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N-SUB RULES WERE BROKEN

 JASON GROVES Western Morning News

09:00 - 08 April 2003
 
 The Ministry of Defence yesterday admitted it had ignored internal
rules that could have saved the taxpayer hundreds of millions of pounds
when it awarded the contract to refit Britain's Trident nuclear
submarines to Devonport Management Limited. Giving evidence to MPs, the
MoD's top civil servant Sir Kevin Tebbit acknowledged that a "rule of
thumb" used by the department to prevent major contracts going to
companies that were too small to honour them had been ignored in the
case of the Trident work.

He said that the rule "must have slipped through my fingers".

Sir Kevin also admitted that the Government had been forced to abandon
the prospect of legal action against DML when costs spiralled out of
control because of the danger it would have "broken" the Plymouth
company, threatening the vital work to keep Britain's independent
nuclear deterrent afloat.

He said that even if the MoD had won in court, forcing DML out of
business would have proved a "Pyrrhic victory" that would not have been
in the taxpayers' interests. Although DML is owned by the American
defence giant Halliburton, MPs heard that the US firm had only limited
liabilities on the Trident contract, leaving the British taxpayer to
pick up an additional costs bill running into hundreds of millions of
pounds.

Sir Kevin's evidence came as the Commons Public Accounts Committee
launched an inquiry into why the cost of building facilities at
Devonport to refit the Trident fleet had risen from an original bid of
#237 million to almost #1 billion.

Alan Williams, the deputy chairman of the committee, said the decision
to award a contract to DML that was 28 times over the limit suggested by
MoD rules, had left the Government "massively exposed" to extra costs
when things went wrong.

MPs on the committee, which monitors Government spending, were sharply
critical of both DML and the MoD at yesterday's hearing.

The former Labour Defence Minister George Howarth described the handling
of the Trident refit contract as a "monumental failure".

Tory MP Richard Bacon said that costs on the contract appeared to have
been "unmanaged and out of control".

And the left-wing Labour MP Ian Davidson said DML had proved to be
"incompetent". He said the work should have gone to the rival yard at
Rosyth, in Scotland.

But Sir Kevin said there was "no evidence" that the project would have
been cheaper if it had been carried out anywhere else. And he insisted
that the MoD had not given DML an "easy ride" as the firm had been
forced to forego its profit and pay back #43 million. "This is still
quite a tough result for the company," he said.

Anthony Pryor, executive chairman of DML, defended the handling of the
project.

Mr Pryor said the completion of the "complex" project on time last year
had been "an outstanding achievement". He said that mistakes by DML had
contributed only a small amount to the final cost.

A report last year by the National Audit Office found that DML and the
MoD blamed each other for the huge cost overruns. The difficulty of
building a facility to meet civilian nuclear standards was also singled
out as a major contributor to costs.

But Laurence Williams, chief inspector of nuclear installations at the
Health and Safety Executive, yesterday said that the standards required
did not change during the course of the contract.

Sir Kevin said the difficulty had come with applying those standards in
practice. He said that with hindsight, the MoD should have established
the likely cost of the design work before letting the contract. And he
admitted that the MoD should have intervened more quickly when things
started to go wrong in the late 1990s.