The projects support the national submarine-based nuclear deterrent operations. © Getty Images
The projects support the national submarine-based nuclear deterrent operations. © Getty Images

MoD 'failed to mitigate commercial risks'

10 January 2020

The Ministry of Defence’s (MoD) “poor management” of the nuclear weapons infrastructure programme has led to delays and increased costs by £1.3bn, according to a report.

Commercial and delivery issues in the “earlier, riskier” stages of projects impacted production schedules and led to overspend by 115%, according to The National Audit Office (NAO).

The main reasons for extra costs and delays were construction starting prematurely “before requirement or designs were fully developed”, which cost the MoD £647m, said the watchdog.

A report by the NAO assessed the progress of three infrastructure projects on nuclear-regulated sites in Reading, Derby and Cumbria, which have been delayed between one and six years, and are now costed at £2.5bn.

The projects faced challenges due to “changes to commercial approaches or project management”, according to the report, as well as nuclear-related regulatory and supplier restrictions. 

The projects include a new nuclear warhead assembly and disassembly facility, operated by Atomic Weapons Establishment, which started construction in 2011 and was delayed by around six years. The construction will now cost £1.8m, 146% over the initial budget. 

There is also a project to upgrade facilities on a Rolls Royce-operated site in Derby to design the latest nuclear reactor cores. It started in 2012 and was delayed by around five years, with increased costs of 45% to £474m. 

The third project involves new facilities at a BAE Systems site in Cumbria, which cost £240m, up 116% on the original budget, to improve ageing facilities and support better submarine construction techniques. According to the report, changes in requirements increased construction costs by £108m.

Gareth Davies, comptroller and auditor general and head of the NAO, said: “While these infrastructure projects are complex, the MoD has encountered similar challenges before in its nuclear work. Although it has recently introduced changes to enhance its oversight of the projects and improve its contracts with suppliers, it should have learnt earlier from past mistakes and the experience of others in the nuclear sector.

“Instead, the MoD’s failure to mitigate commercial and delivery risks early on has led to project delays and cost increases, as well as impacting its wider work.”

The MoD has since made changes by renegotiating contracts to reduce costs in later stages and improve its project management and relationships with contractors and regulators, according to the report.

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