set against an estimated reduction of Z43 million resulting from the Department’s pricing negotiations with sub-contractors on the main production contract.
2.19 The non-competitive iixed price simulator training contract with Loral-ASK (formerly IBM-ASK) was agreed in July 1994, nearly three years after the production contract had been signed in 1991. Over this period, the cost of the contract increased to El17 million from the 270 million estimated at the time of the 1991 approval of IBM as prime contractor. The cost escalation on the training contract forced the Department to consider various de-scoping options in order to contain costs. These would have resulted in a training system of degraded capability with a need for considerable additional training on real aircraft, leading to very significant Increases in running costs and loss of aircraft from operational usage. Offsets to cover the funding shortfall could have Included a cut-back in spares provision, to the detriment of operational availability. In the event, these measures were not required as the forecast savings achieved through the Department’s price negotiations with the sub-contractor on the production contract (E43 milhonl enabled the Department to accommodate the training system cost Increases from within overall project funds.
11 MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994
2.20 The National Audit Office consider that the Department could have avoided placing elements of the training package at risk by including the training contract within the production contract in 1991. This would have given the Depatient a better estimate of training costs under prime contractorship. There might also have been a greater incentive on the contractor to pare the costs of the training package since these would have been considered as part of the competition. However, the Department believe that, in the event, the delay enabled risks to be reduced by better definition of the system requirements and that, taken overall, the competing of sub-systems and the final contractual negotiations with the prime contractor have achieved the best possible value for money. The Department further believes that it is inappropriate to generalise from this experience as simulators are often supplied by other than prime equipment manufacturers and can be subject to separate competition.
1. Trident: f643 million reduction. Realchanges to theTrident programmeare maskedby relative changesin inflation and the UnitedStates:United Kingdom exchange rate. The net effect of the real changesto the programmeis a forecast reduction of f24 million. This demonstratesthat the reportedunderrun on Tridentshould be interpretedwith careas a large percentageof it relatesto assumptionsabout inflation and exchangerate variations. The major real changesto the programmebetween the 1993 and 1994 Major ProjectsReports are given below (figures shown at 1992-93 prices):
(4 a decreaseof f83 million relatingto reducedsubmarine production costs;
(b) a decreasein unallocatedcontingency of f74 million reflectinga reduction in the uncertaintyon the programme;
6) an increaseof f69 million reflecting new stores provisioning plans following delaysin finalising the design of the submarine:and
(d) an increaseof f60 million to takeaccount of an expectedcut-back in the numberof missiles purchasedby the United StatesNavy and the resultant increasein the unit cost of missiles.
2. Eurofighter 2000: f431 million increase.Over 50 per cent ofthe increasecan be attributedto the changeinaccounting rules for intra-mural costs (f232 million). Any such increase does not, therefore,represent additional expenditureon the project.The remainderis attributed by the Departmentto additional estimatedexpenditure involving the integration of new weaponsnot originally specifiedand to there-orientation of the developmentprogramme. The NationalAudit Officeare currently examining the reasonsfor cost overruns as part of a separatestudy on Eurofighter2000.
3. Rapier FSC:f45 million reduction.The changeis due to reductionsin the requirementin programmeswhich FSCpart funded.These were the NATOIdentification SystemProgramme (f36 million FSCelement) and an lnfra RedSurveillance System/Passive Aircraft Surveillance System(f7 million FSCelement).
4. EHlOl “Merlin”: f40 million net increase.The changeis mainly due to increasedcosts on a simulator training contract and increasedcosts resulting from the crash of a prototype helicopter balancedagainst reductionsfrom the Depattment’spricing negotiationswith sub-Contractors (paragraph2.18).
12 MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994
(b) Change in slippage in in-Service dates 2.21 For half of the 20 projects common to the 1993 and 1994 Major Project Reports the in-Service date has slipped further (Figure 6). The average further slippage is over four months per project. The equipment for three of the projects will now be delivered one year or more later than envisaged in 1993. Only one project, the Sea Harrier mid-life update, is showing an improvement in the slippage position (by one month due to early achievement of the first aircraft deliveries). Figure 7 sets out the reasons for slippage for those projects showing the greatest increase in slippage.
Bowman
High Velocity Missile
JTIDS
Spearfish
TornadoMLU
Eurofighter2000
RapierFSC
SeaHarrier MLU
Slippage4(!onths)
Source:lvA0 analysis of Major ProjectsRepoti 1993and 1994data
Note: Slippagesfor COBRAand CfVGFomitted as figures are classified
Figure6 shows the slippagefor those projectsshowing a changebetween the 1993 and 1994 Major ProjectsReports
2.22 The Department intend to become more realistic in their estimates of in-Service dates by implementing “three point timings” which aim to quantify the degree of risk attached to estimates. This is currently recommended practice in risk management and the Department are considering making the procedure mandatory in all submissions to the Equipment Approvals Committee. The Department believe that, in time, the use of “three point timings” will reverse the trend towards greater slippage by making timescale risks more explicit at the outset of a programme. MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994
:. r* * ,ii-,”,,. . . “‘3.,, bU**>y \, ygq&& !$$i 7: Proj& Shiwlng.larg~increases;Ip,S!lppage. ~9~~~~~~~~~~~~~ , ‘S‘I i 2,: > 5, .“ 5 9.* .: _.., , 1, The CommonNew Generation Frigate (CNGF):The reasonforthe new slippageis the needto synchronisethe programmesrelated to the combatsystems with that of the warship. This reflects continuing dialoguewith Franceand Italy over the PrincipalAnti-Air Missile Systemfor the ship. 2. MR Trigat: 18 months increase.Further slippage has resultedfmm technical problemswith warheadintegration and guidance(6 months) and further budgetarymeasures to allow the programmeto be matchedwith availableresources (12 months). As it is a collaborative programme,the intention is now that the UnitedKingdom will begin to take its equipmentlater in the production run than originally envisaged.The Departmenttold the Houseof Commons DefenceCommittee (Tenth Reportof Session1993-94) that there was also a positive decisionto delaythe in-Servicedate in responseto what they perceivedto be a reducedthreat. 3. COBRA:Increased slippage is predictedfollowing reductionsin the likely production requirement of a partner nation and the consequentneed for further developmentwork aimedat reducing unit production costs. 4. Bowman:7 months increasecaused by the needto matchthe programmeto availableresources. Wider budgetaryobjectives have led to a m-profiling of plannedexpenditure resulting in extra slippage. 5. High Velocity Missile: 7 months increase.The projectis coveredin detail in Part 3. 6. JTIOS:7 months increaseresulted from softwareintegration problemsbetween the TornadoAir DefenceVariantand JTIDS. 7. Spearfish: 6 months increaseresulted from a 2 month overrun on the ReliabilityAssurance Programmeand problemswith the environmentaltrials requiredfor safety acceptance(4 month delay).The DepartmenfsSafety Directorate insisted that the latter problembe solved beforethe project progressedany further. 2.23 The National Audit Office noted and the Department recognises that the worsening picture on slippage could lead to additional costs and the retention of older less capable equipments in-Service for longer than originally planned. For example: . The lives of the Jaguar and Tornado F3 aircraft are being extended beyond their original out-of-Service dates to cover for the forecast in-Service date slippage on Eurofighter 2000 (currently 24 months). This will involve additional costs for the Department as they will have to pay for fatigue modifications and upgrades to the aircraft which would not otherwise have been necessary. The Department are assessing the extent of these additional costs and the National Audit Office will consider the results of this work as part of a separate study of Eurofighter 2000. . The in-Service date slippage on the Spearfish torpedo (over 6 years) will necessitate running on the Tigerfish torpedo for longer than planned. . Slippage on the BOWMAN project (49 months) involves running on CLANSMAN radios for longer than planned. To retain CLANSMAN in-Service 14 MlNlSTRYOFDEFENCE: MklORPROJECTSREPORT1994 the Department estimate that they will incur additional expenditure of up to $I200 million which they describe as a “financial penalty” of slippage on the BOWMAN project. . The five year slippage on the EHlOl “Merlin” helicopter has led to its predecessor, the Sea King helicopter, and its related support infrastructure being kept in-Service for longer than forecast at the time of the original Merlin approval. 2.24 In-Service date slippage can also render the armed forces less able to respond during the slippage period to the threats which the new equipment was designed to counter. For example: . The CLANSMAN radio system, which is being run on during the slippage period for BOWMAN, is based on 1960s technology and is becoming increasingly vulnerable to electronic countermeasures and lacks the data handling capacity to meet the requirements for secure voice, data and currently approved Command, Control and Information Systems. . The slippage to the Replacement Type 23 Command System is placing additional demands on the fleet of Type 22 frigates and Type 42 destroyers which are being used instead of Type 23 frigates. Guidelines relating to maximum times spent at sea for Ships Company are currently being breached for these ships. The deployment of Type 23 frigates without the first three phases of software of the Type 23 Command System carries significant military risk. . The slippage to the Eurofighter 2000 programme will result in the continued employment of the Tornado F3 in an air defence role and the Jaguar in an offensive strike role. As one would expect neither of these aircraft are as effective in their given roles as the more technologically advanced Eurofighter 2000 should be. The Department are currently assessing the operational implications of this and the National Audit Offrce will consider the results as part of a separate study of Eurofighter 2000. 2.25 In-Service date slippage can also have a knock-on effect on the in-Service date for associated projects: . The main reason for the slippage on CNGF is the need to synchronise the programme relating to the Principal Anti-Air Missile System with those of the warship. . Changes to the Submarine Refit Programme have led to changes in the opportunities for fitting the final phase of the update to the Swiftsure and Trafalgar class submarines, This has caused a 27 month delay. MINISTRY OF DEFENCE: h%AJOR PROJECTS REPORT 1994 Key Points 2.26 a) The overall cost variance (excluding Trident) has increased from a 6.1 per cent overrun in 1993 to a 7.2 per cent overrun in 1994 for the 20 projects common to both reports. If Eurofighter 2000 is also excluded, cost variance has remained roughly unchanged between the two years (paragraph 2.17). b) In order to avoid cost increases such as that seen on the EHlOl “Merlin” helicopter, the Deparunent should aim, where appropriate, to agree training contsacts and any other ancillary contracts at the same time as the main production contract (paragraph 2.20). Cl The in-Service date has slipped further for half of the 20 projects common to the 1993 and 1994 Major Projects Reports. The average further slippage is over 4 months per project with three projects slipping by a further one year or more (paragraph 2.21). d) The worsening position on in-Service date slippage has implications for both cost and the operational effectiveness of the armed forces (paragraphs 2.23-2.24). Analysis of Cost Variance by Stage of Project 2.27 The Major Projects Report contains details of projects across the whole spectrum of stages from Feasibility Study to Full Production. Figure 8 shows the current stages of projects. 2.28 The National Audit Office analysed forecast cost outturn in the development and production stages. On 20 projects, there was an overall forecast cost overrun of 24.5 per cent in development for those projects either in or having undergone development compared to only 1.4 per cent at the production stage for 15 projects. A large proportion of the development stage forecast overrun is accounted for by the Eurofighter 2000 project and the overall forecast development overrun reduces to 13.6 per cent if this is excluded. Development problems also occurred on the Tornado mid-life update (covered in depth in the C&G’s report on BMajor Projects Report 1993”, HC 356, April 1994) and the EHlOl “Merlin” helicopter, where a prime contractor has now been appointed as a result of cost overruns at the development stage. Serious problems were encountered during software development and integration up to 1985 for the Vertical Launch Seawolf missile (see Part 31. 2.29 Development cost overruns tend to decrease, in percentage terms, the further projects are through their development stage because of actions taken to contain cost overruns and because the equipment is better defmed. An example of the control of cost overrun occurred in the case of the Tornado mid-life update where the number of aircraft to be upgraded was reduced and certain equipments deleted in order to curb cost growth. It also occurred for the EHlOl 16 MINISTRY OF DEFENCE: MAJORPROJECTS REPORT 1994 Project Stage LPD(R) CommandSyst Spearfish S&T Update Trident VLSW AS 90 Howitzer Bowman BR 90 Challenger2 COBRA High Velocity Missile MR Trigat RapierFSC AMRAAM ASRAAM EHl 01 “Merlin” Eurofighter IRCM JTIDS SeaHarrier Attrition Buy Sea HarrierMLU SKYNET4 Stage2 TornadoGRI MLU -1 1 1 1 Source:Major ProjectsRepoil 1994 Note:Not al/projects havegone through a// the stageslisted “Merlin” helicopter where a E209 million overrun in development prompted the Department to examine de-scoping options in order to bring the price down to an affordable level before letting the prime contract for production. These examples and the analysis in the previous paragraph indicate, as might be 17 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 expected, that problems leading to cost overruns tend to occur in the earlier stages of projects. The lower cost variance found at the production stage is partly indicative of technical difficulties having been overcome by this stage and the fact that the estimates are based on experience of producing prototypes and consequently are subject to smaller estimating tolerance. In some cases, it also reflects the neutralising of earlier cost growth as a result of decisions by the Department to accept a corresponding reduction in equipment capability Competitive and Non-Competitive Contracts 2.30 The National Audit Office compared time and cost performance on competitive and non-competitive contracts. 23 of the 25 projects could be clearly classified into one category or other. Two projects (Sea Harrier Mid Life Update and Bridging for the Nineties) were left out of the analysis because the projects contained an even mix of competitive and non-competitive work. Trident and Eurofighter 2000 (both non-competitive) were again left out of the cost analysis. The conclusions drawn on cost performance are based on 13 competitive and 8 non-competitive projects and the conclusions on time performance are based on 13 and 10 projects respectively. 2.31 The average forecast cost overrun on non-competitive contracts, at 9.5 per cent, was signiilcantly larger than for competitive contracts, at 0.8 per cent. If the Tornado mid-life update, which shows a large cost overrun of over 50 per cent, is excluded the average cost overrun for non-competitive contracts is reduced to 4.7 per cent. Forecast inServIce date slippage was also greater for non-competitive contracts at 38 months compared to 33 months for competitive contracts. However, because non-competitive contracts tend to be longer running, the average percentage slippage is about the same at 32 and 33 per cent for competitive and non-competitive contracts respectively. These results con’ilrm the findings in the Comptroller and Auditor Generals report on the Major Projects Report 1993 (HC356, April 1994) that there is better cost and, to a lesser extent, time performance, on average, on major projects which are let competitively. Collaborative and Non-collaborative Projects 2.32 There are six collaborative projects in the Major Projects Report. The National Audit Office examined performance on these projects to test whether there was any difference between them and the non-collaborative projects. Trident and Eurofighter 2000 were again omitted from the cost analysis. The analysis showed that there was little difference, on average, in cost performance but that the average forecast in-service date slippage for collaborative projects, at 45 months, was considerably greater than for non collaborative projects, at 33 months. However, because collaborative projects take over 50 per cent longer, on average, than non-collaborative projects there is little difference between the two types of project in forecast percentage in-Service date slippage. Four of the six collaborative projects list problems with the collaboration process as contributing to time and cost overruns (Figure 9). MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 1. CNGF(United Kingdom, Franceand Italy). Signatureof a tripartite programmeMemorandum of Understandinghas been delayeddue to a continuing dialoguewith Franceand Italy overthe Principal Anti-Air Missile Systemfor the ship. 2. COBRA(United Kingdom,France and Germany).Apart from a m-assessmentof the in-Service datefollowing ProjectDefinition, slippageoccurred due to protractednegotiations between the three collaborativepartners and betweenthe four companiesforming the industrial consortium. Furtherslippage is now predictedfollowing reductionsin the likely production requirementfor one partner nation and the consequentneed for further developmentwork aimedat reducing unit production costs. 3. MR Trigat (United Kingdom,France and Germanyare Pilot Nations,Belgium and Netherlandsare AssociateNations). A f19 million cost increaseresulted from a reducednumber of Partner Nations (Italy, Greeceand Spain did not join the programmesas expected).Twenty-four months of procurementdelays resulted from an under-estimationof the time each PartnerNation would requireto achievethe necessaryinternal financial approvalsto moveto production. 4. Eurofighter 2000 (United Kingdom,Germany, Italy and Spain). Part of the cost increaseis due to Germanwithdrawal from certain equipments,Twelve months of procurementdelays reflectthe revised budgetaryrasources of the PartnerNations, and the needto reviewthe project in the light of the changedstrategic and operationalenvironment in Europe. Key Points 2.33 a) Forecast cost overruns tend to occur in the development stage of projects rather than the production stage (paragraph 2.28). b) Forecast cost overruns in the development phase are sometimes offset by reducing the requirement either by cutting the numbers to be purchased or by reducing equipment capability (paragraph 2.29). c) The average percentage forecast cost overrun on non-competitive contracts (9.5 per cent or 4.7 per cent excluding the Tornado mid-life update) was significantly greater than for competitive contracts (0.8 per cent). The average forecast percentage in-Service date slippage is about the same for both types of contract (paragraphs 2.30-2.31). d) There was little difference in either average forecast percentage cost overrun or average forecast percentage in-Service date slippage between collaborative and non-collaborative projects. However, a majority of the collaborative projects cite problems with the collaboration process as contributing to time or cost overruns (paragraph 2.32). 19 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 Part 3: Examination of three missile projects Introduction 3.1 Excluding Trident, a project which in addition to the missile element includes the cost of four submarines and a large proportion of the cost of the related works programme, six missile projects are reported in the Major Projects Report 1994. The National Audit Office selected three missile projects for more detailed examination. The three projects selected were Vertical Launch Seawolf, the High Velocity Missile and the Advanced Medium-Range Air-to-Air Missile. These projects were selected so that a missile project from each of the three Systems Controllerates was examined and so that the examination covered different types of missile projects involving a wide range of issues. Development of the Vertical Launch Seawolf and the High Velocity Missile were financed primarily by the Department. The Vertical Launch Seawolf is a mature missile system which is now in-Service, whilst the High Velocity Missile, a particularly advanced project technologically, is just completing development and is in production. The Advanced Medium Range Air-to-Air Missile is an off-the-shelf purchase from the United States. Scope of examination 3.2 For each of the three missile projects the National Audit Office considered : . The Department’s performance in managing the project against originally approved cost and time estimates. . The reasons for any variance from originally approved cost and time estimates. . The lessons to be learned. Vertical Launch Seawolf Background 3.3 The Vertical Launch Seawolf(VLSW) missile is a surface-to-air self-defence missile system. It is fitted in the Royal Navy’s Type 23 Frigates to provide protection against anti-ship missiles and aircraft. VLSW is fired from a multi-tube launch silo vertically clear of the ship as illustrated in Figure 10. The vertical launch improves reaction times. VLSW has a longer range than the earlier version of Seawolf and is much more capable against multiple attacking 20 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 targets. Target indication for the missile is provided by the 996 Surveillance Radar and tracking by the T91 l(2) Tracker. Figure 10: Vertical Launch Seawolf Missile System ; ,... . ‘Ly , 3.4 VLSW will eventually be folly integrated with the Type 23 Frigate Command System. However, until the Type 23 Frigate Command System enters service, firings are controlled by a stand-alone unit. Procurement route 3.5 In May 1984, British Aerospace Dynamics Limited (BAeD) were awarded a non-competitive prime contract for the development of the system and missile and production of the first buy of launcher sub-systems and associated missiles. The contract was not competed as it was let prior to the Department’s drive for competition which commenced in the mid-1980s. The contract included the production of 500 missiles and launch silos for the first eight Type 23 Frigates. It was a condition of this contract that a price for the work should be agreed within 12 months. At the time the Department considered that it would not be possible to secure a futed price contract on a project which included such a substantial amount of development work. However, the contract was renegotiated to a taut futed price contract in June 1986. 21 MINISTRYOFDEFENCE: MklORPROJECTSREPORT1994 Performance against approved cost and time estimates 3.6 The cm-rent estimate of cost for VLSW is E769 million. This represents a E55 million (7.7 per cent) cost overrun against the original cost estimate. There have been no further real cost increases since the contract was renegotiated in June 1986. The in-Service date for VLSW, defined as the date at which the VLSW system has completed First of Class trials and is at sea in an operational Type 23 Frigate, was achieved in October 1991, an in-Service date slippage of 17 months against the original in-Service estimate of May 1990. The bulk of this slippage occurred before the fixed price contract was negotiated in 1986. Reasons for variances from approved cost and time estimates Variance from approved cost estimates 3.7 The E.55million cost overrun on VLSW is the net effect of a ES0 million cost overrun in Full Development and a X25 million cost underrun in Production. The Department acknowledged to the House of Commons Defence Committee in 1989 (10th Report of Session 1988-89) that the E80 million cost overrun during Full Development resulted from insufficient work being undertaken in the Feasibility Study, and the omission of the formal Project Definition stage. There was, therefore, no sensible basis for making a cost estimate until 18 months into Full Development. The first 18 months of Full Development were, in effect, occupied by Project Definition activities undertaken by BAeD as they sought to establish a futed price for the contract. The cost estimates made when the renegotiated contract was let in 1986 have proved reliable and there has been no further cost increase since then. 3.8 The E25 million cost underrun in Production arises from lower than expected prices arising from contract negotiations. Variancefrom approvedtime estimates 3.9 The 17 month slippage against the original in-Service date for VLSW resulted, as in the case of the cost overrun in Full Development, from technical problems experienced by the contractor early in the programme. The Department accept that the slippage could have been less likely had their initial management of the project included a more extensive Feasibility Study and a formal Project Definition stage. The timescale estimates made when the renegotiated contract was let in 1986 have proved reliable. 3.10 The Admiralty Surface Weapons Establishment (now part of the Defence Research Agency) led Feasibility Study for the VLSW lasted only six months. A weapons consultant engaged by the National Audit Office (Cray Systems) considered that Feasibility Studies for a system as complex as VLSW should last ideally between 12 to 16 months. The Feasibility Study for the Common New 22 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 Generation Frigate’s Inner Layer Missile System has yet to be placed but is based on a 13 month programme. This missile system, like VLSW, builds on existing equipments. The major problem identified by the VLSW Feasibility Study was the integration of VLSW with the Type 23 Frigate’s main radar - the 996 Radar. However, the Feasibility Study did not identify, as a major risk, the very large amounts of software to be written for the missile trackers. The Department and the contractors acknowledged to the House of Commons Defence Committee in 1989 (10th Report of Session 1988-89) that the amount of work in developing the software had been seriously under-estimated.* 3.11 Another cause of slippage against the original in-Service date related to the late delivery of inputs to the Type 23 Frigate Shore Development Facility at Portsdown. Late delivery was caused by the Department’s decision to cancel an existing contract and go for further competition. This in turn, led to delays in the VLSW software and interface proving trials at the Shore Development Facility and, as a consequence, the Department incurred Delay and Dislocation costs of X5.25 million. The Department consider that the cost and risk reduction advantages from going to competition outweighed the disadvantages. Similarly, the decision to cancel the Type 23 Frigate’s original CACS 4 Command System, meant that the VLSW project had to develop a stand alone control system, at a cost of f0.6 million, in order to continue with the planned VLSW firing programme and prove the Command System interfaces. All the increases were contained within the renegotiated contract in June 1986 where the decision to compete contributed to the E25 million savings (see paragraph 3.81. Lessons to be learned 3.12 One of the main problems which can arise with missile projects in ships and aircraft is the number of equipments with which they have to interface and the number of those interfacing equipments that are major and managed separately in their own right. this was certainly the case for the VLSW project and problems stii remain with some of the interfaces belonging to other systems, notably with the 996 Radar and the Command System where integration remains to be proven (paragraph 3.101. Many lessons appear to have been learned from the experience on the VLSW project, many relating to the integration aspects. The main lessons that have been absorbed and are being acted upon by the Department are: a) allowing adequate time and specific stages to define the requirement, identify technical problems and minimise their risk, and quantify costs accurately (paragraph 3.7). The Department has taken these lessons into account, and will be applying them to their negotiations with international partners for the missile system to be carried in the Common New Generation Frigate: Continued * House of Commons Defence Committee 10th Report of Session 19X8-89, “The Vertical Launch Seawolf Missile System and The Type 23 Frigate Command System’. Ministry of Defence’s written evidence page 12, paragraph 8. BAe’s written evidence page 13. 23 MWISTRYOFDEFENCE: MkTORPROJECTSREPORT1994 b) from 1996, integrating weapon project teams with their parent platform’s project team. This combination will ensure that there is a sharp focus on interface and integration problems; cl becoming an intelligent customer through maintaining staff, either in-house or under contract, to provide the appropriate mix of skills in the right quantities. The Department have now made good an m-house shortfall in software skills on a number of projects by contracting in software specialists, most notably on the Type 23 Frigate Command System. High Velocity Missile Background 3.13 The High Velocity Missile (HVMl is designed to maintain the Army’s close air defence capability into the next century. The HVM system will be deployed primarily in self-propelled mode, on the highly mobile Stormer armoured vehicle as illustrated in Figure 11. Missiles may be fired independently of the vehicle using a lightweight multiple launcher on a tripod base, or launched from the shoulder using the same aiming unit as the lightweight multiple launcher. The self propelled HVM incorporates an Air Defence Alerting Device (ADAD), a passive i&a-red automatic surveillance device. 3.14 In the view of the manufacturer of HVM - Shorts Missile Systems Limited (SMS), once HVM comes into Service the system will be capable of destroying all known current and future threats from armoured helicopters or fighter ground attack aircraft. The missile contains three highly accurate, manoeuvrable darts, each containing a high explosive warhead which will provide significant increases in lethality over conventional missiles. It is immune to all known countermeasures. SMS believe that HVM will excel in areas where heat-seeking missiles have proved to be deficient such as cluttered target background environments and against armoured target aircraft, particularly helicopters. Procurement route 3.15 SMS are the prime contractors for the Full Development and Initial Production of HVM. The futed price contract for Full Development and Initial Production was placed with SMS in November 1986 following a competitive Project Definition stage. The Department have not yet finally decided on the procurement route for any follow-on production contracts, although without prejudice negotiations are in progress at present between the Department and SMS. 24 MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994 Figure 11: High Velocity Missile system and Stormer armoured vehicle Performance against approved cost and time estimates 3.16 The estimate of cost given in the 1994 Major Projects Report for JJVM is E411 million. This represents a El4 million (3.5 per cent) cost overrun against the original cost estimate. The in-Service date for HVM, defined as the date by which one Army battery is fully equipped, trained and supported, was, at the time the 1994 Major Projects Report was submitted, forecast to be December 1994 against the original in-Service date of December 1990, an in-Service date slippage of four years. However, subsequent to the submission of the 1994 Major Projects Report, the in-Service date has slipped further as a result of continuing problems with the Stormer vehicle and is now likely to be approximately mid 1995. Reasons for variances from approved cost and time estimates Variance from approved cost estimates 3.17 Since the project started in 1986, HVM has experienced a forecast cost increase of El4 million (3.5 per cent) over the original estimate. E4 million of the increase arose because the contractually agreed industrial indices used to calculate the payments to the contractor have been escalating faster than 25 MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994 general intlation. This is evident from the Major Projects Report for the first 0me because it now uses the GDP deflator to uplift original prices (paragraph 2.9). 3.18 The remaining El0 million cost increase relates to the cost of a number of Centrally Repaired Modules forming part of the in-Service support spares, the need for which was overlooked by the Department at the Rrst approval. As the variance from approved estimates on HVM is relatively small compared to other projects in the Major Projects Report 1994 (see Figure 11,the National Audit Offtce examination concentrated on the substantial in-Service date slippage. Variance from approved time estimates 3.19 As at the reporting date for the 1994 Major Projects Report, HVM had experienced a substantial in-Service date slippage of four years. Because the project is covered by a futed price contract with payment dependent on achievements (paragraph 3.151, SMS are not paid for equipment not delivered. Most of the slippage has resulted from unforeseen technical difticulties in the contractor, but procurement delays, budgetary delays and delays with an associated project (the Air Defence Alerting Device), have also contributed. The Department attribute slippage to the following factors: l 36 months slippage due to unforeseen technical difficulties in the contractor. Most of this slippage relates to problems with the missile experienced during the development phase. Although some additional problems were experienced during initial entry into Service of the equipment, the major issues have, in part, now been resolved, particularly those associated with the Stormer vehicle. . Seven months slippage due to delays in an associated project (four months of this delay were concurrent with delays due to unforeseen technical difficulties and are considered by the Department to be an adjustment for realism). This delay related to software problems encountered in integrating the Air Defence Alerting Device into tbe Stormer vehicle. This problem has now been resolved to the satisfaction of the Service user. * Sevenmonths slippage due to budgetarydelays. This delay occurred atthe outset of the project in 1986. l Two months slippage due to procurement delays relating to prolonged contractual negotiations on some remaining small contracts, in part because SMS underwent a major restructuring in early 1993. 3.20 The National Audit Office examination focused on the slippage of three years resulting from unforeseen technical diff?xlties in the contractor, the related issue of apparent problems with the availability of Government Furnished Facilities and Equipment, and the seven months in-Service date slippage resulting from delays in an associated project, MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 (a) Unforeseen technical difficulties 3.21 The in-Service date slippage resulting from unforeseen technical difRculties has resulted largely from problems with the missile and also problems with the Stormer vehicle. The main problems with the missile have been: . Difficulties experienced (by SMS) during development including problems with guidance and with the ignition of the second stage motor of the missile. The lethality was demonstrated during development using test missiles which provided performance data. The current problems arise from attempts to duplicate those lethality data using production missiles. l Problems have been experienced (by SMS) during the Production System Validation Test firings which were undertaken in July 1993 to prove the effectiveness of the three variants of the HVM systems. The self-propelled HVM and the lightweight multiple launcher HVM passed the tests but the shoulder launched HVM has yet to be proven, as the required number of missile hits on the target was not achieved. The shoulder launched HVM was due to be re-tested by October 1994, but this milestone has not yet been achieved due to the need to ensure that modifications to the aiming unit have been correctly implemented. The re-test is due to take place in the second quarter of 1995. 3.22 With hindsight, both the Department and SMS accept that, in relation to the missile element of the project, this aspect was more technologically challenging than had originally been foreseen. During the tender evaluation at the end of the competitive Project Definition stage, the Department considered that the risk of SMS failing to meet their objectives was low. The Department took account of SMS’ good track record of delivering successful missile systems. 3.23 A number of different techniques have been used to test the lethality of the missile. The lethality requirement for HVM is defined in the Staff Requirement as kill probabilities at a number of target ranges. During development SMS were required to produce their own lethality-range curve based on the performance achieved by the missile during Development. This lethality curve differed in shape from that in the Staff Requirement, bettering requirements at some ranges while falling short at others. Operational Analysis performed at the time showed that, using SMS lethality curve, the overall effectivenessof HVM was only slightly different than that required and was acceptable to the Service user. 3.24 Once the Development stage was completed, a contractually required Production System Validation Test was undertaken by SMS, to demonstrate for each of the three HVM variants whether or not production standard launchers and missiles met the system speciiication. The self-propelled and lightweight multiple launcher variants passed, while the shoulder launched variant has yet to be proven. As the missile is common to all launch modes and two out of three had met contractual requirements, the Department began to take delivery of production standard missiles. A Batch Lot Acceptance trial (a production quality check) was undertaken as each batch was delivered. On some batches the results were better than others. One batch of missiles failed to pass the Batch 27 MWISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 Lot Acceptance trial because of problems with the motor produced by a sub-contractor. The Department’s view is that quality problems within SMS have contributed to inconsistencies in performance. SMS acknowledge that some problems arose due to quality problems in their supply arrangements and have taken steps to enhance their Quality Systems in that area, for example, through tighter quality control over sub-contractors 3.25 The Service user has also been firing production missiles since late 1993, as part of the process of operator training. The data gathered, together with that from the Batch Lot Acceptance firings, were used as the basis for a further assessment of the lethality being achieved. Analysis of these data showed that the lethality achieved differed slightly from the lethality achieved during development (paragraph 3.231. The Department believes that this result may, to some extent, be due to the inexperience of the Service user and better results will be achieved with increased experience. SMS have also been making great efforts in production to improve the reliability and consistency of the missile. Additional firings took place in Autumn 1994 on Government ranges and in closely controlled conditions, using experienced Service users and missiles incorporating a number of process improvements introduced by SMS since early 1994. The analysis of the results obtained is still being conducted, but initial outputs are encouraging 3.26 The analysis of the various missile firings has been fed into a further Operational Analysis study, commissioned by the Department. This new analysis will assess the practical consequences of the established lethality by assessing the system’s performance in appropriate operational scenarios. Evaluation of the results of the Operational Analysis is going on at present. In addition to the Operational Analysis, a Combined Operational Effectiveness and Investment Appraisal is being conducted to assess whether or not there is a case for procuring more HVM systems, by comparing HVh4 with other available missile systems. This work is expected to be completed in early 1995. 3.27 Another issue linked to the missiles is that of the provision of Government Furnished Facilities and Equipment. The contract with SMS includes a significant amount of Government Furnished Facilities and Government FurnishedEquipment where the Department must provide the contractor with access to certain facilities or certain equipment at a specified time. For missile projects, the provision of certain Government Furnished Facilities, notably iirmg ranges, is unavoidable. One item of Government Furnished Equipment that had to be provided, on the HVM project, was an Electrical Optical Tracker, a unique piece of equipment that is part of the range facilities. This item provides information on what is happening when the missile dart is in ilight. SMS claim that the Electrical Optical Tracker was not available to them when it should have been and that ifit had been delivered on time, problems with the performance of the missile might have been overcome earlier. The Electrical Optical Tracker has been deployed at the range but SMS maintain that it cannot produce the data required. The Department’s view is that SMS were late in their development programme for other reasons. 28 MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994 3.28 The main problem experienced with the Stormer vehicle is that it has failed to achieve in Production the durability requirements demonstrated during Development of the self-propelled HVM system. The Stormer vehicle was assessed in 1985 to be low risk as it was, in effect, an off-the-shelf purchase of an existing vehicle. The problem encountered with production vehicles was that the friction brake bands which control gear changing were failing prematurely. Pending resolution of the problem the Department stopped taking deliveries and withheld final payments. The manufacturer of Stormer, a sub-contractor to SMS, has now rectified the problem but it has delayed the in-Service date beyond the December 1994 date given in the 1994 Major Projects Report, and it is now likely to be approximately mid 1995. (b) Delays in an associated project 3.29 Seven months in-Service date slippage relates to delays in integrating into self-propelled HVM an associated project, the Air Defence Alerting Device. Although SMS were appointed prime contractors for the HVM project, the Department let a separate contract for the Air Defence Alerting Device because this was a separate major project with its own Staff Requirement which would have more applications than just for HVM. In 1986, when the contract was let, the Department were just expanding the concept of prime contractorship. The prime contractorship with SMS did not make the contractor responsible for either procuring the Air Defence Alerting Device for the Stormer vehicle or define clearly who was responsible for integrating it into the Stormer vehicle. The Air Defence Alerting Device was, therefore, a major item of Government Furnished Equipment. 3.30 Problems arose with the software when integrating the Air Defence Alerting Device into the Stormer vehicle. In relation to integration, SMS undertook to assist the Department in installing the Air Defence Alerting Device at no extra cost, but with no responsibility for performance. The Department now accepts that these problems might well have been resolved more quickly if SMS’ prime contractorship role had included the procurement and integration of the Air Defence Alerting Device into the Stormer vehicle, although the Department would have had to recompense the contractor for taking on this additional risk and the Department believes that this cost would have been considerable. The problems with the Air Defence Alerting Device mounted on the Stormer vehicle have now been resolved to the satisfaction of the Service user. Other findings from the examination 3.31 At the time when the HVM contract was let in 1986, the concept of formal risk assessments of a project was only just beginning to be introduced in the Department. For the HVM project various investigations were undertaken on key risk areas but this did not equate to the current practice of undertaking a formal risk assessment exercise. With hindsight, the Department acknowledge that a number of risks on the HVM project were underestimated. 29 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 3.32 In relation to the gearbox problems with the Stormer vehicle, this risk was identified by the Department and the probability of the problem arising was assessed as low. Despite the estimated probability being small, problems with the Stormer gearbox did in fact occur. 3.33 At the contract evaluation stage, the Department identiiied SMS’ limited experience of controlling major sub-contractors as being a potential risk area and noted that careful monitoring of sub-contractor aspects would be required. A large proportion of the HVM missile system, for example the Stormer vehicle and missile motors, is bought-in from sub-contractors. 3.34 The Department satisfied themselves that SMS had an adequate quality system in place ISMS were approved to the Allied Quality Assurance Publication (AQAPl 1 standard - the highest AQAP standard) and that SMS had suitable quality plans. The Department also required the principal sub-con&actors to be approved to the AQAP 1 standard or its equivalent and examined their quality plans. 3.35 The Department also had in place a Quality Assurance strategy document for the project and holds Quality Assurance co-ordination meetings with Quality Assurance and project staff with both SMS and the principal sub-contractors. These arrangements enable the Department to continually monitor and re-assess the Quality Assurance risk and to task the Department’s Quality Assurance Representatives at SMS accordingly. 3.36 Despite the Quality Assurance arrangements in place, in practice, SMS have experienced significant quality problems with their principal sub-contractors, for example with the Stormer gearbox brake bands and the missile motors. The National Audit Office note that, as prime contractor, SMS are ultimately responsible for all aspects of the project, including those of their sub-contractors. 30 MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994 Lessons to be learned The main lessons to be learned from the HVM project are: a) The HVM project has shown that through fixed price contracting, the bulk of the financial risk of slippage can he transferred to the contractor (paragraph 3.19). b) The problems experienced on the missile element of HVM have to a large extent resulted from the fact that the Department and the contractor under-estimated, at the outset, how technologically challenging the project would be despite the fact that Feasibility Study and Project DeRnition stages were undertaken (paragraph 3.22). The Department have, subsequent to the start of the HVM project, introduced the risk management initiative which should ensure that, as formally structured risk assessments are now required for all projects, the risks in a project at entry to the Full Development stage are made more fully explicit. c) The issue of whether the HWvl system has demonstrated adequate lethality has been the subject of extensive debate within the Department (paragraphs 3.23-3.25). The Department recognise that the performance criteria and the methods to be used for measurement should be clearly identified at the start of the contract, although this may prove difRcult for new and innovative systems. d) To avoid problems that have arisen with the provision of Government Furnished Facilities and Equipment (paragraphs 3.27-3.281, the Department should, as they recognise, seek to reduce, wherever it is cost effective, and practicable to do so, the amount of such items in their contracts. This point was made in the Comptroller and Auditor General’s Report on “Equipment and Spares held by Contractors” which was published in August 1994 (HC 636), and should be applied in the case of future possible purchases of HVM and more generally. Guidance to staff now emphasises the need for arrangements for the provision of Government Furnished Facilities and Eqoipment to be firmly in place and underwritten by the responsible project/support staff before contract award. The guidance also makes it clear that the provision of such facilities and equipment must be subject to a balanced appraisal of risk and cost prior to contract award. e) Against the background of the Air Defence Alerting Device having been procured by the Department from another contractor and the difEculties this caused in relation to integration (paragraphs 3.29-3.30X the Department accept that, where possible and cost effective, they should seek to ensure that the prime contractorship role should transfer to the prime contractor the responsibility for purchasing all equipment and integrating it into the main equipment although, the fact that the Air Defence Alerting.Device development commenced after that of HVM and MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 has wider applications within the Army would have made that difficult in this instance. D Despite the Department having at the contract evaluation stage identitied SMS’ limited experience of controlling major sub-contractors as being a potential risk area, and having sought to ensure that SMS and the principal sub-contractors had suitable qtmhty systems in place the contractor experienced significant quality problems with their principal sub-contractors (paragraphs 3.33-3.36). The Department should continue to investigate problems as they arise and consider whether there are lessons to be learned with a view to improving the Quality Assurance arrangements more generally on projects. Advanced Medium-Range Air-to-Air Missile Background 3.37 The Advanced Medium-Range Air-to-Air (AMRAAM) missile system is an all weather, active radar, homing missile developed in the United States by the Hughes Aircraft Company. The missile has a “launch-and-leave” capability which allows the pilot of the aircraft to engage other targets immediately after launch. AMRAAM will be carried initially on the Royal Navy’s Sea Harrier FRS2 aircraft as shown in Figure 12 (and may in due course be a contender for the Future Medium Range Ah-to-Air Missile (FMRAAM) competition). Figure 12: AMRAAM carried on a Sea Harrier MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 Procurement route 3.38 AMRAAM is being purchased from the United States under a Foreign Military Sales arrangement. A Letter of Offer and Acceptance was received by the Department in August 1990 on which the Investment Appraisals were based. The Letter of Offer and Acceptance was issued by the United States Government in September 1991 and accepted by the United Kingdom Government in March 1992 for the purchase of 210 AMRAAM missiles. 3.39 In determining the most appropriate procurement route, the Department considered a number of options. Based upon the results of investment appraisals and consideration of performance and risks associated with other weapons systems, the purchase of AMRAAM from the United States was selected as the preferred option, Once a procurement from the United States was decided upon, the Department considered two possible methods: a direct contract between the United Kingdom Government and one of the United States manufacturers or procurement through the Foreign Military Sales procurement system. 3.40 The United Kingdom’s purchase of AMRAAM was the first European sale agreed, following which a number of other European countries, including Denmark, Sweden and Finland agreed to buy AMRAAM. Negotiations are currently underway with Switzerland, Germany, Greece and Norway for further sales in the European market. The United Kingdom purchase was therefore an important sales opportunity for the United States in that it demonstrated confidence in the performance of the missile to other potential purchasers. This should have placed the United Kingdom in a strong bargaining position. However, the Department consider that, conversely, the United Kingdom’s bargaining position was weakened by the fact that AMRAAM was the only available compliant solution to the United Kingdom’s requirement. The other missiles considered were the French MICA and Active Skyflash which were both rejected on a combination of grounds including lower performance, greater risk, cost and longer timescale. On balance, the Department consider that the United States, as a monopoly supplier, was in the stronger bargaining position as they might well have been able to find another first European customer but the Department could not have found another missile within the timescales needed to meet the operational requirement. 3.41 The Department explored the possibihty of directly competing the contract between the two manufacturers in the United States, Hughes and Raytheon, which would have put the United Kingdom in a strong bargaining position with regard to price and performance. A direct contract would also have allowed the Department access to price breakdowns and to monitor directly the contractor’s performance. However, the United States Government made clear that they would be unwilling to grant an export licence for missiles procured in that way. Therefore, the Foreign Military Sales procurement system emerged as the only option available. The Department noted, however, that they enjoy the benefits of the United States led competition between Hughes and Raytheon, including the United States price evaluation and negotiations, which the United States 33 MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994 Department of Defense uses to determine the award of the contract for each lot of missiles. The Department also noted that, for large volume items such as these missiles, the FMS route can provide direct access to the economies of scale generated by the much larger United States orders and transfers the risk to the United States Government to supply acceptable products. The Department believe that FMS greatly reduces administrative costs by using the United States procurement system already in place for the large United States order rather than setting up a separate British team. Performance against approved cost and time estimates 3.42 The current estimate of cost for AMRAAM is El48 million. This represents a E49 million (25 per cent) underrun against the original cost estimate. There is no formal separate definition of in-Service date for AMRAAM as it is linked to the upgrade of the Sea Harrier FRS2 aircraft. .The original forecast date for the first delivery of the missile and associated equipment was December 1994. The current estimate for the first delivery of the missile and associated equipment is May 1995, a slippage of live months which remains acceptable for Sea Harrier. Reasons for variances from approved cost and time estimates Variance from approved cost estimates 3.43 The substantial cost underrun of 249 million (25 per cent) on AMRAAM is explained by a number of factors which follow from the FMS route in this case: l The annual competitions between Hughes and Raytheon, the two manufacturers of the missile. . The AMRAAM Producibility Enhancement Programme, an initiative to reduce both production and life cycle costs. It resulted in savings to the United States of $1.6 billion from an initial outlay of $300 million to help Rnance more efficient production techniques (see paragraph 5.17 of Comptroller and Auditor Generals report “Defence Procurement in the 1990s”. HC390, 20 May 19941. 3.44 Under the terms of the Foreign Military Sales arrangement, the United Kingdom Government is not able to fix the price of missile production as would happen when a conventional fixed or firm price contract is placed. This avoids the substantial risk contingencies and may deliver lower prices than the original estimate. Conversely, it can leave the Department at risk of unplanned rises in prices above the initial estimate. If the Unit Production Cost was to rise unexpectedly, the United Kingdom Government would rely on the United States Government to apply controls and seek remedies in its own interests with its much larger orders. It would, however, have to pay on demand and there is no legal limit to the exposure to such cost increases. In practice, the increase will 34 MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994 be limited to what the United States Government will pay for its own requirements. If the cost increases were acceptable to the United States Government hut unacceptable to the United Kingdom, the Department retains the option to terminate the case (and pay termination costs), or reduce quantities. The Foreign Military Sales system, therefore, carrles with it different risks to tight financial management of the project and the achievement of value for money than do domestically managed projects. In the case of AMFIAAM. The Foreign Military Sales system has so far worked substantially to the advantage of the United Kingdom Government through reductions in the Unit Production Cost. However, price rises (or further falls) cannot he ruled out until the Foreign Military Sales case is closed. Traditionally, this can take a long time, often more than three to four years. The Department consider that as the United States Deparunent of Defense’s contracts with industry are based either on futed of firm prices, the scope for price rises is limited. The Department do not know of any case where the original estimate was exceeded without the scope of the work being amended. 3.45 The Department consider that the FMS system is becoming more flexible and, when they choose FMS in future, they will seek to negotiate limits to their exposure to significant increases in the Unit Production Cost of missiles while not excluding them from the benefits of price reductions which may arise. Variance from approved time estimates 3.46 AMRAAh4 has suffered a relatively small in-Service date slippage of five months. The in-Service date slippage has arisen i?om a range of factors: l Discussions to clarify issues relating to the Family of Weapons Memorandum of Understanding. . Claims made by Hughes which have been rejected by the Department. Other fmdings from the examination 3.47 In addition to the United Kingdom’s limited control over costs, the United Kingdom also does not have a direct interface with the contractors. The United States Government act as the purchaser of the production quantity which is sold on to the customer, in the case of AMRAAM, the United Kingdom Government, inclusive of a charge for administration. Consequently, the Department is one step removed from the contractor and is unable to influence terms and conditions, although the United States Department of Defense would have more negotiating leverage than the United Kingdom Ministry of Defence. 3.48 Another drawback with purchasing AMRAAM through the Foreign Military Sales system, is that there are also restrictions on the United Kingdom’s ability to enter into technical discussions related to integration and in-Service support. Such restrictions on the availability of technical data are a feature of procurement from the United States and not unique to purchasing through the Foreign Military Sales system. The cuulract for AMFiAAM missile production is MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 a legal agreement between the United States Government and the contractor and offers no visibility to the United Kingdom Government. This prevents the United Kingdom from knowing exactly what the manufacturer is obliged to produce and whether they have met their objectives. The only substitute for this is the information which the United States Government provides, which in itself is subject to the stringent restrictions of commercial confidentiality and national security. 3.49 The Department’s Operational Requirements staff have confirmed that they have experienced difficulties in obtaining data from the United States about AMRAAM’s capability, although they considered that sufficient information had been gathered to form an initial conclusion. They did note that the most reliable evidence of AMRAAM’s performance is provided by the United Kingdom Sea Harrier test firing results conducted in the United States and attended by the Deparnnent’s scientific staff. 3.50 The United States General Accounting Office reported in 1991 and 1992 that difRculties were being experienced with AMRAAM’s lethality. Their reports referred to a number of options for accelerating improvements to AMRAAM, including retro-fitting the warheads of many AMRAAMs already produced. Following the General Accounting Office reports the United States undertook a series of tests and demonstrations to prove the lethality of AMRAAM which led to upgrades in the missile’s software. The results of the tests have indicated that required levels of lethality have now been met, and the Department are satisfied with the additional work performed. However, because of the limited visibility of United States technical information, particularly in the important area of Electronic Counter Measures, the Department recognise that they will need to be vigilant to ensure that United Kingdom standards are being met and that the improved AMRAAMs will be delivered in the United Kingdom production Lots. 3.51 Under the terms of the Letter of Offer and Acceptance, the needs of the United States Government always take priority, and they reserve the right to suspend or cancel all or part of the terms of the Letter of Offer and Acceptance. This includes the right to retract the offer made to the United Kingdom, and only provide some, or none, of the missiles on order. The Department consider this to he extremely low risk. MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 Lessons to he learned 3.52 In the case of AMRAAM, procurement through the United States Foreign Military Sales system (the only available option for the project) has so far worked to the advantage of the Department as a result of substantial reductions in the original estimated Unit Production Cost of the missile. However, there are risks in taking this procurement route: a) Unit Production Costs for AMRAAM may rise or fall as a consequence of the United States Government actions in relation to its own requirements. This adds an extra element of uncertainty to the financial management of the project which could impinge upon value for money. In practice the extent of any cost increase wiIl be limited to that which the United States Government is willing to pay for its requirements. b) The Department is one step removed from the AMRAAM contractor and is unable to use payment to influence terms or conditions. cl Restrictions on technical information relating to AMRAAM can prevent the Department from knowing exactly what the manufacturer is obliged to produce and whether they have met their objectives, although such restrictions are a feature of procurement from the United States and not unique to purchasing through the Foreign Military Sales system. In the National Audit Office’s view there are drawbacks to the off-the-shelf purchasing arrangements for AMRAAM from the United States through the Foreign Military Sales system. However, the Department are confident that the advantages, manifest in reduction to date in the Unit Production Cost, outweigh the drawbacks. The issues involved may also be applicable to other purchases made from the United States and should be borne carefully in mind when considering purchases of equipment from overseas. In particular: a) The Department should, once again, explore the possibility of direct purchase from one of the manufacturers by competing the contract between the two of them (paragraph 3.42). and compare this to purchase through the Foreign Military Sales route in their Investment Appraisal. However, even if the United States Government did approve an application for an export licence for weapons procured by direct competition, there would be legal diiculties over a United Kingdom run competition between Hughes and Raytheon because the terms of the licence under which Raytheon could exploit Hughes’ design limited such exploitation to sales to the United States Government. In the National Audit Office’s view the Deparnnent should examine this aspect further before discounting the direct purchase route. MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 b) The Department must maintain their pressure on the United States authorities to provide the technical information that is required to assess AMRAAM’s capability. For any additional purchases of AMFAAM, the Department must ensure at the outset that the required information will be provided (paragraphs 3.49-3.51). 38 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 Appendix MINISTRY OF DEFENCE MAJOR PROJECTS REPORT 1994 (AS AT 31 MARCH 1994) July 1994 39 40 MINISTRY OF DEFENCE: MAJORPROJECTSREPORT1994 MINISTRY OF DEFENCE MAJOR PROJECTS REPORT 1994 Contents Preface 42 Sea Systems Projects Common New Generation Frigate (Project Horizon) 43 Landing Platform Dock (Replacement) 47 Replacement Type 23 Frigate Command System 50 Spear&h Heavyweight Torpedo 53 Swiftsure & Trafalgar Class Nuclear Submarine (SSNl Update 56 Trident 60 Vertical Launch Seawolf IVLSWI 63 Land Systems Projects AS90 155mm Self Propelled Howitzer 66 Bowman 69 Bridging for the Nineties (BR 90) 72 Challenger 2 76 COBRA 79 High Velocity Missile (HVMl 82 Medium Range TRIGAT 85 Rapier Field Standard C (FSC) 88 Air Systems Projects AMRAAM 92 ASFiAAM 94 EHlOl “Merlin” Anti Submarine Warfare Helicopter 97 Eurofighter 2000 101 Infra-red Countermeasures (IRCMI 104 JTIDS (Joint Tactical Information Disiribution System) 106 Sea Harrier Attrition buy 109 Sea Harrier Mid Life Update 111 Skynet 4 Stage 2, UK Military Satellite Communication System 114 Tornado GRl Mid Life Update 117 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 MINISTRY OF DEFENCE MAJOR PROJECTS REPORT Preface The 1994 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 1994. Events since then, however important, are not reported. Project Summary Sheets have been prepared for each project being reported upon. Changes have been made since MPR 93 to improve the clarity and uniformity of information provided. 42 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECT Common New Generation Frigate (Project HORIZON) GENERAL INFORMATION Controllerate Responsible: Sea Systems Associated Project(s): Title ISD EHlOl 1998 PURCHASE ARRANGEMENTS A number of feasibility-type studies are underway for the ship and associated combat systems. The most significant are listed below: Contractor Contract Type Procurement Route BMT Ltd Fixed Price Competitive UK (Warship Initial Design Plan Study) BAeSema Fixed Price Competitive UK (Combat Management System Feasibility Study) VSEL Fixed Price Non-Competitive (Fully Integrated Communications System Project Definition) EUROSAM Fixed Price Non-Competitive (Project Definition) UKAMS Firm Price Non-Competitive (Project Definition - Phase 2) Siemens/Plessey Firm Price Non-Competitive Quantities Required: Quantity yet to be approved MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY FUTURE EVENTS The Common New Generation Frigate (Project HORIZON) is a collaborative programme between the UK, France and Italy to procure a new class of Anti-Air Warfare (AAWl frigate to enter service in ******. It will replace the UK’s existing Type 42 AAW destroyer. The Staff Requirement was endorsed in its original form in 1991 as a basis for collaborative negotiations with France following collapse of the NATO AAW frigate project NFR 90. Italy was offered observer status but expressed no active interest until the Autumn of 1992, by which time France and the UK were very close to agreement on a joint Staff Requirement. Italy decided to exercise its option to join with the UK and France to sign a Tripartite Staff Requirement in December 1992. Collaboration will start with an initial design and validation phase and then proceed to the detailed design and build of three First of Class (FOCl ships. Industry will be encouraged to identify savings 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 - Italian - UK joint venture company (JVC). A consortium led by GEC (with BAe and others) was selected in January 1994 as the UK member of the NC. Joint development costs will be shared equally. Production costs will be shared on the basis of off take. Although every effort will be made to attain reasonably equal work shares, the prime criteria will be to select equipments to meet the operational requirement at the best price, taking into account through life costs and operational performance. A Joint Project Office has been established in London with full centralised authority for technical, financial and contractual functions. As host nation, the UK provides the necessary contractual and Rnancial infrastructure. Plans for signature of a Tripartite Programme MOU have been delayed due to continuing differences with France and Italy over the Principal Anti-Air Missile System (PAAMS) for the ship. This PSS includes information relating to PAAMS. Key milestones are as follows: July 1994 Programme MOU and Preliminary Supplement, Early1995 SupplementNo. 1 - Phase1. ****-** ISD We are in the early stages of this project and the number of ships to he ordered has yet to be determined. Also there is only a limited view of possible further expenditure. 44 MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994 PROJECT COSTS (at 1994J95 average forecast of outturn prices to the nearest EM) fM Production Development Totals Current Estimate of Cost 86 86 Est cost at MOD approval 94 94 Difference -8 -8 Expenditure to date (31 Mar 94): !Z62M warship First approval: 1991- Initial Studies Latest approval: 1991- Initial Studies comprising: Ship First Of Class Initial Design Combat Management System Feasibility Study Fully Integrated Communications System Project Demtion (Phase 1) Electronic Warfare System Project Definltion (Phase 1) Medium Calibre Gun System Project Definition Other Associated Equipments Feasibility Studies Principal Anti-Air Missile System First approval: 1989 - Project Definition Reasons for Cost Variations: Factor fM Increase Decrease Other Specified Factors 8 Total 8 Revised procurement strategy (from national to international collaborative) and changes in the nature of the programme. Year(s) of Peak Expenditure: 2002/03 - 2003/04 (Reflecting assumed timescale of ship procurement - not yet approved) 45 MINISTRY OF DEFENCE: MAJORPROJRCTSREPORT1994 Unit Production Cost: Cost capped at **** (average cost of 12) Further Expenditure in Clear Prospect: (at 1994/95 average forecast of outturn prices to the nearest flOM) IN SERVICE DATES ISD Definition: Completion of Part IV trials, fit to enter full service. Achievement of ISD: Original ISD (month/year) Dee 2002 Current Forecast/Actual ISD (month/year) ***** Variation (month(s)) ***** Reasons for ISD Variations: Factor Month(s) Increase Decrease Other specked factors *** Total *** Explanation of ISD Variations: The main reason for the **** slippage in ISD is the need to synchronise the programmes related to the combat systems with that of the warship. In particular, the need to achieve a realistic and well developed programme for PAAMS, which is a determining factor for the Frigate ISD. . 46 MIMSTRYOFDEFENCE: WORPROJECTSREPORT1994 PROJECT Landing Platform Dock (Replacement) - LPD(R) GENERAL INFORMATION Controllerate Responsible: Sea Systems Associated Project(s): None PURCHASE ARRANGEMENTS Contractor Contract Type a) Warship Project Definition (PD) Firm Price i) Yard Ltd. b) Command System (CS) (Competitive PD) Firm Price i) GEC Marconi Naval Systems Ltd. (Formerly Ferranti Naval Systems) ii) Marconi c) Command Support System (CSS)(Competitive PD) Firm Price i) E.D. Scicon ii) GEC-Marconi d) InternaYExtemal Communications System (lXCS) Fib-mPrice (Competitive PD) i) Redifon ii) GEC Marconi Naval Systems Ltd. (Formerly Ferranti Naval Systems) Procurement Route: In all cases the contracts were awarded following competition. With the exception of the Warship contractor, all the companies involved in the CS, CSSand IXCS activities incurred significant private venture costs, whilst recognising that at the end of the PD phase only one would be successful in each area for the eventual award of the final Development and Prodtiction contracts Quantities Required: N/A MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECT DESCRIPTION. PROGRESSTO DATE AND KEY FUTURE EVENTS The proposed vessels are replacements for the current amphibious assault ships Fearless and Intrepid which will bc 30 years old in 1995. An initial Feasibility 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 ship design the elements of the Combat Management System that would be fitted. In 1993 a further round of PD studies was approved to identify a ship that was both affordable and still provided military capability. These additional studies have confirmed that it should still be possible to procure two effective ships without compromising critical operational and safety requirements. Approval will be sought during June 1994 to invite tenders for the detailed design and build of the ships. PROJECT COSTS (at 1994/95 average forecast of outturn prices to the nearest EM) EM Production Development Totals Current Estimate of Cost 23 23 Est cost at MOD approval 23 23 Difference NIL NIL Expenditure to date (31 Mar 941: E18M First approval: 1987 Feasibility Study. Latest approval: 1993 Additional Project Definition Studies. Reasons for Cost Variations: N/A Explanation of Cost Variations: N/A Year(s) of Peak Expenditure: 1999/00 and ZOOO/Ol Unit Production Cost: **** Further Expenditurein ClearProspect: (at 1994/95 average forecast of outturn prices to the nearest ElOM) Procurement of two ships is *****. It is essential, in order to ensure a viable competition and value for money when a production order is eventually placed, that industry does not become aware of MOD’s estimated costs or Rnancial provision. 48 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 IN SERVICE DATES ISD Definition: The date when the ship becomes fully operational. Achievement of ISD: LPD(R)Ol LPD(R)OZ Original ISD (month/year) Sept 1997 Jan 2001 Current Forecast/Actual ISD (month/year) Aug 2000 Ott 2002 Variation (month(s)) 35 21 Reasons for ISD Variations: Implementation of various LTC savings measures. LPD(R)Ol LPD(R)02 Factor Month(s) Month(s) Increase Decrease Increase Decrease Unforeseen technical difRculties 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 following reasons: a) The need to undertake essential Project Definition work. b) The timing/affordability of the LPD(R) programme within the overall Navy budget. cl Reassessment of the ship build period. 49 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECT Replacement Type 23 Frigate Command System GENERAL INFORMATION Controllerate Responsible: Associated Project(s): Title ISD Type 23 Frigate 1989 GWS 26 Model l/Vertical Launch Seawolf (VLSWl 1991 PURCHASE ARRANGEMENTS Contractor Contract Type Procurement Route BAeSEMA Fixed Price UK Competition Quantities Required: 17 Ship Systems (includes 2 Training, 1 Reference Model and 1 Shore Development Facility (SDF) PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY FUTURE EVENTS An automated Command System to process data from ship sensors and other sources for weapon direction, command planning and information purposes which is being fitted to the l)pe 23 Frigates. Hardware has been delivered to the SDF, HM Ships WESTMINSTER, MONTROSE and the training establishment HMS COLLINGWOOD.Phase 2 of 5 phases of software has commenced trials in the SDF and will pass to ships trials later in 1994. There will be a series of sea trials before the system is accepted into service with Phase 5. This is a software Intensive project and technical difficulties have been encountered with software development which have delayed the ISD; contract costs are not affected. The problems are being addressed. 50 MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994 PROJECT COSTS (at 199W95 average forecast of outturn prices to the nearest ZMI SM Production Development Totals Current Estimate of Cost 121 153 274 Est cost at MOD approval 131 169 300 Difference -10 -16 -26 Expenditure to date (31 Mar 94): E133M First approval: 1989 Development and 1st production order. Latest approval: 1993 2nd production order. Reasons for Cost Variations: Factor CM Increase Decrease Changes in requirement 3 Note 1 Other specified factors 23 Note 2 Total 26 Explanation of Cost Variations: Note 1. Cancellation of NATO Identibcation System -3 (A friend or foe identifier) Note 2. Limited use of the contingency -23 Year(s) of Peak Expenditure: 1991/92 and 1994/95. Unit Production Cost: 1st Production buy %5.8M 2nd Production buy E5.9M Further Expenditure in Clear Prospect: (at 1994/95 average forecast of outturn prices to the nearest ZlOM) g20M 3rd and hnal production order. MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 IN SERVICE DATES ISD Definition: ISD is de%ned as when Phase 5 sofhwre has been proved at sea. Operational software wilI be fitted in 1994. Achievement of ISD: Original ISD (month/year) May 1995 Current Forecast/Actual ISD (month/year) Mar 1997 Variation (month(s)) 22 Reasons for ISD Variations: Factor Month(s) Increase Decrease Unforeseen technical difficulties 22 Total 22 Explanation of ISD Variations: Software development diffkulties experienced by the contractor. ::;, ,!~, ::.~~ : “. 52 MINISTRY OF DEFENCE: MAJORPROJECTSREPORT1994 PROJECT Spearfish Heavyweight Torpedo GENERAL INFORMATION Controllerate Responsible: Sea Systems Associated Project(s): None PURCHASE ARRANGEMENTS Contractor Contract Type Procurement Route GEC-Marconi Fixed Price covering Selected after comparison Development&Initial with US MK48 ADCAF’ torpedo Production (Non-competitive) Quantities Required: Initial Production: 100 In clear prospect: *** PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY FUTURE EVENTS Spear&h has been designed as the replacement heavyweight torpedo for the TigerRsh torpedo in RN submarines. A contract for the development and production of an initial 100 torpedoes was placed in the early 1980s. but deliveries were suspended because of reliability problems. Some weapons which were produced have been consumed during trials and the balance will be delivered to the improved reliability standard as part of the Reliability Assurance Programme. Tbe company achieved the required in-water reliability in November 1993. Design Certification and in-Service date were achieved in March 1994. An initial warshot outload was made to a HM submarine in March 1994. GEC-Marconi are just over halfway through the delivery programme for torpedoes reworked to the build standard determined by the Reliability Assurance Programme. An ITT has been issued to GEC-Marconi for the Main Production Order including in-Service Support. Subject to a satisfactory response it is planned to place the contact by the end of 1994, for warshot deliveries to commence in 1999. MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECT COSTS (at 1994/95 average forecast of outturn prices to the nearest EM) fM Production Development Totals Current Estimate of Cost 315 745 1060 Est cost at MOD approval* 885 Difference NIL NIL i-175 * EAC approval was for initial development and production Expenditure to date (31 Mar 94): f1002M First approval: 1982 - Development and Initial Production Latest approval: 1992 - Re-endorsement of Development and Initial Production Reasons for Cost Variations: Factor EM increase Decrease Price variations 138 Other speci6ed factors 37 Total 175 Explanation of Cost Variations: Difference in annual price uplifts between specific indices and GDP Deflator (f 138lvi) Programme delays required in-Service Support costs of first torpedoes to be accounted for against project costs until ISD had been achieved (E37M). Year(s) of Peak Expenditure: 1987/88 UnitProduction Cost: ***** InitialProduction, **** MainProduction Order, Further Expenditure in Clear Prospect: (at 1994/95 average forecast of outturn prices to the nearest f1OM) Circa ** Main Production Order MINIsTaY OF DEFENCE: MAJORPROJECTSREPORT1994 IN SERVICE DATES ISD Definition: Availability of the iirst outload of weapons with Certified Design to an RN Submarine. Achievement of ISD: Original ISD (month/year) Dee 1987 Current Forecast/Actual ISD (month/year) Mar 1994 Variation (month(s)) 75 months Reasons for ISD Variations: Factor Month(s) Increase Decrease Unforeseen technical difficulties Other speci6ed factors 6: Total 75 Explanation of ISD Variations: During contract acceptance trials it became evident that the reliability requirements of the contract were not being met. Following a design audit, it was necessary for the contractor to initiate a Reliability Assurance Programme. This accounted for 62 months of the slippage. The achievement of ISD was delayed a forther 4 months due to problems in environmental trials required for safety acceptance. MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECT Swiftswe & Trafalgar Class Nuclear Submarine (SSN) Update GENERAL INFORMATION Controllerate Responsible: Sea Systems Associated Project(s): Title ISD Submarine Command System ** (SMCS) Batch 2 Trafalgar Class *** (B2TC) PURCHASE ARRANGEMENTS Contractor Contract qpe Procurement Route Major Contractors Initial Phase - Development and Production GEC Marconi Naval Systems Sonar Systems Division (Sonar 2074) Firm Price Competitive UK GEC Marconi Naval Systems Sonar Systems Division (Sonar 2074 Enhancement) Firm Price Non-Competitive BAe SEMA (Submarine Command System Changes) Firm Price Non-Competitive BAeSEMA (Weapon Systems Agency) Fii Price Non-Competitive EASAMS (Shore Integration Demonstration Facility) Fii Price Competitive UK Vickers Shipbuilding and Engineering Ltd (Databus) Firm Price Non-Competitive 56 MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994 Major Contractors Final Phase - Development and Production Ferranti Thomson Sonar Systems (Sonar 2076) Firm Price Competitive UK BAe SEMA (Submarine Command System Changes) Firm Price Non-Competitive EASAMS led Consortium (Weapon System Integration Authority) Fixed Price Competitive UK Ferranti Thomson Sonar Systems ffactical Weapon System Highway1 Firm Price Competitive UK Quantities Required: Initial Phase (Previously Stages l&2) - Production of 7 boat sets. Final Phase (Previously Stages 3&4) - Initial Production of 4 boat sets and supporting shore equipment. PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY FUTURE EVENTS 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 Brst Initial Phase sets are being fitted during planned refits. Final Phase. The Final Phase implements acoustic signature reduction measures to reduce counter detection and enhances the submarines own sonar performance, replaces a number of individual sonar sets with the Sonar 2076 suite and provides the associated equipment and SMCS changes which constitute the fully integrated tactical weapon system and provide the required capability to take the submarines into the next century. Project Definition Studies have now been completed, Full Development and Initial Production commenced in February 1994 The present procurement strategy intention is to continue initially with the current policy of MOD management of all contracts. However, following 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 will then assume contract responsibility for the achievement of the Final Phase requirement. MINISI'RYOFDEFENCE: WORPROJECTSREPORT1994 PROJECT COSTS (at 1994/95 average forecast of outtorn prices to the nearest EM) EM Production Development Totals Current Estimate of Cost 316 312 628 Est cost at MOD approval 316 312 628 Difference NIL NIL NIL Expenditure to date (31 Mar 94): S99M First approval: 1988 - Foil Development and Initial Production of Initial Phase following completion of Feasibility Studies and Feasibility Studies for Final Phase. Latest approval: 1994 - Procurement of a forther 3 Initial Phase sets and Foil Development & Initial Production of 4 Final Phase sets. Reasons for Cost Variations: N/A Year(s) of Peak Expenditure: 1995/96 and 1996/97 Unit Production Cost: Initial Phase - E4.2M Final Phase - f27.1M Further Expenditure in Clear Prospect: (at 199495 average forecast of outtorn prices to the nearest flOM) E70M (Procurement of 3 additional Final Phase sets). 58 MINWFXOFDBFENCE: WORPROJECTSREPORT1994 IN SERVICE DATES ISD Definition: ISD is defined as the date by which the first Initial Phase or Final Phase Tactical Weapon System is fitted and operationally effective on a submarine. Achievement of ISD: InitiaI Phase Final Phase Original ISD (19.12.881 act 1994 Current Forecast/Actual ISD Aug 1996 * Variation 22 months 41 months Reasons for ISD Variations: InitiaI Phase Final Phase Factor Month(s) Month(s) 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 Impact of procurement delays due to a period of Rnancial constraint which delayed the placement of contracts (+12). Changes to fit opportunities resultlng from changes to the Submarine Refit Programme (~121. Final Phase Impact of procurement delays due to a period of financial constraint which delayed the placement of contracts (+5). Changes to fit opportunities resulting horn changes to Submarine Refit Programme and extended Development (+27X Delay to start of Full Development and Initial Production as a result of the extension to Project Definition (+9). 59 MINISTRY OF DEF6NCE: MAJOR PROJECTS REPORT 1994 PROJECT TRIDENT GENERAL INFORMATION Controllerate Responsible: Sea Systems Associated Projects: Title ISD Trident Strategic Weapon System **** Sonar 2054 **** Submarine Command System ***** Vanguard Weapon Handling and Discharge System ***** Vanguard Self Protection Mast t**** PURCHASE ARRANGEMENTS (Vanguard class Trident missile submarine only). Prime Contractor Contract Type Procurement Route Vlckers shipbuilding Fixed Price Non-Competitive but with and Engineering Ltd Incentive Fee competition for sub-contracts the value of which is in the region of 40% of the overall value of the prime contract. Quantities Required: 4 submarines PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY FUTURE EVENTS The Trident II D-5 Sixategic Weapon System, which will be carried aboard four Vanguard class nuclear-powered submarines, will replace Polaris as the UK’s nuclear strategic deterrent in the mid-1990s. Following acceptance by the Royal Navy in September 1993 and the successful test firing of two Trident missilesin theUnited States this summer, the 6rst submarine remains on course to enter service in ****4. The second submarine commenced contractors’ sea trials in May 1994, and construction of the other two submarines is progressing well. Development of the submarines’ Tactical Weapon System is well advanced, and the nuclear warhead programme at the Atomic Weapons Establishment and the Strategic Weapon System programme continue to schedule. Cons&uction of all major facilities at the Clyde Submarine Base is now complete. The current Trident project cost estimate of El1,631M was announced to the House of Commons in January 1994. 60 MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994 PROJECT COSTS (at 1993/94 average forecast of outturn prices to the nearest EM. El= $1.44) EM Development & Production Totals Current Estimate of Cost 11631 11631 Est Cost at MOD approval 15085 15085 Difference -3455 -3455 (Individual elements of the above figures rounded to SM hence any apparent imbalance) Estimated expenditure to date (31 March 19941 E8908M 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 ml Increase Decrease Decision to process missiles in the USA 1138 Submarine 1235 Strategic Weapon System 1427 Tactical Weapon System 297 Shore Construction 802 Dockyard Projects 28 Warhead, Miscellaneous and Unallocated 782 1127 4582 Total Balance 3455 (Individual elements of the above figures rounded to EMI 61 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 Explanation for cost variations: The real cost changes shown above reflect principally the refinement of early cost estimates and the success of both the UK and US projects in containing costs (-G558M); programme requirement changes (S241M); and the decision to process missiles at Rings Bay (-!?1138M). The increase in the Tactical Weapons System programme has been due primarily to the need to develop the various sub-systems to provide the required performance to integrate them into a coherent system. The increase in the Shore Construction programme reflects a signiRcant under-estimation of the costs and requirements, in particular to meet the stringent nuclear safety standards. Years of Peak Expenditure: 1990-91 to 1993-94 Unit Production Costs of the Vanguard class submarines: SSBN 05 1620.5 (includes First of Class costs) SSBN 06 919.4 SSBN 07 923.7 SSBN 08 1017.9 Further Expenditure in Clear Prospect: None foreseen. IN SERVICE DATE ISD Definition: ISD is defined as the date on which the first submarine contributes to the operational capability of the Royal Navy. Achievement of LSD: Original ISD **** Current Forecast/Actual ISD *m Explanation of ISD variation: Not applicable. 62 iviXVISTRY OF DEFENCE: MAJORPROJECTSREPORT1994 PROJECT Vertical Launch Seawolf 0 GENERAL INFORMATION Controllerate Responsible: Sea Systems Associated Project(s): Title ISD lype 23 Frigate 1989 Type 23 Command System 1997 PURCHASE ARRANGEMENTS Contractor Contract Type 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 first buy of launcher sub-systems and associated missiles. BAe Dynamics Ltd Fixed Price UK Non-Competitive with approx. 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 launcher sub-systems which became available h-om the AOR programme as a result of an LTC savings measure. (See also NOTE below). GEC Marconi Radar Firm Price UK Non-Competitive with no appreciable competition for sub-contracts. First buy of Tracker Guidance Sub-systems. MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 GEC Marconi Radar Firm Price UK Non-Competitive with no appreciable competition for sub-contracts. Provision of second batch of Tracker Guidance Sub-systems by conversion of tracking radars available from the cancelled GWS 26 Model 2 (Lightweight Seawolf) programme. NOTE - 2 sets of trackers also became available from the AOR programme as a result of the savings measure. The approval and cost for these are included in the Project Costs section of this Statement. Quantities Required: Ship Systems Missiles Ordered 18 Tracker sub-systems, 950 15 Launcher subsystems (includes 2 of each for training programme) In clear prospect: Nii PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY FUTURE EVENTS Vertical Launch Seawolf iVLSWl is a surface-to-air point defence missile system fitted in T23 Frigates to provide an autonomous 24 hour hard kill protection against anti-ship missiles and aircraft. BAe Dynamics Ltd are the system design authority and supply the missiles and some elements of the ship system. MRS provide the tracking radars. Target indication is provided by the T996/LFA surveillance radar VLSW is to be fully integrated with the T23 Command System: however, until this equipment enters service, peacetime firings are controlled by a stand-alone unit. The development cost overrun reflected below was mainly attributable to difficulties experienced during software development and integration up to 1985. There have been no further real cost increases since 1986. Key future events: Contractual Acceptance - 1994; Provisional Fleet Weapon Acceptance - 1995; Full Fleet Weapon Acceptance - 1997. PROJECT COSTS (at 1994/95 average forecast of outturn prices to the nearest EM) EM Production Development Totals Current Estimate of Cost 543 226 769 Est cost at MOD approval 568 146 714 Difference -25 +80 c55 Expenditure to date (31 Mar 941: 5Z577M First approval: 1984 - Full Development and Initial Production (Re-approved in 1986) Latest approval: 1994 - 2nd batch of Tracker Guidance Sub-system 64 MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994 Reasons for Cost Variations: Factor EM Increase Decrease Price variations 25 Other speciiled factors 80 Total 80 25 Total Balance 55 Explanation of Cost Variations: Lower than expected prices for production equipments resulting from contract negotiations: -E25M Underestimation of costs due to insufficiently detailed specifications: E80M Year(s) of Peak Expenditure 1988/89 and 1990/91 Unit Production Cost: System - 1st batch - Sl1.9M 2nd batch - Xl3.1M 3rd batch - E12.8M Missile - 1st and 2nd buys - E0.3M Further Expenditure in Clear Prospect: (at 1994/95 average forecast of outturn prices to the nearest SlOMl Less than +ZlOM IN SERVICE DATES ISD Dehnition: The ISD is defined as the date at which the VLSW system has completed First of Class trials and is at sea in an operational Type 23 Frigate. Achievement of ISD: Original ISD (month/year) May 1990 Current Forecast/Actual ISD (month/year) Ott 1991 Variation (month(s)) 17 Months Reasons for ISD Variations: Factor Month(s) Increase Decrease Unforeseen technical difficulties 17 Total 17 Explanation of ISD Variations: Difficulties with the tracking and guidance sub-system software and system integration. 65 MINISTRY OF DEFENCE: MAJORPROJECTSREPORT1994 PROJECT AS90 155mm Self Propelled Howitzer GENERAL INFORMATION Controllerate Responsible: Land Systems Associated Project(s): Title ISD Extended Range Ordnance 1999 (EROl PURCHASE ARRANGEMENTS Contractor Contract me Procurement Route VSEL Fixed Price International Competition (Development & Production) Quantities Required: 179 Howitzers PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY PUTURE EVENTS AS90 is the new 155mm selfpropelled howitzer which is replacing the obsolete 105mm ABBOT and the 155mm Ml09 SP howitzer. It was designed and developed as a private venture by VSEL. Deliveries to the Army commenced in February 1993 and to date two regiments based in the UK have been equipped and the first of the three regiments based in Germany has started to re-equip. Deliveries to the Army are expected to be completed in March 1995. PROJECT COSTS (at 1994/95 average forecast of outturn prices to the nearest EM) fM Production Development Totals Current Estimate of Cost 465 27 492 Est cost at MOD approval 435 24 459 Difference +30 c3 +33 Expenditure to date (31 Mar 94): S319M First approval: 1989 (Development and Production) Latest approval: 1989 (Development and Production) MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 Reasons for Cost Variations: Factor EM Increase Decrease Changes in requirement 4 Quantity/Volume variations 8 6 Price variations 34 14 Other specified factors 7 Total 53 20 Total Balance 33 Explanation of Cost Variations: Changes to specifications of on-board electronics c4 Additional ancillary items and special tools and test equipment +7 Revised handbooks for improved repair procedures +l Reduced requirement for spare barrels following decision to introduce Extended Range Ordnance -6 Underestimate of inilation +25 Change in rate of VAT +8 Cost of DRA support activities not previously charged for +l Difference in annual price uplifts between speci6c indices and GDP deflator. -14 Additional provision for In-Service Reliability Demonstration +7 Year(s) of Peak Expendimre: 1992-1994 Unit Production Cost: **** Further Expenditure in Clear Prospect: None MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 IN SERVICE DATES ISD Definition: Deployment of first operational regiment trained and equipped. Achievement of ISD: Original ISD (month/year) Aug 1992 Actual ISD (month/year) Nov 1993 Variation (month(s)) 15 months Reasons for ISD Variations: Factor Month(s) Increase Decrease Unforeseen technical dif&xlties c7 Other specified factors +8 Total +15 Explanation of ISD Variations: Technical difklties in development programme +7 Delays caused by problems encountered by the contractor during transition to full production +8 ;1;~. :: .;,~ ~~,‘:~68 MIMSTRYOFDEFENCE: MAJORPROJECTSREPORT1994 PROJECT BOWMAN GENERAL INFORMATION Controllerate Responsible: Land Systems Associated Project: Title ISD Vehicle Integrated Communications and Information Distribution System MCDS) 2000 PURCHASE ARRANGEMENTS Contractor Contract Type Procurement Route Data Sciences Ltd flechnical Firm Manhour Rate UK Competition SupporR ITT Defence0 Ltd PDl Firm Price 1 ITT Defence(W) Ltd FS2 Firm Task Rate I International Siemens Plessey Systems Ltd PDl Firm Price I Competition Siemens Plessey Systems Ltd FS2 Firm Task Rate i Racal Communications Ltd PDl Sub-contractor Quantities Required: Nil Eventual production requirement of about 60,000 radios. PROJECT DESCRIPTION. PROGRESSTO DATE AND KEY FUTURE EVENTS BOWMAN will provide the Armed Forces with a combat radio system to replace the Clansman family of radios which has been in service since the mid-70’s and which is becoming increasingly obsolescent. ISD slippage and cost increase were experienced early in the project’s life when its complexity required the Feasibility Study to be extended and split into two stages. FSl was completed in August 1993. The procurement strategy for BOWMAN is based on the maximum use of existing equipment and technology currently available in industry, with minimum software development activity to integrate the two. In 1993 following international competition, contracts were placed with SPS and I’PI for both PDl and FSZ. A single production contract is expected to be placed in 1997. 69 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECT COSTS (at 19941% average forecast of outturn prices to the nearest EM) EM Production Development Totals Current Estimate of Cost fPD1 + FSl & FS2) 103 103 Est cost at MOD approval 91 91 Difference +12 +12 Expenditure to date (31 Mar 94): E21M First approval: FSl 1988 Latest approval: PDl/FS2 1993 Reasons for Cost Variations: Factor EM Increase Decrease Price variations Other specified factors G Total 12 Explanation of Cost Variations: Price Variation - Final negotiations on software requirements, exchange rates and IIS for PDl increased costs. Other specified factors - Greater complexity and volume of work associated with assessing options to meet the requirement, and the need for additional support to the project to define the performance requirement, the greater than expected scope of operational analysis work and the need for work to define the proposal to split BOWMAN into two stages. Year(s) of Peak Expenditure 2001/02, 2002/03 onwards Unit Production Cost: *** Further Expenditure in Clear Prospect: (at 1994/95 average forecast of outturn prices to the nearest El&) Zl590M 70 MINISTRY OF DEFENCE: MAJORPROJECTSREPORT1994 IN SERVICE DATES ISD Dehnition: The original ISD was 1995. No ISD deiinition was stated at iirst approval. The current ISD of Jan 2000 is defined as the date by when the first brigade group is fully trained, equipped and logistically supported. Achievement of ISD: Original ISD (year only specified) 1995 (December assumed) Current Forecast/Actual ISD (month/year) Jan 2000 Variation (months) 49 months Reasons for ISD Variations: Factor Month(s) Increase Decrease Unforeseen technical difficulties 24 Budgetary constraints 25 Total 49 Explanation of ISD Variations: Unforeseen Technical difficulties - Greater complexity and volume of work in support of the objectives of the Feasibility Study phase, which were to define the essential requirements of the radio system and to evaluate options for meeting the requirement. Budgetary Constraints - The need to match the programme to available resources. MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994 PROJECT BR 90 (Bridging for the Nineties) GENERAL INFORMATION Controllerate Responsible: Land Systems Associated Project(s): None PURCHASE ARRANGEMENTS Contractor Contract Type Procurement Route THOMPSON DEFENCE Firm Price UK Competition PROJECTSLTD (Design & Development) THOMPSON DEFENCE Firm Price Non-Competitive PROJECTSLTD (Production) Some 30%, by value, of the major sub contracts ie those valued at E0.5M and above have been competed. Quantities Required: CLOSE SUPPORTBRIDGE 48 sets each comprising: 1 modihcation to an Armoured Vehicle Launched Bridge (AVLBl, 1 Tank Bridge Transporter, 1 No.10 bridge, 2 No.12 bridges. GENERAL SUPPORTBRIDGE 29 sets each comprising: 1 Automotive Bridge Launching Equipment (ABLE), 2 Bridging Vehicles, 1 32M Bridge. LONG SPAN BRIDGE Qty 9 TWO SPAN BRIDGE Qty 9 PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY FUTURE EVENTS BR90is afamily of four complementary bridge systems designed ascommon 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: a. The Close Support Bridge (CSB) - A bridge of up to 24.5m span, which is launched by bridge-laying tanks (Armoured Vehicle Launched Bridge AVLB) in the forward areas of a battle zone. b. The General Support Bridge (GSB) - A bridge of up to 30m span, used in other battle areas and launched using Automotive Bridge Launching Equipment (ABLE) mounted upon a common Unipower chassis. c. The Long Span (LSB) reinforcing equipment, again launched by ABLE, which will increase the span of the GSB to at least 44m. d. The Two Span CTSBlequipment which enable multi-span GSB or LSB to be constructed over floating pontoons or fixed piers. MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 The bridges are designed to carry the British Army’s vehicles, including Main Battle Tanks and fully laden tank transporters, across rivers, canals and dry gaps. They will supersede several types of existing bridges, some of which have been in-Service for up to 30 years. Following a feasibility study in 1982/83 a procurement strategy of national development by means of Prime Contractorship determined by competition was approved in 1984. The development contract was placed in November 1987 and included production options. However, following the Options for Change review quantities were reduced to a level outside these options, As a consequence fkm price production prices were re-negotiated under NAPNOC arrangements in 1993. Reliability Demonstration trials have just been completed and acceptance of CSB and GSB is scheduled for August 94 and full production of these bridges will commence immediately afterwards, completing in 1998/99. LSB and TSB user trials should commence in August 1994 and acceptance is scheduled for July 1995 with production scheduled to complete in 1998/99. PROJECT COSTS (at 1994I95 average forecast of outturn prices to the nearest EM) EM Initial Production Development Totals Current Estimate of Cost 28 48 76 Est cost at MOD approval 17 47 64 Difference +ll +l cl2 Expenditure to date (31 Mar 94): !?33M First approval: 1982 Feasibility Latest approval: 1993 Re-approval to initiate production Reasons for Cost Variations: Factor EM Increase Decrease Engineering Changes 6 Revised Stage Payment Plan 11 Slippage in Fii Price Payments 5 Total 17 5 Total Balance 12 MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994 Explanation of Cost Variations: The Increase in development cost relates to engineering changes identified during the development programme. The Increase In production costs reflect a re-negotiated stage payment plan to initiate production agreed as part of the contract renegotiation in 1993. The decrease in development costs results from outturn costs on the Rrm price contract being lower than expected at the time of approval, partly because of slippage of firm price payments. Year(s) of Peak Expenditure: 1996/97 and 1997/98 Unit Production Cost: Because of the diversity of equipments comprising BR90 a single unit production cost is not applicable. The individual UPC’s of the major components have therefore been listed separately: Tank Bridge Transporter f 534K No.10 Bridge f. 460K No.12 Bridge f 175K ABLE ElOlSK Bridging Vehicle E 337K 32M Bridge E 539K Long Span Bridge E 588K Two Span Bridge f. 215K Further Expenditure in Clear Prospect: (at 1994/95 average forecast of outturn prices to the nearest z+XOM) Full production approval for CSB, GSB, TSB and LSB: EllOM. IN SERVICE DATES ISD Detinition: CSB, GSB and TSB - When half of the equipment has been deployed to BAOR. LSB - When 7 equipments have been deployed to BAOR. Following Options For Change and subsequent reviews of Army deployment commitments the latest ISD definition, issued in March 1994, is as follows: CSB:AlI equipmentdelivered and supportedin-Service to meet peaceholdings of the AT0 and 22 Engr Regt complete. Quantities as follows: 12 AVLB modifications, 13 TBT’s, 11 No10 Bridges, 22 No.12 Bridges. GSB: All equipment delivered and supported in-Service to meet peace holdings of the AT0 and the UK Forward Support Squadron. Quantities as follows: 6 ABLE, 10 BV, 5 x 32m GSB MlNISTRY OF DEFENCE: MkTORPROJECTSREPORT1994 TSB and LSB: All equipment delivered and supported in-Service to meet peace holdings of the AT0 and UK Forward Support Squadron. Quantities as follows: 3 Two span equipments. 3 Long Span equipments. Achievement of ISD: CSB GSB TSB LSB Original ISD (month/year) 93/94 1992 1992 1992 (Assume Sept 19931 (Assume July as mid-point) Current Forecast/ Actual ISD (month/year) Dee 1996 Feb 1996 Jul1997 May 1997 Variation (month(s)) 39 43 60 58 Reasons for ISD Variations: CSB GSB TSB LSB Factor (I = Increase, D = Decrease) I D I D I D I D Prioritisation of Development 12 12 - 36 - 24 - Programme: Budgetary Constraints: 6 - 6 - 6 - 6 - Unforseen Technical Diiculties: 19 - 19 - 13 - 25 - Procurement Delays: 27 - 6 - 5 - 3 - TOTALS 52 12 43 - 60 - 58 - BALANCE * 39 43 60 58 Explanation of ISD Variations: Prioritisation of development programme: In an attempt to achieve the early introduction of the CSB to replace the existing Army No.8 bridge. Technical problems: with the machinery used to produce the large bridge panels and problems with the vehicle sub-contractor Involving some re-design work. Increases to lead times for large section aluminium extrusions. Delays resulting from re-negotiation of the initial production contract following a reduction in planned quantities as a result of the Options for Change review. * A proportion of the delays due to Technical Difiiculties and those due to Procurement Delays acted concurrently, thus the Total Variation and Balance figures do not reconcile. MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECT Challenger 2 (including Challenger Armament (CHARM) 1 & 3) GENERAL INFORMATION Controllerate Responsible: Land Systems Associated Project(s): None PURCHASE ARRANGEMENTS As at 31 March 1994, a contract exIsted only for the procurement of 127 Challenger 2 (CR2) Main Battle Tanks, together with a training and support package. This is reported below as serial (a). No contract had yet been agreed for the proposed follow-on buy of CR2 announced by the Secretary of State for Defence on 1 December 1993. This is reported below as serial(b). Contractor Contract Qpe Procurement Route (a) Wckers plc Fixed Price International Competition Cb)Vickers plc Fixed Price Non-Competitive NAPNOC Quantities Required: (a) 127 Main Battle Tanks (MBTs) and 13 Driver ‘Daining Tanks (DlTs) @,)Up to 259 MBTs (precise quantity yet to be determined) and 9 DlTs PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY FUTURE EVENTS CR2 was selected as the replacement for the Army’s remaining two regiments of Chieftain MBTs after an international competition. The demonstration phase and the development programme (including Reliability Growth and User Trials) are now both complete. Production of the MBTs is well underway, with the first off the production line due in Summer 1994. The in-Service date for CR2 is December 1995. CR2 is currently coniigured to fire CHARM 1 ammunition. The new CHARM 3 ammunition round is being developed within the Uckerscontract, with sevenof the sixteendevelopment stages already completed. CHARM3 system acceptance is scheduled for 1996. Approval for the integration of CHARM 3 ammunition into the tank and for production of CHARM 3 ammunition was secured in September 1993. As announced last year, a follow-on buy of CR2 has now superseded the Challenger 1 (CRl) Upgrade programme. It is envisaged, subject to the negotiation of satisfactory contractual terms, that up to 259 further CR2s, together with a training and support package, will be procured. Production bands below this quantity are also under consideration. Ministerial consideration of the follow-on buy is scheduled for later in the year. MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994 The CR1 Upgrade programme as reported in MPR93 included the cost of the earlier CHARM 1 programme (now substantially complete), from which the Upgrade programme was in part derived. The CHARM 1 programme cost is accordingly again reported under the CR2 follow-on buy programme. CHARM 1 is being procured under a Target Cost Maximum Fee Incentivised Contract with Royal Ordnance PLC. It is intended that the CHARM 1 guns which have already been produced and are currently in storage will be fitted to follow-on buy tanks. PROJECT COSTS (at 1994/95 average forecast of outturn prices to the nearest !W (a) CR2 (qty 127) including CHARM 3: EM Production & Development Total Current Estimate of Cost 933 933 Est cost at MOD approval 941 941 Difference -8 -8 Expenditure to date (31 March 1994): S336M Reasons for Cost Variations: Factor EM Increase Decrease Price Variations 6 -14 Total 6 -14 Total Balance -8 Difference in annual price uplifts between speciiic indices and GDP deflator: +S6M Lower contract price achieved than earlier estimated for Demonstration Phase Equipment: -S14M First approval: 1988 Demonstration Phase Latest approvals: 1991 Development Phase MBT 1993 for CHARM 3 Integration and ammunition production Years of Peak Expenditure: 1994/95 - 1995/96 Unit Production Cost: E3.OM Further Expenditure in Clear Prospect: None MTNISTRYOFDEFENCE: MAJORPROJECTSREPORT1994 (b) CR2 follow-on buy (CHARM 1 only): (Some costs are provisional: adjustment wiII follow). EM Production Development Total Current Estimate of Cost 33 179 212 Est cost at MOD approval 34 156 190 Difference -1 23 22 Expenditure to date (31 March 1994): E199M First approval: 1980 Development Phase Latest approval: 1987 Development and Production Reasons for Cost Variations: Factor !&I Increase Decrease Price variations 3 3 Specification changes 22 Total 25 3 Total Balance 22 Explanation of Cost Variations: Increases of E22M due to change in ammunition speciiication and E3M due to increase in rate of VAT from 15% to 17&, offset by reduction of s3M resulting from final pricing of CHARM 1 contract being less than previously estimated. Years of Peak Expenditure: Dependent on future Ministerial consideration. Unit Production Cost: SO.lM per CHARM gun Further Expenditure in Clear Prospect: Dependent on future Ministerial consideration - a number of options are under consideration, which vary considerably in cost. IN SERVICE DATES ISD Deilnition: Delivery of a proportion of Individual Training Organisation vehicles plus one regiment’s establishment Achievement of ISD: (a) CR2 (qty 127): Original ISD (month/year) Dee 1995 Current Forecast/Actual Dee 1995 Variation (b,)CR2 follow-on buy: ISD varies between options. CHARM 1 previously had an ISD of June 1995, but the guns will now only enter service as part of the CR2 follow-on buy programme. They have been produced and are now in storage. Reasons for ISD Variation: N/A 78 MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994 PROJECT Counter Battery Radar (COBRA) GENERAL JNFORMATION Controllerate Responsible: Land Systems Associated Project(s): Title ISD BATES 1996 PURCHASE ARRANGEMENTS Contractor Contract Type Procurement Route EuroArt Advanced Radar Fixed Price (with Collaborative Technology GmbH Variation of Price International Competition Clause) Sub-contractors: Siemens AG (Germany) 29% Thomson-CSF (France) 29% Thorn EMI Electronics (UK) 16% Martin Marietta (USA) 26% Quantities Required: Quantities yet to be approved. PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY FUTURE EVENTS COBRA is a collaborative project for a Long Range Weapon locating Radar under development for UK, France and Germany. A Military Requirement, agreed by the three nations, was used as the basis of a joint Project Deftition (PD) Phase. Contracts were placed with three competing consortia in July 1986, with PD reports and 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. The development contract was programmed to take six years to complete. Although the completion of integration testing and the start of live fire trials have been delayed by some six months, the development programme is progressing well. Two of the three prototypes have been completed and are now undergoing integration testing. Live Firing ‘Dials are due to start in Sept 1994, with completion of contractor testing in Ott 1995. A one year period of Troop Trials will lead to contract completion in Sept 1996. The three partner nations are currently formulating plans for production. MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECT COSTS (at 1994/95 average forecast of outturn prices to the nearest EM) !ZM Production Development Totals (BATES equipment only) Current Estimate of Cost 68 Est cost at MOD approval i 2 69 Difference -1 0 -1 Expenditure to date (31 Mar 94) : S35M First approval : 1985 - Project Definition Phase Latest approval : 1989 - Full Development Phase and limited Production for BATES. Reasons for Cost Variations: Factor EM Increase Decrease QuantityNolume variations 5 5 Other speciRed factors 1 Total 5 6 Total Balance -1 Explanation of Cost Variations: QuantityNolume variations: Further development work aimed at reducing production costs +s5M Reduced requirement for communications, technical and trials support during development -GM Otherfactors: BATESequipment priced lower than anticipated -ElM Year(s) of Peak Expenditure: FY 1998/99 and FY 1999/00 Unit Production Cost : ** to protect contractor’s futed price offer Further Expenditure in Clear Prospect: (at 1994/95 average forecast of outturn prices to the nearest ElOM) UT**** 80 MINISTRY OF DEFENCE: hL4JORPROJECTSREPORT1994 IN SERVICE DATES ISD Detinition: First COBRA troop deployed. (COBRAtroop = 3 systems) Achievement of ISD : Original ISD Ofear only specified) ***** Current Forecast/Actual ISD (month/year) ****** Variation (month(s)) ****** Reasons for ISD Variations: Factor Month(s) Increase Decrease Procurement delays *** Other specified factors *** Total *** Explanation of ISD Variations : ***** MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECT High Velocity Missile (HVM) GENERAL INFORMATION Controllerate Responsible: Iand Systems Associated Project(s): Title ISD Vehicle Mounted Air Defence Alerting Device 1994 (VM .4Dm PURCHASE ARRANGEMENTS Contractor Contract Type Procurement Route Shorts Missile Systems Fixed Price UK Competition Quantities Required: Self Propelled Systems: 135 Missiles: **** PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY FUTURE EVENTS The HVM programme (known commercially as Starstreak) is designed to enhance the Army’s Close Air Defence capability and is a short time of Right air defence system with a rapid re-engagement capability. The system will be deployed primarily on a Self Propelled ISPl launcher vehicle (Alvis STORMER),but missiles may also be Rred independently of the vehicle using a separate portable aiming unit, mounted either on a tripod base (lightweight multiple launcher &ML)) or carried on the shoulder of the firer (shoulder launched (SL)). SP HVM will be deployed with VM ADAD, a passive 24 hour automatic surveillance device. The contract for full development and initial production of HVM was placed in November 1986 following a competitive project definition phase between British Aerospace and Shorts Missile Systems. Development is complete and validation of the production build standard has been carried out by means of Production System Validation Test (PSVTl firings. PSV’I for the three platforms was completed by July 1993. SP HVM and LML HVM passed, but SL HVM did not. SL HVM is therefore due to be re-tested by October 1994, following the introduction of a number of improvements, including a modified aiming unit. The ISD for HVM has slipped from May 1994 to December 1994 due to further technical problems for which a programme of remedial action is in hand. MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECT COSTS (at 1994/95 average forecast of outturn prices to the nearest !Xl EM Production & Development Totals Current Estimate of Cost 411 411 Est cost at MOD approval 397 397 Difference +14 +14 Expenditure to date (31 Mar 94): S338M First approval: 1984 - Project DeRnition Latest approval: 1993 - Full Development/Initial Production Reasons for Cost Variations: Factor EM Increase Decrease Underestimation 10 Price variations 4 Total 14 Explanation of Cost Variations: The cost of Centrally Repaired Modules to provide in-Service Support overlooked in the estimate at first MOD approval for Full Development/Initial Production. Difference in annual price uplifts between specific indices and GDP Deflator. Year(s) of Peak Expenditure: 1991/92 and 1992/93 Unit Production Cost: SP HVM System ***** Missile ***** Further Expenditure in Clear Prospect: (at 1994/95 average forecast of outturn prices to the nearest SlOM) s30M (Thermal Sighting System) MINISTRY OF DEFENCE: WOR PROJECTS REPORT 1994 IN SERVICE DATES ISD Deiinition: The date by which one battery is fully equipped, trained and supported. Achievement of ISD: Original ISD (month/year) Dee 1990 Current Forecast/Actual ISD (month/year) Dee 1994 Variation (month(s)) 48 months Reasons for ISD Variations: Factor Month(s) Increase Decrease Unforeseen technical difilculties 36 Procurement delays 2 Budgetary constraints 7 Delays in associated projects 7 Total *48 * 4 months concurrent Explanation of ISD Variations: Technical diiBculties: ****** Procurement delays: Prolonged contractual negotiations on some remaining small contracts, in part because Short Brothers PLC underwent a major restructuring in early 1993. Budgetary delays: A delay at the outset of the project arising from the need to match the Close Air Defence Weapon Systems programme (including HVM) with available resources. Delays in associated projects: Software problems encountered in integrating VM ADAD into SP HVM. 4 months of this was concurrent with the technical diihculties. 84 MINIS'IXYOFDEFENCE: MAJORPROJECTSREPORT1994 PROJECT Medium Range TRIGAT GENERAL INFORMATION Controllerate Responsible: Land Systems Associated Project(s): None PURCHASE ARRANGEMENTS Contractor Contract Type Procurement Route Euromissile Dynamics Fixed Price Single Source, Non-Competitive Group (EMDG) (French MOD are (BAe Def, Aerospatiale, Contracting Authority) DASA) Quantities Required: Nil In clear prospect: ***** PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY FUTURE EVENTS Medium Range Trigat is a crew-portable anti-tank guided weapon system which will be capable of defeating improved enemy armour at a maximum range of 2000m. Medium Range TRIGAT will incorporate a missile with a tandem charge warhead supported by a laser guidance system with a thermal sight. The latter will allow its effective operation at night and in adverse weather conditions. Medium Range TRIGAT is a multilateral defence programme with the United Kingdom, France and Germany participating as Pilot Nations and Belgium and the Netherlands as Associate Nations. The Thermal Imager Right guidance trial was successfully completed in December 1993. Qualification trials by industry began in February 1994 and are planned to complete in July 1995. They will be followed by multilateral service qualification trials and national trials from August 1995 to mid-1996. The purpose of these trials is to test performance of the total missile system in order to demonstrate achievement of the design specification prior to formal national acceptance. Whilst the programme is behind schedule in some areas there remains high confidence that the final developed system will meet the requirement. MINISTRY OF DEFENCE: MAJORPROJECTSREPORT1994 PROJECT COSTS (at 1994195 average forecast of outturn prices to the nearest XI@ Costs reflect Full Development (FD) Phase only. (See note below). fM Development Current Estimate of Cost 119 Est cost at MOD approval 110 Difference c9 Note: The FS and PD phases were combined for both Medium Range and Long Range TRIGAT projects out of which the separate projects were born. Expenditure to date (31 Mar 941: g69M First approval: 1979 - Feasibility Study Latest approval: 1988 - Full Development Reasons for Cost Variations: Factor EM Increase Decrease Reduced number of Partner Nations (Italy Greece and Spain did not join the programme as expected). 19 Reduction in National costs outside of the main contract (eg Government Furnished Facilities (GFF)) 9 Minor reductions in contractual requirements. 1 Price Variations 9 Exchange rate variation 9 28 19 Total Balance 9 86 MINISTRY OF DEFENCE: MAJORPROJECTSREPORT1994 Explanation of Cost variations: Price variation: Difference in annual price uplifts between specific indices and GDP deflator. Year(s) of Peak Expenditure: 2002/03 &X12003/04 ‘Unit Production Cost: Missiles - 14k Fig Posts - *** Further Expenditure in Clear Prospect: (at 1994/95 average forecast of outturn prices to the nearest EM) E780M (Industrialisation and Production of missiles, tiring posts, training equipment etc.) IN SERVICE DATES ISD Definition: Fist Battalion fully equipped with all its Firing Posts and first line missile stocks Achievement of ISD: Original ISD Dee 1995 Current Forecast/actual ISD Jun 2000 Variation 54 months Reasons for ISD Variations: Factor Month(s) Increase Decrease Unforeseen technical difficulties 6 Procurement delays 24 Budgetary constraints 24 Total 54 Explanation of ISD Variations: Technical difficulties - due to problems with warhead integration and guidance. Procurement delays - an under-estimation of the time each partner Nation would require to achieve the necessary internal financial approvals to move to production. Budgetary constraints - the need to match the programme to available resources. MlNlSTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECT Rapier Field Standard C (FSC) GENERAL INFORMATION Controllerate Responsible: Land Systems Associated Project(s): None PURCHASE ARRANGEMENTS Contractor Contract ljpe Procurement Route British Aerospace Target Cost plus Non-Competitive Contract (sub- Defence Ltd. Dynamics Incentive Fee with a contracting was not MaxImum price. subject to competition). Quantities Required: Fire Units and Surveillance Radars: 57 Tracker Radars: 43 MKII Missiles: **** PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY FUTURE EVENTS Rapier FSC is a completely new low level Air Defence System currently beginning production. It will have a full day/night, poor weather capability. Improvement over the current Rapier equipments include a new Surveillance Radar, an improved tracking and missile guidance system, an eight rail instead of a four rail missile launcher, Improved Electronic Counter Measures, an upgraded Tracker Radar, and a new @IKII) Surface to Air Missile. The project was on a cost plus contract basis between 1984 and 1986 because the technical risks did not allow otherwise. Technical diiculties leading to slippage in the ISD occurred during this period. Subsequently, the technical risk decreased allowing negotiation of the current IncentivIsed contract. CertificationofDesign (C of D) for Ground Equipment was achieved in October 1993. Ground equipment and MKII Missile deliveries will be completed In early 1996. 88 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECTCOSTS (at 1994/95 average forecast of outturn prices to the nearest EM) EM Production Development Totals Current Estimate of Cost 918 1167 2085 Est cost at MOD approval 915 1163 2078 Difference +3 +4 c7 Expenditure to date (31 Mar 94): !&594M First approval: 1977 - Feasibility Study Latest approval: 1994 - Re-endorsement against revised ISDs. Reasons for Cost Variations: Factor EM Increase Decrease Changes in requirement 45 Price variations 52 Total 52 45 Total Balance 7 Explanation of Cost Variations: Price variation is due to diierence in annual price uplifts between specihc indices and GDP deflator. Changes in requirement are the result of deletions of programmes which FSC part funded - Infra Red Surveillance System/Passive Aircraft Surveillance System (!?7M FSC element) and Nato Identification System programme (S38M FSC element). Decisions were taken in 1989 and 1991 respectively. Year(s) of Peak Expenditure: 1991/92 and 1993/94 Unit Production Cost: Fire unit & Surveillance Radar: ***** Tracker Radar: ****** MKIIB Missile: **** 89 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 Further Expenditure in Clear Prospect: (at 1994/95 average forecast of outturn prices to the nearest !rZlOMl. A further buy of 14 Tracker Radars, support equipment and towing vehicles. E60M IN SERVICE DATES ISD Deilnition: ARMY: The time at which the first Battery is due to have received all its prime and support equipment and declared operational readiness. RAF: The tie at which the ilrst Squadron is due to have received all its prime and support equipment and declared at operational readiness. (The ISD for the RAF was originally “The time at which the first FSC system is delivered to a squadron”. The RAF ISD was redefined to make the ISD definitions for the two Services consistent). Achievement of ISD: Original ISD (month/year) Army 1990 RAF 1989 (Assumed to be Jan 1990) (Assumed to be Ott 1989) Current Forecast/Actual ISD Army Apr 1995 RAF Dee 1994 (month/year) Variation (month(s)) 63 months 62 months Reasons for ISD Variations: Factor Months(s) -Y RAF Increase Decrease Increase Decrease Unforeseen technical di&ulties 39 32 Need for project redefinition 12 12 Budgetary constraints 12 12 Change in ISD definition from first equipment delivery to forecast date of hrst operational deployment. 12* Total 63 62 * 6 of these months were concurrent with technical diificulties and, therefore, only 6 months have been included in the total. 90 MINISTRY OF DEFENCE: MAJORPROJECTSREPORT1994 Explanation of ISD Variations: - Technical dlfflculties. Prior to incentivised contract placement in 1986 24 months of slippage occurred due to technical difficulties. These arose in the areas of signal processing software and computing; there was also a delay in providing Govermnent developed processors. These difficulties have now been overcome. Since 1986 further slippages of 8 months (RAF) and 15 months &my) has occurred due to difficulties in CoiD completion which have had a knock-on effect on production deliveries and the deployment of equipment. - Project redefinition. During the early Full Development phase of the programme much work was done to assess and reduce technical risks. This work enabled the development programme to become sufI?ciently mature to be lncentivlsed. - Budgetary constraints. Funding restrictions were applied 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 restrictions contributed to delays in the programme but cost increases were inhibited as a result. - Change in ISD definition. This followed the lncentivisation of the contract and was in response to NAO criticism about inconsistent definitions of ISD within the MOD. The RAF ISD was redefined as the point at which the Rrst Squadron is due to receive all its prime and support equipment and is declared operational; previously the deiinition was the time at which the first system was to be delivered. This change means the RAF and Army definitions of Rapier FSC ISD are now consistent. 6 months of this delay was concurrent with technical diiculties. 91 MINISTFX OF DEFENCE MAJOR PROJECTS REPORT 1994 PROJECT AMRAAM (Advanced Medium Range Air-to-Air Missile) GENERAL INFORMATION Controllerate Responsible: Air Systems Associated Project(s): Title ISD Sea Harrier FRS2 MLU 1993 Sea Harrier FRS2 Attrition 1996 PURCHASE ARRANGEMENTS Contractor Contract Qpe Procurement Route US Govt Foreign Military Sales US Govt places contract with Hughes and Raytheon following competition. Quantities Required: 210 Operational Missiles plus associated equipment. PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY FUTURE EVENTS AMRAAM (Advanced Medium-Range Air-to-Air Missile) will be carried on the Navy’s Sea Harrier FRS2. The purchase order for the Navy requirement was entered into with the US DOD under Foreign Military Sales terms and signed in 1992. Deliveries were expected to begin in 1994 but delays resulting in the need to clarify issues relating to the termination of the Family Of Weapons MOU and a possible levy claim by the Hughes Aircraft Company mean that deliveries of the missiles are now expected in 1995. PROJECT COSTS (at 1994% average forecast of outturn prices to the nearest EM) CM Production Development Totals Current Estimate of Cost 111 37 148 Est cost at MOD approval 149 48 197 Difference - 38 - 11 - 49 Expenditure to date (31 Mar 94): E27M. MINISTRY OF DEFENCE: MAJORPROJECTSREPORT1994 First approval: 1984 (Development) Latest approval: 1991 (Production) Reasons for Cost Variations: Factor EM Increase Decrease Other specified factors 49 Total 49 Explanation of Cost Variations: The cost variation between Current Estimate of Cost and Estimated cost of MOD approval is attributed to a reduction in the UPC of Missile costs and a re-evaluation of requirements for test assets and software support in aid of the integration. Year(s) of Peak Expenditore: 1995196 - 1996197 Unit Production Cost: sO.4M. Further Expenditure in Clear Prospect: None foreseen IN SERVICE DATES ISD Definition:- There is no formal separate definition of ISD for AMRAAM as it is linked to the upgrade of the Sea Harrier, The dates below reflect the estimated dates for first delivery of missiles and associated equipment. Achievement of ISD: Original ISD (month/year) Dee 1994 Current Forecast/Actual ISD (month/year) May 1995 Variation (month(s)) 5 Reasons for ISD Variation: Factor Monthfe1 Increase Decrease Procurement delays 5 Total 5 Explanation of ISD Variation: The deliveries have been delayed due to the need to clarify issues relating to the termination of the Family of Weapons MOU and a possible levy claii by the Hughes Aircraft Company. MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994 PROJECT ASRAAM (Advanced Short-Range Air-to-Air Missile) GENERAL INFORMATION Controllerate Responsible: Air Systems Associated Project(s): Title ISD Harrier GR7 1988 Eurofighter 2000 2000 PURCHASE ARRANGEMENTS Contractor Contract Type Procurement Route BAe Fixed Price International Competition (Full development and production package) Quantities Required: ** Operational Missiles plus assoc. equipment PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY FUTURE EVENTS ASRAAM will be carried on the RAF’s Harrier GR7 and, eventually, Eurofighter 2000 aircraft. It is a replacement for the Sidewinder AIM-9L missile currently in-Service. ASBAAM was originally a collaborative project under the Family of Weapons MOU, signed in 1980, but the programme encountered difficulties in the agreement of the missile coniiguration, the establishment of effective collaborative arrangements in industry and the identification of an affordable solution. Our partner nations 6nally withdrew Tom the programme during 1989 and 1990. These difficulties caused signihcant delays in the procurement process, to which was added the need for two re-definition phases. Once ASRAAM had become a national project, a competition was held. Three missile systems were considered before a contract for Full Development and Production of ** missiles was placed wltb British Aerospace Defence Ltd in March 1992, with deliveries scheduled to take place in 1997-2000. Approval has been given for the procurement of a second tranche of **** missiles and we are negotiating with British Aerospace a delivery and payment schedule for this additional requirement. At 31March 1994 work was continuing on full development. 94 MlMSTRYOFDEFENCE: MAJORPROJECTSREPORT1994 PROJECT COSTS (at 1994/95 average forecast of outturn prices to the nearest EMI EM Production Development Totals (D&P package) Current Estimate of Cost 705 90 795 Est cost at MOD approval 745 103 848 Difference -40 -13 -53 Expenditure to date (31 Mar 94):2223M First approval: 1981 (Pre-feasibility) Latest approval: 1994 (2nd tranche production) Reasons for Cost Variations: Factor EM Increase Decrease Changes in requirement 1 QuantityNolume variations 13 Price variations 41 Total 1 54 Total Balance -53 Explanation of Cost Variations: Changes in requirement - A requirement arose for a safety audit of software. Quantity/Volume variations - The collaborative development programme was curtailed following the withdrawal of our partner nations. Price variations - The difference in annual price uplifts between speci6c indices and GDP deflator. E6M. Also lower prices achieved in contractual negotiations for the Development/Production package 235M. Year(s) of Peak Expenditure: 1996/97 - 1997/98 Unit Production Cost: **** Further Expenditure in Clear Prospect: Nil 95 MWISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 IN SERVICE DATES ISD Definition: ISD is defined as the date by which the first 60 production missiles have successfully completed Service Evaluation Trials. Achievement of ISD: Original ISD (month/year) Dee 1994 Current Forecast/Actual ISD (month/year) Dee 1998 Variation (month(s)) 48 Reasons for ISD Variations: Factor Month(s) Increase Decrease Need for project redefinition 12 Procurement delays 24 Budgetary constraints 12 Total 48 Explanation of ISD Variations: Need for project redefinition - Rvo redefinition phases were required as a 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 constraints - The project was slipped by one year through an LTC91 savings measure, 96 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECT EHlOl “Merlin” Anti Submarine Warfare Helicopter GENERAL INFORMATION Controllerate Responsible: Air Systems Associated Project(s) Title ISD Passive Search Sonobuoy 1998 Simulators and Trainers 1998 CNGF (Horizon) PURCHASE ARRANGEMENTS: Contractor Contract Qpe Procurement Route Phase EH Industries Target Cost + Non-Competitive Dl (EHU Incentive Fee with with no competition PI ) (EH 101) a Maximum Price for sub-contracts reflecting 50:50 workshare agreement between Westland and Agusta. Loral-ASK Fixed Price International D & P (Merlin) (formerly Competition IBM-ASK) Principal Sub-contractors Westland MOD designated D) Helicopters sub-contract PI 1 (EH 101) Limited (WHL) EHI MOD designated D & P (Merlin) sub-contract D = Development; D&P = Development and Production: PI = Production Investment Quantities Required: 44 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY FUTURE EVENTS The Royal Navy EHlOl “Merlin” Anti-Submarine Warfare @SW) helicopter is a variant of the collaborative Anglo-Italian EHlOl helicopter. It is due to enter service in 1998 and will form an essential part of the RN’s ASW capability, replacing the ASW Sea King. The project was begun in 1979 and was initially carried out under a collaborative development contract on EHI, a company jointly owned by Agusta of Italy and Westland. Development flying is now over two-thirds complete. As a result of delays and cost increases, it was decided in 1990 that the project required a prime contractor if it was to be completed satisfactorily. IBM-ASK (now Loral-ASK1 won a prime contract competition in 1991 and are responsible for the completion of development work specific to the RN variant, the integration of mission systems equipment, and the production and delivery of 44 aircraft, fully operational and to an overall performance specification. The collaborative production investment (PI) contract was placed on EHI in March 1992 in relation to those elements of the air vehicle which will be common to the variants of each Navy; production of these elements will be on a collaborative basis. The first production aircraft is due off the production line in 1996. PROJECT COSTS (at 1994/95 average forecast of outturn prices to the nearest EM) The original approval for development in 1982 envisaged a phased procurement route, with EHI as tbe main contractor throughout. By contrast, the 1991 approval subsumed all previous approvals and added both (collaborative) Production Investment, and a package consisting of completion of RN specific development, mission systems Integration and production, i.e. the Merlin Prime Contract on Loral. There are therefore two baselines for comparison of approvals and costs, (1). Original 1982 EPC Approval for Development EM Production Development Totals Current Estimate of Cost 1229 1229 Est cost at MOD approval 959 959 Difference +270 +270 Reason for Cost Variations Factor EM Delays and reassessment of costs +209 Price variation +61 Total MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994 Explanation of Cost Variations: In Major Project Statements previous to MPR 93, tbe real cost increases in development estimates were mainly attributable to new provision being made for mission system integration work, together with a reassessment of the costs of other development activities. The resulting differences between original approval and current estimate were greater in those years than in MPS 92 and subsequent years; the apparent reduction in the difference reflects the transfer of provision for mission system integration and some other development work to the Merlin prime contract on Loral. A direct comparison between the position reported in MPS 92 and subsequent years and that reported in years previous to MPS 92 is therefore not possible, because of the revised basis for the development programme and its costing. 1990 Equipment Policy Committee Approval for Development to mid-1991 and initial RTM 322 engine Integration work !ZM MOD Approval 271 Note: although MOD approval was E271M, only g239M was approved by Treasury. This approval covers additional development and integration work; some of this is included in the “difference” figure of E209M above, and some is now included in the prime contract, as a result of a review of the relationship between the collaborative development programme and the prime contract. (2). 1991 Equipment Policy Committee Approval (subsuming aII previous approvals) for RN EHlOl programme - completion of collaborative 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 Totals Current Estimate of Cost 3925 3925 Est cost at MOD approva 3799 3799 Difference +126 cl26 Reason for Cost Variations Factor fM Quantity~olmne variations +40 Price variation +86 Total cl26 Explanation of Cost Variations: Quantity/Volume variations increase in the current estimate of cost is due to delay and consequent cost increases on the collaborative development contract with EHI. Price variation is due to the difference in amual price uplifts between specific indices and GDP deflator. Expenditure to date (31 Mar 94): sl596M MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 First approval: 1982 Development Latest approval: 1991 D&P package Year(s) of Peak Expenditure: 1996197 & 1997/98 Unit Production Cost: N/A, because D&P package makes the calculation of an UPC impossible. Further Expenditure in Clear Prospect: None IN SERVICE DATES ISD definition: The date by which the 12th helicopter is delivered to the RN. Achievement of ISD: Original ISD Dee 1993 Current Forecast/Actual ISD* Dee 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 Month(s) Increase Decrease Unforeseen technical difficulties 29 Need for project redefinition 24 Redefinition of ISD (see Note) 5 Budgetary constraints 12 Total 65 5 Total balance 60 Explanation of ISD Variation: Unforeseen technical difficulties: A number of separate technical problems in the early stages of the collaborative programme. Other factors: At original approval ISD was defmed as the date by which the seventeenth helicopter would be delivered to the RN. ISD is now deiined as the date by which the twelfth helicopter is delivered to the RN. The definition was changed in 1991 because it was decided that there was not sufficient reason to change the ISD of 1998 when the EPC approved a reduced buy of Merlin (44 instead of 50); however, the reproBled delivery will result in fewer aircraft being available to the front line by the end of 1998 than previously envisaged. 100 MINISTRY OF DEFENCE: MAJORPROJECTSREPORT1994 PROJECT Eurofighter 2000 GENERAL INFORMATION ControlIerate Responsible: Associated Project(s): Title ASRAAM PURCHASE ARRANGEMENTS Contractor Contract me Procurement Route Eurofighter Max Price Non Competitive but (Comprising Alenia, (Plan to convert with International sub BAe, CASA & DASA) to fixed as soon contract competitive elements as possible). tbe value of which amount to some ***** of overall value of tbe prime contract. Eurojet Max Price Non-Competitive but (comprising FIAT, (Plan to convert with International sub ITP, MTU & to iked as soon contract competitive Rolls Royce) as possible) elements the value of which amount to **** of overall value of prime contract. Quantities Required: Quantity yet to be approved PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY FUTURE EVENTS The Eurofighter 2000 (EF2000) is to be an agile fighter aircraft with an offensive support capability and is being developed In a collaborative programme with Germany, Italy and Spain. Aircraft and engines are at an advanced stage of development, iirst Right occurred on 27 March 1994 in Germany. Commitment to PI and Production expected in 1995. 101 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECT COSTS (at 1994/95 average forecast of outturn prices to the nearest EM) EM Production Development Totals Current Estimate of Cost 3967 3967 Est cost at MOD approval 2838 2838 Difference +1129 +1129 Expenditure to date (31 Mar 94): X1588M First approval: 1984 Feasibility Study Latest approval: 1988 Full Development Reasons for Cost Variations: Factor EM Price variations 125 Other specified factors 1004 Total +1129 Explanation of Cost Variations: Price variations are due to difference in annual price uplifts between specific indices and GDP deflator, Other specifaedfactors: f232M is due to changes in accounting rules for intramural costs. The remainder, some g772M is due to German withdrawal from certain equipments, higher than expected development costs, most notably for equipments, additional tasks and integration of new weapons not specified in the original contract, and the cost of reorientation. Year(s) of Peak Expenditure: 2002/03 2003/04 Unit Production Cost: g37.3M Further Expenditure in Clear Prospect: E10970M (Production of 250 Aircraft, Integrated Logistic Support, Simulators and Training Aids). MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994 IN SERVICE DATES ISD Deikition: ISD is defined as the date by which the first aircraft is delivered to the RAF. Achievement of ISD: Original ED Dee 1998 Current Forecast/Actual ED Dee 2000 Variation (month(s)) 24 Months Reasons for ISD Variations: Factor Month(s) Increase Decrease Procurement delays including delay to meet changed international situation and revised budgetary resources of the four partner nations 12 Technical difficulties 12 Total 24 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECT Infra-red Countermeasures (IRCM) GENERAL INFORMATION Controllerate Responsible: Air Systems Associated Project(s): None PURCHASE ARRANGEMENTS Contractor Contract Type Procurement Route Loral Systems Company Firm Price International Northrop DSD International Inc. Competition Lockheed Sanders Inc. Quantities Required: Nil, since current approval only covers PD phase Quantities associated with Further Expenditure in Clear Prospect: **** PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY FUTURE EVENTS *-. Contracts for the Project Definition phase of the programme were awarded to 3 companies on 12 February 1993, and the PD studies were completed by the end of 1993. The dossier paper seeking approval for full development and production awaits EAC endorsement then Ministerial and Treasury approval. Much of the work involved in the preparation of the ITT has already been completed, and it is expected that issue of the I’IT will take place witbin 4-6 weeks of EAC approval. Placement of a contract for development and production is forecast for March 95. MINISTRYOFDEFENCE: MAJORPROJECTSREPORT1994 PROJECT COSTS (at 1994/95 average forecast of outturn prices to the nearest !W XM Production Development Totals Current Estimate of Cost 15 15 Est cost at MOD approval 15 15 Difference NIL NIL Expenditure to date (31 Mar 941: Cl5.2M First approval: 1990 - Feasibility Study Latest approval: 1992 - Project Dehnition Reasons for Cost Variations: N/A Explanation of Cost Variations: N/A Year(s) of Peak Expenditure: 1996/7 & 1997/8 Unit Production Cost: Not yet available (Ihe figure will not be available until after ITT evaluation) (Note. UPC wlll vary considerably between aircraft types.) Further Expenditure In Clear Prospect: (at 1994/95 average forecast of outturn prices to the nearest XlOMl JI150M, for Full Development and Production IN SERVICE DATES ISD Definition: The PD approval paper did not include ISDs. It was stated that ISDs for each aircraft type would be resolved after PD and agreed in the submission for endorsement of Full Development and Production. Achievement of ISD: Original ISD (month/year) - N/A Current Forecast/Actual ISD - Classihed Secret. Variation (month(s)) - N/A Reasons for ISD Variations: N/A Explanation of ISD Variations: N/A 105 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECT JTIDS (Joint Tactical Information Distribution System) GENERAL INFORMATION Controllerate Responsible: Air Systems Associated Project(s): Title ISD Tornado ADV 1994 VC10 & ‘Iristar Tankers 2002 United Kingdom Air Defence Ground Environment 1993 PURCHASE ARRANGEMENTS Contractor Contract Type Procurement Route GEC Marconi Electronic Fixed Price International Non-Competitive Systems Corp - IGMRSClIUSAl (USA) (Under terms of JTIDS MOU) Quantities Required: 60 terminals plus 85 terminals in clear prospect PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY FUTURE EVENTS JTIDS provides a secure, electronic countermeasures resistant, communications capability by means of high speed, high capacity, data communications links for Command and Control in battle management. The initial data link terminals were procured by single tender, but future buys will be by international competition, Integration is planned in the following systems: Tornado ADV, UKADGE (20011 and Air-Air refuelling Tankers (20021. Deliveries for the Tornado ADV began in March 1993 and will be complete in December 1994. Other orders will follow on witbin current cost estimates. MINISTRY OF DEFENCE: MAJORPROJECTSREPORT1994 PROJECT COSTS (at 1994J95 average forecast of outturn prices to the nearest 2M) fM Production Development Totals Current Estimate of Cost 81 245 326 Est cost at MOD approval 87 252 339 Difference -6 -7 -13 Expenditure to date (31 March 1994): c262M First approval: 1977 - Project definition and System Integration Studies Latest approval: 1990 - Initial Production Reasons for Cost Variations: Factor fM Increase Decrease 1. Changes in requirement .- 19 2. Price variations 8 3. Exchange rate variations 6 4. Maintenance costs 8 5. Technical di6iculties 11 6. Software upgrade 5 Total 22 35 Total Balance -13 Explanation of Cost Variations: 1. Simplification of the design arising from US navy modifications 2. Contract negotiations resulting in lower than estimated costs 3. Due to f/E/$fluctuations 4. Maintenance costs for in-Service Support wrongly included in estimate of development cost 5. Technical difficulties arising from integration 6. Software upgrade required for Tornado AJN to handle increased data processing Year(s) of Peak Expenditure: 1993/94 - 1994/95 Unit Production Cost: f700K Further Expenditure in Clear Prospect: ,(at 1994/95 average forecast of outturn prices to the nearest ElOMI: f300M MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 IN SERVICE DATES ISD Definition: To fit 2 Squadrons of Tornado ADV’s with JTIDS Achievement of ISD: Original ISD (month/year) Sept 1988 Current Forecast/Actual ISD (month/year) Apr 1994 Variation (month(s)) 67 months Reasons for ISD Variations: Factor Month(s) Increase Decrease Unforseen technical difhculties 7 Budgetary constraints 48 Procurement delays 12 Total 67 Explanation of LSDVariations: Unforseen technical difkulties arose from software integration problems between the Tornado ADV and JTIDS. In addition, delays in the delivery of JTIDS equipment from GEC/Marconi in the US. MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECT Sea Harrier Attrition Buy GENERAL INFORMATION Controllerate Responsible: Air Systems Associated Project(s): Title ISD Advanced Medium Range Air 1995 to Ah Missile (AMPLAAMI PURCHASE ARRANGEMENTS Contractor Contract ljye Procurement Route BAe Target Cost Incentive Non-Competitive (Airframe and with Maximum Price aircraft integration) GEC Marconi Target Cost Incentive with Non-Competitive Avionics Maximum Price (Blue Vixen Radar) Rolls Royce To be determined. Non-Competitive (Engine conversion) Quantity Required: 23 (18 new build aircraft plus 5 additional FRSl to FRSZ Mid Life Update (MLUI conversions) PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY PUTURE EVENTS A procurement of additional Sea Harrier FRSZ to maintain the Front-Line Aircraft Establishment throughout the operational life of the aircraft. PROJECT COSTS (at 1994/95 average forecast of outturn prices to the nearest WI EM Production Development Totals Current Estimate of Cost *** *** Est cost at MOD approval *** *t* Difference Nii Nil 109 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 Expenditure to date (31 Mar 94): f53M First approval: Approval for 18 new build Sea Harrier FRSZ aircraft and radars and for the 5 additional MLU conversions and radars: 1993 Reasons for Cost Variations: N/A Explanation of Cost Variations: N/A Year(s) of Peak Expenditnre : 1994/95 and 1995/96 Unit Production Cost : New Build aircraft *** (Corn) MLU aircraft E5.8M Further Expenditure in Clear Prospect : None IN SERVICE DATES ISD Definition: Delivery of 6rst aircraft. Achievement of ISD: Original ISD (month/year) Dee 1995 Current ForecastJActual ISD (month/year) Jan 1996 Variation (month(s)) 1 Reasons for ISD Variations: Factor Month(s) Increase Decrease Procurement delays 1 Total 1 Explanation of ISD Variations : Approval delayed pending PES 93 settlement 110 MINISTRYOF DEFENCE: MAJORPROJECTSREPORT1994 PROJECT Sea Harrier Mid Life Update GENERAL INFORMATION Controllerate Responsible: Air Systems Associated Project(s): Title ISD Advanced Medium Range Air 1995 to Air Missile (AMRAAMl PURCHASE ARRANGEMENTS Contractor Contract Type Procurement Route BAe Target Cost Incentive Non-Competitive (aircraft integration) with maximum price GEC Marconi Avionics Target Cost Incentive Competitive - UK (Blue Vixen radar) with maximum price Quantity required 33 PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY FUTURE EVENTS The Sea Harrier MLU programme modifies the current FRSl aircraft to FRSZ standard. This includes incorporating a new generation pulse doppler radar, the Blue Vixen and the Advanced Medium Range Air-to-Air Missile (AMRAAM). The FRSZ will be capable of operating in all weather conditions, of acquiring and engaging targets beyond visual range, of flying at low level, and of engaging multiple targets simultaneously. It is planned to modify all available FRSl aircraft. The first modified aircraft was delivered in April 1993. AMFiAAM and Blue Vixen Bring trials were completed early in 1994. The next key event is the trials due to take place in 1995 which marks the end of the development phase of the aircraft. 111 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECT COSTS (at 1994/95 average forecast of outturn prices to the nearest EM) fM Production Development Totals Current Estimate of Cost *** *** Est cost at MOD approval *(* ** Difference +60 +60 Expenditure to date (31 Mar 94): f505m First approval: 1984-Project Definition and Initial Development for MLU, Full D&P for BLUE VIXEN. Latest approval: 1988-Full Development and Production for aircraft integration and re-approval of BLUE VIXEN Development and Production. Reasons for Cost Variations: Factor fM Increase Decrease Revised cost of Blue Vixen Test Equipment 3 Problems experienced during Initial Development phase of Blue Vixen Radar 38 Price variations 19 Total 60 Explanation of Cost Variations: Difference in annual price uplifts between speciiIc indices and GDP deflator. Year(s) of Peak Expenditure: 1988/89 & 1993/94 Unit Production Cost: f5.8M Further Expenditure in Clear Prospect: Now included in Sea Harrier Attrition Buy. MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 IN SERVICE DATES ISD Dehnition:ISD hisdefined as the date by which the first 8 aircraft have been delivered. Achievement of ISD: OrIginal ISD (month/year) Dee 1989 Current Forecast/Actual ISD (month/Year) Dee 1993 Variation (month(s)) 48 Reasons for ISD Variations: Factor Month(s) Increase Decrease Unforeseen technical difficulties 22 Need for project redehnition 27 Other specified factors 1 Total 49 1 Total Balance 48 Explanation of ISD Variations: Unforseen technical diiculties were due to impact of aircraft/radar/ weapon systems integration. Need for project redefinition was due to estimated cost increase requiring programme rescoping. Other specified factors was early achievement of first 8 aircraft deliveries. Note: Delivery of AMRAAM is not due until May 1995. In the interim the new radar system will significantly improve the effectiveness of the existing weapons fit (Sidewinder AIM 9M) in updated Sea Harriers. MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECT SKYNET 4 STAGE 2 UK military satellite communication system GENERAL INFORMATION Controllerate Responsible: Air Systems Associated Project(s): None PURCHASE ARRANGEMENTS Contractor Contract me Procurement Route Prime - BAeSSL Firm Price Non-Competitive but with competition for sub- contracts, the value of Sub Contractor Firm Price which amount to 45% of MATRA MARCONI the overall value of the prime contract. Quantities Required: Two satellites and related ground equipment PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY FUTURE EVENTS 1. The project will enable continued use of satellite communications by 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 theatse requirements by ensuring that mobile operations eg ships, submarines and ground troops are not constrained by the need of those forces to remain within reliable terrestrial radio communications range of their headquarters and bases. 2. In order to meet the required capacity and availability, two satellites will be launched. The first will be launched in 1997, and will be in-Service in 1998. The second will be launched and will be in-service iu 1998. The prime contractor will have overall responsibility for all aspects of the satellite build and launch activities up until acceptance is achieved in orbit. 3. The project definition stage was completed early in 1993. A contract was placed at the end of February 1994 for production and launch. 4. Major project milestones are: In Orbit Acceptance First Satellite - Apr 1998 In Orbit Acceptance Second Satellite - Nov 1998 System Acceptance -Dee 1998 114 MINISTRY OF DEFENCE: MklOR PROJECTS REPORT 1994 PROJECT COSTS (at 1994/95 average forecast of outturn prices to the nearest EM) ZM Production Development Totals Current Estimate of Cost 321 12 333 Est cost at MOD approval 329 12 341 Difference -8 0 -8 Expenditure to date (31 Mar 941: 28 12 40 Development Production First approval: 1991 1994 Latest approval: 1991 1994 Reasons for Cost Variations: Factor EM Increase Decrease Other specitied factors 8 Total 8 Explanation of Cost Variations: Refinement of figures on final contract negotiations E4M. Reassessment of DRA tasking E4M. Year(s) of Peak Expenditure 94/95 - E83M, 95/96 - 278M Unit Production Cost: SX45.6M for Satellite and Launcher only. Further Expenditure in Clear Prospect: None MRGSTRYOFDEFENCE: MklORPROJECTSREPORT1994 IN SERVICE DATES ISD Definition: The acceptance of the first satellite in orbit. Achievement of ISD: Original ISD (month/year) May 1997 Current Forecast/Actual ISD (month/year) May 1998 (1st Satellite) Variation (month(s)) 12 Reasons for ISD Variations: Factor Month(s) Increase Decrease Procurement delays 12 Total 12 Explanation of ISD Variations: Under-estimate of 3 months in satellite build time, 6 months extra in commencement and completion of PD phase, and 3 months extra in negotiating production contract. 116 MINKIRY OF DEFENCE: MAJORPROJECTSREPORT1994 PROJECT Tornado GRl Mid-Life Update GENERAL INFORMATION Controllerate Responsible: Associated Project(s): Title ISD Forward Looking In&a Red (FLIR) 1991 Night Vision Goggles (NVG) 1993 Defensive Aids Sub System (DA%) 1994 Thermal Imaging & Laser Designator (TIALD) 1993 Simulators 1997 PURCHASE ARRANGEMENTS contractor Contract T&qe Procurement Route Panavia Dev/Production Prime contract non- (BAe,DASA,Alenia) Invesiment - Max Prices competitive but with competition for equipments. BAe Prime contract under NAPNOC conditions for production of equipments, modkits & for their embodiment. (Contract negotiations are nearing completion which will produce firm prices for the development and PI and a fIxed price contract for production and embodiment). Quantities Required: 142 aircraft PROJECT DESCRIPTION, PROGRESSTO DATE AND KEY FUTURE EVENTS The MLU programme will enhance the capabilities of the Tornado GRl aircraft to Iind and successbilly attack its target in all weathers, and reduce its vuhierability to counter attack. Development and production planning contracts have been placed through the Tornado @i-national arrangements. Commitment to production is expected mid 1994 under a package deal with BAe. Following substantial slippage to ISD and signiiieant 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 full MLU, striking a balance between capability and quantity on the one hand and affordability on the other. MLU93 was recently endorsed by the MOD. 117 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 PROJECT COSTS (at 1994/95 average forecast of outturn prices to the nearest EM) EM Production Development Totals Current Estimate of Cost *** ** *** Est cost at MOD approval *** *** *** Difference *** *** *** Expenditure to date (31 Mar 94): E198M First approval: 1984 Feasibility study Latest approval: 1993 Re-approval of Full Development & Production for MLU93 programme. Reasons for Cost Variations: Factor EM Increase Decrease Specification/contract changes (11 84 Quantity variations (2) 104 cost growth (3) 297 Price Variations (41 9 Total 390 104 Total Balance 286 Explanation of Cost Variations: 1. Tasks originally excluded from the contract specification as they could not be adequately deRned and costed at the time; additional Government Furnished Equipment and later additions to the Operational Requirement (‘IIALD and a Digital Geographic Processing & Preparation Station) plus additional trials support is required as a result of the cancellation of 8th batch production aircraft. Increases shown are net of all changes made. 2. The total of 161 aircraft envisaged in the full MLU programme gave rise to affordability problems. Because of attrition during Operation Granby, this number could only be met by bringing up to a suitable standard early (1st batch) production aircraft that were not fully operational. The costing figure shown above relates to a reduced number of 142 aircraft. 3. Cost growth is due to: a. cancellation of the 8th Tornado production batch which resulted in additional design and trials work falling to the development contract; b. initial under-estimates of the technical and financial complexity of the programme. 4. Price variation is due to the difference in annual price uplifts between specific indices and GDP deflator. 118 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 Current Approval The November 1993 MOD approval should be considered as subsuming all previous approvals since it endorsed a siguificantly revised programme, for a different number of aircraft and at new NAPNOC prices EM Production Development Totals Current Estimate of Cost *** *** *** Est cost at MOD approval *** *** *** Difference +7 +l c8 Reasons for Cost Variations: Factor EM Increase Decrease Price variations 8 Total 8 Explanation of Cost Variations: Price variation: the difference in annual price uplifts between specific indices and GDP deflator. Year(s) of Peak Expenditure: 1997/98 - 1998/99 Unit Production Cost: Not possible to calculate UPC because still negotiating prices with the contractor. Further Expenditure iu Clear Prospect: None foreseen 119 MINISTRY OF DEFENCE: MAJOR PROJECTS REPORT 1994 IN SERVICE DATES ISD Dehnition: Delivery of first aircraft Achievement of ISD: Original ISD (month/year) Mid 1993 (original approval did not specify a month) Current Forecast/Actual ISD Sept 1998 Variation (month(s)) 63 Reasons for ISD Variations: Factor Month(s) Increase Decrease Unforeseen technical difficulties 24 Need for project redefinition 11 Procurement delays 28 Total 63 Explanation of ISD Variations: Slippage of the ISD occurred initially because of technical diIEculties emerging during Initial development, and because of the time taken in competitive tendering for the MLU equipments. More recently sign&ant 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 definition. .’ 120