Select Committee on Defence Written Evidence

Annex A (continued)


ContractorContract Type Procurement Route
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.
Eurojet GmbH
Engine consortium comprising FIAT, ITP, MTU, and Rolls Royce.
Fixed PriceNon-competitive, but with international sub-contract competitive elements, the value of which amounts to some 10% of the overall value of the prime contract.


ContractorContract Type Procurement Route
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.
Eurojet GmbH
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 £9 million.

  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.

Export Potential

  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.

Industrial Factors

  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.

Smart Acquisition

  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 standard—to allow early training—with 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 curve" gains).

  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.

In-Service Support

  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 with Typhoon.

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.

In-Service Life

  Typhoon is planned to be in service for ***.

Development Potential

  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.


  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 Requirement

  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 this type.

  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.

Military Capability

  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 in 2006.

Acquisition Approach

  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.

Alternative Acquisition

  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 effective.


  As the chosen solution is for procurement of an existing off the shelf system, the possibilities for collaboration are minimal.

Export Potential

  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.

Industrial factors

  The JAVELIN joint venture has established an team of UK industrial partners and has committed to delivering 100% UK industrial participation.

Smart Acquisition

  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 the procurement.

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 prices).

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.

In-Service Life

  The system is expected to remain in service for 20 years.

Development Potential

  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.

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