WEDNESDAY 2 MAY 2001

SIR ROBERT WALMSLEY KCB AND VICE-ADMIRAL SIR JEREMY BLACKHAM KCB

  80. What is your fallback position if the necessary improvements which you are asking for do not happen?
  (Sir Robert Walmsley) I do not envisage that. I do envisage that we will agree the necessary improvements. If every time we embarked on a development programme we developed fallbacks and fallbacks to those we would never take any decisions at all. It is for Admiral Blackham to explain to you how we retain the operational capability in the meantime.

  81. I can understand your irritation. On the other hand, you can understand why because there are one or two examples where the fallback situation, plan D, is absolutely necessary. I do not want to rattle off the long list. We are not suggesting this is what will happen but we have to explore the possibilities because the possibilities sometimes become reality.
  (Sir Robert Walmsley) I apologise for seeming irritated. The point I was trying to make was that there is an operational fallback which Admiral Blackham can explain. In terms of procurement fallbacks—i.e., procuring another missile—I do not envisage that.

  82. I understand that so far you have got £19 million back because of liquidated costs from the contractor. Is that correct?
  (Sir Robert Walmsley) It is correct, within a million or so.

  83. £19 million out of potentially £500 million spent is not very much to get back. Are you confident that you could get a larger amount back in future, if necessary?
  (Sir Robert Walmsley) Putting "if necessary" at the end allows me to say absolutely, because "if necessary" would imply that we had cancelled the contract. We would only cancel the contract if no capability had been delivered. In that case, I believe our position is totally robust.

  84. You and I had an exchange a year ago about Bowman and I recall it very well because I had a constituency interest in Bowman, as you know. I hope that we are not going to get into another Bowman fiasco. Could I have your reassurance that this is not potentially another Bowman?
  (Sir Robert Walmsley) It is not potentially another Bowman. Bowman was about getting the programme to contract. We are now arguing about whether the thing performs to 100 per cent of the contracted capability. I am very much concerned that my perhaps rather petulant answers imply that I regard the questions as trivial. I absolutely do not. This is right at the top of my in-tray. What I am also trying to do is to tread a very careful line between leaving you with the wrong impression that ASRAAM is not an excellent missile. It is an excellent missile but when we have contracted for 100 per cent performance that is what we want to see. Those are the sort of lines I am encouraged to take. We do not want to provide a missile to the Royal Air Force if we are not clear that it is going to achieve all the capabilities that Admiral Blackham's staff have specified. That is the line we are sticking to. In the meantime, the aircraft are able to defend themselves.

  85. In the meantime while you are waiting for these things to be put right at some unspecified date, there are costs of having to maintain Sidewinder longer than originally envisaged. Who is going to be paying for that and who is going to be paying for the additional costs incurred as a result?
  (Sir Robert Walmsley) Liquidated damages are precisely designed to put the customer in the position he would have been in if the thing had arrived. They will contribute to the Sidewinder costs. It is not clear what those costs, if any, are going to be yet. It is clear that that is the purpose of liquidated damages and that is where we should see them being applied, as we did with the C-130J.

  86. If we were to accept ASRAAM now, how significant would be the shortcomings operationally?
  (Vice-Admiral Sir Jeremy Blackham) They would be very significant. We want ASRAAM but ASRAAM is designed against a threat which we expect to develop over the next 25 years. In other words, it is right at the top end of the market during the time in which we expect to have it in service. At the moment, the aircraft we have deployed, armed predominantly with Sidewinder are entirely adequate against the threat which they are facing. That is not to say that I do not want ASRAAM to its date which, as you have already observed, has passed. I am satisfied that the capability that our deployed aircraft have on the operations on which they are deployed is entirely satisfactory. It would not be in ten or twenty years' time but I confidently expect to have ASRAAM long before then. As far as Sidewinder is concerned, we have always planned that Sidewinder should be in service, particularly on the Tornado GR4, until that goes out of service which is currently thought to be about 2018. We are not having to maintain a missile in service that we would not have had to maintain under our previous plans. We may have to keep rather more of them operational.

  87. Have you already received any ASRAAM missiles?
  (Vice-Admiral Sir Jeremy Blackham) We have not accepted any.

  88. You had to send some back?
  (Vice-Admiral Sir Jeremy Blackham) There have been a number of tests and trials. They were not offered to us.

  89. What about export prospects? We understand from the memorandum that the Royal Australian Air Force was interested in buying the ASRAAM.
  (Sir Robert Walmsley) It is more than interest. They have signed the contract.

  90. Will this export programme be affected as a result of these delays?
  (Sir Robert Walmsley) We stay in very close touch with our Australian colleagues on the procurement side, as I know Admiral Blackham's staff do on the equipment capability side. They will take a similar view to us. We have been also extremely anxious to make clear that we are operating at the margins of the missile's performance and to other potential customers that we regard this as the right air-to-air missile for the early 21st century. I have had my Canadian counterpart here this week and we have been discussing just that type of thing.

  91. We saw this table of key user requirements on page 37 of the Major Projects Report, the various performances against approved key user requirements. Clearly, at that time, you said that in all ten requirements currently forecast to be met, yes or no, it is yes, yes, yes, yes, yes; and then, percentage currently forecast to be met, 100 per cent. When did you first realise that your forecasts were not going to be met, when ASRAAM was not going to come up to scratch? Why does this report list all ten key areas as being fully met when clearly something has not been fully met; otherwise, you would have accepted ASRAAM?
  (Sir Robert Walmsley) All spot on. This table you are looking at was a prediction on 31 March 2000 as to what would happen with ASRAAM. At that stage, we were doing test runs. This missile flies well. It has hit targets. That is where we stood at the time this report was prepared. The data that goes into this Major Projects Report was prepared during the summer of 2000 and validated before publication in November of last year, but essentially at the stage that this thing went to press we were still hoping to achieve the December 2000 in-service date.

  92. This is a wish list?
  (Sir Robert Walmsley) No, it is not. These are the predictions from the company. We absolutely know now which of these—and I am not going to say that now—are the ones that we are arguing about. What I can tell you is that that is dragging down the whole of the Defence Procurement Agency's performance in terms of one of our five key agency targets. We were previously delivering 98 per cent of the operational performance targets set by Admiral Blackham's staff and this ASRAAM missile on its own has brought it down to about 96 per cent. These numbers are showing up in the Agency's performance; that is why it is at the top of my in-tray. We got the predictions wrong. I would submit that it was on the basis of data provided by the company of satisfactory progress of test firing and we have come up against some problems.

  93. Should we not then have another column as well as having forecasts for actually achieved? Then we would have more accurate information.
  (Sir Robert Walmsley) You would and we could have another column, except that I have never yet had a proposal to remove information from this Major Projects Report. We have just agreed a new format with the National Audit Office and the Public Accounts Committee. For most programmes which are in their very early stages, bearing in mind these things are only demonstrated at acceptance, we would have a great column of not yet demonstrated.

  94. I am not suggesting you remove information; I am suggesting an additional column alongside the forecasts.
  (Sir Robert Walmsley) What I was trying to do as politely as I could was to say that, for the last few years, this report has got more and more complex and there are always proposals to put more information in.

  95. I do not want to intrude into areas where we have no responsibility, but during the negotiations with the NAO and the Public Accounts Committee I thought we were part of the loop as well. Could you politely suggest to them that if they are in negotiation with the Public Accounts Committee and we deal with defence matters on a permanent basis, not sporadically, we would like to be informed. I am not criticising you, Sir Robert, but it might be polite to us if the NAO talks to us as well as their sister operation.
  (Sir Robert Walmsley) I absolutely accept the point. We will do that. I cannot remember; I thought we had told you about the new format of the report.

  96. Should I be able to take the other tables in your performance report as being accurate? Is this a one-off aberration or should I take all the tables with a pinch of salt?
  (Sir Robert Walmsley) I do not think you should take them with a pinch of salt. ASRAAM has been a formative experience for me. Here we were, predicting that we would meet them all and we found we did not. We do meet nearly all the performance parameters. That is just a matter of record. As they go past their acceptance, we do meet them. I think it is true that, because these are predictions of performance at acceptance into service, it is very easy to get yourself into a mind set where you are thinking, "Yes, I know it is not right at the moment, but I think I know what needs to be done to put it right. Therefore, I will give it a tick." I think we have to be a little more self-critical in our assessment of the predicted performance than perhaps we have been. That is the lesson that I draw from this. How sure can we be that ASRAAM is going to meet these performance requirements or was it just that the contractor says so or we think it can be fixed or whatever? I do not think we have been self-critical enough and I think we need to be more so.

  97. In that respect, did DERA have any role in assessing these matters? Could they not have warned you if there were some problems?
  (Sir Robert Walmsley) They could. I do not know the detail of that but the way we try to work it in assessing these matters is that we should not be marking our own homework. What I feel most comfortable with is if Admiral Blackham's staff, to whom we do deliver this equipment, asks us for the evidence that we are going to meet these key performance parameters at the introduction into service. We all have something to learn from the ASRAAM experience and we will get tougher questions next year from Admiral Blackham's staff, I think.

  98. Moving on to the current negotiations about the BVRAAM Meteor contract, the letter from Baroness Symons that I have already quoted also has an interesting statement about that in which she says, "We are also determined to draw the lessons from this programme when we sign the contract for Meteor, the new Beyond Visual Range Air-to-Air Missile for Eurofighter, which will also be built by MBD, to ensure that they deliver the standard of missile we require when we need it." This is quite significant: ". . . the Meteor contract will include a series of key technological milestones, failure to achieve any of which may lead to the termination of the contract with all money being returned to the partners." What lessons can be drawn from this ASRAAM experience for application to the BVRAAM programme?
  (Sir Robert Walmsley) Clearly, there are quite a few. You asked me a question a few moments ago about whose fault it was and I said we were clear in our position and the firm took a different view. What I think that means is that one of the first lessons we want to apply to BVRAAM is that there should be absolutely clear, unambiguous acceptance criteria and how we measure conformity or otherwise with those criteria at the moment of contract placement. It sounds an obvious point but that in effect is what the dispute is about. Quite a lot of this is done in computer simulations rather than by firing against real targets. It is whether the model is accurately representing real life. This is where some of these arguments have their absolute nexus. We have already mentioned key milestones, sometimes called golden milestones. There are four of them that we planned during the BVRAAM development contract. Because those are performance related, that is learning a lesson too from ASRAAM. It is trying to get the performance aspects of the missile under our belt relatively early in the total development programme to essentially prove that it has the basic building blocks to make a weapons system. There are industrial lessons too. This contract was originally placed in 1992 with BAe Dynamics, long gone now, now Matra BAe Dynamics and then, on Friday of last week, it turned into MBDA where the "A" stands potentially for Alenia, but I do not think it is mentioned in particular, as the Italian competence comes into that company. That gives that company a far greater industrial competence in missiles than BAe Dynamics had. In particular, the company will be staffed by people who have a total comprehension of the seeker capabilities; whereas the ASRAAM seeker was done to some extent as an arm's length purchase from an American contractor. What that meant was the seeker was a little bit of a black box to start with and it perhaps took them some time to understand how it performed. One of the reasons we encouraged the formation of MBDA was to give it a total missile competence from the seeker right through to the motor. I think there is an industrial point there. Finally, during the Meteor competition, we were offered some quite ambitious in-service dates by all the contractors at various stages. We have taken quite a cautious view of those ambitious offers in setting the in-service date. That is a lesson learned too.

  99. You took the decision to go for what could be called a big bang approach as opposed to an incremental approach. The Meteor was chosen on the basis that it would be an alternative to Raytheon's incremental approach. Is there not a lesson here about the danger of setting unrealistic requirements technically, and companies making over-ambitious claims when they bid for MoD work?
  (Sir Robert Walmsley) I cannot but agree with that. The question is phrased in such a way that it would be wholly unreasonable to disagree with it. I know I am like a dog with a bone on this, but the point I would make is that, yes, Raytheon offered us an incremental programme, but they only offered us the first increment. It is one thing to offer a person an incremental programme, where you define all the increments at the moment you accept it; it is quite a different thing to offer them an incremental programme which says, "Here is how far we will get you with what you are buying from us. If you need to make it fully compliant with your requirement all these things will have to happen." We had no reliable determination of what all those things were and how much it would cost. Re-engining a missile or whipping out the seeker half-way through life is, as near as could be, equivalent to buying a new missile.