Select Committee on Defence Minutes of Evidence

Examination of Witnesses (Questions 100 - 106)



  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.

5   Ev 45-47 Back

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