Memorandum by the Civil Aviation Authority
CAA's RESPONSIBILITIES FOR NATIONAL AIR TRAFFIC
1.1 The Sub-committee is to conduct an inquiry
relating to National Air Traffic Services Ltd ("NATS"),
including developments at both Swanwick and at Prestwick and the
failure of systems at West Drayton.
1.2 This Memorandum explains the CAA's responsibilities
for NATS as a wholly owned subsidiary company of CAA, and gives
some examples of the CAA's role. It follows on from an earlier
Memorandum to the Sub-committee (8 October 1999), regarding NATS
PPP, which inter alia set out some recent history on the modernisation
1.3 The essential point is that the CAA
retains full responsibility for NATS and is wholly supportive
of the decisions that have been taken by the company.
2. GENERAL POSITION
2.1 Four years ago, NATS was established
as a limited company"National Air Traffic Services
Ltd". It is a subsidiary of the CAA. This takes separation
as far as is currently practicable within the existing legislative
framework. NATS PPP will separate CAA and NATS completely. The
date for this will depend on the coming into force of the Transport
Bill. The CAA therefore remains accountable for NATS as a wholly
owned subsidiary until the Government institutes legal separation.
2.2 Separation is already very far advanced
on the regulatory front, to ensure that the CAA has an arms length,
consistent and effective relationship with NATS, as it has with
the rest of the UK ATS industry. The CAA Board and management
are putting into place the new arrangements needed to carry out
the proposed new roles of licence management and economic regulation.
Safety regulation continues to be executed in the normal, thorough,
professional and robust manner. The CAA's Safety Regulation Group
(SRG) has recruited additional staff to ensure that the team that
is assessing the safety case for Swanwick remains at the correct
strength as the approval workload increases. New arrangements
for Airspace Policy to be undertaken by the CAA are set out in
2.3 In preparation for NATS PPP, Sir Roy
McNulty, Chairman of NATS, and Mr Semple, NATS Chief Executive,
have left the CAA Board. However, the CAA Board continues to execute
to the full its governance role over NATS and its legal responsibilities
for NATS. The CAA Board appoints/removes the Directors to the
NATS Board (apart from the MoD-nominated non-executive member).
2.4 Formal governance of NATS centres on
CAA Board processes. At each monthly CAA Board meeting, the Chairman
and Chief Executive of NATS attend to present the latest information
on safety indicators, operational issues, financial reports, progress
on major projects, full activity reports, software status of NERC,
controller numbers, and a full briefing on management action plans.
The CAA Board determines the nature and frequency of all these
reports, not NATS.
2.5 Indeed, the creation of NATS as a subsidiary
led to a more formal approach to business reporting. Following
the early signs of problems with the NERC project and the major
CAA Board review of its status and procedures, NATS reporting
to the CAA Board was formalised, made more understandable and
expanded. The CAA Chairman has been concerned to ensure that current
commercial best practice should be the norm. Thus, for example,
formal presentations to the CAA Board on significant issues have
been made mandatory.
2.6 Between Board meetings, the CAA Chairman
is kept fully in touch with significant operational and contractual
matters. The CAA Chairman and NATS Chairman meet at least bi-weekly.
When issues have arisen, NATS has been required to brief the CAA
Chairman. There has therefore been no weakening by the CAA in
discharging its responsibilities for NATS.
2.7 It should also be noted that, as a public
sector organisation, NATS continues to be bound by public sector
budgeting and borrowing requirements. The CAA Board enforces these
rules in accordance with government directions. In particular,
both the NATS Business Plan and large capital expenditure itemsabove
£5 millionrequire CAA Board approval.
3. EXAMPLES OF
CAA RESPONSIBILITY FOR
31. Some examples are given below of CAA
Board decisions concerning NATS investment programme and operational
performance. Other aspects of NATS-related matters are not covered
below. For example, it should be noted that the CAA Board has
discussed the future Pensions arrangements for NATS employees
(NB: the Chairman of the Pensions Trustees is appointed by the
3.2 Appointment of Dr Nigel Horne to
advise NATS on the New En Route Centre (NERC) project: The
Board's review of problems with NATS projects, coupled with the
Sub-committee's earlier reports on NERC issues, led to the need
to appoint independent project expertise. This was agreed jointly
by the CAA Chairman and the then NATS Chairman. Dr Nigel Horne,
the chosen expert, has held a wide range of senior posts in industry:
he has been advising NATS for about three years. He has made regular
independent reports in person to the CAA Board, on the Chairman's
instruction, highlighting potential problems and identifying solutions.
His objective approach, coupled with his clear and specific recommendations,
has made a major contribution to putting the NERC software development
onto an even keel, in comparison to previous over-optimism about
3.3 DERA and Arthur D Little Audits of
NERC: The progress of the audits, on software and financial
aspects respectively, were reviewed by the CAA Board.
3.4 New Scottish Centre (NSCPrestwick)/Bechtel
contract approved: The CAA Board endorsed the appointment
of Bechtel as Project Manager for the NSC project, following a
scrutiny of performance and incentive targets.
3.5 Y2K: the CAA Board monitored
progress on the resolution of "Millennium bug" issues.
3.6 EDS Oceanic Flight Data Processing
System (FDPS) contract suspension approved: The possibility
of EDS defaulting on the Oceanic FDPS contract was identified
some months ago. The recent termination of the EDS PFI contract
for Oceanic FDPS was the final outcome of a structured process
of negotiation and debate with EDS. The CAA Board was fully involved
in all stages of this formal process and endorsed the recommendations
of the NATS Board.
3.7 LATCCWest Drayton17
June 2000 failure reported and debated: NATS will be covering
this topic in more detail in their evidence. It is worth noting
here that the CAA supported the commissioning of Dr Horne and
Mr Martyn Thomas to undertake an independent review of the events
leading to the failure. They will also make recommendations for
any necessary improvements to the system or the way it is managed.
[Mr Thomas is a leading independent computer consultant and Chairman
of the Praxis Critical Systems company.]
3.8 NERC O-date approved: The
Board approved the NERC plan to completion and examined the recommendation
by Dr Horne and NATS that the scheduled NERC O-date should be
27 January 2002. The Plan covered the key risks and their mitigation.
The risks covered all aspects of the projectfrom software
"bugs" to computer interfaces to controller availability.
4.1 It is the CAA's responsibility, until
PPP is complete, to provide through NATS the safest and best system
of UK ATC. The CAA maintains a robust safety regulatory oversight
of NATS and will continue to do so post PPP, when it will take
on the additional responsibility of economic regulation of NATS.
In the meantime the CAA continues to take full responsibility
for NATS, and is wholly supportive of the planning and operational
decisions that have been taken.
Civil Aviation Authority
20 September 2000