Examination of Witnesses (Questions 220
- 239)
WEDNESDAY 24 MAY 2000
SIR ROBERT
WALMSLEY AND
VICE-ADMIRAL
SIR JEREMY
BLACKHAM
Mr Hood
220. If you walk away from Archer, and you are
saying you do not want to do that, you will be in the position
of who do you walk to. You will be in exactly the same position
if you do that.
(Sir Robert Walmsley) No. We will have two companies
then. The problem with Archer is that they are a single tender.
We are working extremely hard, that is why I have got all these
people at the Archer headquarters doing the pricing. If we decide
that we cannot place the contract with Archer, and I keep on trying
to emphasise that is our preferred course of action, then I do
not want to spend a long time working out what to do next. These
study contracts, which we have paid good money for, are to, so
to speak, qualify the intellectual content of what CDC and Thomson
might offer. We will put that in the freezer while we pursue the
business with Archer but if Archer does not work for some reason,
those things will be out of the cupboard faster than that and
we will have a competition between those two companies.
Mr Cohen
221. If you push ahead still with Archer, how
is the problem solved on this matter of the sub-contractors? It
may well be that they choose their chosen sub-contractor for their
own reasons, not necessarily best value for money, and then the
bill ends up back with us. How do you solve that problem?
(Sir Robert Walmsley) I think I will get the numbers
right. On the VHF radio competition, which was actually the nutcracker,
there were four people from Archer and three people from the Minister
of Defence on the Tender Assessment Panel. Therefore, we had total
visibility of what was going on. I have tried to explain that
the Ministry of Defence insisted on a different management structure
being adopted in Archer, put British Aerospace in charge and make
them—make them—deliver decisions which are genuinely
not being conditioned by their shareholders' interests. Putting
really good people into Archer from the shareholding companies
has electrified the position in Archer because no longer are they
looking over their shoulders. In Archer they are thinking "this
is really something, we see these good people from our company
enjoying it. We are no longer interested in our shareholders,
we want Archer to do well on Bowman". So there are two things:
total visibility of what is going on in these sub-contract competitions
and getting the right people into Archer under the right management
structure. Finally, I should say that results matter. They have
selected a VHF radio, they have now selected another radio and
all I can say is that the process is satisfactorily under way.
These prices with these sub-contracts are what we are using to
synthesise the total contract with Archer.
222. I think you said it but I missed it. Can
you say when you expect you will make a decision either to go
ahead with Archer or to go with one of the others?
(Sir Robert Walmsley) I did say that we would get
a bid from Archer next month. I think by the time we get that
bid we will have decided whether to carry on with them for the
next few months. We then get that bid confirmed in the autumn,
30 September actually. Provided that is satisfactory we will then
be able to put a proposition to ministers before the end of the
year. All through that process Archer's fingers will be in the
mangle just as much as our's. We will be sharing the costs during
this period.
Chairman
223. This takes an awful lot of your time then
obviously.
(Sir Robert Walmsley) It does.
224. And you want to go through this again on
a project like this?
(Sir Robert Walmsley) I do not, Chairman, but as I
think I have said before, and I hope it does not sound too grandiose,
this is worth doing. This is really important, it is not some
administrative puzzle that is quite good fun to solve. I am under
a lot of pressure from Admiral Blackham, a former colleague and
an old friend.
225. He does not look as though he is putting
you under pressure.
(Sir Robert Walmsley) He does. He comes into my office
and gives me a very hard time and not always in private.
(Vice Admiral Sir Jeremy Blackham) And writes to him
when I cannot get in.
(Sir Robert Walmsley) I just want the Committee to
know that this is something I am spending far more time on than
I am on most things. I will continue to do that until we get the
thing on contract and then it will be down to the Integrated Project
Team.
Mr Cohen
226. If we do not go with Archer, is there anything
out of that that can be salvaged?
(Sir Robert Walmsley) That is obviously a big worry
to me. Because Thomson would own Racal, the Racal components may
well have some relevance to a Thomson bid. Because I do not want
Thomson to be caught up in a conflict of interest at the moment
that is shelved. We have learned a lot of course.
Mr Gapes: I have got three questions.
The one is you have accepted that this has been a long and protracted
process and it has obviously caused a lot of uncertainty, to quote
the excellent manufacturing facilities in my constituency, enormous
concern for the hundreds of people who thought they might be working
and this has been going on for eight or nine years. I think for
all the companies involved, leaving aside individual sites, and
the workers who work in those places, this has caused enormous
anguish, worry and speculation. Do you accept that this has not
been the right way to run a railway?
Mr Cohen
227. Or a radio.
(Sir Robert Walmsley) I do accept that the results
have been wholly unsatisfactory and I take responsibility for
that, of course I must. But I have to say three years ago those
workers were in one of two consortia and they did not know at
that stage whether or not they were going to get the contract,
and if any of their management led them up the garden path by
telling them that they were bound to get it then that is the management's
responsibility. That is what has caused that uncertainty. With
the formation of Archer we, the Ministry of Defence, made it quite
clear that we would expect competing bids for these components.
How else are we going to keep a company which is getting a non-competitive
contract under control? The management of those factories should
have told them about it. Of course, if I have got the factory
right, I think that might have been owned by Siemens at one stage.
Mr Gapes
228. It was.
(Sir Robert Walmsley) The question was whether Siemens
were going to put manufacturing technology into that factory.
We all know what happened to the other big Siemens investment
which dwarfs that in this country. I do not think the Ministry
of Defence should be held to account for the uncertainty, not—I
just underline this point—not that we are not aware of the
hugely disturbing effect that has on some of our best people.
229. I will leave that point there and carry
on but I think the point is made. You referred earlier to the
question of competition and pushing down the price. How much do
you think the price premium was on the Archer proposals before
you brought in effective competition?
(Sir Robert Walmsley) My working rule is that you
always get ten% off the price for competition. That is just on
average. In this case we have brought the Archer initial price
down by something like 30% but, and I am nervous in front of Mr
Hancock, partly by sensible, coherent adjustments in the requirements.
I do not want to say all that 30% is Archer's fault.
230. So what you are saying in effect is your
specification originally was gold plated?
(Sir Robert Walmsley) I am trying not to say that
because I think that is a bit unfair as well. We did not know
what the various bits cost and it is only when you start to understand
what the various bits cost that you say "am I really prepared
to pay that much for this component and capability?" You
say "it is just not value for money".
231. So you would not accept any responsibility
within your own Department, this is all the fault of the manufacturers?
(Sir Robert Walmsley) Of course I would accept responsibility,
there is no question about that. I am trying not to characterise
it as gold plating. I am trying to get across this quite important
message that when you know what things cost you start to place
them in a different priority order. Our previous system did not
require Admiral Blackham's people to pay any attention to what
the various components and capability cost, they just wrote them
down.
232. Finally, you have referred to the way in
which the Archer consortium is being well led now by British Aerospace
but is it being properly resourced and staffed by the three constituent
components?
(Sir Robert Walmsley) Obviously there are always individual
slots that need to be filled. The truth is I would be looking
more at the beam in my own eye rather than the mote in their's.
They have made enormous strides and they have come to me, being
absolutely frank, and said we need more commercial officers on
our side for this engagement we have got with them and I accept
that.
Mr Hancock
233. In your reply to Harry Cohen you said you
were expecting to have the final bid from Archer in a month. If
that does not materialise how much longer are you prepared to
dilly-dally with them?
(Sir Robert Walmsley) A week or two.
234. Is that all?
(Sir Robert Walmsley) Yes.
235. And then you would do what?
(Sir Robert Walmsley) Twenty-one days is what I have
agreed with them.
236. So if they do not deliver by the end of
the month, this month, they have 21 days grace, but if they do
not deliver then what is your scenario?
(Sir Robert Walmsley) At the end of next month. I
did say their bid and I did say interim and I said the final bid
is in September. I did say if they fail on any of these milestones
they have got 21 days to sort themselves out.
237. And if they do not, what is your scenario
then?
(Sir Robert Walmsley) Get these two studies out of
the cupboard, speak to the people who I have got preparing a potentially
competitive invitation to tender and get permission, because I
have to persuade my colleagues at my level and then ministers,
to launch a competition.
238. Have your staff said to you that these
two other possibilities are as good or better than what you are
trying to get from Archer?
(Sir Robert Walmsley) No.
Chairman: We will have to move on. All
I am saying is I hope that if there is anyone from Archer here,
if they want to be reminded they should send for a copy of the
transcript. I think you have made it pretty clear what the consequences
will be. Now our second echelon forces are coming into action
and Ms Moffatt has a constituency interest in Racal. To celebrate
their new status she is going to ask this question in French.
Laura Moffatt
239. Merci, Monsieur. I am certainly
not. Chaps, you could not write this, could you? If you were to
set out to write a book or a mini-series you could not do it with
this, it would be impossible. In fact, Sir Robert, if you want
to do it I will be your manager, okay, because I think we could
make some bucks on this with a mini-series, a bit of love interest,
you cannot go wrong. Maybe there was and that is what I have missed,
but I do not know. The fact is this is a pickle. There is enormous
frustration, and the Chairman has already said I have got a constituency
interest, and I have felt their pain and anguish. I have gone
into the field and felt even more the pain and anguish of those
who are trying to use equipment that is not up to the job. Let
us talk about where we are and how we can move it forward. You
very honestly laid out the future but what I want to know is is
the in-service date of late 2003/early 2004 realistic?
(Sir Robert Walmsley) Yes, it is. Please understand
that the in-service date is equipping a defined number of units
in the army, it is not equipping the whole of the army.
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