Costs have increased by more than the unit price of a submarine
3.7 Forecast costs over the past three years can be used to demonstrate that nearly £1 billion has been added to the cost to complete the seven Astute boats because of slowing down the build programme.18 Of this, £266 million19 was added during 2010-11 including £200 million on the approved boats (boats one to four). Other cost increases since the main investment decision was taken currently total £914 million,20 indicating that there has been over £1.9 billion of total cost growth in the past 14 years. The additional pre-2009 costs for Astute boats four to seven has not been calculated by the Department.
Figure 15 |
|
NOTE 1 This graphic shows the total time taken to construct an Astute Class submarine from when construction first starts to when the submarine is ready for operational deployment. Note that this is not the same as the in-service date as recorded in the project summary sheet. Source: National Audit Office analysis of Departmental data. |
3.8 As the reported forecast unit cost of Astute boat four is £1.4 billion, a programme cost increase of £1.9 billion amounts to substantially more than the cost of acquiring a further Astute Class submarine. Had the Department avoided cost increases on the Astute Class described above it could have built an additional submarine for less than the cost the Department is currently forecasting to build seven boats. The original Defence requirement for 'up to eight' Astute Class boats would have been more closely met. Eight boats of comparable availability would generate less pressure than seven boats in achieving the classified availability requirement.
3.9 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.21
____________________________________________________________________________
18 The Major Projects Report only measures the detailed cost increases of projects that have received their main investment decision. For the Astute Class programme, this has covered only the first four vessels of the seven-boat Class. This figure includes the cost impact across all seven Astute boats.
19 This includes £144 million recorded on the project summary sheet for boats one to three and £56 million for boat four. The remaining £66 million relates to boats five to seven but as these boats have not yet passed their main investment decision this is not shown on the project summary sheet.
20 The Astute project summary sheet records the total cost increase at £1,333 million. Recorded within this are cost variations specific to the decision to slow the build programme of £419 million. All figures are exclusive of cost of capital.
21 Securing Britain 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