Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 160 - 179)



  160. What you are saying, since you have confirmed just now that you would not have accepted these ships without sonar and therefore they were pretty well useless until the sonar had been put in, that had Sir Robert suddenly realised in placing the order that actually he had used up his whole budget, what you would then have done would have been to have diverted some other money from some other budget.
  (Vice Admiral Sir Jeremy Blackham) I would certainly have had to think about it and, given the position I have taken in front of this Committee on sonar, I think you can make your own deductions. I believe that a sonar is an important part of a ship, certainly.

  161. A vital part of a ship, without which a ship should not be accepted at all, is what you were saying. Not just an important part but a sine qua non for accepting any ship.
  (Vice Admiral Sir Jeremy Blackham) Indeed and it has always been my objective that we should have a sonar and we shall.

  162. Is it not slightly odd though to order a ship and confirm the order before you had worked out whether you were going to have to divert some other budget in order to make that ship an acceptable ship for your Navy?
  (Vice Admiral Sir Jeremy Blackham) I do not think so. If I may just spend a little time on this. It would be very difficult for me if that were the case. For a start, a ship has not been fully designed yet, so I should be quite surprised if every detail of it were settled now. Much more importantly than that, given the rate of change of technology, given the lessons we learn, it would be an impossible position for me if we could not change the fitting of a ship in response to whatever pressure arose during the next five or 15 or 20 years. It would not surprise me in the least if in response to some operational experience, what I like to refer to as the live laboratory, we actually learnt something which made me conclude that some hypothetical capability needed to be added to the ship and that I would be prepared to pay for that from some other part of the equipment programme. That is the nature of the world we now find ourselves in, both the political and operational world and the technological world.

  163. I am quite prepared to believe that you actually take all sorts of decisions about changes to budgets as you go on to take account of changes which are made to the technology, but it does seem to me to be rather peculiar that you could order three ships on 20 December without knowing whether you were going to have to find some other budget in order to make those ships acceptable into operation by the Navy. That seems to me to be taking some risks with your other budgets, given that you knew at the time that you would need the sonar, whatever happened you said you would not accept these ships without sonar, yet you did not know if you had the budget to pay for it.
  (Vice Admiral Sir Jeremy Blackham) I have said that I regard the sonar as a critical part of the ship which ought to be there, certainly. I have always been confident that we would find a way of putting a sonar in.

  164. In other words you were always prepared to find some money in some other budget, although you did not at the time know which other budget or how much you would need to find. You knew you would be prepared to do that, whatever happened that would be your first priority above all other budgets.
  (Vice Admiral Sir Jeremy Blackham) No, I cannot possibly say that, because I hold budgets for an enormous range of different equipments. What I am saying is that I would have regarded it as something I would have wanted to get in and I would have looked very hard both at the Type 45 itself, and at other things, to see what we might do about it. But to say that it would be the top priority of the defence programme would not be true.

  165. I am sorry if I misled you there. I did not mean to say that. What I meant to say was that you were so clear that sonar was needed in order to bring these ships into operation that you would have found some other money from somewhere; it is that important.
  (Vice Admiral Sir Jeremy Blackham) I believe I would have had to find some way of doing it. I was also confident that this was well understood by the IPT leader, who of course deals directly with my Capability Director, that this was the subject of an ongoing communication between them. I was equally determined, as CDP was, to get the thing on contract so that we could actually start to make progress, have a ship designed and start the process of getting it to sea.

  166. It just seems to me a rather odd way of budgeting for things that you actually put the order in before you know how you are going to pay for it. That seems to be in this case what happened. It does not strike me as being the usual process of budgeting for major contracts of this sort.
  (Vice Admiral Sir Jeremy Blackham) We had a budget. We seem to have got what we wanted within it.

  167. You have, as it turns out, been able to get the sonar within the budget, but you did not know that at the time you placed the order and that is the important point.
  (Vice Admiral Sir Jeremy Blackham) I expected it.

  168. Can we turn to Sea Dart? I am interested in paragraph 3.13, the one before the one we have been talking about. We were talking earlier about the difficulties of getting the update to the Sea Dart to work because of finding that paint flecked off the front and that sometimes the sun came out from behind the clouds, both of which were apparently unexpected and, Sir Robert, you made it clear you could not explain why these things were unexpected and you might have expected the scientists concerned to have expected them rather more than they did. Who therefore is going to pay for the delays which were consequent upon that?
  (Sir Robert Walmsley) In terms of paying, the first price which has to be paid is one of operational capability.

  169. Yes; I am talking about the price in terms of pounds, shillings and pence.
  (Sir Robert Walmsley) There will have been a cost attached to the changes which I explained as a result of the Silkworm experience in the Gulf War. We will have paid for that. My memory is that this is a fixed price contract, but I would have to check that; in other words it would fall to the contractor.

  170. The paragraph says, and I did not quite understand what it meant, "It is currently forecast to come into service in mid-2001 at a cost of £43 million". That therefore is not the cost of the delay, that is the cost of the total update.
  (Sir Robert Walmsley) That is correct.

  171. That presumably therefore is the fixed price contract you were talking about.
  (Sir Robert Walmsley) I am saying fixed price, but fixed price would have included a variation of price and therefore because it took longer we shall have been more susceptible to it being uplifted for inflation. If it runs longer, there is more inflationary uplift and I do not know what the variation of price terms were in the contract. Sometimes in those days we used to have variation of price arrangements which took account of the so-called defence industry inflation which ran ahead of GDP. Therefore the contract may have been significantly more onerous as it turned out because it ran for longer than it would have been if it had run to time. That is the qualification in my mind.

  172. Since you seem a little bit uncertain, I should be grateful if you could send us a note afterwards just to confirm that was a fixed price contract and what the terms of variation were.
  (Sir Robert Walmsley) I should be very happy to do that[8].

  173. May I turn briefly to Brimstone? In paragraph 3.2 we are now told that it has been delayed, put off, in order to align the date of deployment of Brimstone with the Tornado GR4 package 2 update. What advantage was there to our armed services in having that alignment?
  (Sir Robert Walmsley) The Brimstone system is of no use unless it is integrated onto an aircraft which could be operated effectively. That is self-evidently true. We started the Brimstone programme on the basis that we would be looking at the Harrier GR7 as the aircraft which would be the lead in terms of introducing the capability. The Brimstone weapon requires what is called a digital data bus and we had some difficulty in sorting out how to fit the equivalent of a digital bus data in the Harrier GR7. The delays to the Harrier programme, the Harrier modification programme, became such that it was quite clear that the Tornado was going to be the first aircraft capable of introducing it into Royal Air Force service. The advantage to the frontline forces, although I am nervous about describing it as an advantage, is to reduce the delay for its introduction into service by choosing the Tornado programme rather than the Harrier programme and the Tornado programme itself then suffered a delay and it is the same thing, it's software, it's avionics, the aircraft.

  174. May I stop you there for a moment? May I turn you to paragraph 3.2 where one sentence says, "Although the missile could potentially be deployed and used on the aircraft without the package 2 update"? That indicates to me that you could have it on the Tornado, unless I have misunderstood this sentence, before the update came into effect. In other words, you could put it on the pre-update Tornado a year before you are going to put it on the updated Tornado.
  (Sir Robert Walmsley) That is undoubtedly what this means. What I also know is that when you say "put it on", it tends to mean that the weapon's effectiveness is very much reduced and the pilot's workload is very much increased. A decision will have been taken that it simply was not worth while introducing this as an intermediate capability.

  175. Although, according to this paragraph, ". . . the missile's full capability cannot be realised". That does not indicate that there is a huge diminution in effectiveness.
  (Sir Robert Walmsley) No, I agree.
  (Vice Admiral Sir Jeremy Blackham) But it is in fact a substantial limitation and the decision was taken not by the DPA, but by the customer organisation in consultation with the user, that it was not a sensible proposition to do this, given that we expected to have the Tornado GR4 in service during the current year, which indeed we did.

  176. Paragraph 3.8 indicates that you may now be trying to buy fewer of the missiles, but that it is a fixed price contract. Was it a fixed price contract for a fixed number of missiles?
  (Sir Robert Walmsley) Yes. There were options to buy more but it was effectively a fixed price contract for a fixed number of missiles.

  177. So buying fewer may mean that you do not get any reduction in price. There is an indication here that you are ". . . in discussion with industry over the level of savings".
  (Sir Robert Walmsley) That is correct. We are deep in negotiation with industry. It was what is called a package deal contract, rolling up both the development and production elements. Clearly there is no saving in the R&D component of the contract. The R&D component of the contract is something approaching 50 per cent of the total contract price, so even on a pro rata basis one is only going to be on about half rations.

  178. Are these discussions with industry still proceeding?
  (Sir Robert Walmsley) They are and we shall conclude them shortly.


  179. I have just two questions today for you to finish off with. The first one really goes back to the infamous paragraph 3.14. It just seems to me that you have put to us two different theses. One is yours, Sir Robert, in which you effectively said to us that the sonar was paid for out of contract savings, or, to put it the other way round, if the contract price had been a couple of percent higher there would have been no sonar. The alternative point of view put to us by Vice Admiral Blackham was that he was going to find the money whatever happened really.
  (Vice Admiral Sir Jeremy Blackham) That is not a position I put to the CDP until this meeting because I am in negotiation with him. He did not know that.

8   Note: See Evidence, Appendix 1, page 36 (PAC 00-01/170). Back

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