Annex A (continued)
|Eurofighter GmbH Airframe consortium comprising: Alenia, BAE SYSTEMS, EADS (Deutschland), and EADS (CASA).
||Fixed prices for airframe and aircraft equipments, with a target cost incentive arrangement for aircraft equipment integration.
||Non-competitive, but with international sub-contract competitive elements, the value of which amounts to some 30% of the overall value of the prime contract.
Engine consortium comprising FIAT, ITP, MTU, and Rolls Royce.
|Fixed Price||Non-competitive, but with international sub-contract competitive elements, the value of which amounts to some 10% of the overall value of the prime contract.
|Eurofighter GmbH Airframe consortium comprising Alenia, BAE SYSTEMS, EADS (Deutschland), and EADS (CASA).
||Overall maximum prices for production investment and production of airframes for all 232 aircraft (Fixed1 prices for production of 1st Tranche airframes). Fixed prices for all production investment and production of aircraft equipment.
|| Non-competitive, but with international sub-contract competitive elements, the value of which amounts to some 30% of the overall value of the prime contract.
Engine consortium comprising: FIAT, ITP, MTU, and Rolls Royce.
|Overall maximum prices for production investment and production of engines for all 232 aircraft. Fixed prices for all Tranche 1 engine production investment and production.
||Non-competitive, but with international sub-contract competitive elements, the value of which amounts to some 10% of the overall value of the prime contract production.
Typhoon is primarily a single seat aircraft although it is
planned to procure 37 two-seat variants for training purposes
as part of the UK order of 232 aircraft.
Alternative Procurement Options
A number of alternative solutions to meet the UK's requirement
for an agile fighter aircraft were considered prior to signature
of the European Staff Target in 1984 including a UK national solution
and an off the shelf purchase from overseas. These options were
reviewed prior to commitment to the Development, Reorientation
and Production Phases of the Programme. On each occasion, it was
established that Typhoon offered the most cost-effective solution.
Government oversight of the programme is exercised through
the Board of Directors of the NATO Eurofighter and Tornado Development,
Production and Logistics Management Agency (NETMA), which carries
out day-to-day management of the international contracts. The
Agency has some 300 staff and an annual budget of about 40 million
Euro. Funding for the Agency is shared in accordance with the
respective participation of each nation in the Eurofighter and
Tornado programmes. The UK contribution is about 35%. The UK national
project office element of the programme is managed by an Integrated
Project Team (IPT), which co-ordinates UK input to the programme
and provides national oversight. The IPT comprises some 200 staff
but is proposed to increase to between 250-270 as a result of
the additional workload associated with the transition to an in-service
support authority. Its annual operating budget is currently about
Existing development work and costs are shared on the basis
of nations' planned production off-takes, as declared in 1987,
giving the UK and Germany 33% shares each, Italy 21%, and Spain
13% . Production Investment and Production work and cost share
are based on aircraft off-take declared at the start of these
phases in 1997, giving the UK some 37.5%, Germany 29%, Italy 19.5%,
and Spain 14%.
Seven MoUs define the collaborative arrangements between
the four partner nations for the various phases of the programme
and its management.
Several potential customers for Typhoon have been identified
world-wide. Export sales could run to several hundred aircraft
over many years, but there will be competition from a variety
of American, French, and Russian combat aircraft types. Typhoon
was selected by Greece for its fourth generation fighter requirement,
although the purchase, which could involve at least 60 aircraft,
has now been postponed until after the 2004 Athens Olympiad. Several
other export campaigns are ongoing.
The Typhoon project is fundamental to maintaining an industrial
capability within the UK for the design and build of advanced
military aircraft. As the only suitably qualified UK firms to
undertake the development and manufacture of advanced fast jet
aircraft and engines, BAE SYSTEMS and Rolls-Royce were the natural
choice as the major UK partners. Similar factors influenced the
selection of contractors by our collaborative partners. The project
sustains something in excess of 6,000 jobs in the UK, expected
to rise to 14,000 jobs at the peak of production. Any export sales
will also have a positive impact on these numbers.
The Typhoon programme embraces several Smart Acquisition
features. The UK has an Integrated Project Team with collocated
procurement, military customer and logistics staff, including
some seconded from industry. The design standard of delivered
aircraft will follow an incremental acquisition path, with the
first aircraft being delivered to an initial standardto
allow early trainingwith the full standard delivered later
to meet the declaration of operational capability. The prices
negotiated with industry have taken account of efficiency improvements
by industry; arrangements have been agreed to share further efficiency
benefits beyond those already included in the price. Elements
of the production contracts include firm, non-revisable prices
for the first five years and, for subsequent years, Variation
of Price formulae based on Producer Output Indices. There is provision
for liquidated damages and the right of termination. Development
and adoption of innovative support arrangements for Typhoon in
partnership with Industry has identified potential reductions
in cost of up to £1.8 billion over traditional arrangements
through the life of the aircraft, including the incentivisation
of repair and overhaul services; the transfer of risk for reliability
to suppliers; and taking advantage of the benefits offered by
evolving, more reliable, technologies. Innovative support arrangements
are already in place for the initial period of in-service activity,
which will capitalise on experience and infrastructure at the
BAES Warton site, matched with suitably "smart" arrangements
with Rolls-Royce for the propulsion system.
Acquisition Phases, Key Milestones and Costs
There are four distinct phases within the Typhoon programme:
pre-development, development, production, and support.
The Typhoon production contract strategy is based on "umbrella
contracts" that secure maximum prices for all production
investment and the total order of 620 aircraft and their propulsion
systems. Commitments against these contracts are made through
a series of supplements against fixed prices within overall maximum
prices. The umbrella contracts and the first supplements covering
production investment were signed in January 1998. Supplements
covering the production of the first Tranche of 148 aircraft were
signed in September 1998.
The first flights of the Instrumented Production Aircraft
(IPA) took place in April 2002. The first Series Production Aircraft
of all 4 Nations made their maiden flights in February 2003. The
flight test programme is generating the evidence necessary for
the 4-nation Type Acceptance process. Acceptance of the aircraft
into service (ISD) is dependent on the Type Acceptance process
being successfully completed to the satisfaction of all the partner
nations' governments. Series Production Aircraft for the Royal
Air Force are currently being assembled by BAE SYSTEMS at Warton
and Samlesbury, and production engines are being assembled at
Rolls-Royce, Filton. The first aircraft is scheduled to be delivered
to the RAF in June 2003.
Industry's proposals for supplements covering the second
Tranche are currently being assessed. Commitment to Tranches 2
and 3 are planned for 2003 and 2007 respectively.
Expenditure to 31 March 2003 is estimated at £7.7 billion
(on a resource basis at outturn prices). The estimated total acquisition
cost as at 31 March 2003 is £19,666 million, some £2,302
million in excess of the total approved in 1987. This is an increase
of £797 million on the projected cost reported last year.
Of this £797 million, some £515 million (65%) is attributable
to accountancy factors, namely Cost of Capital Charge increases
due to the programme slippage and technical redefinition of the
"beneficial use" date. The "cash" increase
of £282 million is due to a number of factors including inflation
due to the slippage, a £117 million increase due to a decision
to retrofit the Tranche 1 aircraft to a Tranche 2 standard to
make through life support of the fleet more economical, reassessment
of the cost of developing aircraft Enhanced Operational Capabilities
and changes to the estimated cost of Tranche 2 & 3 aircraft
production, (most notably due to adjustments to the assumed "learning
All interim payments made prior to delivery are subject to
the achievement of technical milestones. If a milestone is not
achieved, payment is not made. Additionally, in the event of late
delivery, the production contracts with Eurofighter GmbH and Eurojet
GmbH both include provision for liquidated damages to compensate
the customer Nations for the delay up to a maximum of 3% of individual
weapon system value.
Support for Typhoon is being managed collaboratively to reduce
life cycle costs. MoUs and International Framing Agreements aim
to ensure that all elements of the project are taken forward on
an agreed international basis. Costs are shared in proportion
to the aircraft off-take of each nation. This is the first major
international project to apply integrated logistic support (ILS)
procedures, thus enabling all aspects of logistic support to be
optimised. Emphasis is being placed on partnership with industry
to define the most cost-effective solution.
For 18 months following the delivery of the first aircraft,
RAF Typhoon will be operated and supported at BAE SYSTEMS, Warton.
This enables the support arrangements for these aircraft to be
optimised through combined use of RAF assets and support from
BAE SYSTEMS production line facilities and resources, during this
period of relatively low flying rates. Additional benefits will
be achieved through the close proximity of RAF flying training
and BAE SYSTEMS test flying at Warton.
The Typhoon IPT is maintaining close liaison with the RAF
throughout the planning process to ensure that the end users contribute
to the development of support policy and have a clear understanding
of the developing support concepts. The IPT is also ensuring that,
where it is cost-effective, maximum use is made of existing support
capability and also that, where possible, any new generic support
equipment being procured for in-service aircraft is compatible
Front Line Numbers, (Aircraft)
The planned active RAF fleet of Typhoon *** will cover ***
front-line squadrons, the Operational Conversion Unit (OCU), and
the Operational Evaluation Unit. Each squadron will have one in-use
reserve and the OCU will have two in-use reserves, giving a total
of nine. The remaining aircraft allow for assumptions of attrition
and overall use of the aircraft over the assumed *** life of the
aircraft. The fleet once in steady state will be managed around
engineering requirements, such as scheduled servicing, fatigue
life management and modification programmes.
Interoperability is fundamental to the Typhoon design. The
Typhoon programme has adhered to NATO Standardisation Agreements
(STANAGs) and protocols to ensure Typhoon's compatibility with
current and future systems, both operational and logistic.
Typhoon is planned to be in service for ***.
Unlike previous programmes, where major enhancements were
incorporated via a major in-service upgrade, we shall, following
Smart Acquisition principles, establish a programme for through-life
evolution of the RAF Typhoon fleet. The aim is to acquire and
incorporate emerging technology, on an incremental basis, to maintain
the capability of the weapon system. Partnering between the MoD
and industry will provide the necessary expertise and focus to
enable us to identify, prioritise and pursue modifications to
Typhoon that balance operational effectiveness, life cycle costs,
and component obsolescence issues.
SYSTEM (LF ATGWS)
The LF ATGWS requirement was originally developed to equip
the Light Forces within the Joint Rapid Reaction Forces with a
lightweight, man portable, medium range anti-tank guided weapon.
Following a Balance of Investment study undertaken as a result
of the UK's decision not to proceed with the collaborative Medium
Range Third Generation Anti-Tank (MR TRIGAT) programme, this requirement
was expanded to cover the Mechanised Infantry.
Operational Analysis (OA) consistently demonstrates that
there is a need to equip the dismounted soldier with a medium
range man portable weapon that can be used against armour and
secondary targets in an offensive and defensive role.
Despite the world-wide reduction in tank inventories since
the end of the Cold War, the major threat nations have generally
maintained their numbers and are actively trying to acquire new
tanks with increased capabilities. Accordingly the armoured threat
remains and may in fact be increasing. The more modern Main Battle
Tanks not only have increased capabilities, they also have more
capable armour and as such are more difficult to destroy.
Tactics have also changed with Main Battle Tanks and Light
Armoured Fighting Vehicles more likely to be deployed in a dispersed
and unpredictable manner, in an effort to avoid longer range offensive
assets. These changes in opposition tactics significantly increase
the importance of the portability characteristics of weapons of
The current weapon used for this role, MILAN, is becoming
progressively less effective against these better protected targets
as it nears the end of its in service life and as such a replacement
for it is needed. In order to avoid a significant capability gap
developing as MILAN is phased out, the requirement will be satisfied
with the off the shelf JAVELIN medium range anti-tank weapon from
the United States.
Options for the Armoured Infantry are still being considered.
These options include acquisition of more JAVELIN using the systems
growth potential to migrate to a longer range armour protected
capability in due course or acquisition of an armour protected
capability as part of the Future Rapid Effects System (FRES) programme.
During the LF ATGWS Assessment Phase, second order requirement
issues have been traded, in consultation with the Customer community,
to minimise enhancements to the off the shelf solutions being
considered. Identifying the most appropriate solution to meet
the Armoured Infantry requirement will involve reaching a balance
between time cost and performance parameters.
The quantities of JAVELIN being acquired for the Light Forces
and the Mechanised Infantry are in the order of 350 Command Launch
Units (Firing Posts) and *** missiles.
The number of equipments required for the Armoured Infantry
is dependent on the mechanism for delivering the capability. This
is subject to ongoing review and a decision as to how to proceed
is expected in the next 12 months.
Strategic Defence Review
The Strategic Defence Review (SDR) confirmed the need for
an anti-armour capability. This was further confirmed in the light
of SDR New Chapter.
LF ATGWS can be used by the individual soldier to defeat
Main Battle Tank and other Light Armoured Fighting Vehicles at
a range of up to 2.5km.
Equipment to be Replaced and ISD
This weapon will replace the current MILAN system to an ISD
Following the LF ATGWS Main Gate approval (January 2003)
the contract for Demonstration and Manufacture was placed (February
2003) for procurement of the JAVELIN missiles and training systems
from a joint venture of Raytheon and Lockheed Martin. This contract
runs alongside a US Foreign Military Sales case which will supply
the Command Launch Units and the first five years support of the
equipment. It also includes fixed price options for a further
three five year support periods, providing opportunities for equipment
support through life. JAVELIN was chosen following a competition
with the Israeli Spike system offered by a joint venture between
MBDA and Rafael. The competitive pressures resulted in significant
cost savings and improved procurement terms.
Should JAVELIN be selected for the Armoured Infantry, costed
options have already been negotiated as part of the existing contract.
Training will be principally conducted by simulation with
only very limited live training firings being undertaken. This
approach has been facilitated by the rapid advancement in simulation
technology and has the benefit that the number of training missiles
procured can be reduced.
Procurement of an off the shelf solution following the failure
of MR TRIGAT was the best option to prevent a significant capability
gap developing once MILAN was phased out. The option of acquiring
further MILAN weapons had previously been discounted as not cost
As the chosen solution is for procurement of an existing
off the shelf system, the possibilities for collaboration are
There is likely to be significant world-wide demand for weapons
of this type over the coming years. If JAVELIN is successful at
meeting these demands there is potential for UK industry to provide
sub-components for these and potential US Government procurements.
The JAVELIN joint venture has established an team of UK industrial
partners and has committed to delivering 100% UK industrial participation.
Buying a system off the shelf will ensure acceptable performance
is delivered in the shortest possible time. The close working
relationships that have been established with industry, using
Smart methodology, will simplify problem resolution throughout
Acquisition Phases, Key Milestones and Costs
Having let the Demonstration and Manufacture contract in
February 2003, we expect to achieve the approved ISD of 2006.
The maximum procurement cost of this programme is estimated to
be in the order of £340 million (in resource terms at outturn
In Service Support
The system has a simple In Service Support strategy. The
missiles are maintenance free through life, apart from routine
surveillance of the stockpile. Other than very basic repair, the
Command Launch Units and Training Systems will be maintained at
a contractor run permanent UK repair facility.
Front Line Numbers
Apart from a small repair pool, all the Command Launch Units
will be held by Units and ready for use. Missiles will be issued
as required in anticipation of imminent action, except for a small
number each year that will be used for training firings.
The procurement of an Off The Shelf solution from the US
gives us increased interoperability with a number of other nations.
The system is expected to remain in service for 20 years.
The system is designed to be easily upgradeable. The software
required to operate the missiles is held within the Command Launch
Units and any software upgrades, such as improvements to the tracking
algorithms, that are developed can be easily distributed and rapidly
deployed to the missiles on launch. A Memorandum of Understanding
has been agreed between ourselves and the US to facilitate joint
future development of the system should this be desirable.
Disposal of Equipment to be Replaced
When MILAN goes out of service it will have no remaining
value and, as stocks will have been run down, the cost of disposal
is expected to be minimal.