Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 100 - 119)



  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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