Examination of Witnesses (Questions 100
- 106)
TUESDAY 18 OCTOBER 2005
MR JOHN
COLES CB, MR
ALLAN CAMERON,
MR CHRIS
GEOGHEGAN AND
MR TONY
PRYOR CBE
Q100 Mr Havard: We have been told
that the MoD have indicated that the Whole Life costs were £31
billion, £12 billion of which was the acquisition. Is that
acquisition figure totally related to the actual carrier?
Mr Coles: No, I think the cost
for the ship itself is quite a lot less than that, just over a
quarter, if I remember correctly.
Q101 Mr Havard: That is the proportion
and the ship is about a quarter?
Mr Coles: We are talking about
the ship itself in terms of the cost and its true life cost is
actually quite different. If my memory serves me correctly it
is about a quarter of the cost or thereabouts to the ship as opposed
to the aircraft and everything else that goes with this capability.
Q102 Mr Havard: How much is the ship?
Mr Coles: I seem to remember,
as I said, it is about a quarter and I think we might have put
it into the memorandum to you.
Q103 Mr Havard: In terms of this
calculation you have to deal with about Whole Life Costs, operating
costs and all the rest of it, the Alliance did a 100-day review—and
that was last March, as I understand it—at that point you
said it was still financially viable?
Mr Coles: Correct.
Q104 Mr Havard: What I want to know
is does that mean affordable within the costs that you have been
given because there is potentially a difference between these
two figures? There is a lot of slippery language about the place
and I would like some clarity.
Mr Coles: I will try. What the
100-day programme did was it looked at what the industry and ourselves
thought this project should cost, and the outcome of that was
that although we have yet to tease out the final costs, it can
be made compatible with the funding that is available for this
project. In other words, we think that the cost that we have in
the assessment phase today, what we think this may cost, with
some of the changes we would drive in through the Alliance arrangements
can be brought in line with the available funding. That is what
I mean by the term you used.
Q105 Mr Havard: Within that, as I
understand it, you give three figures, which are the lowest and
the maximum and within it there is a "most likely" figure.
You did that assessment after 100 days and it was last March you
reported that. Where are we now? Is it still the case that it
is still costing that? You have talked about your value engineering
process and all the rest of it. I understand you have done that
and driven down cost out of that, but that has meant changes in
system design and all the rest of it. March to October—where
are we now?
Mr Geoghegan: What the 100-day
committee did was it generated a common cost model so there is
a single cost model for this project that is shared by all of
the participants. Clearly that is based upon a number of assumptions
that have to be validated over time. Clearly there is a range
of potential outcomes around each of those. As the project progresses,
and in particular as we get more detailed involvement with the
shipyards around the ship build strategy and the individual cost
inputs for the various sections of the ship, then we would be
able to validate these specific aspects. In terms of our view
of the cost model, it has not changed substantially since the
end of the 100 days. Clearly there is still a long way to go and
a lot of those assumptions have got to be tried out in great detail
with the people who are going to have to commit to them.
Q106 Mr Havard: So the whole envelope
has not changed and the proportions within it have not changed,
so it is still roughly a quarter for the cost of the ship, is
it?
Mr Coles: In terms of the overall
capability of acquiring it, there is no substantial change.
Chairman: Thank you very much indeed.
We have various questions which we would have liked to ask you
about the RAND Corporation report and suggestions arising from
the RAND Corporation report but because of time I think it would
be best if we write to you and ask if we could have a memorandum
on that.[5]
Can I say thank you very much indeed, gentlemen, for your evidence
to the Committee this morning. I suspect we may be seeing more
of each other over the years, which will be an enormous pleasure.
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