Select Committee on Defence Minutes of Evidence

Examination of Witnesses (Questions 40 - 59)



  Q40  Mr Crausby: Clearly it would involve quite complicated negotiations on a project of this size. Can we be absolutely assured that the MoD will not make any compromises from the point of view of design of the programme? One of the things that interests me is what will the French fly off their carrier in comparison to what we fly off our carrier? Will that mean completely different things from the point of view of the carriers? I know we are going to talk about the Joint Strike Fighter later but these two things have got to come together in some respects from the point of view of the initial design. Can you tell us something about that?

  Mr Coles: There are some parts, of course, and the aircraft is a particular one, where the French Navy would be operating different aircraft, but the broad characteristics of how those aircraft would be operated from either ship would be very similar. There would not need to be detailed changes to support the individual aircraft because of the aircraft characteristics, so that is not a big issue, I do not think. The rough shape and size will accommodate both aircraft. The real issue—and you have touched on this—is we do not want to make it over-complicated in terms of administration, in other words you do not want to produce costs and delay in decision-making. The key to any collaborative programme or co-operation programme—call it what you like—if that is the way that Ministers decided to go, would be to ensure that we did not produce additional bureaucracy and decision-making in the process. Perhaps finally, it is not aligning our requirements. This is taking a solution that we have developed, as Mr Key said, and adapting it to meet French requirements. So it is adaptation of this new product, but of course any adaptation, if they decided to co-operate or collaborate, would be for the French administration, for the French DG in this case, to decide how to fund that. It would not be funded by UK plc.

  Q41  Mr Crausby: You have talked a great deal about cost but what about jobs? There are many different cross-references from the point of view of what is done in British shipyards. Would you, for instance, consider building all three carriers in French shipyards? Is that on the cards? Is that politically acceptable?

  Mr Coles: I think those discussions on the particulars of how, what and when we would like to collaborate or co-operate are really quite some distance off, so I do not think I can give a view on that at this stage. However, you would save some non-recurring costs if you did it in terms of design costs and procurement costs, as I have outlined, you are bound to. How that would work out in terms of sharing those costs and where they would fall is speculative at this stage.

  Q42  Mr Crausby: The fundamental question is there is an enormous difference between STOVL from our point of view and the French. Can we have some qualification on that as to what the French would fly off their carrier?

  Mr Coles: I think you would have to ask the French Navy what they are going to fly, but my understanding is that they are flying the Rafale off the carriers (and other aircraft too actually) but you will have to ask them. I can send you a note if you wish.[1] I am not qualified to give an opinion on that.

Chairman: I think that would be helpful because the difference between flying STOVL on aircraft and non-STOVL would be quite significant.

  Q43  Mr Hancock: I must say, Mr Coles, your response to Mr Crausby's question was a lot different to the one you gave to Robert Key. You seem to have had considerable discussions about a contract possibility with the French. In your response to Mr Key you gave the impression that you were just on the edges of it. You went into some detail about what had been discussed and what was potentially on offer there in the relationship. I would be interested to know exactly what your role has been in those negotiations.

  Mr Coles: I did qualify my remarks, I think, by saying that if we did decide to collaborate with France, this is what we could do, not that we had decided to do, so I did make that distinction.

  Q44  Mr Hancock: So what was has been your role in the negotiations to date?

  Mr Coles: To facilitate discussions between the French and British industries about what is possible from a technical solution point of view, what is possible—

  Q45  Mr Hancock: Has this been going on for some time?

  Mr Coles: It has been going on with the French for, I think, something like two years.

  Q46  Mr Hancock: Two years with the possibility of a joint venture?

  Mr Coles: No, no, no, to establish what was possible, whether it was feasible for this particular design to meet the French requirement? That is the first question. Then deciding it is possible, does the French administration wish to pursue and in what format any form of co-operation. That is for them to decide. What could be done thereafter, as I said, there is a whole range of things you could do but that has to be decided and agreed by ministers and none of that has been decided. I was just saying these are the range of things that could be possible in any form of programme.

  Q47  Mr Hancock: Have you had meetings with senior French ministers and British ministers on this issue?

  Mr Coles: I am sure that is a question for ministers to answer rather than myself.

  Mr Hancock: You do? I thought that was a legitimate question to ask you.

  Chairman: I think the question was about senior French ministers rather than—

  Q48  Mr Hancock: French and UK. I expected an answer.

  Mr Coles: With respect, Chairman, I think ministers must answer whether they have met with opposite numbers.

  Q49  Mr Hancock: I asked whether you had met with senior French ministers.

  Mr Coles: French officials I have met but not French ministers.

  Chairman: Thank you.

  Q50  Mr Havard: Can I be clear. What I understood the situation to be is that industry have been tasked with doing these discussions you have talked about, which are about technical feasibility and about reducing cost and risk, whilst preserving the national programme that currently exists and the time-line. So there is going to be no change there. Is that what you are about doing because that is what the Ministry of Defence think you are doing because that is what they have written to me and told me you are doing? Additional to that, there are other working groups and goodness knows what going on to investigate the range of co-operative possibilities perhaps within that and beyond that as well. That is what I understand is going on. On this question of the French specifically, you talk about adaptations being made so that we do not disturb our national programme, we do not disturb the time-lines and all the rest of it, but if the French participate and do whatever they want to do, if they want to put a new deck on it and have sling shots instead of short take-off and landing or whatever, that is their problem and they pay. Is that where we really are?

  Mr Coles: What I have said, and I will repeat it, is that we have looked at the technical feasibility and between British and French industry we have concluded—the French administration as we have accepted—that it is technically feasibly to adapt this ship to meet their requirements. Thereafter no decision has been taken about whether they are going to pursue that. If they did, that opens up a whole range of possibilities, as I outlined already, of how you might take that forward, within some constraints about time, our own programme and all the other constraints. So in a sense we have explored what is possible. We have not taken any decisions. It is a decision for the French, I might add, in the first place about whether they wish to pursue it.

  Q51  Mr Havard: You told me mid-December earlier on. That is when the answer is coming, is it?

  Mr Coles: That is the sort of time-frame.

  Q52  Mr Havard: That is the sort of time-frame. What does that mean? Does that mean Christmas or does it mean the middle of January?

  Mr Coles: I think it means around that time-frame.

  Mr Havard: That is the best I can do, Chairman.

  Chairman: I think we have taken that as far as we can. We will now move on to ship building. David, do you want to take that?

  Q53  Mr Hamilton: The MoD's submission mentioned the "creation and integration into the Alliance of the Shipbuild Entity".[2] What is the Shipbuild Entity and when is it expected to be created?

  Mr Coles: The Shipbuild Entity was that part of the programme which would bring together all the people who might be engaged in building the ship, ie the physical construction and the detailed design, to form, if you like, a piece in the Alliance we could contract with or negotiate with about how this is best to be done. That is what the Shipbuilding Entity was set up to actually do some time ago. The proposals to the Ministry are not mature enough about how that might work, but it has the aim of creating an entity, ie how to build it and where and the people who might be associated with it.

  Q54  Mr Hamilton: What would its status be within the Alliance?

  Mr Coles: That would need to be debated. It could either be a separate sub-alliance or they could be full partners or a combination. That is yet to be teased out because we have not received formal proposals from the companies about what that format might finally look like.

  Q55  Mr Hamilton: BAE Systems is a member of the Alliance and owner of one of the shipyards. There is an obvious conflict there. How will you be able to resolve that conflict with BAE Systems?

  Mr Coles: One of the roles is—and it does depend on the final format of the Shipbuild Entity of course—for KBR on behalf of the Alliance to police precisely prices and the programme to make sure that it is all viable, so they would have a role in that as well. I am not sure there is a conflict of interest, although we have to make sure they do not have two voices at the table, a shipbuilding voice and a voice as a member of the Alliance.

  Q56  Mr Hamilton: That is not a conflict?

  Mr Coles: It is something that we have to tease out. You are right to recognise it.

  Mr Pryor: There are many normal procedures which we have employed in very similar situations when individual companies inside an alliance are bidding to the alliance for work in various of their facilities. What normally happens—and certainly this is my own personal experience—is that you run an assessment tender process with sealed bids at which you have independent observers for those sealed bids (in this case we had the Ministry of Defence as the independent observer) and the participating Alliance member does not participate in the recommendation of the assessment team. It goes to the Alliance Management Board, which is the executive authority for the whole project, and at that board the participating member has to be excused, or they excuse themselves, from the decision process, and it accepts the decision of the other alliance members on the particular tender put forward. So there are some very robust procedures for making sure that the conflict of interest is not there.

  Q57  Mr Hamilton: Can you find an independent observer?

  Mr Pryor: I have operated many times with independent observers. They come either from industry or from one of the trade associations normally.

  Chairman: We will now move on to the potential shipyards. Mike, do you want to start on this?

  Q58  Mr Hancock: When the contract was being talked about there was a lot of speculation around the country about who would benefit from the shipbuilding. It finally came to fruition, I think, in January 2003 where four yards in particular were identified—BAE Systems' naval yard at Govan, Vosper Thornycroft in my own constituency at Portsmouth, Swan Hunter on Tyneside, and Babcock BE at Rosyth. Is it still the intention of the Alliance to give the work to these four yards in the same sort of proportions that were being discussed back in those heady days of January 2003?

  Mr Coles: I think what I would say is there are a number of proposals that the industry and the Alliance have had about where this ship could be assembled and where it could be done and how it could be done, but we have not reached a definitive view on any particular solution. Clearly what I and the rest of the Alliance board want to establish is any solution that is put up minimises capital investment, that the solution offered has the capability and capacity to match all this, that we have the right level of competition and the right skills-set to do this. In a project like this to bring all the Alliance partners in and to sign up to that, as I said some time ago, is a long process and if we want to de-risk this and take the risk out of the programme we have to get all that information assembled, clearly on the table, and understood by all, before we make recommendations. In the end these would be the sorts of things you are doing to the rest of the Ministry of Defence to make sure that it is the viable way forward and is a minimum-cost solution for the delivery of these ships. So it is a long process and no decisions have been taken. A lot of people are speculating how we could do this, where we could do this, but I need to think about capacity, capability, cost, risk and minimum capital investment, because all those are important factors in driving the final costs of the programme. We do not want to create capacity, for example, that we would only need for a short time. So it is a complex jigsaw to put together and we have not actually reached a solution yet.

  Chairman: Mike Hancock wants to come back on that but before he does Kevan has a question.

  Q59  Mr Jones: So the report in the Sunday Times that Swan Hunter, one of the main four yards mentioned, is not actually one of the main yards is not correct?

  Mr Coles: As I said, we have not decided on any solution so no decision has been taken. As far as I can judge, there is enough potential work for any of these four who wants to compete for work.

1   Ev 45 Back

2   Ev 43 Back

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