Select Committee on Public Accounts Appendices to the Minutes of Evidence

Copy of a letter from Air Foyle Ltd to the Chief of Defence Procurement


  I note that various questions on the STSA programme arose during the Public Accounts Committee meeting on 17 January. You will be aware that, being dissatisfied with the management of the STSA procurement process, Air Foyle has referred the question to the National Audit Office. I was therefore very interested in your answers.

  As you know, Air Foyle was invited to offer the standard An-124 100 in the second phase of the STSA procurement process. We were briefed that:

    —  the performance of the An-124 100 was known to the MOD;

    —  the MOD preference was for the C-17 but that the C-17, previously defined as "unaffordable", must come within the available budget of 500 million pounds; and

    —  "value for money is paramount".

  Our own assessment of C-17 costs, made by a number of experts familiar with MOD budgeting methods as well as independent financial advisers, was that this target was a financial impossibility. We therefore continued into the process on the basis that we could offer a real "value for money" alternative and had a fair chance. We have now been debriefed by your Agency that the C-17 programme cost did indeed breach the 500 million pound budget even without the additional items still under scrutiny. It would therefore be reasonable for us to expect to have won given that we satisfied all the other requirements put to us. If the budget limit were not to be decisive then bidders should have been advised exactly how much leeway was to be allowed to the C-17. This would naturally affect their decision to proceed.

  Air Foyle appears to have been misled on the basis on which the decision would be made.

  In your responses to the Public Accounts Committee you twice confirmed that the An-124 "did not offer a guaranteed solution. It depended upon Kiev and Moscow . . ." and that the C-17 was chosen "for our guaranteed access to it". As you also acknowledged, Air Foyle put a great deal of effort into resolving MOD concerns about political risk. With our entirely British solution covering ownership, registration, crewing, maintenance, logistics and design support it is difficult to understand the great weight you have given to an extremely tenuous residual risk.

  You will also know of the letters from the Ukrainian and Russian Prime Ministers as well as from the President of Ukraine to the Prime Minister expressing their support for this project and opening the means by which any such residual risk could have been dealt with. In the joint programme of January 2000 between Air Foyle, Antonov and DPA to develop further information requested by EAC we specifically asked the DPA project team if they saw any "show stoppers" particularly relating to political risk. We were advised that there were none and this was confirmed again during our debrief. During a personal conversation with me on 20 July 2000, Baroness Symons, Minister for Defence Procurement, stated "The politics was not an issue. We found a more capable solution".

  Air Foyle not only solved this problem but has been repeatedly advised at every level that the political question was not an issue. The scenario you painted of "dependence for design authority and airworthiness issues" was specifically addressed and resolved in our bid, the mitigation of any tenuous, residual risk had the strongest possible political backing which was not pursued and the picture you paint of "dependence" is both inaccurate and subjective.

  There therefore, appears to be a contradiction between your response to the Public Accounts Committee and the information provided to Air Foyle as a bidder.

  You confirmed that some aspects of support for the C-17 remain in American hands. On 21 November 1999, the Prime Minister said in a radio interview on military capabilities, "But supposing there are circumstances in which the US is unwilling to act or unable to act for some particular reason". Can you therefore advise what assessment criteria were used to compare the political risk of the C-17 solution, owned by a foreign government with maintenance and logistics support provided by a foreign military power against the An-124 solution to which neither of these risks apply? If the level of assurance provided by the totally British, Air Foyle bid was unacceptable, then clearly the An-124 should never have been invited to participate.

  It appears that the MOD knowingly invited and encouraged Air Foyle to participate in an unwinnable procurement process.

  You further referred to the C-17 as being "hugely cost effective for what it does". Again, Air Foyle has been debriefed by your Agency that our bid met the requirement. Does the C-17 do something not identified in the requirement briefed to Air Foyle? It is the An-124 100 that carries twice as much cargo for half the price of the C-17 and is "hugely cost effective" and meets the "value for money is paramount" criteria given to Air Foyle. Some justification of your highly subjective remark would be welcome.

  You advised the Public Accounts Committee that the C-17 was not chosen for its tactical ability. Yet Air Foyle has been debriefed by your Agency that a critical factor in the decision for the C-17 was its ability to land in 4,000 feet. Your own Minister referred to "a more capable solution" and the Chief of the Air Staff has confirmed to Mr Christopher Foyle on more than one occasion that the C-17 was chosen over the An-124 because of its greater tactical abilities. If this was a requirement then why was Air Foyle invited to bid the An-124 100 when the DPA were well aware that landing in 4,000 feet was never a possibility?

  Your evidence to the Public Accounts Committee contradicts the information given previously by your Agency and your Minister to Air Foyle and by the Chief of the Air Staff to Mr Christopher Foyle.

  To summarise, Air Foyle has been repeatedly advised that political issues were not a factor in the decision yet you have informed the Public Accounts Committee that this was the principal reason for the choice. The C-17 was apparently preferred for political reasons but objectively has greater political risk than the An-124. No effort was put into resolving those political concerns relating to the An-124 that you have voiced to the Committee in order to provide a true comparison. The C-17 programme breaches the budget limit yet Air Foyle apparently has no recourse for the misleading brief, which led us into this procurement process. Either with the level of political risk which you reported to the Committee as being decisive, or the performance requirement which others report as critical, no An-124 bid ever had a chance of success and should never have been invited.

  I would very much appreciate your comments on how your remarks to the Public Accounts Committee may be reconciled with statements made previously to Air Foyle in the course of the STSA procurement process during which we were promised a "fair and open competition".

  Please note that I shall be forwarding a copy of this letter to Baroness Symons, Sir John Bourn at the National Audit Office and to the interested members of the Public Accounts Committee.

Bruce Bird

23 January 2001

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