Financial risks on Trident successor – a Conspiracy of Concealment
The problems associated with letting uncontested, single-source contracts like that for the new Trident nuclear submarines, scrutiny of which falls within the remit of the Single Source Regulations Office, are not only limited to the usual delays and cost overruns – they extend to the contractual support arrangements put in place to acquire and re-provision additional Support Assets to sustain the equipment in-service, for the full period of its service life.
Financial risks don’t come any bigger than the £41bn officially set aside for the initial cost of the four Trident submarines – £180bn if one takes into account the whole-life sustainment costs – given the fact that, the cost of acquiring and re-provisioning Support Assets associated with military equipment over the whole life cycle can be in the order of four to five times the prime equipment costs.
Now that Parliament has given its approval for Trident to proceed to the manufacture and build phase, the focus of attention turns to the ability of the Ministry of Defence to deliver this project without incurring the usual delays and cost overruns, which have dogged military equipment programmes for as long as anyone can remember.
On the basis of past performance, it can be predicted with certainty that the newly established Submarine Delivery Agency will not deliver Trident successor within contracted time and schedule boundaries.
Whereas the mainstream media is, as always, focused on the human interest story of the person who has been appointed as head of the SDA and the organisational construct within which he will operate, the intellectually engaging public interest story of failings in the existing business processes used by MoD to procure this highly complex weapons platform, is certain to escape scrutiny.
Not least, the likelihood that financial risks on this uncontested, single-source contract, which involves substantial design, development & systems integration work, will materialise sometime soon – a concern expressed by the then Permanent Secretary at MoD Jon Thompson, who admitted that the possibility of this happening is what keeps him awake at night, when he appeared before the Public Accounts Committee in October 2015.
Anyone who has worked in the defence engineering industry will know that financial risks start-out as innocuous looking technical risks on the Defence Contractor’s premises, where selected ones are deliberately concealed by the Contractor during the design and development phase, then skilfully transferred to MoD Abbey Wood, Bristol where they suddenly morph into ‘show stopping’ risks and come to the fore immediately after the main investment decision has been taken (as they have done so spectacularly on the Type 45 destroyers with total power blackouts, costing a further £280 million to fix), ultimately ending up as an additional cost burden on the Front Line Commands, who have recently been given day-to-day responsibility for managing the defence equipment budget – resulting in sleepless nights for many other people too!
This happens because a key behavioural characteristic of Defence Contractors is that they will always choose to conceal technical risks identified early in the programme, by engaging with procurement officials and getting them to focus on declared risks which ordinarily fall in the trivia category, whilst skilfully diverting their attention away from those really huge ‘show stopping’ risks which they will only reveal later on, when things go wrong, to realise their objective of ‘growing’ the Contract by getting Abbey Wood Team Leader to raise Contract Amendments and/or let Post Design Services Contracts.
They achieve this by contriving situations which entice procurement officials into partaking in detailed design decisions relating to the evolving Technical Solution, and then use this involvement to coerce procurement officials into raising Contract Amendments later on. Indeed, it the very existence of Contract Amendments and PDS Contracts that causes Contractors to conceal ‘show stopping’ risks in the first place!
These concealed risks then come to the fore immediately after (never before) the main investment decision has been taken, surprising everyone (except the Contractor) and imposing a budget-busting burden on MoD.
And because there exists no ‘Code on Ethical Behaviour in Business’ which would offer protection to good people on the Contractor’s payroll (generally in the direct labour category) who are driven by strong professional, ethical and moral values and who would otherwise blow the whistle on this conspiracy of concealment, they are forced to remain silent.
The only people who are not in the know about this blatant scam are those in the pay of the State!
So the chances of financial risks coming to the fore on Trident soon after the main investment decision has been taken are about as certain as night follows day.