Select committee inquiry
Submarine defueling and dismantling inquiry
Closed
What the inquiry looked at
“In 1995, the government took the decision to dispose of its nuclear liabilities, including nuclear submarines. It was agreed that these would be disposed of as soon as was ‘reasonably practicable’. However, since then no nuclear submarines have been dismantled: despite the fact that 20 submarines have been taken out of service since 1980. These decommissioned submarines have incurred £0.5 billion in maintenance and storage costs at the dockyards in Devonport and Rosyth. In June, the National Audit Office reviewed the Ministry of Defence’s progress on submarine disposal and considered the main reason for the delays. The NAO reported that there have been major delays to the MoD’s defueling work which has not progressed since 2004 as facilities were not up to standard. The upgrade of these required facilities has now been delayed by 11 years and will cost £100 million more than expected. The MoD now expects to start defueling in 2023. The MoD’s dismantling project has also encountered major delays and is 15 years behind schedule: costs of this project have now increased from £0.8 billion to £2.4 billion. These delays have led to the MoD incurring even further costs: it spends £30 million a year on maintenance and storage costs, as well as the £24 million it pays a year to Babock International Group plc, the contractor which owns the dockyards at Rosyth and Devonport. On Wednesday 1 May, the Committee will be hearing from senior officials at the MoD, as well as a representative from Babcock to ask what progress the MoD has made against its disposal requirements and what the implications of the delays of this project will be. The Committee will also ask the MoD how it intends to prevent similar problems and delays in future.”
The committee's words, from the inquiry page on parliament.uk ↗.
What it found
In the committee's words, from the summary of 101st Report - Submarine defueling and dismantling ↗
The UK retired its 20 legacy submarines in 1980 and the Ministry of Defence’s (the Department) progress in disposing of these submarines has been a serious disappointment. The project has moved at a glacial pace and the 15-year delay has led to extortionate storage and maintenance costs which are now costing the taxpayer £30 million per year. The Department is also looking increasingly likely to find itself without any further storage space by the mid-2020s. The Department is rapidly approaching crisis point and simply cannot afford any further delays, particularly as much of the money currently being spent on the project is not going directly towards either defueling or dismantling. While it has taken the Department 16 years to devise a workable dismantling strategy, it is encouraging to see that progress is now being made and there is finally some momentum behind the project. However, while there is now an agreed policy, we remain sceptical that the ambitious timetable will be met, particularly given how many times this project has been delayed or deprioritised over the years.
It is clear that the commitment to dismantle its first submarine—Swiftsure—by 2023 will not be met and will likely be completed three years after the target date. The scale of the task faced by the Department appears even more challenging given the defence affordability ‘black hole’ which totals at least £7 billion. The Department has some way to go to establish submarine disposal as a routine part of its business.
What the government said
No government response is linked to this report.
How the inquiry ran
Each dot is a dated item listed on this page, from the inquiry's opening on 7 March 2019 to 19 June 2019.
- Oral evidence 1 May 2019
- Report 19 Jun 2019
- Correspondence 2 letters
What it recommended 1 recommendation · 19 conclusions
1The continual failure to progress submarine disposal has created an unacceptable and unnecessary problem for...
Concluded (the committee's words)
The continual failure to progress submarine disposal has created an unacceptable and unnecessary problem for the Department. In not yet disposing of a single submarine, the Department now risks running out of both storage and maintenance space. The projects needed to allow disposal to happen have been beset by delays, with an 11-year delay to defueling and a 15-year delay to dismantling. The Department will not be able to meet its commitment to fully dismantle its first submarine in 2023. Delays have resulted from the Department having to clarify policy through public consultations, but also through poor contractor performance and affordability constraints. In its 2018 annual nuclear update to Parliament, the Department outlined the status of its disposal projects, although these are not mentioned in the Agency’s annual report despite disposal being one of its six ‘purposes’. Recommendation: To ensure the task receives the attention it deserves, the Department and its partners must maintain the recently established momentum by regularly monitoring progress with these projects at senior level, and continuing to provide information on developments via the Department’s annual update to Parliament on the future nuclear deterrent.
2The Department has yet to resolve significant uncertainties affecting the projects that are needed in...
Concluded (the committee's words)
The Department has yet to resolve significant uncertainties affecting the projects that are needed in order to avoid future space constraints and meet its commitments. The Department has now committed to dismantling its first submarine, Swiftsure, by 2026, when it will roll out a tried and tested dismantling approach across other submarines. After having agreed a dismantling policy, published in 2016, it is confident of meeting this date but still needs to secure regulatory approval, allocate funds and procure the intermediate-level waste transport arrangements, which it sees as high risk. To avoid space constraints for both storing and maintaining submarines, the Department must re-start submarine defueling, suspended since 2004, in 2024. It needs to agree a timetable and cost for completing this work with the contractor, Babcock International Group plc (Babcock), alongside securing nuclear-regulatory approval to restart defueling. Recommendation: To avoid running out of space and to meet its commitments, the Department must achieve the milestones it has set itself over the next ten years, including by having commercial arrangements agreed for defueling by the end of
3The Department has repeatedly made decisions on short-term affordability grounds which have increased costs in...
Concluded (the committee's words)
The Department has repeatedly made decisions on short-term affordability grounds which have increased costs in the longer-term and led to poor value for money. These decisions included deferring Devonport infrastructure work to save £19 million in the short-term, which then delayed the defueling project by two years. The Department is not yet able to confirm how much it will now cost to complete the project. Given delays, the Department continues to pay storage and maintenance costs of £30 million a year. To achieve value for money, the Department and Babcock recognise the value of a constant ‘drumbeat’ of work to avoid peaks and troughs. 6 Submarine defueling and dismantling Recommendation: Where it has made decisions on affordability grounds that affect disposal-related projects, the Department should detail the targets, timescales and success indicators in its annual nuclear deterrent report to Parliament how these impact on progress towards establishing a routine programme of disposals, as well as how it will manage the risks to value for money.
4We remain unconvinced that funds will be available for disposal-related projects, or that the Department...
Concluded (the committee's words)
We remain unconvinced that funds will be available for disposal-related projects, or that the Department has done everything it can to secure potential funds. Wider affordability decisions have increased costs and delayed disposal-related projects. Looking ahead, there remain well recognised affordability challenges. With a £7 billion ‘black hole’ in the defence budget over the next ten years, the Department will need to prioritise, which creates further uncertainty for disposal- related projects. The Department cannot yet provide certainty that funding will be available for either defueling, where costs remain unclear, or for dismantling, where some technical processes need to be finalised. It cannot access the dedicated long- term nuclear decommissioning funding set aside for civil nuclear in the Energy Act 2004, and it remains unclear why the Department has not considered pursuing this source of funds. Recommendation: To sustain momentum behind this work, the Department must provide certainty over longer-term funding as soon as possible. It should do this by: • urgently clarifying department-wide priorities and making decisions to delay, defer or descope areas of the programme so as to plan funding on a longer-term basis; • being clearer on the priority of disposal-related projects and how this may change over time; and • work with the Department for Business, Energy & Industrial Strategy and HM Treasury on the scope of the Energy Act 2004. The Department cannot access the decommissioning funds ringfenced as part of this Act and it should work with these other departments to push for change.
5The engineering challenge of dismantling and disposing of nuclear submarines provides an opportunity to develop...
Recommended (the committee's words)
The engineering challenge of dismantling and disposing of nuclear submarines provides an opportunity to develop much needed skills in support of the government’s wider industrial and skills strategies. There remain skills shortages across the nuclear enterprise with, for example, the 2016 unplanned refuel of HMS Vanguard diverting skilled personnel. Both the Department and Babcock recognise this work can be complicated but challenging for engineers, with graduates keen to work on these demanding projects. They recognise the lack of skills to progress projects is a significant challenge and see establishing nuclear skills as a national endeavour across the civil and nuclear sector. Recommendation: Given the importance to the UK of developing a broad pool of skilled engineering talent, the Department and Babcock should set out by December 2019 its strategy for exploiting opportunities across disposal projects, such as working with universities, with the aim of increasing the size of the skilled workforce. Submarine defueling and dismantling 7
6The Department’s ability to achieve value for money depends on managing complex commercial risks and...
Concluded (the committee's words)
The Department’s ability to achieve value for money depends on managing complex commercial risks and relationships. The Department has a significant and unique relationship with Babcock, which is the nuclear-licensed site owner as well as the only supplier able to conduct defueling and dismantling. It recognises the need to collaborate with Babcock, while maintaining contractors at arm’s length. The Department has adopted various mechanisms designed to provide the transparency it needs to manage the contract closely, and the protection it needs should things go wrong. To progress submarine disposal, the Department needs to complete challenging commercial negotiations, facilitated by the Cabinet Office, to balance cost and time perspectives. It also needs to re-start the procurement of its intermediate-level nuclear waste transport approach where it misjudged the market’s risk appetite, leading to a two-year delay. Recommendation: The Department should report to us by 31 March 2020 to confirm that it has in place the appropriate commercial arrangements it needs and that good value for money will be delivered for the taxpayer. 8 Submarine defueling and dismantling 1 Performance of submarine disposal projects
7While acknowledging responsibility for past delays, the Department told us it remains committed to the...
Concluded (the committee's words)
While acknowledging responsibility for past delays, the Department told us it remains committed to the safe, secure and cost-effective refuelling and dismantling of all decommissioned submarines as soon as it practically can. It considers it has acted responsibly, with decommissioned submarines stored and maintained to the highest standards of safety and security. The nuclear regulators have assessed current arrangements as safe. The Department gave us assurances it would not compromise on the safety and security of submarines. It commented that the interest of this Committee and the National Audit Office report had focused the Department’s mind and reminded it of the importance of this issue.11
8In July 2018, the Department acknowledged that although it had deferred dismantling submarines for affordability...
Concluded (the committee's words)
In July 2018, the Department acknowledged that although it had deferred dismantling submarines for affordability reasons, this was no longer acceptable on safety and reputational grounds.12 It now recognises the need to progress these projects to avoid running out of storage and maintenance space when future submarines retire.13 Currently, the Department stores 12 submarines in a purpose-built water basin in Devonport which has approval to hold 14 boats. It plans to request regulatory approval to hold up to 16 submarines so it can accommodate the remaining four Trafalgar-class submarines when 7 Qq 12 -13, 78–84 8 Committee of Public Accounts Report, Ministry of Defence nuclear programme, Sixty-First Report of Session 2017–19, 10 September 2018, para 5; Ministry of Defence, The United Kingdom’s Future Nuclear Deterrent: The 2018 Update to Parliament, December 2018 9 Qq 14–15; Submarine Delivery Agency, Corporate Plan 2018–2019, April 2018 10 Qq 14- 15, 17; Letter from the Ministry of Defence, received 9 May 2019 11 Qq 1–2, 19; Committee of Public Account’s evidence session, 8 May 2019, Q4; C&AG’s Report, para 2 12 Committee of Public Accounts Report, Ministry of Defence nuclear programme, Sixty-First Report of Session 2017–19, 10 September 2018, para 5 13 Qq 34, 43 10 Submarine defueling and dismantling they leave service. Without approval, the basin will reach capacity around the mid-2020s.14 The Department told us it is confident it can store submarines leaving service through to the mid-2030s, and hopes its water-based approach to preparing submarines for long- term storage will overcome dock constraints.15
9To avoid space constraints, the Department needs to restart defueling in 2024, which it admits...
Concluded (the committee's words)
To avoid space constraints, the Department needs to restart defueling in 2024, which it admits is a challenging timetable.16 To do so, it must complete work to nuclear regulatory standards on both the reactor access house, to allow entry to the submarine, and on the dock. The Department and Babcock are currently negotiating the timetable and costs to complete this work, which the Department aims to agree by the end of 2019.17 The Department does not yet have nuclear regulatory approval to use the facilities and re-start defueling. It is confident the facilities will meet the required regulatory standards although it recognises work is needed.18 Given ongoing commercial negotiations, the Department could not confirm how much it would cost to re-start defueling in 2024, although it expects to pay more than initially forecast to complete the defueling facilities.19
10The Department will not meet its previous commitment to fully dismantle its first submarine in...
Concluded (the committee's words)
The Department will not meet its previous commitment to fully dismantle its first submarine in 2023.20 It acknowledged previous delays but assured us it is now better placed to progress after publishing its dismantling policy in 2016, removing the low- level radioactive parts from its first submarine, Swiftsure, and progressing the technical solution to remove the intermediate-level radioactive parts.21 It has now committed to dismantling its first submarine and to start rolling out a tried and testing dismantling approach for its submarines in 2026.22 Although it sees this as a pragmatic timetable it is confident of meeting, the Department recognises these projects have residual risks.23 To date, the Department has formalised where it will store its waste, but not how to remove or transport it. It has assessed developing the transport solution as high risk and the Agency did not meet its associated 2018–19 performance indicator. It continues to refine the technical solution to removing intermediate-level waste, but was confident this will be completed on time.24 14 C&AG’s Report, para 2.12 15 Qq 35–37 16 Q 52 17 Q 17- 18 18 Qq 50–51 19 Qq 54–56; C&AG’s Report, para 2.10 20 Committee of Public Accounts Report, Ministry of Defence nuclear programme, Sixty-First Report of Session 2017–19, 10 September 2018, para 16, 21 Qq 2, 12, 76 22 Qq 21–22, 24 23 Qq 13, 22 24 Committee of Public Account’s evidence session, 8 May 2019, Q14; C&AG’s Report, para 3.17; Letter from the Ministry of Defence, received 9 May 2019 Submarine defueling and dismantling 11 2 Challenges for submarine disposal Managing funding and affordability constraints
11To keep spending within the available funding, the Department has made decisions that have increased...
Concluded (the committee's words)
To keep spending within the available funding, the Department has made decisions that have increased longer-term costs, created delays and led to poor value for money. This includes to save £19 million by deferring Devonport infrastructure work, which affected the 90% complete defueling project, causing a two-year delay and cost increases.25 The Department also recognises that a failure to progress submarine disposal has increased storage and maintenance costs - £30 million each year - which it wishes to avoid paying in perpetuity.26
12Looking ahead, it remains uncertain whether long-term funding will be available to progress submarine disposal.
Concluded (the committee's words)
Looking ahead, it remains uncertain whether long-term funding will be available to progress submarine disposal. The Department told us these projects have been included within future funding plans, but it cannot be certain a budget will be available to support these plans.27 For example, it continues to develop the submarine defueling project requirements and costs, which need to be completed before funding approval can be sought.28 The lack of clarity over the timing of a potential spending review, creates additional funding uncertainty for the Department.29
13The Department faces significant affordability challenges, on which we last reported in February 2019, highlighting...
Concluded (the committee's words)
The Department faces significant affordability challenges, on which we last reported in February 2019, highlighting the affordability gap of at least £7 billion across the ten years 2018 to 2028.30 Given funding uncertainties and potential changes to funding plans, it remains likely the Department will have to re-examine its priorities to allocate a constrained budget. It reassured us of the importance of submarine disposal but stressed that this needed to be balanced against other demands such as maintaining the continuous at sea nuclear deterrent, which remained its highest priority. It recognised submarine disposal was important, however, given the risk of running out of space in Devonport, alongside the parliamentary interest. It reiterated the importance of not deprioritising projects in a way that created future problems and told us it would bid vigorously for long- term submarine disposal funding.31
14Consistent regulatory and safety standards apply across civil and defence nuclear, with the Department working...
Concluded (the committee's words)
Consistent regulatory and safety standards apply across civil and defence nuclear, with the Department working to the same objectives as civil counterparts such as the Nuclear Decommissioning Authority (NDA). In terms of nuclear decommissioning, the Energy Act 2004 established dedicated long-term funding for civil decommissioning work. The Department did not know why it had not sought access to these funds when the Act was established in 2004 and told us that it would welcome an amendment to the Act.32 It told us the Department and NDA continued to work together with, for example, joint aspirations on when defence will transfer nuclear liabilities to the NDA and a memorandum of understanding. While recognising commonalities, the Department 25 C&AG’s Report, para 2.6 26 Qq 66, 72 27 Qq 6, 33 28 Q 17 29 Qq 6–7, 33 30 Committee of Public Account’s Report, Defence Equipment Plan 2018–28, Seventy-Seventh Report of Session 2017–19, 1 February 2019, para 1 31 Qq 8–10, 75; Committee of Public Account’s evidence session, 8 May 2019, Q 4 32 Qq 63–64; Committee of Public Account’s evidence session, 8 May 2019, Qq 10–11 12 Submarine defueling and dismantling stressed that it remained best placed to deliver aspects of submarine disposal where, for example, specific submarine engineering skills are needed to understand the boat’s construction.33 Ensuring the right skills and capabilities
15Both the Department and Babcock identified submarine disposal skills shortages as a significant concern.34 The...
Concluded (the committee's words)
Both the Department and Babcock identified submarine disposal skills shortages as a significant concern.34 The Department told us it would need to bolster skills to re-establish defueling, hoping to develop its plans during 2019 given a lack of people to satisfy future Devonport workload demands.35 In 2016, limited availability of skills delayed defueling six months when the Department announced the unplanned refuel of HMS Vanguard which required them to divert skilled personnel.36 To ensure longer-term value for money, by avoiding expensive peaks and troughs in labour demand, the Department aims to establish a consistent and regular ‘drumbeat’ to its submarine disposal. The Agency told us that, with some smoothing of workflow, it could sustain skills over a prolonged period in Devonport. Babcock confirmed it saw the lack of a continuous work flow as an issue as teams needed by making it harder for teams to maintain expertise.37
16Submarine disposal can be attractive work for engineers given the technical challenges and complexities involved.
Concluded (the committee's words)
Submarine disposal can be attractive work for engineers given the technical challenges and complexities involved. In developing an efficient and methodical approach to removing radioactive parts in the smallest packages possible, the Department is attempting something no other nation has done.38 The Department told us it had graduates volunteering to be involved in what is seen as simulating work.39
17In September 2018, we reported on national skills shortages across nuclear work, recommending that the...
Concluded (the committee's words)
In September 2018, we reported on national skills shortages across nuclear work, recommending that the Department cooperates with contractors and across government to ensure that they all have the skills needed.40 The Department told us it continues to express concern at the level of nuclear skills in the United Kingdom and that sustaining necessary expertise remains a long-term challenge. The Department confirmed it had been working with the NDA, the Department for Business, Environment and Industry Strategy and the education and civil sectors to share skills plans and identify synergies. It felt that the civil sector had made more progress than defence.41 Managing commercial relationships
18The Department has a significant and unique relationship with Babcock, which owns the nuclear-licensed sites,...
Concluded (the committee's words)
The Department has a significant and unique relationship with Babcock, which owns the nuclear-licensed sites, with the Department paying £24 million each year to use the Rosyth and Devonport sites for submarine disposal. Babcock is also the only supplier currently able to conduct defueling and dismantling.42 The Department recognises the need to collaborate with Babcock, while maintaining the company at arm’s length. It 33 Qq 57, 59–60, 65 34 Qq 94, 97, 99; Committee of Public Account’s evidence session, 8 May 2019, Q 12 35 Q 43, 92 36 C&AG’s Report 2.6 37 Q 53, 69, 86, 88 38 Qq 2–4, 23, 86 39 Qq 105–106 40 Committee of Public Accounts Report, Ministry of Defence nuclear programme, Sixty-First Report of Session 2017–19, 10 September 2018, para 2 41 Q 107; Committee of Public Account’s evidence session, 8 May 2019, Q 12 42 Q 47; C&AG’s Report, para 1.14 Submarine defueling and dismantling 13 confirmed that should Babcock no longer be able to satisfy its obligations, which Babcock’s Chief Executive stressed was unlikely, commercial arrangements allowed Government to step in at Devonport. In addition, sharing a strategic asset list, open book arrangements, and the single source defence contract regulations, provide the Department transparency and protection.43
19To progress submarine defueling, the Department needs to complete challenging commercial negotiations with Babcock by...
Concluded (the committee's words)
To progress submarine defueling, the Department needs to complete challenging commercial negotiations with Babcock by the end of 2019. Ongoing discussions include balancing cost and time perspectives to complete the defueling project, alongside looking across the Devonport site where there are many infrastructure challenges. The Agency told us the Cabinet Office had recently facilitated constructive partnering discussions between themselves and Babcock, with these discussions having helped them focus on relationship and behavioural issues.44
20In 2018, the Department had to re-start its procurement for intermediate-level waste transport procurement after...
Concluded (the committee's words)
In 2018, the Department had to re-start its procurement for intermediate-level waste transport procurement after receiving no compliant bids. This has led to a two-year delay to dismantling.45 The procurement failed as potential bidders were unwilling to accept the risks the Department tried to transfer.46 Based on this learning, the Department de-risked arrangements by restructuring the competition, separated the design and manufacturing aspects, and provided greater clarity on what it wanted.47 The Department now has four interested parties and hopes to select a bidder by the end of 2019.48 43 Qq 46, 48–49 44 Q 43 45 Q 13; C&AG’s Report, para 3.17 46 Qq 27–28 47 Qq 25–26 48 Qq 25, 29 14 Submarine defueling and dismantling
Evidence
Oral evidence sessions 1
- 1 May 2019No witnesses recordedparliament.uk ↗