Select Committee on Defence Tenth Report


The Defence Committee has agreed to the following Report:—



1. Over the last two decades, successive Defence Committees have monitored the MoD's performance in procuring equipment and weapon systems, and have undertaken numerous inquiries on specific programmes. The MoD's record over that time has been less than glorious. An example of why there needs to be close scrutiny of procurement projects is provided by the SA80 individual and light support weapon. Our predecessors were strongly critical of it in a report in 1993[8]. This month, the MoD announced an £80 million programme to remedy the defects of the weapons which have now been officially recognised[9]. Our other reports over the years, and successive Major Projects Reports,[10] have highlighted a pattern of frequent delays and cost escalation. The MoD's 1998 Strategic Defence Review (SDR) made much of its 'smart procurement' initiative, designed to tackle these weaknesses, which we examined in some detail in our report on the SDR.[11] We have continued to monitor closely the progress of the major projects within that new environment, as well as the key procurement decisions produced by the SDR.

2. To continue that ongoing work, last year we initiated an annual survey of major procurement projects.[12] This annual review has to be read alongside our continuous review of the MoD's annual reporting cycle, on which we last reported in February.[13] Our aim is to monitor, and report progress on, a selection of the operationally more significant procurement programmes in a way that can measure the success of the smart procurement initiative, which will measure the implementation of projects which are keystones of the SDR strategy, and which can inform the House's annual defence equipment debate. The projects monitored currently comprise—

  • The new aircraft carriers
  • The Future Carrier-Borne Aircraft
  • The Common New Generation Frigate
  • Additional sealift capability
  • The Bowman communication system
  • The Tactical Reconnaissance Armoured Combat Equipment Requirement (TRACER)
  • Eurofighter
  • The Beyond Visual Range Air-to-Air Missile (BVRAAM)
  • The Advanced Short Range Air-to-Air Missile (ASRAAM)
  • The long-term and short-term airlift programmes—the Hercules Rolling Replacement Aircraft tranche-2, and the Short Term Strategic Aircraft

3. Last year our report could not be produced in time to inform the defence equipment debate—itself a recent innovation[14]—which took place in April 1999. In that report we recommended that the next debate should not take place before June 2000, to allow us time beforehand to receive the MoD's latest memorandum (on the position as at 1 April), to take evidence on it and report our findings.[15] We are grateful for the House's business managers for scheduling this year's equipment debate in a way that allows us to inform it. It would be useful if as far as possible this pattern could be followed in future years.

4. As we did last year, we have again included the MoD's memorandum on our monitored projects with this report.[16] It addresses for each project a standard set of issues and information under headings suggested by the Committee, and which we consider provides a good synopsis of the important features of each programme. We asked that it should be self-standing—in other words that it can be understood without reference to last year's memorandum. The House will also soon have the National Audit Office's report on the 1999 Major Projects Report, analysing the costs and progress of the 25 financially most significant procurement programmes, which overlap with the portfolio of programmes addressed in our rolling inquiry.

5. Although the MoD's memorandum provides a comprehensive picture of the full range of projects, our intention is each year to focus our inquiry on investigating particular issues concerned with a selection of them. Last year we dealt at some length with the Common New Generation Frigate, because of the UK's decision in April 1999 to withdraw from the 'Horizon'warship component of that programme.[17] In this brief inquiry, conducted as part of this year's report, we have focussed on three currently topical areas—

  • Eurofighter armaments: Last month, the government finally decided between two competing bids for the Beyond Visual Range Air-to-Air Missile (BVRAAM) for Eurofighter. At the same time, it announced that more Advanced Medium-Range Air-to-Air Missiles (AMRAAM) would be procured for use on the aircraft ahead of BVRAAM's introduction.[18] Lastly, at the same time Ministers decided not to fit the Mauser cannon on later batches of the aircraft for the RAF.[19]

  • Strategic Lift: Also last month,[20] the government decided on its preferred suppliers for the long-term and short-term transport aircraft requirements.

  • Bowman: After concerns over the availability of secure communications used by our troops in Kosovo, a further delay in the expected in-service date of the new Bowman digital communications system was announced last December.[21] Around that time the MoD sought proposals from alternative suppliers for the Bowman system. The future direction of the programme is at a critical juncture, as the MoD aims to place production contracts later this year.

6. We took oral evidence from Sir Robert Walmsley, Chief of Defence Procurement (CDP) and Chief Executive of the Defence Procurement Agency, and from Vice-Admiral Sir Jeremy Blackham, Deputy Chief of the Defence Staff (Equipment Capability), heading the MoD's internal 'supplier' and 'customer' organisations respectively.[22] The decision clearly to separate these roles was one of the changes implemented as part of the MoD's smart procurement initiative, and the creation of Sir Jeremy's organisation in particular was intended to address the previous lack of a 'customer' focus at the centre of the MoD, with both equipment programming and budgeting responsibilities brought together.[23] Admiral Blackham's organisation focusses on broad areas of generic military capability, such as strike, manoeuvre or strategic deployment, and is now responsible for considering trade-offs between technical solutions to satisfy capability requirements within these broad fields, as well as between cost and capability.[24] Informed by such considerations, the Defence Procurement Agency seeks to provide cost-effectively the equipment capability sought by the 'customer'. With Sir Jeremy and Sir Robert sitting at either end of this customer/supplier chain, it was possible to obtain both perspectives during our hearings. This is an approach we intend to follow in future.

7. In this inquiry we also briefly examined the secondment of Sir Robert's deputy, Mr John Howe, to Thomson-CSF. Two of the procurement programmes that we cover in this report involve Thomson-CSF—Bowman (paragraphs 41-59) and the Carrier programme where the firm leads one of two competing consortia (paragraphs 65-68). We therefore took the opportunity to question the benefits to the MoD of Mr Howe's secondment to this French-owned firm, which has a significant government shareholding,[25] and which is in the process of acquiring major UK firms.

8. The chief factor in the MoD's decision to loan Mr Howe to Thompson-CSF was, Sir Robert Walmsley told us, to help the firm to establish itself as a credible competitor in the UK where the defence electronics industry was increasingly dominated by BAE Systems. CDP explained the Department's thinking—

    It is very important ... that we continue to derive as much benefit from competition as possible. Thomson-CSF have not so far been a prime contractor in the United Kingdom in a very big way. Their acquisition of Racal puts them in a position where ... they are potentially able to... take on prime contracting for ships like the carrier ... The company has to understand how the MoD works as a prime contractor. That is the first thing that Mr Howe will be able to explain very clearly to Thomson. ... The second point is security. When you have an owner who is centred in a foreign country, ... the confidence with which other allies and the Ministry of Defence look to that company to operate security procedures is fundamentally important ... Mr Howe will take a very close interest in those aspects to ensure that we do not have any stumbles there ... I want to build up an alternative competent prospective prime contractor. If we do not do that we will lose competition, and all the benefits that we get from that, in defence electronics.[26]

9. CDP explained that this was a unilateral initiative, without any reciprocal move by the French government to help UK firms competing for French MoD orders.[27] The aim, he assured us, was to develop Thomson-CSF's competence in the UK,[28] where it would continue to be an important part of the "British" defence electronics industry.[29] The test of the success of this at first sight risky decision to loan a senior civil servant to a foreign-owned competitor for UK defence contracts will be whether the competitive pressures are in fact maintained, and whether there are identifiable consequential benefits in terms of price and innovative technical solutions, in the Carrier, Bowman and other programmes. These gains will have to be significant if this act of apparent altruism is to be shown to be actually self-interested. The MoD's case would be more persuasive had it been able to secure a reciprocal arrangement with the French defence department.

10. We now turn to an examination of this year's spotlighted projects.

8  Third Report, Session 1992-93, The SA80 Rifle and Light Support Weapon, HC 728 Back

9  HC Deb., 23 June 2000, cc 318-319 w Back

10  Published each year by the National Audit Office Back

11  Seventh Report, Session 1998-99, The Strategic Defence Review, HC 447 Back

12  Eighth Report, Session 1998-99, Major Procurement Projects Survey: The Common New Generation Frigate Programme, HC 544 Back

13  Second Report, 1999-2000, Ministry of Defence Annual Reporting Cycle, HC 158 Back

14  From the 1998-99 Session, the Government has replaced the three separate debates on the Royal Navy, Army and Royal Air Force with debates on defence equipment, armed forces personnel and defence in the world Back

15  Eighth Report, Session 1998-99, op cit, para 2 Back

16  Ev pp 49-88 Back

17  Eighth Report, Session 1998-99, op cit, para 3 Back

18  HC Deb., 16 May 2000 cc 149-151 Back

19  HC Deb., 16 May 2000, cc 95-96w Back

20  HC Deb., 16 May 2000, cc 149-151 Back

21  HC Deb., 21 December 1999, c468w Back

22  The 'customer' role for equipment programmes is shared between Sir Jeremy Blackham's Equipment Capability organisation and the relevant front-line commands who will use the equipment. Back

23  Ev p 43, para 25 Back

24  Ev p 43, paras 25-33 Back

25   A third of Thomson-CSF's shares are held by 100% state-owned firms, although another third of its shares are traded on stock exchanges Back

26  QQ 291, 292 Back

27  QQ 295, 296 Back

28  Q 295 Back

29  Q 298 Back

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