Select Committee on Defence Appendices to the Minutes of Evidence


Letter to the Chairman of the Committee from the Secretary of State for Defence on A400M (19 December 2001)


  I am writing to let you know that, yesterday evening, I signed an inter-Governmental Memorandum of Understanding to allow the A400M contract to be placed. The contract itself was also signed yesterday by the Organisation for Joint Armaments Co-operation (OCCAR), on behalf of the partner nations, and by the contractor Airbus Military Company.

  The contract provides for the development and manufacture of 196 aircraft in a single launch order. The UK's share is 25 aircraft. OCCAR will manage the programme to standards agreed by the partner nations.

  The A400M contract will enter into force once final Bundestag approval has been given to the German commitment. The German Government is confident that this will be forthcoming. The agreement of other nations, including the UK, is subject to the German signature becoming effective. If this has not happened by the end of January 2002, these authorisations will lapse, providing a further opportunity to review the position.

  I am content that the programme now agreed with Airbus Military satisfies the conditions that I set out in my announcement to the House on 16 May 2000 for our participation in the A400M programme. Specifically:

    —  Programme commitments from partner nations now total 196 aircraft, well above the notional level of viability of 180 aircraft.

    —  The price negotiated with Airbus Military is affordable and represents value for money;

    —  Achievement of contract signature on 18 December is consistent with the UK's In-Service Date—this is now planned to be 2010; and

    —  The commercial terms and conditions of the contract are acceptable.

  All in all, contract signature last night represents very welcome progress on this important project, which should provide the RAF with a highly capable and flexible aircraft to replace the Hercules C130Ks.


  The A400M programme embraces the Airbus "commercial approach". Airbus will be free to select, through fair competition open to the suppliers from all nations according to cost and capability, so that the programme can be organised and managed as cost effectively as possible in accordance with best aircraft manufacturing practice. Allocation of work, including that for the support package, will be determined by Airbus to achieve the best value for money, taking into account the off-take. The Prime Contract contains provisions to ensure maximum transparency on work allocation. We understand that workshare at the level of the Airbus partner companies is comparable with UK offtake and, as Airbus is incentivised to achieve best overall value for money for the customer, so the genuine competitiveness of UK suppliers will stand them in good stead for additional work.

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