Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 140 - 159)



  140. Yes, but that takes us back to an issue which has emerged as the afternoon has gone on and that is whether or not the equipment which was supposed to come in at a previous date—and this is a theme I have picked up on before—actually keeps up with the technological change which has taken place. If Bismarck were procuring a gun in 1871, I guess it did not change very dramatically by 1881, but ten years for technology in terms of a radio system or a missile system could almost be revolutionary in the early 21st century.
  (Sir Robert Walmsley) I absolutely agree with that and that is partly why we acknowledge not just the possibility but the certainty that the twelfth Type 45 destroyer will be of much greater capability than the first one and why it is necessary to envisage growing the capability through life, just as the Mavericks have gone through successive generations.

  141. Nevertheless, in the meantime, while that is happening and we are getting better kit at the end of that process, we are left in this situation where our forces now are having to make do with equipment where time is passing them by. If you take for example the BL755, Sir Jeremy said that it still has a utility, but the report says that hostile tanks are now four times more likely to survive an attack by that weaponry.
  (Sir Robert Walmsley) And part of its utility was against soft-skinned targets. We are buying the Maverick for special circumstances.

  142. I hope we are not being complacent in any way. If we take another example, the report says of MILAN that the system has an extremely limited ability to defeat modern tank armour. I would not be very reassured if I were a tank commander or one of the tank crews. Even if that equipment is working now, it is not just about the technology which is at my disposal, it is the technology which is at the enemy's disposal as well. It is not just about offensive capability, it is about defensive capability as well, is it not?
  (Sir Robert Walmsley) One of the difficulties I have at these hearings is that I try to explain what has happened. If that ever sounds like complacency, then I am getting it seriously wrong. I can explain; I am not complacent.

  143. Okay; let us move on. I want to look at the question of cost. If we are waiting for this equipment to arrive, there are several options, are there not? One is to upgrade the equipment we have, in the case of Maverick to buy off the shelf to plug a gap. At the same time we have the cost of updating the weapon which should have been coming into service much earlier. One of my concerns is the question of who bears the cost and the risk in these strategies. For example, does the taxpayer bear an undue risk? If you take the upgrade of BL755, that was twice as costly as it would otherwise have been, was it not, some £20 million?
  (Sir Robert Walmsley) No, I do not think that is quite fair. You did mention as you started that question the cost of updating the weapon which should have come into service sometime sooner. The Brimstone costs have not gone up. The cost which is being referred to and which you have picked up on is the proportionally higher cost of upgrading a smaller proportion of BL755s as a result of the envisaged need to replace some RBL755s which might have been used during the Kosovo conflict. What that means in essence is that if you order a smaller extra quantity, it is probably going to cost you more pro rata than if you ordered a large quantity. Let me also say that in that procurement, the original contractor who produced the devices, the radar proximity fuse sensors, had stopped manufacturing them. The components were obsolete, so we had to change manufacturer and defeat obsolescence. It was not just a question of scale, it was also a question of going round, finding somebody to do it and finding out how to get the components to do it. That is why it cost more pro rata.

  144. Two very quick points on that then. If, while we are waiting for Brimstone, the model is in a sense being updated, that is not being done by the manufacturer for nothing, is it? There must be an additional cost which is presumably passed on to the MOD.
  (Sir Robert Walmsley) I know I have failed to get this across. Brimstone is not being updated by comparison with the performance for which we contracted in 1996. It will be delivered to the performance for which we contracted then. What I have been trying to say, and I know how much it annoys the Committee because it sounds like complacency or an excuse, is that the Brimstone for which we contracted in 1996 will have a very much better performance than the Brimstone for which we would have contracted if we had done it on time in, let us say, 1986.

Mr Rendel

  145. I want to start off by coming back to what does seem to be the nub of a lot of our arguments today which is over paragraph 3.13 and just try to clarify a few further points about that. Am I right in saying, Sir Jeremy, that you said earlier to the Committee that you would not accept a ship into operation in our Navy today unless it had sonar in it?
  (Vice Admiral Sir Jeremy Blackham) I did say that.

  146. I think that you said that the decision to put sonar in the first three Type 45 destroyers had finally been taken this year.
  (Sir Robert Walmsley) That is true, but I would not want you to think that we had not been trying for months to find a way of squeezing it into the budget.

  147. I am sure. On what date was that decision taken?
  (Sir Robert Walmsley) To be frank, I do not know. I can only say it is this year.

  148. We have only had two weeks so far this year.
  (Sir Robert Walmsley) Yes; we agreed it last week but I cannot remember which day it was.

  149. Very dramatic. So the decision was taken to order the first three vessels on 20 December last year.
  (Sir Robert Walmsley) Yes, that is the decision was taken quite a long time before we actually placed the order on 20 December last year.

  150. I beg your pardon. The order was placed on 20 December last year. When the order was placed, they were for vessels which did not have sonar but had the capability of having sonar inserted at a later date.
  (Sir Robert Walmsley) Exactly.

  151. So we placed an order for something which the Navy would not have accepted as it was at the time it was ordered.
  (Sir Robert Walmsley) We needed to place the order because placing that order starts the design of the ship. I knew that we did not need to take a final view on the sonar at that stage. We did need to get the prime contract rolling otherwise the ships were going to be late.

  152. Did you know at that stage that you had sufficient money in the budget in order to order the sonar later?
  (Sir Robert Walmsley) I did not know until I settled the contract; I did not sign it. Until I settled the contract price, I did not know how much headroom we had to play with. These are quite sensitive negotiations[7].

  153. You settled the contract price without knowing whether you had a budget which was bigger than that contract price, did you say?
  (Sir Robert Walmsley) No; until we settled the contract price we did not know whether a sonar was going to be affordable.

  154. But you settled the contract price presumably before you placed the order on 20 December.
  (Sir Robert Walmsley) Correct. We settled the contract price quite late on 19 December.

  155. You knew at that stage that the sonar was affordable.
  (Sir Robert Walmsley) I do not think I knew probably until the beginning of this year as we started to run over the ground. It would have been deducible at that stage.

  156. When you came to discuss this Committee, was it as a result of those discussions between the two of you that this decision was finally taken that you would have to go ahead with sonar?
  (Sir Robert Walmsley) Yes, it was as a result of discussions between us.

  157. In preparation for this Committee?
  (Sir Robert Walmsley) No, not in preparation for this Committee, in reaction to the circumstances where we placed the prime contract, what options were now open to us for managing this ship.

  158. Sir Jeremy, may I ask you when you first noticed this line in the report which said these ships were going to be brought into operation without sonar?
  (Vice Admiral Sir Jeremy Blackham) When I really turned to the report in December.

  159. So you knew before the order was placed that the ships were not going to have sonar on them.
  (Vice Admiral Sir Jeremy Blackham) No. I do not think I can improve on what Sir Robert has already said. I knew that the order was placed on a certain basis for the ship's construction which included the fitting of the ability to take a sonar. What I did not know, because I could not know, was whether that price would provide us with a chance to incorporate the sonar, nor did I know whether I would have to go and think further about whether I might divert money from some other part of the programme if that were necessary, which as things turned out it is not. To put the sonar in would have an opportunity cost. There is an opportunity cost of everything we do. I would have had to react to that situation had it been the situation, but happily we find that within the price we can afford a sonar.

7   Note by Witness: The Type 45 overall budget has always included provision for the fitting of a sonar under an Incremental Acquisition Plan. However, until placement of the Demonstration and First of Class Manufacture contract for the first three ships it was uncertain that funding headroom would be available early enough to allow the sonar to be fitted on build to the First of Class vessel. Back

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