10 The most significant development for defence acquisition in-year was the October 2010 Strategic Defence and Security Review, the first full defence review since 1998. The Review was undertaken during a significant military commitment in Afghanistan and with a shortfall reported by the Department of up to £42 billion (which includes funding for the Successor nuclear deterrent programme) between the anticipated Defence budget and forecast spending over the coming decade.4 As the Review noted, such a shortfall made 'painful, short-term measures unavoidable', such as reducing or cutting military capability. Two of the most significant measures taken by the Review were extending the build programme of the Astute Class submarine and cancelling the Nimrod maritime patrol aircraft. The Review also changed the aircraft variant to be carried on the Queen Elizabeth Class aircraft carrier. This has been covered by a separate NAO study.5
11 As a result of the delay to Successor and to further save costs in the short-term, the Astute build programme was slowed to avoid a production gap in the submarine construction industry. The Review therefore extended the build time for the seven-boat Astute Class submarine programme by a further 96 months, including the 13-month deferral to boat four noted in paragraph 4. This has resulted in an average deferral to the Astute Class over the past three years of 28 months per boat. By extending the Astute build programme, the Department will have to use older boats beyond their out-of- service dates, work the smaller feet of Astute submarines harder, or reduce scheduled activity for submarines. Therefore, the Department is currently reporting that the Astute Class submarines will not meet the Royal Navy's requirement for sufficient numbers of submarines to be available for operations over part of the next decade.
12 Extending construction time of the Astute Class submarines also added a further £200 million in-year to the forecast cost to complete the Astute programme for approved boats (boats one to four). In total, these decisions have added nearly £1 billion to forecast costs to complete all seven boats in the last three years. The cost increase rises to over £1.9 billion when technical difficulties and capability changes made since the original approval for boats one to three was taken in 1997.6 In procurement terms, this equates to substantially more than the cost of acquiring a further boat.
13 Although outside the scope of the Major Projects Report, the Department also announced in the Strategic Defence and Security Review plans with the main industrial partners to reduce the cost of the entire submarine business by £900 million over the next decade.7
14 The Nimrod maritime patrol aircraft project has had a long history of management, technical and commercial difficulties. By the time the Department cancelled Nimrod in 2010 for financial reasons, the project was 114 months late and £789 million over budget. Cancelling the Nimrod maritime patrol aircraft has avoided approximately £1.9 billion in forecast costs associated with running and maintaining the aircraft up to 2020. The Department has noted that cancelling Nimrod was a difficult decision, but was considered 'an acceptable risk and not a gamble'.8
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4 House of Commons Defence Select Committee, The Strategic Defence and Security Review and the National Security Strategy, Rt. Hon. Liam Fox MP, 9 March 2011, Q134, www.publications.parliament.uk/pa/cm201012/cmselect/cmdfence/761/11030902.htm
5 Carrier Strike, HC 1092, Parliamentary Session 2010-2012.
6 The approval process for the Astute programme has been split into five parts. Astute boats one to three were approved together in 1997 and have a recorded forecast cost increase of £1.3 billion in the Astute project summary sheet. Astute boat four was approved in 2007 and has a recorded forecast cost increase of £0.1 billion. The remaining £0.5 billion is the forecast cost increase of boats five to seven (to be approved separately) which have yet to be approved. All figures are excluding cost of capital.
7 Securing Britian in an Age of Uncertainty: The Strategic Defence and Security Review 2010: http://www.direct.gov.uk/prod_consum_dg/groups/dg_digitalassets/@dg/@en/documents/digitalasset/dg_191634.pdf
8 House of Commons Defence Select Committee, Appointment of the Chief of Defence Staff, Oral and written evidence, HC 600-i, Session 2010-11, Q 38.