Tuesday 13 January 2015
Equipment Plan and Major Projects Report
I am today placing in the Library of the House the third annual summary of the Defence equipment plan. The equipment plan represents the position at the end of March 2014 and sets out our plans to spend around £163 billion on new equipment and equipment support over the next 10 years. For the third successive year, this plan is realistic and affordable over the whole of the decade. It includes a central contingency provision of £4.6 billion over and above the provisions for risk within individual project budgets, and around £8 billion of additional headroom in the later years of the decade. Together these provide flexibility to address any cost growth within the core equipment plan while allowing us to fund, incrementally and flexibly, a number of additional programmes that are a high priority for Defence, as soon as we can be sure that they are affordable.
Today, the National Audit Office (NAO) will publish its third assessment of the affordability of the Ministry of Defence (MOD) equipment plan, which this year has been merged into one document with the MOD’s Major Projects Report for the first time. The report recognises the progress we are continuing to make, including the relative stability of forecast project costs, as well as highlighting areas where we must continue to improve and refine our processes.
Of the 11 projects within the MPR sample of 17 projects that have passed the main investment decision point, we have delivered 99% of requirements, the forecast cost of the projects has reduced by £397 million and the in-service dates have had a small increase of 14 months. This is the MOD’s best cost performance since 2005 and the best time performance since at least 2001, with delivery of military requirements routinely good over the period.
Energy and Climate Change
Nuclear Decommissioning Agency
I would like to inform the House that the Nuclear Decommissioning Authority (NDA) is today announcing a change to its commercial model at Sellafield, its largest and most complex site.
The Government closely monitor the work of the Nuclear Decommissioning Authority (NDA) and its contractors. Our goal is to ensure that the nuclear legacy is made safe, decommissioned and cleaned up, and in a way that best delivers value for money.
The Government agreed last year with the Public Accounts Committee’s conclusion that it was a priority to consider what contractual model might best deliver improved performance and value for money at Sellafield. In the meantime, we endorsed the Nuclear Decommissioning Authority’s decision to roll the current parent body organisation (PBO) contract forward into the second term (from 1 April 2014) to ensure that the progress made in the first five year term could be built upon. Sellafield Ltd (the site licence company which operates the site under the ownership of the PBO) continues to make progress and is currently on track to deliver against its key performance measures and milestones in 2014/15.
Despite this progress, the NDA has concluded that a change in model is now the best way forward. The current arrangements brought stability to the site from 2009, have allowed for effective planning and delivered important progress on key projects in the last six years. However, it is now clear that Sellafield’s complexity and technical uncertainties present significantly greater challenges than other NDA sites, and it is therefore less well suited to the transfer of full site-wide responsibility to the private sector via a PBO structure.
Under the new arrangement, Sellafield Ltd will become a subsidiary of the NDA and will continue to be led by a world class team, who will be appointed and governed by a newly constituted board of the site licence company. Engagement with the supply chain at all levels remains central to this new approach. The new model will, in due course, see a strategic partner appointed by Sellafield Ltd, to strengthen the programme management and commercial capability at the site as well as playing a key role in managing capital projects and contracts. This approach is recognised as best practice in other major projects, such as Crossrail and the Olympics.
NDA and Sellafield Ltd will manage the transition to the new arrangements, expected to take around 15 months to complete, in close co-operation with workforce representatives, Nuclear Management Partners (NMP), the supply chain, the regulators and the local community. The continued safe and secure operation of the Sellafield site will remain the over-riding focus during the transition and under the new structure.
We recognise the achievements of the site in the last six years and thank NMP for their support in stewarding Sellafield through a crucial phase of delivery and planning. We anticipate their constructive and supportive position on this change.