Examination of Witness (Questions 40 -
59)
WEDNESDAY 10 NOVEMBER 1999
SIR ROBERT
WALMSLEY KCB
40. One other point at this stage is to ask
if you think the Future Large Aircraft, the A400M, will go into
OCCAR management. Is that being considered?
(Sir Robert Walmsley) If I may say so, that is an
extremely dangerous question to answer without making the obvious
bureaucratic point. There is no presumption yet that the nations
will sign up to that project. If I can just make that point absolutely
clear: there is no presumption that we will choose that because
we do have our competition. Other countries have competition too.
I have to make that point because sometimes people read more into
words than they should otherwise do. Having said that, because
the A400M is a candidate in a competition, it is absolutely an
obligation on people like me to look at arrangements we would
use if it were to win the competition. We cannot say we will not
contemplate that. There are a great many countries in the Future
Large Aircraft, although fewer than there were three years ago,
as countries drop away. It is true to say that we entered this
procurement with a clear idea that we would use commercial practices
to acquire that aircraft. What that meant was that at some stage
the half dozen countries ordering the aircraft sit round a table
like this with the supplier, Airbus Military Corporation, and
we would simultaneously sign our own national contract, just as
British Airways and Delta and Air France would sign a contract
with Airbus to launch a civil aircraft. That is an excellent idea.
However, it has proved trickier to work through in practice, not
just from the United Kingdom's point of view but for lots of technical
reasons in other countries. Also, something which Michael Colvin
touched on earlier: the Airbus Military Company do not much fancy
receiving contracts in six different legal systems. They like
to have them all in English. I immediately ducked that because
if they were all in English, do they want us to be the contracting
authority on behalf of all these other countries, which would
give us a responsibility that we were not seeking? It would also
dilute this commercial relationship. So we said, "We do not
want to do that for you, thank you very much," inevitably
looked for possible contracting authorities, and OCCAR has been
one of them. OCCAR, of course, is going through this very complex
ratification process and there is no guarantee that this will
be completed—I suppose ever—in time, as the real thing
to place a contract for the A400M. So we think that today's best
appreciation of the position is that if it was selected, that
Germany would be prepared to be the lead nation, with a view to
handing the contract over to OCCAR once it received legal status
and if all the nations agreed that this was a good thing to do.
That immediately raises the problems of Spain and Turkey who are
not members of OCCAR, but in OCCAR's Convention there is a paragraph
which says that OCCAR may undertake work, with the agreement of
the Board of Supervisors, on behalf of procuring things for the
nations who are not members of OCCAR. So there are routes through
that which seem quite complex, but I hope I have given you assurance
that we have been looking at them very seriously. However, I come
back to my first statement, that this must be not read presupposing
that we are going to choose that aircraft.
Mr Cohen: I appreciate that answer. Thank
you very much indeed.
Mr Colvin
41. That is a very interesting answer. The fact
is that if OCCAR proves its worth, this is going to make it easier
to get a European solution to the heavy lift programme. May I
pick you up on one thing. The question has come to mind because
of the answer you have given. Essentially, OCCAR is de facto
in existence and it has programmes within it. However, there has
not been ratifications of the Convention by every Member State
but de jure they are already operating. Is that the position?
(Sir Robert Walmsley) That is absolutely the position
but with great difficulties in some areas which we have not touched
on today. Principally, because the people who work in OCCAR are
employees of their own Government, the rules for handling confidential
information inside OCCAR are infernally complex. You simply cannot
contemplate that a United Kingdom finance administrative specialist
should receive all the commercial data associated with the Tiger
Helicopter project. That is an unlikely proposition, so we have
had to embark on quite complex Chinese walls which inhibit OCCAR's
efficiency. Making all the OCCAR staff employees of an international
organisation, in the same way as NATO employees are employees
of NATO, means that we will break down some of these inefficient
barriers which exist in OCCAR. So de facto yes, but de
jure, we hope so, once the Treaty has been ratified. The Treaty
will also open up new possibilities in that it will get over one
of the most difficult issues of handling national information
efficiently.
42. You have answered a lot of questions on
the separate legal identity of administration. When you were talking
about employees moving from the DPA into OCCAR, presumably there
will be a to-and-fro movement because OCCAR have six or seven
major programmes, but which may be down to two or four with fewer
people, so there will be a ready movement between nations and
OCCAR itself.
(Sir Robert Walmsley) Yes.
43. On the question of decision making, Annex
IV of the Convention sets out the procedure for reinforced qualified
majority voting. Now that means that ten votes can veto a decision.
That is an adequate safeguard, is it, against other Member States
joining and diluting the power of founder members to resist growth
and bureaucracy and inefficiency?
(Sir Robert Walmsley) Well, I hope so. We have put
in that mechanism with just that purpose in mind. I can hardly
say we have been very brave about whether we allow qualified majority
voting to take effect. You will notice that it is only on the
disestablishment of committees, which is hardly a revolutionary
step. One of the key principles, I would simply add to the veto
power though, is that we have also got an agreement that where
a nation is not involved in a programme, (it is in the Convention
as well), it will not vote on it. It is purely a programme management
issue. In other words, if France or Germany are talking about
the Tiger Helicopter and admission into OCCAR, of course they
have to ask all the member countries whether they agree with it;
but the idea that Italy and the United Kingdom should then seek
to interfere with the management of the Tiger Helicopter project
would be intolerable. So I think there is a commonsense about
this and, yes, I do believe that ten votes is a robust mechanism.
44. What about the situation with major suppliers
to a defence contract? There are going to be circumstances in
which an OCCAR project is proceeding, and yet a major sub-contractor
in a country that is not a member of OCCAR is going to have power
over that programme but have no legal status. How do you accommodate
them? There may be no other alternative source of supply. In fact,
it may even come from America.
(Sir Robert Walmsley) It might. This Convention will
have things missing. It does not have that missing. What it, in
essence, says is that we would normally expect to use the industries
of those countries, who are members of the Western European Union,
for sourcing the equipment.
45. 28 members, including associates.
(Sir Robert Walmsley) Not quite.
46. Including associates.
(Sir Robert Walmsley) When you do not include the
associates. I am talking quite legalistically now. Secondly, it
says that we can go outside that group of industries, with the
agreement of the countries involved in the programme, and subject
to adequate reciprocity. It does not go into defining adequate
reciprocity. It says somewhere else in the Convention, in the
usual way of things, that where there are discussions necessary
to define whether that adequate reciprocity exists or not, they
will be undertaken by the Board of Supervisors. You can be absolutely
clear that the United Kingdom will not stand in the way of introducing
countries from outside the participating nations if that is what
is necessary to get a better deal, better equipment, more likely
to fulfil the contract on time. The mechanism was open. That was
another difficult argument we had in writing the Convention. However,
that was the best deal we could get and I think that was good
enough.
Mr Hood
47. You are CDP representative on the Board
of Supervisors, which meets twice a year. What mechanisms are
in place for more regular contacts between the Ministry of Defence
and OCCAR Central Office?
(Sir Robert Walmsley) I think the Convention does
provide for two meetings a year. I have to say that we had three
meetings a year. I think it was at my suggestion actually and
since I have been Chairman I have followed that through. While
establishing something there are an awful lot of changes. Sitting
behind me is Mr Grant Morris and he is a member of the so-called
One Star Group. The One Star Group is a group of Government officials,
who work very closely to their national armament practice, who
meet—I do not know how often it is—but it certainly
seems nearly all the time to me, although it is probably once
a month. That was where a lot of the legwork was to establish
the Convention. That is where all these procedures and processes
are being improved. So we have this virtually permanent session,
(that is what it seems like), and the One Star Group are trying
to bring this off. Grant Morris has worked extraordinarily hard
on this for a couple of years now. It is going to continue for
another year or more. So, yes, we have formal meetings three times
a year and not twice a year, and we felt that was necessary to
maintain our momentum. Secondly, a lot of the real work is done
in the One Star Group. Of course, as I have made clear when I
took over as Chairman, I go to visit OCCAR and I do see my Board
of Supervisors colleagues in many other fora. We had a meeting
of National Armament Directors in NATO last week. All my OCCAR
Board of Supervisors colleagues were present. We did indeed take
time out at one of those meetings to have a little talk on OCCAR.
48. How many Ministry of Defence staff are directly
involved in the activities related to OCCAR?
(Sir Robert Walmsley) Actually situated in OCCAR Central
Office, at the moment, I think there are five. We also have people
in this country who are concerned with it. I have mentioned Grant
Morris. Steven Logan, who is behind me, is pretty well full-time
on OCCAR. Getting all these procedures in place is hard work.
We have to cover every line of them to make sure that we are getting
our ideas in place. So we have probably about two people on average
working on OCCAR in this country, and it takes a bit of my time,
a good bit of Grant Morris's, a good bit of Steven Logan's, and
a good bit of other people's.
49. Will this number grow as more programmes
come on-stream?
(Sir Robert Walmsley) No. I have been talking about
the OCCAR central administration. There is a separate body for
managing each programme, which Michael Colvin talked about, the
ebb and flow. A programme brings its programme staff with it like
COBRA. I mentioned that it started with three heads and 19 staff.
It is now down to one head and it will reduce to 16 staff. That
is extra and depends on the programmes appearing. They disappear
when the programmes disappear.
Mr Cohen
50. May I ask you about the monitoring of OCCAR
projects and indeed an assessment of progress, on whether that
has been made or not. Clearly it is not just a matter of staying
within the budget. It is whether the project would actually successfully
deliver. You have done a good job with your agency in those areas
in ensuring that there is proper monitoring and assessment in
the course of projects and project programmes. Is that in place
in the OCCAR system?
(Sir Robert Walmsley) There are two separate parts
to the answer. First of all, as a contract is negotiated in place
it will include demonstrating that the thing we are buying does
what it is supposed to. That is a fundamental part of the commercial
relationship with industry. We used not to see the obvious importance
of that but we do now. So the Multi Role Armoured Vehicle contract
is about demonstration. I cannot remember how many thousands of
kilometres driving it to be done to prove that it is reliable,
which we used not to think was part of the deal. We are now absolutely
clear on that. That is self-contained within the contract. Then
there are the processes inside OCCAR by which we disburse monies
against contracts. That is a part of it too. How do you know that
it is sensible to make a progress payment at all? I mentioned
the work we are doing with industry now to draw up contract placement
procedures. This will address just that point. How much money
should we hold back? We do not pay all the money that the firm
has incurred, so that we have spent 95 per cent of the money before
the thing arrives in-service, otherwise there is not much incentive
to finish it, so we like to hold some of it back so that there
is a real incentive to finish it. We used not to do it. So those
are parts of the processes which are being drawn up by those people
sitting behind me, as well as my contracts experts in OCCAR headquarters.
51. The people abroad in the OCCAR structure,
are they willing to go along with these sorts of processes?
(Sir Robert Walmsley) They love it.
52. For assessment and monitoring?
(Sir Robert Walmsley) When I go to a Board of Supervisors
meeting, which is in Bonn, they appear in my hotel at 7 o'clock
in the morning to tell me what a good job they are doing, etcetera.
They are very enthusiastic people.
53. They may be enthusiastic but the systems
have to be in place.
(Sir Robert Walmsley) They are responsible for putting
the systems in place. They would not be enthusiastic if their
systems did not meet their aspirations, which is what procurement
is all about. They are keen.
Mr Colvin
54. On the subject of audit, the National Auditors
will have access to all the necessary information for them to
ensure that the programmes have been conducted properly. Have
you actually spoken to the National Audit Office about those arrangements,
and are you happy that all the other Member States have got equally
adequate arrangements in place? Do you see the National Audit
Office's role as being the only one for reporting to Parliament?
Presumably there will also be a role for select committees in
this respect.
(Sir Robert Walmsley) I am clear that there will be
a role for select committees, Mr Colvin. I have to say that you
are absolutely right. The Convention does provide for total access
of the National Audit Office and its equivalents in the other
countries. Whether these equivalents are as rigorous as our own
National Audit Office is not for me to answer. I can only say
that from the scale of my colleagues' offices in other countries,
I guess they have the same ultimate effect but I cannot speak
for their auditing processes.
55. Will we have access to programmes, on which
we are not actually involved ourselves, but the other Member States
of OCCAR are?
(Sir Robert Walmsley) The answer is no. That is actually
partly what ratification is about. I should just make the point
that the Convention was laid in front of the House of Commons
earlier this summer for the requisite period of time. The next
step is for the Foreign Office to draft the protocol, which provides
for some of the immunities on access to documents, staffs ability
to travel, etcetera, etcetera. It is only when that has been laid
in front of Parliament and they have had a little debate or maybe
not—that is not for me to say—and that is signed off,
that really the ratification process would be completed in the
United Kingdom; so it is partly to provide that immunity from
improper interference in a document, with other people's documents
that we need to go through the development of this protocol. We
will access, through the National Audit Office, everything to
which we currently have access on a United Kingdom programme.
You will not be allowed to go through the minutia of the French
Tiger Helicopter programme. There are two other levels of audit.
First of all, the organisation has to produce annual accounts.
We will get them audited by someone outside the organisation.
That is for the Executive Director to arrange, in just the same
way as a company will arrange to have itself audited. Then there
will be internal audit. It always sounds a bit incestuous but
actually internal audits are sometimes as demanding as anybody
else. I will expect my Board of Supervisors colleagues and the
Executive Director of OCCAR to have a robust system of internal
audit, because these international organisations must not develop
untidy habits about the custodianship of relatively small sums
of money associated with day-to-day running.
Mr Hood
56. Is there a risk of a two-tier Europe developing
with OCCAR as a first option for the big nations keen to embrace
balanced workshare, because they have the most efficient industries
which would be more likely to win contracts, and a rump of smaller
countries left operating through WEAG because they need juste
retour to protect their inefficient industries?
(Sir Robert Walmsley) That is a very real risk as
perceived by the smaller countries. I do, of course, attend the
Western European Armaments Group as a United Kingdom representative,
and I think it is fair to say that my colleagues—not just
from countries with relatively unsophisticated industries, but
the Developing Defence Industry Nations, and Portugal and Greece
are two examples of those—but from smaller countries, extremely
sophisticated smaller countries, with an extremely sophisticated
defence industry, Netherlands as an example, are concerned that
(so to speak) the four members of OCCAR should not take all the
good projects to OCCAR, and leave all of the Western European
Armaments Group nations struggling on the crumbs falling off the
table. We did see that very clearly from the moment we started
OCCAR. What we decided to do, therefore, once we had understood
about having to get a legal personality, is that if you go to
all the trouble of having a Convention, our first approach was
to seek legal status from the Western European Union in the same
way that the Western European Armaments Organisation—a small
body maybe in terms of money but it handles research contracts—we
sought OCCAR's legal status from the Western European Union. We
thought that it provided, if it had come off, a very good way
of reassuring the Western European Armaments Group nations that
OCCAR was not living on some separate planet, operating in a hidden
way; and also providing, in quite a good way, the emerging of
the potential European Armaments Agency idea, which is coming
out of the Western European Armaments Group, if OCCAR belonged
to that legal framework. It is with great regret that having put
in a heck of a lot of effort in trying to persuade the Western
European Armaments Group nations to accept OCCAR under the same
legal umbrella, they said no. We went round and round all the
countries and in the end we said, "Look, our Convention cannot
wait." There is a real perception now, in some areas at least,
that an opportunity was missed about making OCCAR more welcome
in the Western European Armaments Group. Of course, OCCAR looks
more attractive now that it has its own Treaty and has succeeded
with some existing projects, than it did when decisions were being
taken.
Mr Colvin
57. Is the European Armaments Agency a pipe
dream?
(Sir Robert Walmsley) I do not want to go that far.
It is an important vision. I do not mean that in a trivial sense.
I think if you are going to have a European security and defence
identity, that naturally carries connotations for industrial competence.
Once you have industrial competence, as part of it clearly you
are looking to establish something more efficient on the demand
side, on the customers' side, in terms of project management,
harmonisation of requirements. The Western European Armaments
Group is a vision for delivering that. It is going to take a long
time to be effective.
58. Collectively driven?
(Sir Robert Walmsley) Politically driven, yes, but
necessity driven in terms of better programme management. It was
because it was taking so long that OCCAR came. We then tried to
put OCCAR under the same umbrella but they did not want it.
Mr Hood
59. Do you think the United Kingdom should take
the initiative in winding up WEAG?
(Sir Robert Walmsley) I do not think I would like
to do that. In fact, I have spent quite a bit of time talking
with my colleagues, to very valuable colleagues. The obvious example,
Norway and Greece: two countries now contemplating becoming partners
in Eurofighter. They set great store by this. Greece is the President
of the Western European Armaments Group and they lead the way;
in seeing this organisation, so to speak, become history would
be intolerable to them. It would also not be very constructive
from the point of view of our involvement with them on a number
of other projects as well as the ones I have mentioned. So I think
our job is to make sure that Western European Armaments Group
has a place in the future. That it is as efficient as possible.
We are then left with this thing which I said was not very important,
the Western European Armaments Organisation, which does R&D
and has a legal personality from the Western European Union. It
is quite a difficult little nut to crack if the Western European
Union Treaty was, so to speak, to be cancelled. As long as it
stays on ice, then the Western European Armaments Organisation,
which is used to place contracts for R&D, still has a legal
personality derived from the Treaty. We have to find a solution
to what is going to happen to the Western European Armaments Organisation.
It is one of the important and knotty little problems associated
with the public changes to the Western European Union.
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