27 March 2009
Full Report - The Red Dragon project
Red Dragon – a project by the Ministry of Defence (MOD), Welsh Assembly Government and the then Welsh Development Agency (the Welsh Authorities) to provide modern aviation repair facilities at St Athan, South Wales – has cost the taxpayer around £113 million, although it was meant to have saved MOD money and protected jobs in the area, according to a joint report released today by the National Audit Office and the Wales Audit Office.
The project was established in 2000 and involved the modernisation of ageing MOD facilities, the construction of a super-hangar for fast jet repair and an aerospace business park promoted by the Welsh Authorities. DARA – the Defence Aviation Repair Agency – was the intended main tenant, with most of its work on RAF fast jets being moved into a purpose built facility. However, the MOD committed to the project without having decided on its full vision for aircraft support. Once this vision had been established, but after the Red Dragon deal had been closed, MOD announced in 2005 that DARA would close its fast jet business at St Athan, leaving the site without its anchor tenant by April 2007. The super-hangar project has achieved efficiency savings of only £57 million (accounted for in the £113 million total net cost) as opposed to planned savings of £263 million. Over £1 billion of cost savings have separately been made through transferring repair to main Royal Air Force operating bases.
The closure of DARA’s fast jet business also resulted in many job losses which the Welsh Authorities had originally intended to prevent through the project. It was also hoped that 4,000 new jobs could be created over 15 years through the development of the aerospace park, but the closure of the fast jet business delayed and complicated these plans and only 45 jobs have been created so far.
The MOD and the Welsh Authorities did not work sufficiently closely during the project. Although they had complementary objectives, there was no common purpose between them, with the MOD interested in securing more efficient repair of fast jets and the Welsh Authorities interested in safeguarding and creating jobs in South Wales. When the MOD decided that the St Athan site was no longer the most efficient place to repair its fast jets, the objectives were no longer complementary. The MOD and the Welsh Authorities did not have a shared understanding of each other’s key assumptions. The Welsh Authorities were not told as early as they might have been about the implications for St Athan of the MOD’s review of fast jet support. However, there were examples of effective collaboration to address key issues of joint interest, with the Welsh Authorities and the MOD cooperating on marketing the site.
The MOD and the Welsh Authorities are now working together to secure the future of the site. There are currently plans by the MOD to establish a Defence Training Academy using the super-hangar, which the MOD and Welsh Authorities expect to bring significant economic benefits to South Wales. The MOD and the Welsh Authorities expect that the Academy will bring over 5,500 jobs to the area (although a third are likely to be filled by staff relocating from other parts of the UK). The Welsh Authorities also expect that the Academy will provide an impetus for current plans for an aerospace park, potentially creating around an additional 2,000 jobs.
Tim Burr, head of the National Audit Office, said today:
"Both the Ministry of Defence and the Welsh Authorities have invested a considerable amount of time, effort and money in creating modern aviation repair facilities in South Wales, with a super-hangar which is now sitting almost empty. As it happens, under the Defence Training Review there should be a future for the super-hangar at St Athan, but the Red Dragon project underlines that public bodies need to have considered all implications of their respective strategies before commencing joint projects."
Jeremy Colman, Auditor General for Wales, added:
"The Ministry of Defence and the Welsh Authorities failed to collaborate sufficiently throughout the project. Although for much of the time both had complementary objectives, they did not establish a common purpose for the project or a common understanding of their respective assumptions about the future of the site. The Red Dragon project highlights the danger in large and complex projects that involve multiple public bodies of insufficient openness and information sharing."
Notes for Editors
The Welsh Assembly Government and the former Welsh Development Agency are collectively referred to in this press notice and the accompanying report as the Welsh Authorities. In April 2006, the Welsh Development Agency was merged into the Welsh Assembly Government
This joint report reflects the separate powers of the National Audit Office and Wales Audit Office and the accountability arrangements which the two bodies support. The National Audit Office examined the activities of the Ministry of Defence under section 6 of the National Audit Act 1983 and reports to the House of Commons. The Wales Audit Office examined the activities of the Welsh Authorities under the Government of Wales Act 1998 and the Government of Wales Act 2006 and reports to the National Assembly for Wales. The conclusions are joint.
The Defence Aviation Repair Agency (DARA) became a trading fund of the Ministry of Defence in 2001. DARA became a trading fund in order to compete with industry for business that it had previously held.
The Comptroller and Auditor General, Tim Burr, is the head of the National Audit Office which employs some 850 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.
The Wales Audit Office is independent of government and is responsible for the annual audit of some £20 billion of annual public expenditure. Its mission is to promote improvement, so that people in Wales benefit from accountable, well-managed public services that offer the best possible value for money. It is also committed to identifying and spreading good practice across the Welsh public sector.
Press Notice 23/09
Phil Groves
Press Officer – National Audit Office
Laura Towler
Communications Officer – Wales Audit Office
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NAO (National Audit Office), UK Ministry of Defence
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