NAO warning to MoD over aircraft carrier costs

The National Audit Office (NAO) has published the latest in a series of challenging reports on defence procurement, highlighting how significant uncertainties over the future costs of plans to bring new aircraft carriers into service may limit their effectiveness

The Ministry of Defence (MoD) Carrier Strike programme is based around the two Queen Elizabeth Class aircraft carriers, the largest warships ever built for the Royal Navy, which have been delivered at a cost of £6.4bn.

The plans also include a £10.5bn budget for the purchase of 138 Lightning jets to help sustain operations for the next 40 years.

So far, the MoD has built the two new carriers in line with its timetable and for 3% above the budget, both of which it agreed in 2013. It has so far taken delivery of 18 Lightning jets out of an initial order of 48 aircraft, accounting for £6bn of the agreed budget.

However, the NAO noted that the defence department has not yet committed to buying more planes, and has also deferred receipt of seven of the jets to 2025, a year later than planned, because of financial pressures.

Since the NAO last reported in 2017, the approved cost of the Lightning project has increased by 15% from £9.1bn to £10.5bn because of additional expenditure on system upgrades, integration of UK weapons and sustainment costs.

While the MoD is planning to review the number and types of jets it needs, the audit watchdog points out that buying fewer aircraft would affect how Carrier Strike can be used.

Carrier Strike is planned to reach its ‘initial operating capability’ by December 2020. The MoD expects to meet this date, although it will not have the full level of radar capability that it expected at this point. The timetable for it to develop ‘full operating capability’ by 2023 remains tight.

The new airborne radar system is 18 months late, affecting capabilities for the first two years of operation.

The delay has been caused by a subcontractor, Thales, failing to meet its contractual commitments for developing equipment and not providing sufficient information on the project’s progress. Neither MoD nor its prime contractor, Lockheed Martin, were aware of these problems until it was too late, which the NAO says reflects MoD’s ineffective oversight of its contract with Lockheed Martin.

The MoD has also made slow progress developing three new support ships, which are crucial in providing supplies such as ammunition and foot. It has only one ship able to resupply the carriers. The MoD has long been aware that this will restrict Carrier Strike, and the cancellation of a recent competition to build new supply ships – because of concerns over value for money – mean they will not be available until the late 2020s. The MoD will incur additional costs while it keeps the current ship in operation longer than intended.

The MoD does not know how much Carrier Strike will cost over its life. For example, it is yet to make important decisions on the enhancement of the capability over the longer-term, such as how to replace or extend the Merlin helicopters.

The NAO recommends that the MoD improves its understanding of the costs of running, supporting and enhancing Carrier Strike over its lifetime, and warns it may not have made sufficient provision in later years’ budgets for the full costs.

Gareth Davies, NAO head, said: ‘The MoD has made good progress with the big-ticket items needed to deliver Carrier Strike, such as the carriers, the first squadron of jets and the new infrastructure. But it must pay much greater attention to the supporting capabilities needed to make full use of Carrier Strike.

‘The MoD also needs to get a firmer grip on the future costs of Carrier Strike. By failing to

understand their full extent, it risks adding to the financial strain on a defence budget that is already unaffordable.’

Carrier Strike – Preparing for deployment

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