The Torpedo Programme

Home , Tigerfish (torpedo), Torpedo

NATIONAL AUDIT OFFICE

Report by the Comptroller and Auditor General

Ministry of Defence: The Torpedo Programme

Orderedby the House of Commonsto beprinted 21 March 1985

LONDON HER MAJESTY’S STATIONERY OFFICE 52.10 net

291 This report is presented to the House of Commons in accordance with Section 9 of the National Audit Act. 1983.

Gordon Downey Comptroller and Auditor General Nationril Audit Office 20 March 1985 Contents

Ministry of Defence: The Torpedo Programme

Pages Report l-6

History of torpedo development Management by MOD CommitmentoffurtherresourcestoTigerfish Achievement of Value for Money Conclusions

Glossary of abbreviations Ministry of Defence: The Torpedo Programme

Report

1. The Heavyweight Torpedo (HWT) is the major armament of the United Kingdom’s submarine forces and it is important for the overall effectiveness of these forces that such a weapon should be successfully acquired and integrated into the total underwater weapon system. The Lightweight Torpedo (LWT) is the principal anti-submarine weapon of ships, aircraft and helicopters. Substantial resources are involved in the development and production of these torpedoes, the total estimated costs up to the mid 1990s of the 3 current major projects, ie the Mark 24 Tigerfish, Sting Ray and Spearfish torpedoes, being more than f5,OOO million at constant 1984 prices. To date the Ministry of Defence (MOD) have not managed to share the costs of such programmes by entering into collaborative ventures with other NATO countries but they have informed me that world-wide sales are being pursued vigorously to widen the productions base.

2. This Report records the results of a National Audit Office (NAO) examination of the problems which have been encountered by MOD in development of these weapons. For HWTs in particular, their complexity, the need to integrate the torpedo into the total weapon system and the relationship of the latter with other items of equipments on the submarine platforms have made it difficult for MOD to implement satisfactory arrangements for management of the programme. Nevertheless the position is much better than a few years ago; MOD have informed me that the Sting Ray LWT has successfully entered service and they have every confidence that the new Spearfish HWT will be successfully developed. I intend to provide the Committee of Public Accounts with some further details to supplement the Report, on a confidential basis.

3. The NAO examination, which has concentrated on the HWTs, has shown a need, which has been recognised by MOD, first, for improvements in management systems and information requirements, accompanied by adequate staff resources to ensure satisfactory control of the programme and liaison with the contractor; secondly, to improve management of the complete torpedo weapons systems, possibly by appointing a prime contractor in industry; and thirdly, for close monitoring of progress of the Tigerfish project and the cost-effectiveness of allocating further resources to it. The examination also indicated that the problems encountered and the lack of competition for the main contractor role in the United Kingdom have created difficulties for MOD in ensuring fully that value for money is obtained for the resources invested.

History of torpedo 4. Until the late 1960s United Kingdom torpedo design and manufacture was development managed in-house by MOD. However the impact of the development of nuclear propulsion power on submarine capabilities led to the need for a new kind of torpedo with capabilities not unlike those found in airborne guided missiles. The significant technological advances and associated risks of failure which this

1 development entailed could not be sucessfully handled solely by MOD, who de- cided in 1970, as a result of experience with early in-house projects, that in future industry would be associated with MOD’s experts in research and development, including the co-ordination of sub contracts; also more time and care would be devoted to the development phase so as to avoid the dangers of venturing into production prematurely.

5. Hence development of the Mark 24 HWT Tigerfish which began in-house in 1959 was eventually taken on by the Marconi Company in 1972, although the project continued under the existing arrangements involving several hundred contracts placed by MOD with various contractors, but with Marconi as the principal one. Marconi later became prime contractor for the Sting Ray LWT and the Spearfish HWT, although not as yet for the total weapons systems. The company, now Marconi Underwater Systems Limited (MUSL), is currently in a monopoly position for torpedo development and production in the United King- dom, supporting MOD in the three on-going projects referred to above. However other equipments within the total weapons systems are subject to separate contractual arrangements by MOD with various companies.

6. Following the difficulties arising from inadequacies in project control and management of the early torpedo projects, MOD strengthened their own management arrangements. In particular the Special Project Executive (SPE) was established in 1977 to deal exclusively with the Sting Ray project. Subsequently it also assumed responsibility for Tigerfish and Spearfish. In July 1984, following a review, the MOD introduced further changes in its management organisation designed specifically to improve its overall systemsmanagement ability. The post of Special Project Director, the Head of SPE, was abolished as part of the planned reductions in MOD manpower and SPE’s functions were transferred to a Directorate of Torpedoes (DTU) reporting to the Director General of Under- water Weapons Navy (DGUW(N)).

7. Significant technical problems have been encountered in the development of these new weapons, which are at the forefront of technology. The position for each of the major projects is as follows:

(a) (i) Mark 24 HWT Tigerfish Development of Tigerfish began in-house in 1959 with the expectation that it would come into service in 1967. Due to development and engineering problems a limited version with less capability than originally envisaged did not enter service until 1974 and only received full Fleet Weapon Acceptance (FWA) in 1979. An improved version, with greater capabilities, has been developed since 1972 by Marconi acting as principal contractor for the project. This variant has also encountered technical and managerial problems. There were 4 MOD investigations into the Mark 24 problems between 1969 and 1982. Expenditure on the Tigerfish project to 31 March 1984 was $95 1 million at constant 1984 prices.

(ii) Mark 24 Tigerfish Consolidation Programme Some organisational, managerial and technical changes have been made but as a result of the 1982 investigation a comprehensive Consolidation Pro- gramme (CP) has now been approved. It seeksto effect improvements in the Tigerfish torpedo through continuing Post Design Services(PDS) work and to improve the weapon system project management arrangements. (b) Sting Ray LWT Early in-house development of an interim LWT (the Mark 31) was unsuc- cessful and was abandoned by the Ministry in 1970. Subsequently contracts were placed with Marconi for development and production of the Sting Ray LWT, the first United Kingdom torpedo to be developed entirely by private industry, although the design was conceived intramurally. The contract for development and initial production was later subsumed into the Spearfish /Sting Ray contract (seebelow). MOD have informed me that following its deployment in the Falklands campaign in 1982, Sting Ray successfully entered service with the Royal Navy and RAF in 1983, on time and within cost. The project is now at the difficult transition stage between development and production. MOD have informed me that although there are some minor areas where further work is required, this is not unexpected given the scale and complexity of the task and they are confident of achieving full FWA without increasing the unit production cost. Expenditure to 31 March 1984 was f691 million at constant 1984 prices. (c) Spearfish HWT The decision to develop anew HWT to supersede the Tigerfish was taken by MOD in February 1980. In September 1981 the Government approved development of the Spearfish HWT designed by Marconi, in preference to purchase of a US torpedo also under development, subject to satisfactory financial and contractual arrangements being concluded. Subsequently a joint fixed price contract was placed with Marconi for the completion of development and initial production of Spearfish and Sting Ray torpedoes. MOD have informed me that current progress on development of Spearfish is generally on schedule, although there have been some problems, which were not unexpected in view of the scale and complexity of the project. Expenditure to 31 March 1984 was f131 million at constant 1984prices. 8. A major problem encountered with the Tigerfish HWT has been the interface between the constituent parts of the total weapon system. The 1982 investigation (paragraph 7 (a) above) concluded that a major cause of the problem was that organisation in MOD and in industry was too fragmented and lacking in a total systems approach. No one person was in charge of the total weapon system, there was no prime contractor to draw the weapon system together in industry and there were problems in interfaces between the different authorities in MOD, the Navy and industry. Other causes were under-estimation of technical difficulties, insufficient development trials and inadequate funding and resources in the post design phase. t by MOD Current developments 9. As stated at paragraph 6, MOD have reviewed and progressively made changes to internal management arrangements culminating in the total integ- ration of the torpedo management task as part of the overall management of the underwater weapons programme. Currently there are separate system project managers for each of the torpedo projects responsible through the DTU to DGUW(N), who in turn is responsible to two top level torpedo policy Com- mittees. Progress work on the torpedo contracts is monitored against major technical milestones, agreed characteristics and technical standards which the contractor is required to meet. Liaison with the contractor is based on a tiered structure of committees which meet regularly to consider progress reports from the contractor, problems arising and changes to the programme. 10. On a major project such as Spearfish, Marconi and MOD are each responsible for several hundred major sub-tasks. MOD has therefore sought to ensure

3 that the management systems operated by the contractor are adequate to facilitate the necessary interfaces and co-ordination. System equipments other than the torpedo are managed as separate projects outside DTU but the latter is currently responsible for achieving adequate interfaces between all the equipments of the total torpedo weapon system and for total system performance, safety and support.

11. As part of the review referred to above, MOD engaged management consultants to review SPE’s management systems. Their report at the end of January 1984 referred to a lack of staff resources leading to essential tasks not being performed; a need for clearer definition of responsibilities, procedures and arrangements for interfacing between SPE, MUSL and other parts of MOD; and a need for improved information for decision making purposes. The recommendations made to overcome these problems included the enhancement of SPE’s computer facilities to facilitate access to the contractor’s data bases, further development of the existing management systems and studies to define the various responsibilities, procedures and information requirements of the MOD authorities and contractors involved in torpedo weapons projects. MOD are pursuing these recommendations alongside a total DGUW requirement for enhanced facilities for which a pilot study has recently been completed.

Contractors’ responsibilities and resources 12. MUSL’s contractual responsibility for development and production is, with the exception of the Tigerfish CP, currently confined in all projects to the torpedo itself and does not cover the overall system including the warhead, weapon handling and discharge, and fire control. Failure of the overall system cannot therefore be attributed to one contractor. The Tigerfish CP is providing a model to test new systems management arrangements giving greater responsibilities to MUSL as prime contractor for the Tigerfish weapon system. There is agreement in principle between MOD and MUSL that the ultimate objective is to make the prime contractor responsible for the effectiveness of the total weapon system. Among possible disadvantages of such a development however would be the loss of MOD expertise, the possibility for HWTs of adverse effects on the interface between the torpedo weapon system and other naval equipments, and the danger of further reduction in the extent of competition for any new torpedo system in the future, although MOD have told me there should be scope for competition at sub-contract level.

13. The adequacy of Marconi’s resources would be an important factor in any decisionon allocation of greaterresponsibilities to the company.MOD on several occasions in the past have expressed concern that the company may not have the resources to cope with three major torpedo projects for the Ministry in addition to some export work. My staff were assured, however, that there had been no problem in this respect sinceFebruary 1983.

Management summary 14. Strong management within MOD and industry and a closely co-ordinated and clearly defined relationship between the two is essential for the successful development and production of a torpedo and its interface with the other compo- nents of the weapon system. MOD must have adequate information, resources and expertise to ensure the effective operation of such arrangements. Action is therefore required to ensure there is no delay in introducing the improvements in systems, procedures and information requirements accepted as necessary following the consultants’ report and that adequate staff resources are available for implementation. 15. MOD have not to date found a solution to the problem of management of the total weapon system. They intend to apply any lessonslearned from the Tiger- fish CP, in particular those relating to project management and prime contractorship, to the replacement Spearfish HWT system and to consider the relevance of any major improvements to other sea systems projects. The possible creation within United Kingdom industry of a prime contractor role to manage and control the total weapon system could be one major contribution towards overcom- ing the total system management problem, but the possible benefits of such an arrangement, which should lead to some reduction in resources required within MOD, will have to be weighed against the possible disadvantages referred to at paragraph 12 above when the position is assessedon completion of the CP.

16. More than two years have elapsed since the last report identifying the cause of the Tigerfish problems and it seems doubtful whether there will be time for lessons learned from the CP to be effectively applied to the vital development stages of the Spearfish project. Furthermore, changes affecting contractual arrangements already established might be difficult to implement and could in- volve extra cost.

Commitment of further 17. MOD expect that the improved Tigerfish will satisfy the principal HWT resources to Tigerfish requirement up to the graduated introduction of Spearfish and thereafter give support until Spearfish is fully available to the Fleet. In view of the encouraging progress to date on Spearfish, the approach of its in-service date and the doubts whether all the lessons of the CP could be effectively applied to Spearfish, my staff discussed with MOD the economics of proceeding with further production orders for Tigerfish as against committing further resources to improving systems management and enhancing Spearfish production if possible. MOD have this matter under review and I would expect them closely and continuously to monitor the cost-effectiveness of the balance of resources allocated to the Tiger- fish project taking full account, of course, of operational requirements.

Achievement of Value 18. Successive torpedo projects have suffered delays and cost increases and for Money optimum weapon effectiveness has not been achieved. This suggested to me that the taxpayer in the past may not have received good value for the considerable sums spent. MOD have stressed, however, that whilst there have been cost and time overruns on Tigerfish, the improvements incorporated have resulted in a capable weapon with increased reliability; and that for the future, the position on the new torpedoes from the outset is more encouraging. In addition to the moves to improve project management and place more responsibility on the prime contractor referred to above, improved value for money has been sought by a number of means.

United Kingdom competition 19. A major difficulty is the lack of competition in the United Kingdom for the prime contractor role. MOD have informed me that prime contractor competition for Sting Ray production has recently been reviewed and found impractica- ble, but competition does exist for the sub contract work and will be a condition of Sting Ray orders; also that it has already proved effective for Tigerfish. A large proportion of torpedo work will be sub contracted by MUSL after competitive tendering. Other companies within the GEC/Marconi Group are major sub contractors and are invited to tender competitively against other firms.

Jncentives to contractors 20. It is MOD policy to try to build incentives to contractors into contract con- ditions, eg incentive payments are to be a feature of the contract for the Tigerfish

5 CP. The usefulness of such incentives can however be reduced by the lack of competition for any further contracts which may be necessary for improvements or to remedy deficiencies. The nature of the torpedo problems, ie the interface between different parts of the system, makes them difficult to solve by contractual means when no one contractor has responsibility for the whole system and financial responsibility for failure of that system.

Placing large production orders 21. MUSL have claimed that a lower unit cost of production could be obtained if MOD placed one large order rather than a succession of smaller orders. MOD are actively considering the possibility and have informed me they recognise the potential benefits of such an arrangement, but with appropriate break clauses to counter any change in circumstances during the production run.

Foreign competition 22. The joint Sting Ray/Spearfish contract was let after consideration of the competing United Kingdom and US options for the HWT and intensive negotia- tions between MOD and Marconi. MOD regard the fiied price obtained for the development and initial production of the two weapons as a major achievement and consider that there are other benefits from the financial and contractual arrangements agreed with the company. I agree that competitively priced contracts are to be preferred to cost plus contracts for development and initial production wherever possible to increase incentive to the contractor.

23. The competition was keenly fought and close, although the subsequent de- preciation of sterling against the dollar has had the effect of producing a decisive financial advantage for the United Kingdom torpedo. It is clearly worthwhile to invite tenders from overseas in appropriate cases.

24. The main conclusions arising from this Report are:

(a) action is required by MOD to ensure there is no delay in introducing necessary improvements in systems, procedures and information requirements necessary for control and liaison with the contractor and that adequate staff resources are available for implementation (para 14); (b) it is important that MOD find an early solution to the problem of management of the complete torpedo weapon system, taking into account the results of the Tigerfish CP and the advantages and disadvantages of prime contractorship (para 15); (c) progress of the CP and the cost-effectiveness of allocating further resources to Tigerfish should be closely monitored (para 17); (d) there is some doubt whether good value for money has been received in the past for the resources invested in torpedo projects but prospects for the future are more encouraging (para 18); (e) I endorse MOD’s efforts to improve value for money by inclusion of realistic incentive provisions in contracts, placing larger initial orders and use of competition wherever possible for both main and sub-contracts, but I note that the absence of a prime contractor for the overall weapon systems means that financial responsibility for overall systems failures does not currently rest with contractors (paras 19-23).

6 Glossary of Abbreviations

HWT Heavyweight Torpedo

LWT Lightweight Torpedo

MOD Ministry of Defence

NAO National Audit Office

MUSL Marconi Underwater SystemsLimited

SPE Special Project Executive

DTU Directorate of Torpedoes

DGUW (N) Director General of Underwater Weapons (Navy)

FWA Fleet Weapon Acceptance

CP Consolidation Programme

PDS Post Design Service