Examination of Witnesses (Questions 100
- 119)
WEDNESDAY 28 MARCH 2001
MR KEVIN
TEBBIT, CMG, MR
MIKE MARKIN,
OBE, AND SIR
ROBERT WALMSLEY,
KCB, FRENG
100. The Italians were collaborative partners
on Tornado. They did not buy the F3. Why was that?
(Mr Tebbit) It was said they did not necessarily see
a requirement for that type of capability, but I cannot recall
the details.
(Sir Robert Walmsley) I think they had different air
combat aircraft.
101. I think they ended up leasing first generation
F15s.
(Sir Robert Walmsley) F16s. They leased the F3 for
a bit and then we needed them back and so they have chosen F16s
to fill in the gap before Eurofighter arrives. Why they never
had F3s is a matter for Italy, but of course it was the configuration
of their air force. They had other fighter aircraft. It was our
decision to provide Tornado in that mode.
102. The report shows that most decisions taken
with non-MoD ministers in this country seem completely unsupported
by quantified analysis. Is that not a problem? Page 41, paragraph
4.8.
(Mr Tebbit) The difficulty of quantifying factors
other than defence factors, things like political considerations
or industrial factors; is that what you mean?
103. The wording of the report is that only
seven cases were supported by quantified analysis. That is a minority
of the decisions, including consideration of industrial and wider
factors.
(Mr Tebbit) I accept that I may not have explained
it to your satisfaction earlier, but the fact is that quantification
is very difficult in this area, to be precise systematically as
to exactly how much weight can be given and measured to things
like industrial factors, as I explained. It is very difficult
to demonstrate that jobs were indeed involved to the numbers that
one might have assumed beforehand. These are difficult areas to
quantify.
104. Does that mean that we do not know whether
your Chiefs of Staff were hopping mad that jobs had too high a
priority over effectiveness?
(Mr Tebbit) No, no, I do not think so. I think there
was a difference here between whether or not decisions were skewed
artificially by excessive weight being given to these factors
(they were not) or whether these were also taken into account
when the decision was arrived at (they were).
105. In seven cases they were supported by quantified
analysis. Why was that not undertaken on the other ten? To be
more direct, is there not a suspicion that on the other ten it
was either politically inconvenient or that the analysis was sloppy?
(Mr Tebbit) I do not think I would like to accept
either of those assumptions, but I must say at the moment I am
having difficulty finding which particular projects we are referring
to. I do not think I would know what they were. They are not in
the report; they are not specified here.
(Sir Robert Walmsley) It is certainly true to say
that now we will attempt to provide a quantitative analysis of
these wider benefits. It is one of the major threads running through
this report by the National Audit Office that we need to pay more
attention to that. We had started to do that by working more closely
with DTI over the last four or five years but we quite recognise
that it is something we need to give more quantification to.
106. I got the hint a few minutes ago from Mr
Tebbit that all of that was a bit too difficult but now you are
telling me it is possible.
(Sir Robert Walmsley) I am telling you that we should
try. What I am telling you is that an example quoted here is one
of the most recent collaborative programmes we have got into and
where we did make the effort. I just think that ten years ago
we simply would not have had the instinct to keep on trying to
do that.
107. In which case we do not know whether we
spent far too much on back projects that were losers.
(Sir Robert Walmsley) Sorry: I have completely misinterpreted
the thrust of your questioning in that case. I am talking about
analysis for broader factors. We have always undertaken close
analysis of the cost, time and performance factors and normal
project factors. What this is talking about is the broader factors
and whether we followed that, which we did with MRAV.
108. We have still ended up in terms of cancelling
the projects hundreds of millions of pounds out of pocket.
(Sir Robert Walmsley) But it was not the absence of
the broader factors that caused those projects to be cancelled.
In general TRIGAT was cancelled because we could not bring all
the governments to decision, which was absolutely a situation
foreseen by Mr Steinberg: what happens if somebody walks away?
Two of our partners walked away. We are stuck with that.
109. How do we avoid the sorts of delays that
you have raised with the Committee and are in the report which
seem to cause us to lag behind off the shelf solutions available
from the United States and others?
(Sir Robert Walmsley) As I think the report is quite
generous in noticing, we are trying to persuade our partners that
some of the methods we use in Smart Acquisition are appropriate
to collaborative programmes, most obviously in reducing the number
of decision points. I think I have explained that the delays often
occur when you are trying to make decisions. On TRIGAT we sat
for two years waiting for a decision before eventually it was
quite evident that two of our partners were not going to sign,
so by reducing the number of points in the programme that are
like that you reduce the opportunities for such delays. OCCAR
I have mentioned, which I hope will institutionalise best practice
as opposed to each project starting off with a clean sheet of
paper. That is all an attempt to reduce delays. I agree it is
a problem and there is no magic wand that will solve it.
110. Which are the projects that you think would
suffer most if we did not have collaboration?
(Sir Robert Walmsley) Our Joint Strike Fighter would
be completely inconceivable unless we had a collaborative partner.
The R&D bill for that alone is something like $20 billion.
(Mr Tebbit) One could add the missile METEOR. The
capacity for us to do that purely by ourselves would be very stretching,
and also not the Type 45 ship itself but the missile system which
we are doing by collaborative project. These would be hugely expensive
programmes if we sought to do all the research and development
just by ourselves. In fact, virtually every very big project these
days requires partners in order to defray the cost of the development.
Mr Davidson
111. I wonder if I could start by picking up
the issue of the NATO frigates which, if I remember correctly,
was pursued for some time as a collaborative project across eight
countries and then fell to bits and we ended up with two consortia
producing their own alternative designs with the result that production
has been much more expensive and much more delayed than it would
have been had we run with it at the beginning. What are the lessons
that we have learned from those failures?
(Sir Robert Walmsley) I think you said the NATO frigate.
That had eight countries in it. It then disintegrated. The United
States went away on its own, Canada went away on its own. That
is two projects. The Netherlands, Spain and Germany formed a loose
partnership, as I discussed earlier, and Spain has effectively
split off from that, so it is the Netherlands and Germany. We
did the same with Italy and France. Italy and France have stayed
together and we have gone off on our own. What lessons do we learn
from that? Back to the Chairman's point: trying to make sure that
every nut and bolt is identical on a thing as complicated as a
ship, particularly one which needs to be interoperable with your
own Navy, is not a good plan.
112. Would it be fair to say that in these circumstances
the search for collaboration has actually cost us a lot of money
and a great deal of time? Had we had an operational need for this
some time ago we would have been left without for a long period
because our Type 45s are not going to be ready until 2007?
(Sir Robert Walmsley) Correct.
113. Whereas the naval frigate was destined
to be in the water by 2002?
(Sir Robert Walmsley) 2000 at one stage.
114. That is seven years that attempts at collaboration
have cost us. Is that a fair way to put it?
(Sir Robert Walmsley) Not quite. The first point to
make is that the critical path for delivery of the ship's capability
to the fleet is determined by the availability of the missile
system. That is PAAMS. As Kevin Tebbit made absolutely clear,
that is the part of the collaborative procurement that is proceeding.
The ship will be available when PAAMS is available. PAAMS is being
taken to timetable. Where we went wrong and why we have spent
£100 million, a huge sum of money, trying to collaborate
on a ship, was in trying to do the impossible. We have learned
a huge number of lessons from that. I hope that quite a lot of
that £100 million-plus of expenditure will be recovered in
the Type 45 national programme. I am seeing very promising signs
of that.
115. What £100 million worth of lessons
could we learn from this failure?
(Sir Robert Walmsley) The first point is, we needed
a much stronger industrial consortium. I think I have mentioned
to the Committee before that we had a grouping of companies who
were busy tugging the tablecloth back towards their shareholders,
who were more interested in making sure they got their share than
in the project proceeding. What that meant of course was that
nobody had the authority to be the Prime Contractor. I will not
repeat the lesson that the Chairman pointed towards but I think
that is true too.
116. I apologise for having missed the start
of the meeting.
(Sir Robert Walmsley) The point which was put to me
earlier on was: is it right as a discipline of co-operative procurement
to try to pursue an identical solution in every respect? I said
sometimes I think it is, for example in aircraft. I think it is
not in ships, and I gave the example of interoperability with
the rest of your navy. It put huge tensions into the three nation
HORIZON programme. Nobody could agree what the combat management
system should be because everybody wanted to be the same as the
rest of their own navy, for good reasons.
117. Would it be fair to look at the collaboration
on frigates in the way that we now look back at the early days
of PFI and say, "Look: these were valuable learning experiences
and we would never do it that way again but that was a stage we
had to go through", or was the frigate stage unique?
(Sir Robert Walmsley) It certainly was not unique.
Otherwise we would not have withdrawn from TRIGAT. I went round
Blohm and Voss shipyard in Hamburg nine days ago to see progress
on the German and Dutch frigate. That is loose collaboration.
trick to be taken there and if ever such an opportunity presents
itself to us, which does not constrain us in this very tight way,
forcing every little agreement out to the last degree, then I
think we need to look at it seriously.
118. Can I pick up the points about political
benefits which are mentioned on page 23, paragraph 2.3.3? I am
fascinated by the view of our European partners, and in particular
the sentence that comes fairly close to the end, that the embassy
staff who were interviewed told us that all of our major European
co-operative partners consider European political implications
a key factor in the decision making process. I am wondering whether
in these circumstances the enthusiasm amongst some of our European
partners to involve the United Kingdom in defence collaboration
and equipment procurement is perhaps resulting in them being more
generous in financing their share of things than might otherwise
be the case. It is not necessarily a factor that would come into
our cost/benefit equation, but I wonder whether or not there is
any evidence that they are subsidising things or taking a looser
view of costs than we might.
(Mr Tebbit) It is certainly the case that European
partners are prepared to put more effort and resources into something
which they can regard as being part of European construction and
we have seen examples of that just recently. The Dutch, for example,
have put aside a particular amount of money for European collaborative
projects, which is something we have not gone to. I think it is
not fair to say that they are simply subsidising their defence
equipment unfairly in relation to, for example, the way the United
Kingdom goes about it. There is a degree of difference but in
terms of our own co-operation, as I say, we are neither going
to be fortress Europe nor fortress America. We are going to collaborate
in both areas.
119. If it is not a subsidy it is a degree of
involvement there. What is that then if it is not subsidy?
(Sir Robert Walmsley) It is paying their own way.
As far as we are concerned I do not care where the money comes
from to finance paying their share of Eurofighter development.
The fact that some of it comes from their Department of Trade
and Industry budget is fine by me. What I care about is whether
the money is available. If the armed forces cannot get it, then
it is a good thing that they can get it from somewhere else so
that the project can proceed. Those are the types of discussions
which take up all this time.
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