Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 1 - 19)




  1. This week we shall be taking evidence in two hearings on the Ministry of Defence's progress with major defence equipment projects. Later this week, on Wednesday, we shall take evidence on Parts 1 and 2 of the National Audit Office Report on the Major Projects Report 2000, which examines the MoD's progress in procuring its major equipment programmes to cost, time and performance targets. Today we are going to take evidence on Part 3 of the Major Projects Report 1999, which examines the impact of slippage on operational capability and costs on four case study projects, and Part 3 of the Major Projects Report 2000 which updates those. The main witness today is Sir Robert Walmsley, Chief of Defence Procurement and Chief Executive of the Defence Procurement Agency. Would you like to introduce your colleague, Sir Roger?

  (Sir Robert Walmsley) Vice Admiral Sir Jeremy Blackham, the Deputy Chief of Defence Staff, Equipment Capability, but also my customer.

  2. Welcome and a happy new year to you both. You are at least familiar with the procedure, Sir Robert, more than anyone else I know. I shall start with paragraph 3.23 of the Major Projects Report 2000 which records the probable write-off of £115 million of Medium Range TRIGAT development costs and paragraph 3.32 records that between £35 million and £102 million has been wasted on BOWMAN while delays on the Type 45 Destroyer and Brimstone programmes will cost the department an additional £565 million and £48 million respectively. That adds up to about £800 million across four projects. How will that affect the provision of defence capability more widely and can you assure the Committee that it will not result in vital funding being cut elsewhere in the budget?
  (Sir Robert Walmsley) That is an enormous question, as I know you understand. Three separate major programmes.

  3. We shall deal with the details of them shortly.
  (Sir Robert Walmsley) I understand. You did mention £800 million and I would say £500 million of that in round numbers derives from the Type 45 Destroyer programme. You can see that those costs have not yet been incurred and, as the report makes clear, those additional support costs have been accompanied by a deferral of the procurement expenditure. I would submit that the problem there is deferred introduction of capability: it has not resulted in a loss of money because we have not spent the money yet and we have not incurred the cost yet.

  4. That was my question. How will it affect the provision of defence capability? What you are telling us is that it will in terms of deferral.
  (Sir Robert Walmsley) In terms of deferral, not money.

  5. You have put off things we would otherwise have.
  (Sir Robert Walmsley) I put the TRIGAT position in a different category. That is the £115 million. We have spent that on a collaborative programme which has hit the buffers. We withdrew. If the programme had not been conceived at all, then I am absolutely confident that Admiral Blackham or his predecessor's predecessor's predecessor would have required my predecessor's predecessor to have embarked on an alternative anti-tank guided weapons system. I do not believe that the effect on the budget would have been so substantial. The problem is that the front line of the armed forces is today relying on MILAN when they had a reasonable expectation they would have a modern anti-tank guided weapons system.

  6. That one really is a loss, is it not, because it is a write-off?
  (Sir Robert Walmsley) It is an absolute write-off but as to the effect on the defence budget, if we had not started on TRIGAT we would have been asked to start an alternative anti-tank guided weapons system.

  7. It might have worked.
  (Sir Robert Walmsley) That is why I say the problem is that the front line are relying on MILAN when they should have been relying on a better system today. BOWMAN is in a different category. We spent the money, we started off down the wrong track and, depending on which contractor wins the competition, so will depend the value of the write-off. I hugely regret that we have written that money off. It is a waste and the consequences of course depend on the size of the write-off. In terms of your accounting units, as I remember them before, of one frigate, then the minimum level of write-off is at least in the form of 20 per cent of a frigate.

  8. Let us pick up BOWMAN. When you gave evidence at the Major Projects Report 1998 hearing earlier this year, you assured us that you had "the best industry people in the world" working on BOWMAN and that "they were close to a cost-effective solution". Yet paragraph 3.25 of the report says that the competition has been re-opened, some 12 years after the requirement was first raised. Can you explain to the Committee why you did not see the difficulties with the ARCHER collaboration earlier and why it has taken so long for you to decide what to do on this?
  (Sir Robert Walmsley) I do not think the answer will satisfy you. What I can say is that ARCHER did come extremely close to satisfying the Ministry of Defence. They were completely re-energised in 1999 as a result of the consortium being managed properly by BAE SYSTEMS. They brought in new staff, they were supported by their consortium members, both from the United States and from France, with the best people that could be found. We were very keen though to make sure that we based a decision on whether to continue or not with ARCHER on the substance of their final bid, which came in in June. Right until the last few days of that bid, it was not clear to me whether it was going to be satisfactory or not, but the very fact that ARCHER Communications Systems Limited put so many changes into their bid in the last few days caused us to look very closely indeed at whether they would be able to live up to the promise suggested in those changes. I also told the Committee last year that we would be very, very careful about extravagant promises given to us by contractors, particularly when they gave them in the closing days of either a competition or a single source of procurement on the basis that it had become a must-win project for them. Of course I wish we had stopped with ARCHER sooner because there is no point in pretending it has been a good thing for it to go on until July last year, but having had the final bid in late June, 23 June in fact, we announced that we had stopped with ARCHER on 25 July. From the Ministry of Defence's point of view, that is moving extremely fast on a very serious programme to terminate with ARCHER.

  9. I leave aside any comments on glacial timescales but we shall move on to another aspect of the session we had on the Major Projects Report when we talked about Brimstone. You argued that project which is now expected to enter service will be better than the missile which would have entered service had there been no delays. Paragraphs 3.9 and 3.10 of the Major Projects Report 1999 say that the required capability was not available during the Kosovo conflict, while paragraph 3.9 of the 2000 report shows that the delay has cost the department an extra £48 million. In your opinion, to what extent can improvements in capability which arise almost as an accidental outcome of delays ever be a mitigation for the operational and cost penalties associated with the delayed introduction of equipment? After all it missed an entire operation in effect here.
  (Sir Robert Walmsley) I shall ask Admiral Blackham to comment on the operational consequences, but I should like to make the point that these improvements have arrived not as an accident of the delays but as a consequence of the delays.

  10. Inadvertent consequences.
  (Sir Robert Walmsley) I accept "inadvertent". I would just make the very important point that image recognition which allows the missile to discriminate between various different targets would not have been available if the missile had been introduced at the time it had been originally planned. That is just a fact.
  (Vice Admiral Sir Jeremy Blackham) It is probably fair to say that as things turned out in the Kosovo operation the non-availability of Brimstone was probably not critical. The reason for that lies in the nature of the Brimstone weapon itself. Brimstone is what the jargon would call a "fire and forget" missile, but it is a missile which acquires its own target after it has been released by the pilot. That has some advantages if you are facing massed armour on a plain or in a desert, which is of course the scenario for which the Brimstone missile was originally conceived, and if you are flying above cloud or in circumstances where you cannot see the target. But the circumstances in Kosovo were rather different from that and the rules of engagement were rather different. It was important to be able to identify targets quite precisely before they were engaged. Although the Brimstone missile will identify with a very high degree of accuracy a tank or heavy armoured vehicle, it is also the case that it cannot be guaranteed to reject a target which is not one of those things.

  11. Like a tractor.
  (Vice Admiral Sir Jeremy Blackham) I think it would actually reject a tractor because the actual system it uses is very much more precise than that, but you could not be certain it would reject a non-tank type vehicle. Consequently, its use in Kosovo would have been somewhat restricted in the campaign which was actually fought. Whether that would have been different had we had to embark upon an opposed entry into Kosovo, it is rather hard to say and would be pretty speculative. In fact the operational consequences of not having Brimstone were not particularly painful.

  12. Speculative, yes, but quite important when you are talking about armed forces who have to be able to cope with opposed entries. Last time we spoke on this particular issue, I did ask you about the alternative at the time of Maverick. I note from paragraphs 3.5 and 3.7 of the 2000 report that the department has placed an order for Maverick G missiles which are seven times more effective than the BL755 cluster bomb Brimstone will replace. They also, as an aside, meet the consideration that Admiral Blackham raised of being very precise in terms of their targeting. Why did you not decide to buy Maverick earlier to fill the capability gap caused by the delay of Brimstone instead of upgrading BL755?
  (Sir Robert Walmsley) It is always very difficult to work out why you did not do something. My inclination is—

  13. It just looks obvious, that is all.
  (Sir Robert Walmsley) I do recall your advice at the last hearing.

  14. It was a question, not advice.
  (Sir Robert Walmsley) I would say that in Brimstone's favour is the fact that the aircraft can carry up to 18 Brimstones whereas it can only carry six Mavericks. Brimstone as a weapon is more effective than Maverick because of this target discrimination capability, because it is a "fire and forget" weapon, it does not expose the pilot to risk. Mavericks, however, cost twice what Brimstones cost each and we have always got to bear in mind that Brimstone's in-service date, currently October 2002, has slipped so that at the time we took the decision Brimstone's in-service date would have been even closer and Brimstone was placed on contract in late 1996. So the in-service date when we first started with it was about five years away. That is quite a narrow window when it would have seemed sensible to buy Maverick. I would also say that I am extremely pleased that we are buying Maverick. I do not in any way resile from that decision. I would just make the point that Maverick itself has evolved hugely over the now nearly 30 years since it first started service with the United States Air Force. Maverick has been an enhancing capability, so it has always looked more attractive to get the next one, but as you get closer to the Brimstone in-service date more difficult to make that decision.

  15. I might observe that most of the complex weapons systems you buy from America do tend to develop under your feet as it were: Maverick, Tomahawk, whatever. Let us move on to paragraph 3.17 of the 2000 report which notes that the UK withdrew from the TRIGAT project on 28 July 2000, some 20 years after beginning the programme in the face of the uncertainty facing its future. What lessons have you taken away from your withdrawal from the Medium Range TRIGAT programme and how are you applying those to other programmes to ensure that you do not face similar difficulties?
  (Sir Robert Walmsley) One of the first lessons is that we should not specify how to solve the problem. We specified with TRIGAT that it was to be a laser designated weapon and it was therefore to follow a line of sight to the target, which meant that it was attacking the strongest part of the target's armour, instead of allowing the weapons system designer the freedom to recognise that infrared-type seekers which allow the weapon not to follow a fixed line of sight, which do not require any intervention from the firer after he has launched the weapon and which are far less amenable to countermeasures than a laser-designated weapon, all of those things militated against TRIGAT. So we, the procurement authorities, specified, with guidance I may say from the operational customer, that a laser-designated weapon was to be the solution. We do not do that any more and time and again I will come back with that as a lesson learned. Do not specify the solution: specify the requirement.

  16. One detailed point on TRIGAT. One thing paragraph 3.18 of the 2000 report tells us is that you started your industrialisation and production in 1999 and that you considered conducting a Balance of Investment study into the future of the requirement before doing that but you did not do so. Since there have been doubts over the suitability of TRIGAT for some time, why did you not conduct the study then which might have pointed to an earlier and cheaper withdrawal?
  (Sir Robert Walmsley) The answer is that in 1999 we had only 12 months previously completed the strategic defence review which confirmed the place of this weapon, but that was presumed on the basis of a collaborative programme which was going to perform. What happens is that if you withdraw before the collaborative programme has had the chance to perform you would precipitate its destruction. In the event of course I agree we should have done just that because our partners did not sign up and we ourselves eventually had to withdraw a year after we had signed up.

  17. Maybe we were less wise than they.
  (Sir Robert Walmsley) They do not have weapons either and they have spent that money.

  18. Neither of us has. Paragraph 3.14 of the 2000 report tells us that the first three Type 45 destroyers will not have a full capability when they first enter service. How will their initial capability compare with that planned for the Common New Generation Frigate? How long will it be after entering service before the ships are brought up to full capability and at what cost?
  (Vice Admiral Sir Jeremy Blackham) The first thing to explain, although I know you have had it explained to you many times, is what the purpose of this ship is. The purpose of this ship is to provide air defence to the fleet and in order to do that it is going to deploy the PAAMS missile system, which was the centre of the CNGF programme when it was running. That is overridingly its most important duty: to take that system to sea in order to allow the retirement of the Type 42 destroyers which are old and increasingly unable to match up to the threat. That it will do and that is its most important function. Of course no ship can allow itself the luxury of only being suitable in one scenario, so we have to think of other things it might do. The Type 45 will be able to contribute to naval gunfire support, at the moment through a gun, although you may wish to investigate what other possibilities there are there. It will be able to deploy helicopters in a range of roles, it will have an ASW sonar and it will have space on board to carry troops in order to conduct operations ashore. It will have quite a wide range of capabilities. The CNGF had a substantial range of capabilities which were actually, as it turned out, unaffordable and moreover the ship as a ship has collapsed. We then found ourselves with an urgent gap to replace the Type 42 destroyers and it is a remarkable thing that within not much more than a year of the collapse of the CNGF we actually have on order a programme of ships which will deploy the PAAMS, do the other things I have already indicated and allow scope for future development of weapons systems and other capabilities as time goes by and as technology and circumstances show us we need to develop them.

  Chairman: Albeit the ships may be a little handicapped later on.

Mr Leigh

  19. I want to ask you just a few questions about the Type 45 destroyer. Paragraph 3.10 tell us "In April 1999, the Defence Ministers of the United Kingdom, France and Italy decided not to proceed with the collaborative Common New Generation Frigate" and we decided to go it alone with the Type 45 destroyer as a national solution. Could you explain to me why you so decided, especially as Italy and France have continued to collaborate, have they not?
  (Sir Robert Walmsley) The first reason was that we did not have an offer from a prime contractor on which to base a contract to deliver a ship. We had struggled for many years to develop a prime contractor but we did not have a prime contractor, we had a grouping of companies, nominally led by Marconi, then of course BAE SYSTEMS. Having had our collaborative partners agree that Marconi could lead it, the concept developed by the industries of France and Italy was that Italy would take the platform as a total sub-contract and France would take the weapons system as a total sub-contract or perhaps it was the other way round, it makes no difference, and that GEC/Marconi would be left taking all the risk and with none of the work which means that the person taking the risk would not be able effectively to manage it. The companies had tried to get themselves into a real structure; they had not done so. Secondly, there was no prospect of the ship becoming affordable. Admiral Blackham has already spoken on that subject. One of the reasons for that is that there was a great deal of tablecloth tugging going on in each country. Some countries were specialist in gun-based anti-missile systems, others were specialists in missile-based anti-missile systems. Some countries wanted a huge communication system. Whatever any country wanted tended to be loaded into the requirement, that was why it became unaffordable. It is also right to say that there was a huge degree of concern in the Navy about our ability to deliver this thing in any knowable timescale. For those three reasons, timetable uncertainty, unaffordability and no real prime contractor, we were quite right to pull the plug.

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