Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses(Questions 140-159)



140.  It does not say that in paragraph 6, does it?

  (Sir Kevin Tebbit) No, it does not.

141.  It says that the operation ". . . did not set out to demonstrate readiness".

  (Sir Kevin Tebbit) It does say that and that is why I am apologising, because I should have read it more carefully. It was the deployment that it did not demonstrate; it did demonstrate readiness. We brought the units up to their readiness states in accordance with the Joint Rapid Reaction Forces concept.

142.  Are you happy that both of these important parts of the concept are already tested? You are not planning any other events to test them.

  (Sir Kevin Tebbit) That is correct. We did actually demonstrate considerable agility during this exercise: we were doing real-world operations at the same time.

143.  I understand exercises of this kind give you the chance to demonstrate all sorts of things which are good. Can you tell me why planning was so uncertain? Paragraphs 3.2 to 3.4 range over the history of this planning phase which began in 2000 with funds of £32 million for an exercise in the United States, then it shifted to Oman, then doubled in size, then was considered for cancellation, then changed again. In paragraph 3.3, "The Department stipulated an `absolute' cost-cap of £48.1 million" and ended up spending £90 million. Can you take me through how some of that happened, because it did affect value for money of the whole exercise, as the report says?

  (Sir Kevin Tebbit) You are quite right, it did change a lot over the three-year period and it changed from an original plan which was going to America to exercise and to demonstrate this, which would have been much cheaper and much easier, to this much more arduous test. Over a three-year period a lot happened in the Department. We deployed several real-world operations. The Kosovo operation was extremely demanding. Although in the end we did not have to fight our way in, we were about ten days away from calling up very large numbers of reserves. It was very demanding indeed. and we had to cope with other operations at the same time. We also had to cope with a budget which was under a great deal of pressure throughout this period. We were having to make judgements as we went along about the exercise in relation to real operations and how much we could spare in order to demonstrate the JRRF concept through exercises and about the other demands on our budget. For that reason we continued to adjust the provision for the exercise. There were two different Spending Rounds which happened during the period of planning this and therefore it is not surprising that we made adjustments as we went along. The difference in cost growth between the £48 million and the £90 million, the outturn, is going to be about £85 million is due to three things. First, revised policies which changed during that period and realism. Exchange rates and fuel costs moved by £3.7 million. We introduced an operational welfare package for our people, the main element of which was a lot more telephone time home. That was not there to start with; it was a policy change which came in late on. It was very successful. That cost £8.8 million. Then we gave people some leave while they were planning the exercise, because of the length of time they were out there in the very hot period. That was £300,000. Then, to meet our medical guidelines on the conditions we should ensure our people were treated in, as a result of what we found in Sierra Leone and Kosovo, added another £1.5 million. That is £14.3 million for realism. Then, and this is quite an irony really, we decided to run our tanks more heavily than we had originally intended. We added 600 kilometres of track mile. The spares package, the support package for tanks is measured by track kilometre. We shifted that amount of extra tank activity from exercises which would have happened in that year, but did not because of foot and mouth. We could not use our tanks in Canada for a while because of foot and mouth; the Canadians stopped us sending them in. We had extra potential which could not be used elsewhere, so we added it to the exercise. We did more with our tanks than we otherwise would as it happens. That was an extra £11.7 million. Then there was cost growth.

144.  How much do you estimate cost growth at?

  (Sir Kevin Tebbit) The cost growth was about £16 million. There were oversights in our original estimates, which were proved to be wrong. One of them was about how much commercial air lift we would need to use. We used rather more commercial air lift than we had originally planned.

145.  Because of the uncertainties of planning which you have just explained—and I do not think anyone would want to criticise the pressure that the department was under, especially in real-time operations with the work being done in Kosovo at the time—but you managed to get yourself into a situation where over a three-year planning period extra amounts of cost were incurred for last minute cancellations of hired transport and also not hiring and cancelling things and then having to hire at the last minute and a range of changes which increased cost.

  (Sir Kevin Tebbit) Most of the changes decreased cost, although there were cancellations. Sorry, I had not quite finished.

146.  I have some more questions to ask.

  (Sir Kevin Tebbit) You did ask me the difference and I still have about £10 million to do. There were oversights in the original estimates from air lifts, and from food. We thought we would be able to get more food locally and it proved not to be safe to do so, so we bought more food in from the UK. We changed our rules on separation allowances in that period and that meant we needed another £6.1 million for that. We ought to have been able to plan for that, because we knew the dates, but we failed to do so. Then there were in-theatre costs for generators and air conditioning units because we had not estimated well enough how much that would be. That adds up to £90 million. Sixteen million of that was real cost growth, which we should have contained better. We have introduced new systems for capturing the cost of exercises so that we will plan them better in future and not make these sorts of errors. I am not very pleased about the cost growth and at various stages during the planning both I and the Secretary of State summoned the then CJO and interrogated him about the cost increases in the exercise.

147.  That is good to hear. In paragraph 3.5 there is reference to how much stuff is still missing. The report says in paragraph 2.49 that initially £46 million of equipment was sent over for the exercise and that £27.7 million was returned, but there is this issue of Afghanistan. How much was actually lost or misplaced or used or not returned if you take Afghanistan out of the equation?

  (Sir Kevin Tebbit) I am afraid I cannot. We are talking about the ground force stuff, the army equipment. We do not have a tracking system which enables us to do that. I expect, when you think about it, that is not entirely surprising. We do not capture the cost of equipment moving into an exercise like this and out again and certainly not moving from an exercise like this and into Afghanistan and out again.

148.  So we do not know what, if anything, has gone missing.

  (Sir Kevin Tebbit) It has not gone missing, it is a question of the usage attributable to the specific exercise which is our difficulty.

149.  The asset tracking systems were shown to be not adequate for purpose during the exercise. That is one of the things the report shows. How can you be so certain that significant amounts of equipment—and I do not mean Challenger tanks; you might notice if they went missing—of supplies have actually gone missing or disappeared?

  (Sir Kevin Tebbit) You are quite right, I could not tell you down to the last ten pence whether things have gone missing.

150.  You cannot tell us at all, can you? It is not down to the last ten pence.

  (Sir Kevin Tebbit) No. An asset tracking system can only do so much anyway. You are quite right that we did not do a sum which deducted what we were then sending to Afghanistan from what had gone to the exercise and what has now come back from Afghanistan because a lot has not come back yet from Afghanistan because we have left a lot behind, even though we have withdrawn or are about to withdraw quite a lot of the troops. You are quite right. Our systems are not good enough yet to track stuff as precisely as that. I am not sure whether we will ever capture precisely that; in other words separating an exercise from our general usage rates, because it is probably disproportionately costly. You are quite right in saying that we still do not have a good enough system to expedite, to know exactly where things are coming out to deployments. We are putting in place systems to improve that.

151.  So we do not actually know how much equipment—clearly petrol is going to be used up—we have consumed during the exercise and we do not know the cost of running all of that, as you would expect. You do not really know how much money you need to spend to replace so you can get your capacity back to where it was before the exercise took place and therefore we do not actually know the cost of the exercise, do we?

  (Sir Kevin Tebbit) The replacement system we have would have automatically started replacing what was taken out there. This is the army system, which is different from the other services. With the air force, most of it came back, all but about two or three per cent came back. With the navy, ships deploy ready for war and when they come back to port, they then see how much they have used, so there is a delay factor there. It is usually not until they return that the navy know. They work on a broad judgement of about 50% re-supply.
  (Mr Oughton) What we can be clear about is that of those items which did come back, containers of equipment not used, a very high proportion was engines and major assemblies which were not required to repair tanks in the desert or whatever, reinforcing the point we were making earlier that in this case the equipment difficulties with tanks related to changing simple spare parts, tank filters, not replacing main engines. We did provide a very significant stock of main engines and main assemblies, also for helicopters and other equipments, and they returned. The difficulties we have with asset tracking systems relate to the fact that although we have very good static systems for capturing the information about our inventory, we do not yet have very good systems for tracking the consignment of those assets from our static locations in the UK into theatre. We have some information, some bar coded information, which is available to the logistics supply chain, but typically that information is not always available to the commander in theatre. The new systems Sir Kevin is talking about are designed to raise the confidence level of the Commander in theatre to know that those items he has requested or his subordinates have requested are in transit, will be delivered, he can have certainty that they will arrive. Our new systems are intended to plug that gap.

Mr Williams

152.  Sir John, this is very much a NAO point. Are you happy with the progress which is being made in tracking or do you feel that there are lessons which could still be learned by the Ministry from this report?

  (Sir John Bourn) It is quite clear from the report and the points Ms Eagle has made that there is a long way to go and Sir Kevin has substantiated that. I am satisfied that the Ministry of Defence understand the difficulty and the problem and that they are making progress with it. It is an area we shall continue to examine as they take the matter forward.

Mr Jenkins

153.  I shall try not to ask the same questions but I do have one question which still bothers me a little bit. I do not understand, when you say a judgement was made with regard to modifying the equipment for use in the desert in an exercise and that you were not going to put this equipment into a condition for a conflict situation, how the exercise was a success. I wonder how you know the exercise is a success if the equipment was not in a position to fight as in a conflict situation. If we did not do that and did not get the results, albeit because of world problems and having resources elsewhere, how can you put hand on heart and say the exercise was value for money?

  (Sir Kevin Tebbit) Because although we had reduced availability of tanks, we took out some of the tanks from the exercise for the last phase, that did not detract from the value of the exercise as a whole because we still had enough assets in there. We deployed about 50% of our land assets which are in the Joint Rapid Reaction Force headquarters formations into this exercise, the same for the naval forces and about one third of the air capabilities. As the report itself says at paragraph 2.55, these operational objectives were indeed met and we are satisfied. Paragraph 2.60 says, ". . . the Department believes that the Exercise provided valuable training experience". The military authorities, the chiefs of staff, have certified to me that they are absolutely certain that it provided valuable training experience. So you do not have to have all the elements there doing all the things in order to demonstrate the key elements of the concept.

154.  So if I divorce the military side, because I do not understand about tanks, big guns, little guns, and take the helicopters where availability is 55% which, in your words, is very good, very high, I find that amazing. If I were buying a helicopter which was only available 55% of the time, it would go back to the manufacturers rather quickly. I would want a higher availability than that. A simple question which springs to mind: if I was running an exercise and I was changing air filters in tanks every four hours—I do not know how much a tank filter is but it might be 50 pence or it might be £150—how much would it cost to run the exercise, run the tanks, use up the filters? Was that cost evaluated against the preparation cost of putting the tank into a more warlike condition?

  (Sir Kevin Tebbit) A very good question. I wish you had not asked me that question, because I think I can probably answer it as we spent quite a lot of time looking into this issue. Tank filters cost about £1,000 a go; they are expensive things, they are big things.

155.  So not 50 pence.

  (Sir Kevin Tebbit) No, about £1,000 each. This means that you have to measure these costs quite carefully. The full desertisation of the fleet will have cost about £20 million.

156.  For one tank?

  (Sir Kevin Tebbit) No, for the total fleet. The air filters were not being used at this rate for all of the exercise. It was one particular part of the exercise where they were used at that high rate. If you ask me to make a value for money judgement, I think I would have done other things for the tanks as well. One of the lessons we have learned from this is that basically we should have made modifications to the tanks before we sent them on the exercise. I am accepting that. What I have been challenging is the proposition that the tanks broke down, did not work, or anything like that. They did, but we had to change the air filters too often and it is an expensive business. I am entirely agreeing and accepting what the report says, that we learned the lesson there,: it would have been helpful for us to have done the modification. If you ask me to do a cost-effectiveness thing, it is quite tricky, because there are other factors than just money. There was also the operational consideration of needing possibly to fight wars and that was why we kept back these skirts, the up-armoured sides to the tank, giving extra protection against warfare; we did not deploy them with the tanks. Had we done so, we would not have had this problem. This is why I keep coming back to it. It is a combination of operational considerations and cost which led us to make certain compromises in doing the exercise, which gave us valuable lessons and we are learning from them. The implication should not be drawn, as some of the Committee have drawn, that this means the equipment itself is bad or that we failed to demonstrate our concepts.

157.  I do not want to ask about the equipment, I want to ask about the cost and the fact that someone sat down, spent three years planning this and they must have done a risk assessment, they must have done mathematical models, all these calculations about the cost of doing A, B, C and D and now we realise that A is going to be more expensive and that has been fed back into the model, that is an assurance.

  (Sir Kevin Tebbit) That is right. They made a judgement at the time that it was not necessary to do anything about dust ingestion and desertisation. They made the wrong call. That lesson has now been learned.

158.  When they talk about the cost of the actual exercise—and it was £48 million and then it was £98 million—that is the MOD's costing system, is it not? This is the additional cost, not the real cost. The real cost in resources is manpower . . .

  (Sir Kevin Tebbit) Yes, it is not the full cost.

159.  The full cost is much, much higher.

  (Sir Kevin Tebbit) Yes.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 9 December 2002