Select Committee on Defence Minutes of Evidence

Examination of witnesses (Questions 20 - 39)



  20. Can you tell us when it was first made public that it was intended as a temporary arrangement? Do not tell us now, but if you can drop us a note.
  (Mr Hill) My staff will make a note.

  21. What will DARA look like five years from now and what sites will be doing what sort of work?
  (Mr Hill) It is our intention to turn DARA into a world-class production organisation and that is measured against benchmarks that are accepted worldwide and put in place by Oliver Wight Production Specialists. We are already at Class B at our Almondbank site, driving toward Class B at Fleetlands, and it is our plan over the next two years to shape the Agency and get it to world-class measurement. That means looking at all our processes right across the business, everything from finance to production, to make sure that they are as lean and competitive as we can make them in the market-place.

  22. What do you anticipate is going to be either at St Athan or Rhoose five years from now?
  (Mr Hill) We have made an absolutely solid commitment, and this has been publicly stated by our Minister, to remain in the Vale of Glamorgan either at St Athan or at Cardiff Airport. Our Aircraft Business Unit, plus all the supporting functions like manufacturing and structures, will all be part of that entity which is the largest slice of the business in the Agency and that will remain in the Vale of Glamorgan. The other areas I have already outlined which are under study it is too soon to make a conclusion on, but in avionics we have already created a centre of excellence at Sealand, on engines within two years we will have one centre which I believe will be very competitive in the market place at Fleetlands. Almondbank specialises in helicopter transmissions and mechanical components and the key area for us now to work out is what we are going to do with mechanical components. That is completely open in terms of do we migrate work south or north.

  23. Will the Vale of Glamorgan site be designated as a centre of excellence?
  (Mr Hill) Yes, indeed it will. We have every intention and some of the work we have been doing in the past couple of years has significantly reduced turn round times and the manpower content, and we believe we are getting more and more competitive, so the fixed wing Aircraft Business Unit based at St Athan is the jewel in the crown of the organisation.

  24. Obviously you have not worked out which option you are going for if you decide to move away from St Athan, the status quo, new build at St Athan, the refurbishment of St Athan, or Cardiff Airport. Do you have any ball-park figures as to what the workforce is likely to be at each of the sites?
  (Mr Hill) It is difficult to say until the studies are worked through but Sealand will remain as it currently is at around about 1,300 people, Fleetlands around about 1,100, Almondbank is currently at 350 but depending on how we go forward with components it could increase in size or it could decrease depending on where we find it most cost-effective to place the work. As far as St Athan is concerned, clearly with all its disparate functions, if we were able to weld those into a single entity there will be some cost savings in terms of manpower but we will handle that through natural wastage. In terms of numbers we are talking about at least 1,400 people in the Aircraft Business Unit and perhaps more.

  25. We were taken past Rhoose Airport when we left St Athan and we looked at the British Airways hangar. Would it be possible to put something like that somewhere in a large corner of St Athan? It is such a vast site of 1,000 acres and unless there are pressing reasons to move there must be more than enough room to consolidate on site?
  (Mr Hill) And that is going to be looked at in the evaluation of the options, but there are some other key issues associated with remaining at St Athan. The runway is not wide enough or long enough to take all aircraft types whereas Cardiff Airport is. We cannot take AWACs, wide-bodied jets or Tristar which is currently in service with the Royal Air Force. The other issue is—

  Chairman: Sorry to interrupt but would you construct a building like BA's that would be large enough to take all of these aircraft types?

Mr Cohen

  26. Maybe at Cardiff Airport?
  (Mr Hill) It would depend on the way the market goes. Currently we have got the VC10 at St Athan. That is planned to go out of service in a few years' time and we have no plans to stay in the large aircraft market unless a business opportunity comes up because obviously the costs of providing a large aircraft facility are very high indeed. Our core excellence is with fast jets and that is the lion's share of the aircraft business at St Athan.


  27. So, say, if you vacated the St Athan site it might be used by some other MoD user or it could be surplus to requirements and sold off and, if so, the MoD will gain the money from the sale?
  (Mr Hill) Yes indeed. There are a couple of other issues associated with staying at St Athan. Of course, DARA will be likely to become the only user of the airfield in which case we will have to bear all the overheads associated with operations. If we move to Cardiff Airport there is an alternative to share the costs with other users. The other fundamental problem we have found from survey at St Athan is that the site sewage and water systems have broken down over the years and they need considerable investment as does the main runway. Clearly if DARA is the only or major user at St Athan we are going to have to bear the cost.

  28. Will there be any planning approval difficulties if you move to Rhoose?
  (Mr Hill) We are working very closely with the Welsh Development Agency and the Welsh Assembly and their planning people and we do not believe there will be any significant problems associated with moving to Cardiff Airport, if that option is taken forward.

  29. In terms of timing, would you have to get planning permission before you make a final decision?
  (Mr Hill) Yes, and that work is underway as an option. We are looking at that so that we do not have to do everything consecutively. We are doing a number of things in parallel so we have a well-informed business case to present to the Minister.

  30. It would be really helpful even though this Committee will fall in the Election, if when you do complete your study, again on the basis of the previous material, if we could have a look at it. Just a couple more questions, if I may. In your Annual Report it lists the cost of consultancies which was £11 million.
  (Mr Hill) Yes.

  31. I think I am in the wrong job and you are!
  (Mr Hill) No, no.

  Chairman: I cannot say about you, I can only say about me.

Mr Gapes

  32. £12 million, Chairman.
  (Mr Hill) The problem is that the convention is that you put all sorts of things into the consultancy bucket. If you take the £12 million, £4.3 million of it is the contractors' working party with BAE Systems working on our VC10s, so a third of it is associated with CWP, actual physical work on aircraft. Then if you look at other areas that are included within that it includes interim managers and we have had to use a number of interim managers both for expertise and because of a lack of capacity within our own workforce in order to get us towards trading fund. So that bucket does contain a number of elements that are not associated with paying the big five like KPMG their excellent salaries.


  33. You could not decide to move into accountancy, could you, as that would certainly sort out your financial problems because obviously that profession is far more lucrative than engine repair!
  (Mr Hill) This is why we have recruited David Rutherford who is expert in that area.

Mr Cohen

  34. Spending that sort of money it is important what terms of reference you set. How do you decide the terms of reference?
  (Mr Hill) The terms of reference were very clearly mapped out in the competition that we ran and KPMG came in with the best price against that specification and statement of work. They also only got paid if they delivered against the milestones, so there was periodic review of their performance to make sure they delivered. We have given you the enterprise transformation paper findings and you will see that for the investment that went into KPMG that we have had a significant return on investment in terms of savings, something like £33 million once they are all worked through, so it has been a good investment.


  35. A last question from me and then I will hand over the chairmanship to Mr Hood. We have had quite a lot of correspondence, some of it even with their names and addresses on them, so there are disgruntled workers, Mr Hill, you obviously know that, and we have actually spoken to some of them.
  (Mr Hill) Yes.

  36. May I have your assurance that there will be no disciplinary action taken against anyone who has contacted us, and no bars on any promotion? I am sure, as an honourable man you would recognise even though you believe you have a master plan you have to take large numbers of people along with you and certainly you have not done that entirely as of this point in time, even though you do have quite a remarkable consultation process that in many ways should be emulated not just within the public sector but in much of the private sector too.
  (Mr Hill) I do believe that we are doing everything we possibly can to try to carry the entire workforce with us. We do have nearly 6,000 people and you will always have some people who are uncomfortable with change. It is up to us to try to manage and that is why myself and my board are spending a huge amount of effort in consultation and particularly in communication and participation so that we get as many people involved in the change process as we can. You are always going to get some people who will be unhappy with that.

  37. There will be no disciplinary action of any kind or penalties for people who came into contact with us by writing or personal contact outside the structure of the meetings that you arranged?
  (Mr Hill) I do not know what documents have been put in front of you.

  38. They were not classified, I can assure you; it was opinion.
  (Mr Hill) There has been some correspondence that has been libelous against me personally. I do not know who has put that out but I could not give an absolute undertaking that if somebody libelled me in public I would not take action. I might have to do that just like any other citizen is allowed to do in this country.

  39. I can absolutely assure you that although they do not all regard you as the perfect employer, I could see nothing whatsoever that was actionable and nothing whatsoever that was classified, and in those circumstances we will accept your assurance.
  (Mr Hill) I will give an absolute undertaking, subject to libellous material not being put into the open domain.

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