Select Committee on Defence Written Evidence

Annex (continued)


  The Strategic Defence review identified an urgent need to improve out strategic air transport capability and concluded that in the short term pending the introduction of Hercules Rolling Replacement tranche 2, HRR2, see separate memorandum[3]—we should acquire four C-17 aircraft or their equivalent. Proposals are being considered in parallel with those for HRR2. We hope to be able to announce a decision soon.


  1.  Based on operational analysis which modelled a range of scenarios in which UK forces might be deployed, the Strategic Defence Review identified a requirement for additional strategic lift assets, including four C-17 aircraft or their equivalent. The Staff Requirement, endorsed in September 1998, describes the capability equivalent to four C-17s in terms of:

    (a)  those individual equipment considered likely to drive the minimum acceptable payload or cargo-box dimensions, drawn from a list of equipment assessed as likely to have to be transported in the early stages of a deployment of the Joint Rapid Reaction Force; and

    (b)  theoretical overall maximum out-load capability over a 7-day period, derived from the operational analysis supporting the SDR work and expressed in terms of the maximum potential payload, floor area, and volume to be transported.

  2.  Other characteristics sought include the ability to:

    a.  operate world-wide from the widest possible range of airfields, including poorly maintained runways, with the minimum of ground handling support;

    b.  carry wheeled and tracked vehicles, palletised freight (including ammunition), troops, or stretchers, or a combination of all four, using integral equipment;

    c.  load and unload the aircraft without specialist ground equipment, including the ability to drive wheeled and tracked vehicles onto and off the aircraft without an intermediary loading vehicle or platform; and

    d.  rapidly re-role the aircraft between the different load configurations when away from base.


  3.  Trade-offs between cost and capability, including in relation to the characteristics described above, are being considered in the light of the bids received to meet the requirement.


  4.  The SDR established a short-term requirement for four C-17 aircraft or their equivalent. The number of aircraft acquired to meet this requirement will depend on the solution selected.


  5.  This requirement arises directly from work carried out during the SDR.


  6.  STSA will provide a strategic lift capability in peace, crisis and war.


  7.  STSA is being procured to meet a new requirement and does not directly replace any existing equipment or capability. The planned in-service date is defined in terms of a "goal" of June 2001 and a "threshold", ie the latest acceptable date, of December 2001, for the achievement of the operational capability.


  8.  An invitation to tender was issued on 30 September 1998 to eight potential bidders for open competition at prime contractor level. The deadline for tenders was 29 January 1999, the same as that for the four-nation collaborative competition which will identify the solution for the Hercules Rolling Replacement tranche 2, HRR2, requirement, see separate memorandum.[4] The two competitions were linked and assessed in parallel, both to consider the most cost-effective solution overall and to ensure that the solution chosen for STSA does not prejudice the HRR2 competition. Innovative tenders for STSA have been encouraged. For example, combined tenders for both STSA and HRR2 requirements have been compared with the preferred individual solutions to assess overall cost effectiveness.

  9.  At the bidders' conference in October 1998, potential bidders raised concerns that the requirement could only be met by one aircraft type, the C-17. They were therefore asked to identify those areas of the requirement where relaxations would be needed to allow significant cost/capability trade-offs. None of the relaxations identified was ruled out as unacceptable in broad terms for consideration of the bids.

  10.  In January 1999 five bids were received from Boeing (C-17), Air Foyle (Antonov An124-210), IBP (Antonov An124-100), Airbus Transport International (Beluga and a mix of freighters) and Rolls Royce offering a fleet management service of MoD acquired assets. The STSA competition was subsequently terminated in August 1999, because none of the bids offered the right combination of capability and cost. Since then the DPA has continued to work with industry in seeking an off-the-shelf solution to meet the requirement. This work culminated in a Request For Proposals being issued on 14 October 1999, from which three proposals were received on 29 October. Boeing (C-17); Air Foyle (Antonov An 124-100); and heavylift (Antonov An 124-100).


  11.  A variety or procurement options have been under consideration, including charter, lease and purchase.


  12.  STSA is not a collaborative project. Our European partners for FTA are aware of our need for STSA and of our procurement strategy.


  13.  The STSA requirement is most likely to be satisfied by the lease or purchase of commercial off-the-shelf, COTS, aircraft. Export potential is not therefore an issue.


  14.  The number of potential contractors for STSA is limited to those who can provide a solution in the required time-frame. The invitation to tender and subsequent RFP were sent to all potential suppliers who had expressed an interest and had a realistic chance of meeting the requirement.


  15.  The procurement strategy includes key elements of Smart Procurement. Industry has been closely involved in the project from the earliest possible stages. The project is managed by a multi-disciplinary team. The solution to the requirement will be acquired on a firm price basis.


  16.  STSA is not following a conventional procurement programme. The aircraft ISD goal is June 2001; the short time-scale precludes the consideration of a solution other than a COTS aircraft. Bids were received on 29 January 1999 and we expect to reach a decision soon.


  17.  Key milestones are:

ITT issued30 September 1998
Bids received29 January 1999
Competition terminated5 August 1999
RFP issued14 October 1999
Proposals received29 October 1999
Decisionearly 2000
ISD goalJune 2001
ISD thresholdDecember 2001

  18.  We have been assuming costs in the region of £500 million but the costs of the different options vary widely; the actual cost will depend on the solution chosen. No significant expenditure has so far been incurred.


  19.  The ITT requested priced proposals for three levels of contractor support and maintenance, ranging from total contractor support to limited RAF servicing and rectification. The in-service support arrangements will differ markedly, depending on the chosen solution.


  20.  Aircraft would not be owned by the MoD under any of the charter or lease options. All aircraft would be put into front line service.


  21.  We expect that our chosen STSA solution will make a vital contribution to improving the airlift capabilities for NATO and European operations.


  22.  STSA is being procured to meet a short-term requirement, pending the introduction into service of HRR2. The ITT sought proposals for a four-year lease plus annual options for up to a further four years and monthly options thereafter for up to another year. Bidders were also required to quote for a seven-year lease, with the option of a further year, plus monthly options thereafter for another year. Current proposals offer solutions over a minimum seven-year period, with the possibility of further extension.


  23.  The original ITT encouraged bidders involved in both competitions to submit combined proposals to meet both the STSA requirement and the UK's long-term airlift needs.


  TRACER is the name given to the land-based component of the information, surveillance, target acquisition and reconnaissance, ISTAR, capability required to meet the land commander's critical information requirements. We are currently conducting a series of parallel studies into manned land-based and air-based unmanned systems to help determine the optimum balance of investment into these complementary capabilities. No decisions have yet been made on the specification or numbers of each type of platform. As part of the parallel studies, we are conducting a project definition study on TRACER in collaboration with the US. This memorandum covers not just TRACER, but the current position in land and unmanned air vehicle, UAV, elements of the wider ISTAR programme.


  1.  The original requirement for Tactical Reconnaissance Armoured Combat Equipment Requirement, TRACER, was as a direct replacement for the ageing Combat Vehicle Reconnaissance (Tracked), CVR(T), vehicles to provide a high resolution, real time information gathering capability at extended ranges in all conditions. Since then, however, the development of UAV technology promises to deliver a significant portion of the required capability without the risk to life associated with deploying troops far forward into enemy territory. Operational analysis and military judgement show that manned reconnaissance is still required, however, and studies are currently planned into the sensors required to deliver the capability and the most appropriate platform, manned or unmanned, on which to deploy them.

  2.  The US has a requirement for a land-based, manned, armoured reconnaissance vehicle, known as the Future Scout and Cavalry System, FSCS. We decided, therefore, to participate in a joint project definition study to further define the TRACER/FSCS requirement and to provide the information necessary to inform the UK's balance of investment decision. A UK/US Combined Operational Requirement Document was agreed in December 1997 and contracts signed with two competing consortia on 29 January 1999. The UK element of the requirement included two possible variants in addition to the basic Scout, out of which would be equipped with a long-range anti-tank guided weapon, LRATGW, to provide overwatch protection for vehicles deployed far forward without protection from tanks. The US does not currently have a requirement for the LRATGW or Engineer variants, since its armoured cavalry regiments are normally supported by main battle tanks, and their combat engineers are differently employed.


  3.  The principal trade-offs are between a manned, land-based capability and an unmanned, air-based capability, which can only be determined once the parallel TRACER and UAV studies have reported. Within TRACER, possible trade-offs will be studied in depth in the operational analysis conducted as part of the programme. There will be an affordability review 24 months into Project Definition, which will review capability against cost and further refine the TRACER requirement. Studies are also being conducted into the viability of unmanned land vehicles, which will be taken into account in the wider decision on balance of investment studies due in 2002.


  4.  No decision has been taken on the number of TRACER or UAVs to be procured, pending the outcome of the balance of investment studies.


  5.  The Strategic Defence Review emphasised the importance of ISTAR intelligence, surveillance, target acquisition and reconnaissance capabilities. It confirmed the importance of a continued ability to conduct high intensity conflict, which TRACER and/or the UAV capability would be designed to support.


  6.  TRACER and/or the UAV capability would be used in all phases of war and in operations other than war, where they would be able not only to provide intelligence, but also to act as a deterrent, monitor opposing forces, help maintain freedom of movement and provide a credible offensive capability by directing direct and indirect fire onto enemy forces. Any equipment would need to be transportable by strategic transport aircraft.


  7.  The current capability is provided by the Scimitar, Striker and Sabre variants of the CVR(T) vehicles and by the Phoenix UAV. The CVR(T) vehicles were introduced in 1972 and proved to be inadequate during the Gulf war in the areas of sensors, stealth, survivability, mobility and lethality. CVR(T) is undergoing a life extension programme, which will improve, to a limited extent, its sensors and mobility, but is inadequate to meet the requirements of the modern battlefield. The out-of-service date for all members of the CVR(T) family of vehicles is about 2015. An ISD will only be confirmed for TRACER and UAV once a decision has been taken on capability and numbers to be procured. Currently none of the funds allocated to this programme beyond Project Definition has been allocated to a specific platform, land-based or air-based.


  8.  The initial feasibility study for TRACER, jointly funded by the MOD and industry, was conducted by three UK industrial consortia and reported in 1994. A further cost and risk study allowed the consortia to propose concepts and prices, address areas of risk and consider candidate technologies for downstream integration. As the cost and risk study neared completion in 1996, it emerged that the US had a similar requirement. The UK and US decided, therefore, to collaborate on Project Definition studies and subsequently signed an "umbrella" Memorandum of Understanding in July 1998.

  9.  We are currently investigating opportunities for similar collaboration with the US and other countries on the UAV elements of the wider ISTAR programme. It is assessed that there is currently no opportunity for a European collaborative programme on TRACER owing to different national doctrines concerning the use of reconnaissance forces and the force mixes that are employed.

  10.  Two UK/US industrial consortia have been formed to participate in the competitive TRACER Project Definition phase. SIKA International is a joint venture company formed by BAE Systems and Lockheed Martin, and including Vickers Defence Systems, with General Dynamics Land Systems as sub-contractor. LANCER is a consortium headed by BAE Systems, at the time of contract signature Marconi Electronic Systems, acting as prime contractor, and including Alvis Vehicles, United Defense LP & Raytheon. The recent merger of British Aerospace and Marconi Electronic Systems has presented challenges to the programme, but a series of "firewalls" have been put in place by the company to ensure that effective competition continues.

  11.  An invitation to tender for two firm price Project Definition contracts was issued to the two consortia on 9 July 1998. These proposals were evaluated jointly by teams from both the US and UK. The limited competition meant that NAPNOC, no agreed price, no contract, procedures were applied. Contracts were awarded on 29 January 1999.

  12.  In order to inform the Balance of Investment study due in 2002 (para 3 refers), proposals relating to the first stage of an assessment phase for SENDER, a unit level UAV, have recently been received from Industry. These proposals are currently being assessed and contracts are scheduled to be placed in June. Further work associated with SPECTATOR, a formation level UAV, is also being established in order to inform the same Balance of Investment work.


  13.  Alternative procurement options include the extent to which the capability could be provided by UAVs. As far as the possible vehicle element is concerned, two alternatives to the development of a new vehicle were considered in 1992 and again in 1997. A market survey of off-the-shelf options revealed that no commercially available solutions to the requirement existed, or would be likely to exist in the relevant timescale. The possibility of modifying a number of existing or proposed armoured vehicles, including the Challenger 2 main battle tank was also considered. As it was estimated that the platform itself would only account for around 20% of the system cost, and there was a high risk of failure to meet the full requirement, this course was not assessed to be cost-effective. Procurement options for the UAV element are being investigated through a series of studies with Industry and DERA (para 12 refers).


  14.  The TRACER project is directed by a UK/US Steering Committee and administered by a Joint Project Office, JPO. The UK has assumed the lead of the JPO for Project Definition, and was responsible for placing the contracts on behalf of both nations. The JPO is led from the Defence Procurement Agency's office at Bristol. It has a permanent staff of about 35 military and civilian acquisition professionals covering a wide range of disciplines and can also call on the expertise of the Defence Evaluation and Research Agency. The estimated cost of the UK offices for Project Definition is some £4 million a year, funded by the MoD. A satellite project office, funded by the US, has been set up at the US Army's Tank Automotive and Armaments Command in Warren, Michigan. All decisions relating to the progress of the programme must be agreed jointly. There is no commitment by either nation beyond the current Project Definition stage.

  15.  The MoU commits both the US and UK to an equal cost share during Project Definition and Full Development, although the latter would be the subject of further national approvals. Supplements to the MoU, taking account of national off-take, would be negotiated for the production phase if a decision were taken to proceed with production.


  16.  It is impossible to assess the market potential for TRACER or the UAV elements until the projects are better defined.


  17.  Collaboration provides an opportunity for UK companies to forge links and share technical expertise with US companies. The TRACER/FSCS MoU with the US sets a goal of equitable work-share, which is reflected in the proposals received from industry. The two industrial consortia participating in Project Definition were the only industrial groupings to come forward after briefings on the collaborative programme.

  18.  The industrial factors for the UAV element have yet to be determined, although a wide sphere of interest has been received from industry, both from within Europe and the USA. Industry is already showing positive signs of forging links and sharing technical expertise with a view to positioning itself for the potential UK UAV programme. Collaboration at Government level is regarded as unlikely due to the advanced state of the technology associated with UAV products but levels of co-operation, such as the information exchange agreement signed with the USA, will be central to the achievement of a successful UAV programme.


  19.  The TRACER programme embraces several Smart Procurement features. Greater emphasis is being placed on risk reduction during Project Definition. The JPO is liaising closely with all stakeholders, including industry, to reduce timescales and achieve a better understanding of a complex programme. The benefits of this approach have already been realised in the evaluation of tenders for Project Definition-a process which would traditionally have taken six to eight months has been completed in four. Increased emphasis is being placed on through-life costs, with challenging but achievable targets for reliability and in-service availability. A similar approach will be adopted for the UAV element. The TRACER Integrated Project Team was formed in January 2000.

  20.  Smart procurement principles are being applied to the UAV programme. Emphasis is being placed on driving down through-life costs by reviewing the levels of operating and maintenance costs. The current work associated with establishing information to input the Balance of Investment studies is focused on determining through-life cost drivers and will be used to establish cost effective UAV systems. The tactical UAV Integrated project Team was formed in February 2000.


  21.  The initial feasibility study and the subsequent cost and risk study allowed TRACER to be defined by mid-1996. The planned progression to a national Project Definition phase was delayed because of the emerging possibility of collaboration with the US. Following detailed negotiations, two Project Definition contracts were awarded on 29 January 1999. They will last for 42 months. Each consortium is to produce a detailed specification for Full Development and Initial Production in accordance with the agreed pricing strategy; an assessment of training requirements; a range of demonstrators, including an integrated demonstrator vehicle; a risk management plan, supported by an updated risk register, a software integration plan; a trials and acceptance plan, a project management plan; a quality plan; a safety plan; and an integrated logistic support plan. This will then be considered in parallel with similar plans for the UAV element before deciding whether to proceed to the next phase.


  22.  Reporting in January 2001, the TRACER Affordability Review will further refine the requirement following consideration of a number of options. Project Definition should be complete by mid-2002 and the outcome will be used in the TRACER/UAV Balance of Investment Study.

  23.  A reliable estimate of the total cost of the project is not possible in advance of decisions on the balance of investment between platforms. Some £10 million has been spent by the UK on the Feasibility Study phase. The UK costs for TRACER Project Definition is £120 million, at updated 1999-2000 prices. For the UAV elements, it is planned to invest a total of around £50 million on the concept phase for SPECTATOR and assessment phase for SENDER UAVs.


  24.  During TRACER Project Definition, contractors will deliver costed options for contractor logistic support for the first two years in service, the following five years and subsequent periods. Options may include direct supply of spares to the field force, and Public/Private Partnership type arrangements for major spares components, as well as contractorised maintenance support. A Training Needs Analysis will also be undertaken during Project Definition. A similar approach will be adopted for the UAV element.


  25.  To be determined during the balance of investment considerations in 2002.


  26.  Project Definition will cover TRACER's compatibility, interoperability and commonality with other systems. A similar approach will be adopted for the UAV element.


  27.  CVR(T) will have been in service for over 40 years when it is replaced. Options for disposal are likely to be limited. Disposal options for Phoenix have yet to be determined, as the equipment has only recently entered service.


  28.  It is anticipated that TRACER and all the UAV elements will remain in service for a long period of time. The consortium have been instructed to prepare to carry out through life improvements to the system in order to fulfil emerging capability gaps and to capture the advantages of novel technology. Such an approach will add to the useful life of the system.

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