House of Commons - Defence

Select Committee on Defence Fourth Report

FOLLOWING UP PREVIOUS LINES OF INQUIRY

105. We took the opportunity in this inquiry to follow up progress on some other programmes which were the subject of inquiries by our predecessors — ammunition supply, two air-to-air missile programmes, and the A400M transport aircraft programme.

Ammunition Supply

106. Our predecessors conducted an inquiry in 1999 into the security of supply of ammunition, which had been prompted by the decision by Royal Ordnance Defence to close its propellant factory at Bishopton.[253] In our current inquiry we decided to follow up developments since then, in part because of a new programme of possible ammunition factory closures. We also wished, however, to follow up an MoD review, outstanding at the time of the previous inquiry, of ammunition war stock requirements. We were conscious that this is an area where the continuing transformation of the UK's force structure towards more expeditionary operations, exemplified by the Future Rapid Effects System, might require further adjustment of war stock levels in the future.

107. Our predecessors' inquiry examined the operational implications of allowing Bishopton to close, and with it the last indigenous capability to manufacture propellant. The report examined whether propellant was a product of such strategic importance that UK manufacture was needed, and what measures were needed to ensure operations were not hamstrung if we had in future to rely on overseas suppliers. An important component of that operational safeguard was having sufficient war stocks to support operations until resupplies could be activated. In that context, our predecessors examined holdings of artillery and tank ammunition against required war stock levels.[254] They noted that insufficient artillery ammunition was held against war-stock requirements, which were based on a Division fighting for 30 days (as in the Cold War), but that there was surplus tank ammunition as a result of a reduction in the tank fleet since the end of the Cold War.

108. Three years ago, the previous Committee was told by the MoD that it was reviewing the way it calculated its ammunition war-stock holdings, and in the meantime was taking steps to bring ammunition holdings into line with the then current required levels.[255] Mr Adam Ingram, Minister for the Armed Forces, told the House recently that "the method of calculating the size and composition of [the ammunition stockpile held against the risk of short notice conflicts] has undergone significant development in the last three years, and it now reflects more accurately the nature of the conflicts that the UK armed forces could become involved in".[256] We obtained further details, in our current inquiry, on the results of this 'stockpile liabilities' review, including details of those munitions areas where it considers further action or review is needed.[257]

109. We welcome this long overdue reassessment, which is setting requirements for 2005 onwards.[258] More fundamentally, however, we have a concern about the adequacy of future ammunition stock levels because of the basis on which war stock thresholds are to be calculated. Tellingly, the MoD informed us that the previous methodology "did not provide best value for money" and that the new basis of calculating the requirement was to "ensure that best use is made of limited resources, and that stocks of munitions are based upon a suitable balance of capability, risk and cost to provide a coherent and balanced solution to the operational need."[259] The MoD clearly does need to reflect, as it is in its current review, the way operations will be mounted in these post-Cold War times. But in moving away from single-Service ammunition scales, which in the past sought to cater for a wide range of war-fighting contingencies,[260] we detect an opportunity for the MoD to reduce ammunition stock holdings more than sensible caution might suggest.

110. Our predecessors' inquiry also examined the financial implications for the MoD of Bishopton's closure. They found that the Department would have had to have paid an extra £20 million to direct an ammunition prime contractor to use Bishopton as a propellant supplier, and that even then that would not have been sufficient to have ensured Bishopton's longer term viability. Although it recognised that Bishopton's closure would go ahead (this is now expected to be completed this summer), our inquiry encouraged the MoD to negotiate a 'Framework Partnering Agreement', guaranteeing certain ammunition contracts to Royal Ordnance Defence for five years ahead, to allow them to plan any necessary infrastructure investment to make its plants competitive for MoD contracts.

111. Despite our predecessors' hopes, and those of the trades unions, that this would put Royal Ordnance Defence on a sufficiently firm footing to give its other plants a viable future, this now appears unlikely. The company has a raft of further rationalisation measures already in train, which to varying degrees have potential implications for continued UK supply:

Bishopton is closing, as we have described, and Royal Ordnance Defence will source propellants from Nitrochemie of Germany.

the 'RO Special Metals' plant at Featherstone (making depleted uranium and tungsten penetrators) will close in 2002, once current Charm-3 depleted uranium shell contracts are fulfilled.

Blackburn (making fuses) will close, with its fuses work outsourced (in part) or transferred to the firm's Glascoed site (in part).

And more recently, Royal Ordnance Defence have been considering three possible further plant closures:

Chorley, which although mostly undertakes civil work also makes detonators and initiators for the MoD.

Bridgwater, making high explosives, which would then be sourced from overseas, including possibly the Royal Ordnance Defence-run plant at Holston in the USA.

Birtley, which assembles shells and cases.

112. While our inquiry was underway, the uncertainty over the future of the Birtley site was eased. The Parliamentary Under-Secretary of State told the House that "Royal Ordnance Defence has recently announced that it intends to pursue a consolidation option at the Birtley site... the company expects that this option will secure the future of the site as part of its core business".[261] The position at Bridgwater was however less assured. Lord Bach told us that "Bridgwater ... has been running at a loss for several years. As you know, we are committed to the introduction of insensitive munitions. In response to the fact that that is MoD policy, the company are proposing to introduce the appropriate technology based at their Glascoed plant....the trade unions proposed to the company Bridgwater as a site of this investment in insensitive munitions policy and as a consequence of that proposal discussions are still continuing ..."[262]

113. Lord Bach considered that with the Framework Agreement the prospects for Royal Ordnance Defence would not have been good—

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Nonetheless, instead of improving Royal Ordnance Defence's viability, the Framework Agreement has only served to give the firm the foundation it needed to close further plants.

114. CDP highlighted other agreements reached, since our predecessors' inquiry, which contained provisions on security of supply—the so-called 'Declaration of Principles' agreed with the US in February 2000, and the 'Six-Nation Framework Agreement' with five European partners in July 2000. Our predecessors reported on these agreements in February 2001, and concluded that until specific practical measures could be agreed they were mainly a commitment to speedy consultations to resolve difficulties over supplies.[264] We agree. It is therefore imperative that while such security of supply arrangements remain without binding force the MoD must continue to monitor more robustly the implications of ammunition plant closures, and indeed other defence industry rationalisation, to be ready to protect resupply routes for such essential support for our Armed Forces.

ASRAAM and BVRAAM

115. The Advanced Short-Range Air-to-Air Missile (ASRAAM) was conceived for use in short-range air-to-air visual combat to provide air superiority, and thereby to give Eurofighter a "substantial advantage against the forecast threat at the turn of the century".[265] When the in-service date of April 2001 was approaching, the MoD decided not to accept the missile because it did not consider that the missile provided the specified capability. It judged that the missile had performance shortfalls in lethality, target acquisition, tracking and resistance to countermeasures,[266] so that the missile would not have provided "any capability, because of the problems of putting it into operational service."[267]

116. The previous Defence Committee took evidence on this in its last procurement inquiry immediately before the general election.[268] Since our predecessors' examination, the MoD and the contractor (MBDA) have agreed a programme to deliver the full capability, and the MoD accepted missiles into service in January 2002 (37 months later than planned at the programme's 'main gate' stage). These missiles are only of an interim standard, though already, we were told, "the best short-range air-to-air missile available".[269] Development is continuing, with progressive upgrades to achieve full operational capability "no later than 2005" and perhaps by the end of 2003.[270] The MoD informed us that "the delay has had no impact on Eurofighter's operational capability",[271] but one might conclude that this is only the case because Eurofighter's operational utility itself is still some way off.

117. More immediately, ASRAAM had also been intended to replace the Sidewinder missile on the Tornado F3, Harrier GR9 and Sea Harrier FA2.[272] We heard about the preparations at the Operational Conversion Unit at RAF Coningsby to train Tornado F3 crews to operate ASRAAM (to be operational on those aircraft later this year[273]) when we visited the station as part of our inquiry into the defence and security of the UK. With the MoD's recent announcement that it will withdraw Sea Harrier by 2006, however, it will not now be fitting it with ASRAAM. Work to date, which will now be nugatory, had cost £1.2 million.[274] And ASRAAM will also no longer be fitted to the Harrier GR7/9.[275]

118. The difficulties in bringing ASRAAM up to scratch are informing the MoD's 'Beyond Visual Range Air-to-Air Missile' (BVRAAM) programme, whose 'Meteor' missile is also to be supplied by MBDA.[276] The missile is intended to give Eurofighter a "large no-escape zone" at long range.[277] In that context, CDP identified two main lessons from the ASRAAM difficulties—

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119. There is perhaps another lesson, however, about the time needed when programmes depend on co-ordinating the commitments of collaborative partners. When in May 2000 the MoD selected MBDA's Meteor for its BVRAAM missile for UK Eurofighters, Ministers made it clear that proceeding with the missile programme depended on sufficient other countries collaborating with it.[279] Of five potential partners, Germany in particular has delayed committing to the missile,[280] although contract negotiations over price and workshare were also a factor[281] "not least because both [the MoD and MBDA] have wished to include the lessons learnt from the ASRAAM programme, and that has been done".[282] CDP told us that the methods by which the Meteor missile will be evaluated have been clearly defined to everyone's satisfaction, and that the negotiations have (after two years[283]) been successfully concluded.[284] Copies of the final draft contract have been placed with each of the partner nations, which the MoD hopes will be signed later this year.

120. The latest approved in-service date for Meteor of August 2012 was based on the MoD's assumption that the contract would be signed in April 2001.[285] CDP pointed out, however, that in setting the approved in-service date two years ago, the MoD made an allowance for "very protracted negotiations", and that "there is a good chance we will meet the inservice date we set ourselves two years ago, because we set that at a 90 per cent confidence of achieving it, which added several years to the schedule provided by the contractor."[286] We hope CDP's confidence is not misplaced. We will continue to monitor the timeliness of the Meteor programme.

A400M

121. In similar vein, collaborative delays have affected the A400M aircraft programme. The Secretary of State announced in May 2000 that the MoD would acquire 25 A400M aircraft for its long-term outsize airlift requirement, and that in the interim four C-17s would be leased from Boeing.[287] There have been setbacks with the A400M's engine, when Airbus rejected the joint proposal of Rolls-Royce, Snecma and others, and relaunched the engine competition.[288] The potentially more significant difficulties, however, are probably concerned with the aircraft itself. Delays with the A400M since May 2000 meant that a memorandum of understanding (rather than a contract) was signed by the collaborative partner countries in December 2001. A development and production contract will enter force only once Germany is able to provide an "unqualified financial commitment" to the aircraft it says it requires. The partners had set March 2002 as "a realistic deadline" for this,[289] but budgetary difficulties in Germany may allow them only to commit to the funds necessary for 40 aircraft rather than for their total requirement of 73 aircraft. Lord Bach told us in May, however, that "the financial commitment has come from the Germans and has satisfied the other partners, which is why the other partners are in the process of signing up to the agreement that has been reached. I would hope that we would be able to put into effect the contract very soon indeed now."[290]

122. If the A400M does go ahead, however, it is already clear that the in-service date for UK aircraft will be delayed. The MoD has negotiated a restructured delivery schedule, with a one-year delay in the in-service date, which will now be in 2010. Furthermore, some of its tactical capability will also be delayed—a "full day/night poor-weather hostile-environment capability" will only be available in 2015, which is three years later than previously planned. While obtaining an earlier tactically-capable A400M would enhance operational flexibility, the MoD consider that this is a "lesser priority than competing calls for funds within the Equipment Plan".[291] In the intervening period the C-130 will continue to provide a tactical capability. In the C-17s leased by the RAF, moreover, the MoD can also be assured of an effective, continuing airlift capability. When in 2000 our predecessors examined the MoD's decision to seek a solution for its longer term strategic airlift requirements through the A400M , they approved the contribution that the A400M would make to the deployability of the Joint Rapid Reaction Force, and welcomed the "insurance policy" that the C-17 lease provided.[292] In our current inquiry, CDP confirmed the continuing utility of that fall-back position and told us that he had in his back pocket a financial proposal that he could quickly convert to a contract at a known price for two C-17s — "We have got the back door covered against the A400M collapsing."[293] In that advantageous position, we were told, it was better not to be rushed into an unnecessarily constrained deadline for signing an A400M contract, and lose workshare to another country.[294] Currently, therefore, the MoD finds itself in an enviable position. But if the A400M continues to struggle the secret will be to know when it would be better to deal with someone else.