Examination of Witnesses (Questions 80-99)
SIR ROBERT
WALMSLEY KCB AND
VICE ADMIRAL
SIR JEREMY
BLACKHAM KCB
MONDAY 10 DECEMBER 2001
80. One of the things you have just said is
that on the whole the shorter projects have smaller delays and
hopefully, even proportionately shorter. Is there a case for going
for shorter projects?
(Sir Robert Walmsley) Yes.
81. I imagine one of the difficulties for defence
procurement is that if you have to replace your entire fleet of
aircraft all at once, you have a very big project on your hands.
If you could do it by perhaps updating the aircraft a bit more
often, some of your projects are after all updates of things .
. .
(Sir Robert Walmsley) Yes, updates are deceptive though.
They may be quite quick to bring to the point where you have equipped
and modified one equipment. As one of our previous reports in
this Committee pointed out, we sometimes take a very long time
to fit the updates then across the whole population of candidate
equipments. One of the important projects in here, the Seawolf
Mid Life Update, which is exactly that, although there is a delay
in this report, because it captures the delay to the in-service
date which has occurred. It is buried in the appendices and what
is not easy to spot in the report is that we have compressed the
time to fit all the frigates with Seawolf. So the completion of
the update has now come forward three years during the period
of this report. We think that is smart. I cannot pretend we have
always been as good as that, but with updates you have to recognise
that fitting it can take an enormous amount of time because of
the opportunities to do that.
82. One thing I noticed about the Swiftsure
and Trafalgar Update was that you had been involved with GEC-Marconi
and indeed some of their difficulties seem to have been part of
the problem. Is that correct and if so are there other projects
affected by the difficulties that particular company has been
having recently?
(Sir Robert Walmsley) It is absolutely disconnected
with that. GEC-Marconi, the defence arm, which used to be Marconi,
was purchased by BAE SYSTEMS some years ago. This company which
does this sonar used to be called Thomson Marconi Sonar Ltd, because
Thomson of France had 50.1 per cent and Marconi had 49.9 per cent
and that was transferred.
83. They are disconnected systems. Enough said,
thank you. Paragraph 1.3 talks about the strategic goal of getting
projects 90 per cent right. May I just check with you? Does that
mean 90 per cent of the major projects should be according to
your original budget on all three factors, time, cost and performance,
or that 90 per cent of your projects will be correct on time,
90 per cent will be correct on cost and 90 per cent will be correct
on performance, but it may be different ones?
(Sir Robert Walmsley) No, 90 per cent are within their
own approval, they cannot shelter behind another one. I did give
about as full an explanation as I could of this strategic goal
right at the beginning of the hearing. If it is unsatisfactory,
then please write to me.
84. In Figure 1 on page 4 it looks as though
in the last year of these projects some nine have failed on something.
Even in just this one year, and most of these projects will have
a chance to fail on one of these things in some other year of
their lifetime, nine out of 20, 45 per cent, have gone wrong.
You are an awful long way from getting to 90 per cent are you
not?
(Sir Robert Walmsley) I am.
85. This is just one year of these projects
and several of the others may fail somewhere else along their
life.
(Sir Robert Walmsley) That is absolutely true and
that is why what seems like a rather unglamorous strategic goal
is in fact a really tough one. We can do it because when these
projects had their approval set, we were not onto this 10 per
cent, 50 per cent, 90 per cent. It was a good judgement, but it
did not have this much more analytical approach to it. I have
to say, because it has been mentioned both by implication and
explicitly, in ASRAAM, right at the top of this list, I am now
absolutely confident we have a world beating missile on our hands
and that we are no longer as deficient on the KURs as we were
when this report was put to bed. We had a fantastic test firing
about 10 days ago and it is all coming and I am quite pleased
with it.
86. How convenient that they do their test firing
just before the PAC hearing.
(Sir Robert Walmsley) I cannot remember but this is
test firing number 13 or 14 in a long series of firings in a very
difficult operational environment and hitting the target.
Chairman
87. It has been said to me that sometimes the
problem with the MOD has been the culture that a particular officer
feels he owns a programme and he pushes it very hard and perhaps
his career is tied up with pushing it and he overcomes doubts
and then he moves on. Do you think you have overcome this culture
in the MOD?
(Sir Robert Walmsley) I should like Admiral Blackham
to answer that. I might make a comment after he has.
(Vice Admiral Sir Jeremy Blackham) I think we have.
One of the key principles of the new customer organisation was
to produce a single person who was responsible for the entire
equipment programme and that is the DCDS(EC), the post I fill.
The organisation itself is now entirely a joint organisation.
Every single one of my teams has every uniform in it, including
grey suits and eggheads, scientists. It is an organisation which
is wholly committed now to producing capability, not to producing
platforms. I might say that this quite often puts us in some interesting
debates with the individual services because naval officers tend
to want ships and naval officers in particular find it very difficult
to understand why I do not understand that. Air Force officers
tend to want aeroplanes. That is not what we do. We look very
hard at the capability requirements, we have developed quite sophisticated
methodologies and measurement systems to do that, and then we
go along to Sir Robert's organisation and say what we want to
do, what the strategic requirements are and ask how they think
we might do that. Of course in many of the cases it is pretty
self-evident that it should be a ship or an aeroplane or a tank,
but by no means in all. We do not make that assumption. Whilst
we have a considerable ownership of the actual resultant project
within my organisation, we do not start with any expectation about
what it ought to be. Indeed within my organisation, although I
draw heavily on the domain expertise, the experience people have
in their particular environments, I have been at some pains to
prevent them seeing themselves as advocates of their services.
I actually see them as advocates of my organisation to their services.
It is a very uncomfortable position for them sometimes, I might
say. Both structurally and increasingly in terms of our mind set
we have moved away from that, but of course once a project has
been set up, I want the sponsor of that project to feel that he
owns it and will want to see it delivered.
88. His career in no way depends on its successful
conclusion.
(Vice Admiral Sir Jeremy Blackham) We have only been
running two years so it is probably a bit early to be absolutely
certain. His report out of me depends absolutely on his delivering
the task I have set him, which is to produce a balanced approach
to the capability need.
(Sir Robert Walmsley) I do think that people's careers
should to a certain extent depend on whether they achieve the
outcomes they have set themselves and which have been agreed for
them. That is quite a change in the way we approach things in
the Civil Service and perhaps even in some parts of the Armed
Forces. Outcomes in a sense are what we set most store by. I would
make one other point. Right at the beginning you asked me what
we had done in terms of Smart Procurement to make things different.
One of the things we did was to say that every project would be
scrutinised in my organisation by two executive directors, that
is Rear Admiral equivalent, not just one. One of them would be
the owner of the project if you like, who would be expected naturally
to be an advocate for it because he knew about it, he had staffed
it, he had lived with it. The other one, who is there to check
that fair play is done, is absolutely not an advocate of it. I
do think that formal non-advocate reviews of projects are fundamental
to trying to get an objective assessment of where you stand.
89. We are going to go into closed session in
just a moment and we are going to be talking about ASRAAM, but
I want to ask a general question which I think we can ask and
it follows from what Mr Osborne was talking about. Here we have
an Advanced Short Range Air-to-Air Missile based presumably very
much on potential conflict with the Warsaw Pact. Then we are continually
learning new lessons, for instance from what is going on in Afghanistan
at the moment. How confident are you that the new process will
ensure that as these very long procurements go through a life
spanning many, many years you can take account of changing circumstances
and lessons from conflicts such as Afghanistan where you would
not expect a weapon like ASRAAM to be used at all?
(Sir Robert Walmsley) There is a general point there
which is not particular to ASRAAM. There is an issue there. The
issue is about these fixed price contracts for development programmes.
What that relies on is a very tight specification of what you
want the contractor to achieve, bolted down to a price and if
they achieve it they get paid. That is not a structure within
which it is very easy to introduce flexibility because magically
you will find that if you want to add a little element of performance
to one of the many characteristics the article has, you will pay
through the roof. If you want to say you would like to trade that
off by coming back on another one, you magically do not get much
money. Flexibility is very difficult. We have been struggling
with industry to find ways of gain-sharing on contracts, because
it is just a fact that all our contracts are encumbered with lots
of little changes to improve them during execution. There is nothing
surprising in that and we keep a very tight rein on the percentage
value. It is low single figure percent. We are far less prone
and far less able to delete elements of the requirement as we
go on and we do need to get better at this flexibility during
contract execution. It does not sit well with fixed price contracting,
which is why I said we have to do a little bit more work on that
to find a more flexible framework within which to deliver value
for money.
Chairman: Thank you very much for those general
comments. We shall now move into closed session. Would the press
and public now leave and all officials who are not concerned with
this particular inquiry.
The Committee continued to take evidence,
in private.
Chairman
90. ASRAAM. May I start by referring you to
paragraph 3? This says, "The project began to run into technical
difficulties with the first three guided weapon firing trials
conducted between May 1996 and May 1997 when the missiles failed
to guide onto the remotely piloted full-scale target aircraft".
Why did the Department not foresee the future problems which are
outlined in paragraph 3 with the missile's performance and take
action to allay them?
(Sir Robert Walmsley) Some people in the Department
did and I give absolute credit here to the leader of the Integrated
Project Team who said we should judge whether anything is going
to come true by whether the simple commitments which are made
month by month by the company are actually delivered or whether
we are being so confused by the excellent explanations as to why
they have not been delivered that we start thinking that is a
reasonable position. So the leader of the Integrated Project Team
had a very simple criterion and that was "When will the next
missile test firing take place? Did it take place on that date?",
which implies the project is under control, "If it did take
place on the planned date, did it work?". A trend began to
be established over this period when you could see that it was
not going to go well. Endless meetings were held with the contractor
who was a little bit more confident at the time than he now wishes
he had been. We did predict it, we argued with the contractor,
but they are on a fixed price contract and they were promising.
They were also going through a period of reorganisation consequent
on the formation of a Franco-UK joint venture company called Matra
BAe Dynamics. Having let the contract on BAe Dynamics, the company
then went into this Matra BAe Dynamics structure. It took a while
for that to settle down. It is also true to say that the company
were buying the seeker from Hughes, now Raytheon who were one
of their major competitors. I do not think relationships in that
purchase were always quite as comfortable as they should have
been. So we had an industrial structure which was changing, we
had a key component being purchased from a competitor, but we
in the MOD saw the track record of this and it was my Integrated
Project Team leader who stuck out for that, said we would not
let them off these milestones and they were not delivering them.
91. Paragraph 5, "Matra BAe Dynamics voiced
their opinion that the contract specification contained a number
of ambiguities which if not resolved would cause yet further delays
to the programme". Why did you not discuss these ambiguities
with Matra BAe Dynamics rather than ignoring them?
(Sir Robert Walmsley) I do not think we did ignore
them. The contract provided for a resolution mechanism in the
event there were ambiguities. ****** Those who drew the contract
up foresaw that and there was a kind of internal disputes resolution
procedure which I am afraid did not produce a resolution of the
dispute, simply because we could not agree. Most of this is now
behind us. It is behind us in my mind so I now have to persuade—and
I think I am going to be successful—my colleagues in the
Department that we have a good position. The missile is through
its blackest days. I am very comfortable now with ASRAAM. I am
not comfortable that it is late.
92. Paragraph 10, "In Matra BAe Dynamic's
view, the Department has been unclear as to the level of performance
now required from ASRAAM, but it believes that in some cases this
is several orders of magnitude greater than the performance originally
specified". Is that a fair comment?
(Sir Robert Walmsley) No, I do not think it is. The
idea that something should be several orders of magnitude means
in my book at least 100 times greater than specified. What I do
think is that there is a genuine perception in the company that
we are being more demanding. ******.
93. So you have not been over ambitious then
in terms of performance.
(Sir Robert Walmsley) I do not think we have; absolutely
not.
94. How close are we to the resolution of this
dispute?
(Sir Robert Walmsley) Weeks. The way it works is that
this excellent Integrated Project Team leader, who is quite a
tough cookie, goes into bat with the company and has produced
a proposition which I said was a good negotiating basis. He has
delivered that in negotiation. I now have to put that to my colleagues,
including Sir Jeremy, to make sure that the Department is content
and I sense I am sailing slightly close to the wind here but I
then have to put that to Ministers to make sure they are content
and I cannot pre-judge that. I am very much hoping that we will
deliver the first 60 missiles to the Air Force within a month
or so or a little bit more.
95. So they are entering service within the
next month or two.
(Sir Robert Walmsley) Well I hope so. That is subject
to everybody agreeing I am right. If they do not then we are going
to be . . .
96. How far below the performance you wanted
will it actually be when it enters service next month?
(Sir Robert Walmsley) Difficult to put a number on
this. ******. Having spoken to the pilot who has been flying it
since 1999 on a Tornado F3, I am absolutely clear that the Royal
Air Force at the junior operational pilot level want it and want
it now in preference to what they have got because they know it
is key. Admiral Blackham will give you the formal customer view.
97. How much more is it going to cost than originally
forecast?
(Sir Robert Walmsley) I do not think it is going to
cost any more than originally; this is a fixed price contract.
******.
98. You are happy with what your current forecasts
are and it is not going to cost us any more.
(Sir Robert Walmsley) I am just checking to make sure
I am not making that up. It is a fixed price contract.
99. If you are making it up we probably shall
not know you are.
(Sir Robert Walmsley) The variation from the approved
cost is that it is £9 million cheaper than it was at the
point of contract.
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