Examination of witnesses (Questions 40-59)
WEDNESDAY 2 MAY 2001
WALMSLEY KCB AND
40. Do all the designs offer sufficient scope
for deploying early warning aircraft?
(Sir Robert Walmsley) I think you made the point earlier
as to whether a STOVL-only carrier would be able to operate E2C.
Patently the answer is no, but as Admiral Blackham carefully explained,
we are not committed to E2C.
41. Can you reiterate your assumptions about
which type of aircraft may best fill that role?
(Sir Robert Walmsley) I cannot add anything to what
has been said.
(Vice-Admiral Sir Jeremy Blackham) I do not have an
assumption yet. I have an open mind about it. We are busy studying
our overall surveillance architecture.
42. Have the CVF assessment studies indicated
that the force projection capability envisaged in the SDR can
still be delivered with a two-vessel programme that is still affordable?
I would like a ministerial response from both of you. Will the
number be two or three?
(Sir Robert Walmsley) My answer is so far so good.
(Vice-Admiral Sir Jeremy Blackham) I think my answer
is much the same. Once again, we are concerned with whether we
can put this amount of force where we want it when we need it.
I am quite certain that these aircraft carriers will have a much
higher rate of reliability. We have changed our design and build
philosophy and we have changed our maintenance philosophy. They
will have a much higher rate of availability than our existing
ships. I am therefore expecting that we shall be able to produce
one of those all the time.
43. I would hope so. For how long in each 12-month
period will we have two available, or even 1.7 available?
(Vice-Admiral Sir Jeremy Blackham) I cannot answer
that question at this point. There is no requirement in the SDR
to do that.
(Sir Robert Walmsley) The ships are being designed
not to depend on major refits, which is when ships go to the dockyards
for long periods of time.
(Vice-Admiral Sir Jeremy Blackham) It is worth saying
that one has to define the terms. The requirement for two may
have a longer warning time than a situation in which only one
is needed. A ship can be available at five-minutes notice, or
at 10, 30 or 40-days notice. A ship has to be very deep in refitSir
Robert has said that we do not anticipate thatfor it to
be unable to be deployed within a short period.
44. I am delighted to know that we shall have
two carriers that will be available at short notice permanently.
(Vice-Admiral Sir Jeremy Blackham) That is not exactly
what I said.
45. That seems to be a good answer as to why
there should be two carriersthe fact that they will always
be available. Unless physics and finances change, one or other
or both of them will be undertaking a major refit or something
substantial will have gone wrong. I would have thought that if
you want two available, there is a good case for arguing that
you should have three, in order to guarantee two, as opposed to
two to guarantee two, which appears to be the current position
of the MoD.
(Vice-Admiral Sir Jeremy Blackham) I do not think
that we have undertaken that two will be permanently available
at short notice.
46. As long as our adversaries read the record
of our proceedings. I can imagine a situation where there may
be two simultaneous crises.
(Vice-Admiral Sir Jeremy Blackham) There may be. In
the past, even in the days when we did deep refits, within a matter
of days we got the ships out of the refits ready to go into conflict.
47. Is it still your intention to let phase-two
CVF assessment contracts to both biddersBAE Systems and
(Sir Robert Walmsley) That remains the plan.
48. Is that what will happen?
(Sir Robert Walmsley) It is the plan today to let
the contracts by about the end of next month or early in July.
I would never guarantee anyone a contract, otherwise they could
put me against the wall.
49. Do you consider that the phase-two work,
as currently scoped, will deliver carrier designs in 2003 which
adequately address and minimise the project's technical risks?
You may have heard something to the contrary.
(Sir Robert Walmsley) Indeed, I have.
(Sir Robert Walmsley) More frequently recently than
a while ago when we embarked on this plan with the agreement of
all parties. It is important to listen to the concerns. We listen
very carefully to the concerns of the companies involved. These
people know their business, otherwise we would not be employing
them. We have decided to split the next phase of the work which,
if you work out my arithmetic, you will see is worth about £25
million to each of the companies, into half a dozen phases of
equal duration during which we shall try to have an assessment
with the companynot a formal assessment with a capital
A, but a discussion with the company as to how the work has proceeded
with that £5 million slice of work. That will ensure that
both we and the contractor will be content that adequate progress
is being made. I know that there have been suggestions that we
are grossly under-spending on the assessment phase of this programme.
It is worth analysing that quite carefully. In today's money,
the ships will be about £1 billion each. There are no intrinsic
risks that I know of that flow from constructing two that are
more than constructing one. Therefore, what is appropriate for
the assessment phase expenditure can probably be looked at on
the basis of the design work and the integration task that has
to be undertaken on the first ship. The cost of all that will
be more than £1 billion because it will bear all the design
costs. We have planned to spend just about £90 million in
total on the assessment phase which is about 6 or 7 per cent.
That is way below the 15 per cent that has been used as a benchmark
figure for total expenditure, but 6 or 7 per cent is way above
what has been spent by the United States on the Joint Strike Fighter
before entering the EMD phase of that programme. So we are not
out of kilter.
51. That is two carriers as opposed to 3,000
(Sir Robert Walmsley) I am simply making the point
that the arbitrary application of 15 per cent of total programme
costs is a guide to assessment. If the total programme costs of
Joint Strike Fighter is £250 billion, you can quite quickly
work out that they have not spent £40 billion on the assessment
phase. It shows that that arbitrary number is an interesting guideline,
but there are circumstances in which it is wholly inappropriate.
I would suggest that our expenditure on a carrier needs to be
watched, which is why we shall slice the work into these components
and watch progress very carefully with both teams. It needs to
be watched, but I do not think that we are that far wrong in our
assessment of the figure.
52. Have either bidder indicated to the MoD
that they may need a longer or more sophisticated assessment phase
in order to tackle properly the risks of the programme?
(Sir Robert Walmsley) It is difficult for me to answer
that. I am starting to get into competition differentiators, so
I would rather not answer that. At the moment both bidders recognise
the programme to which we are working.
53. What conclusions have you reached about
changing the format of the forthcoming assessment studies, or
are you perfectly happy with the ground rules currently being
(Sir Robert Walmsley) We are right at the point where
we are planning and going to let the phase-two assessment contracts.
I do not want to indicate nowbecause I do not knowthat
we are not going to adjust in some marginal way the figures that
I have indicated to you. We are not going to adjust them in a
big way, and we are going to stick to our timetable, which absolutely
requires ordering these ships at the beginning of 2004, which
means making a decision in 2003, which means getting on with the
assessment phase work starting the next big slice in the summer
of this year.
54. When we were delighted to hear that there
were to be two new carriers, the principal reason that we embarked
on this was to ensure that there would be no slippage. It is ironic,
therefore, that we are asking questions that may lead to slippage.
How firmly is the 2012 in-service date, tied to a "main gate"
decision in 2003?
(Sir Robert Walmsley) I think it is fairly firmly
tied. If you allow dates to slip at the beginning of a programme,
allowing them to telescope or compress the work over the later
years, you are bequeathing an horrendous situation to your successors.
We have no plans to do that. We think that the right decision
is to order the ships in 2004 with a "main gate" decision
55. For how long would it be possible within
existing budgets to maintain competition for the CVF programme
and to put off the selection of the winning bidder? Do you perceive
a risk that one or both CVF bidders might decide unilaterally
that the risk of staying in the race is too great?
(Sir Robert Walmsley) First, we are going to order
ships from only one contractor. So by the beginning of 2004 we
shall be down to one company. The plan is to keep two groups of
prime contractors going through the assessment phase and we shall
complete that in 2003 in order to achieve "main gate"
later that year. If people are putting in a lot of their own money,
there is always a risk that those who approve that moneythe
board of the companywill say, "Just a minute, will
we make enough money out of this?" I think we have seen a
lot of pressures on the companies in Europe, in the United Kingdom
and in the United States to deliver what I believe nowadays is
called "shareholder value". That means that there is
great sensitivity in companies to the profitability of their defence
contracting. That means that there is a risk, but I do not expect
it to be unilateral in the sense that we suddenly get a letter
in the post saying that they have stopped work and gone away.
I would expect it to be discussed and I would expect to see whether
there was some other way in which we could conclude the work with
two competitors during the assessment phase.
56. Are the carrier assessment studies that
are now underway steering you towards one aircraft variant or
(Sir Robert Walmsley) No. We are deliberately working
on the basis that the aircraft is the driving factor. In round
numbers, on rule of thumb stuff, in any aircraft and carrier programme
the ship costs one-third and the aircraft cost two-thirds. The
central matter is to make the right choice in relation to the
aircraft and then in relation to the ship. That is why I mentioned
the twin-track approach, which will cost us about £10 million
which Admiral Blackham has seen as appropriate to provide to my
57. When is the latest point at which decisions
about the JSF variant can be made without jeopardising the timely
completion of the carrier?
(Sir Robert Walmsley) I think probably about the middle
of 2002, but we would like to make it January 2002. We may make
it sooner than that.
58. You would like to make it by then, but you
cannot guarantee that?
(Sir Robert Walmsley) No, because we do not control
the Joint Strike Fighter programme. In a sense, we are having
to adapt our ship procurement to the progress on that programme.
59. Does that programme show any sign of slippage?
(Sir Robert Walmsley) It has slipped a bit, but nothing
substantial. The biggest question is the one raised by the Chairman
at the beginning about how confident we are that the programme
will go ahead as planned. Obviously, that is in the hands of the
United States administration. I am absolutely confident that they
will take account of our concerns that the programme should proceed.