Select Committee on Defence Minutes of Evidence

Examination of Witnesses (Questions 120 - 139)



  Q120  Mr Havard: If the RAF get hold of it, they will.

  Mr Burbage: The plane is designed to a set of requirements. The requirements are identical for the US and the UK.

  Chairman: One of the important issues of the aircraft is the technology of the whole thing, not least the Stealth technology. I wonder if we could move on to general information sharing. Kevan Jones?

  Q121  Mr Jones: Can I say, no, they are not the same and the reason why they are not the same links into this question about information sharing. One of the great concerns that I have got, and I think a lot of people have got, is whether or not this is a completely joint project in terms of information sharing. It is not just Members of this Committee but also the Air Chief Marshal, Sir Jock Stirrup, who in Aviation Weekly of 11 July this year, said, "There is clearly a growing urgency in addressing technology access and the related ability of independent support of the aircraft. Whilst Stirrup remained optimistic that the outstanding areas can be satisfactorily addressed, any indication that this is not going to be achieved will result in the UK having to think pretty hard". I was in Washington at the end of July meeting congressmen and also Lockheed and BAE Systems. From BAE Systems' point of view there is a clear problem here. The answer to your question is that they are not same aircraft because there are aspects to the American aircraft which we have not got access to at the moment because of technology transfer issues, even though we have quite happily transferred technology on, for example, Rolls-Royce engines to the US. Where are we at with this? Clearly there will be a groundswell of opinion including from Jock Stirrup, and I for one will be arguing and saying if these points are not addressed I cannot understand why we are buying this aircraft.

  Commodore Henley: We have a policy of progressive release of information and progressive understanding. We have an agreement signed between the US and the UK at Secretary of State level called "exchange of letters" which lays out the UK's need to be able to operate this aircraft in a sovereign capability when the aircraft is in service. That is clearly a shared aim between the US and UK and what we have in place is a strategy to turn that from a high-level agreement into the individual technology licences that transfer that piece of information.

  Q122  Mr Jones: But how are you going to do that?

  Commodore Henley: We have defined the capabilities that we will require in the UK—and maintenance, repair and upgrade is but one of those—and we understand the technologies that will be needed to underpin that capability. We need to have those under sovereign control. They could either be in government or in the hands of US industry under direct contract with us or they could be in the UK industrial base. We are working with the US Government to understand exactly where that will lie.

  Mr Jones: The problem, with the greatest of respect, is not the US Government. It is the actual Hill who, frankly, will not agree to the transfer of this technology. Having met some of my counterparts on the Hill, including my dear friend Congressman Hunter, there is no way that this agreement between two governments is going to get through Congress. I say first as a UK taxpayer why should we go into a joint project if we are not going to have people able to access to upgrade. I think it is going to get to the point soon in this country where I will be saying, and I think other people will be saying, why are we going to procure this aircraft if the Americans do not trust us on basic technology. On the stealth phase which is something Mr Key raised, it is quite clear, they are not identical aircraft.

  Q123  Chairman: I think the Commodore should be allowed to answer that and then John Smith.

  Commodore Henley: I have to bow to your superior knowledge on the Stealth characteristics because I am not aware—

  Q124  Mr Jones: It was Lockheed who were briefing me when I was in Washington.

  Commodore Henley: I think it would be into the realms of speculation as to where we may get. We have made considerable progression with technology exchange. We have laid out to the US Government the path that we need to follow and we are making progress along that path. Beyond that we are in negotiation with the US to achieve our aims.

  Q125  Mr Jones: I do not question your commitment from a UK point of view but let me quote Jock Stirrup again. He "remains optimistic that outstanding areas can be satisfactorily resolved. Any indication that this is not going to be achieved would result in the UK having to think pretty hard." When are we going to have to start thinking pretty hard on this because, frankly, I came away from Washington in July pretty depressed that any movement had been made on this? If it is not, not only us as a Committee but other people perhaps who have got interests in other aircraft types should be saying to the UK Government, clearly if we do not have access to this on a joint basis why should the UK procure this aircraft? I agree with the Air Chief Marshal on this.

  Commodore Henley: And I brief the Air Chief Marshal fairly regularly. Significant progress has been made.

  Q126  Mr Jones: He looks not very happy.

  Commodore Henley: And we have set ourselves some milestones in the future, points at which we measure that achievement and take a judgment. Right now we are making progress and we have made progress in the last few months. The US understand what it is we have to deliver and we are making progress along the line towards delivering it.

  Q127  John Smith: To help us a bit could you tell us how many requests for technical licences have been requested? How many of those requests have been approved and have we received all the technical information we require from those requests?

  Commodore Henley: The progress to date on work that has been contracted to be done in the UK on behalf of JSF—and at the moment because we are in a development programme that is what the licence has been there to support—the programme has not been held up for the want of a licence and the subsequent transfer of technology. The issue that is being talked about here is looking ahead into the future as to what is the UK's capability to support this aircraft on sovereign operations. The US licensing process has a time limit issue to it. They will transfer information when it is required. Each individual piece of information has to be defined what that information is, why you need it and when you need it. There is therefore a timeliness issue that we are not going to have this aircraft in service in the United Kingdom before 2012, therefore why do we need the technology transfer now? That is precisely the issue that we have tried to tackle with the exchange of letters, laying out the requirements we have for the aircraft in service, understanding the technology we need to support that and then looking for indications that we are going to get the transfer when we need it.

  Q128  Mr Borrow: I think we do need to probe specifically about these licences because in every briefing that I have had with BAE Systems over the last 12 months this question of technology transfer has been at the heart of those discussions and the failure of that technology to be transferred. Saying there is a system where it will be transferred when it is needed is not really the answer. What I want to know is, following up John Smith's question, how many requests for information have been made, how many of those requests have been acceded to and on how many occasions when requests have been acceded to has all the information requested been transferred and on how many occasions has inadequate information been transferred. I want the actual figures. If you cannot give those figures now can you make sure—

  Commodore Henley: We will certainly be able to give you a note on the number of licences that have been processed and passed through.[6] Could I ask Steve to pick that up.

  Mr Mogford: I think from a BAE Systems' perspective to put it in context, normally when you are dealing with technology assistance agreements like this it tends to be very much on a single issue basis. As Commodore Henley said, with the Joint Strike Fighter programme we have had a progressive succession of licence applications which increase access to technology. I think we would have to give you a note on the specific details on all of the applications for requests there,[7] but generically we have had something like nine series of applications as we have gone through the programme and Commodore Henley is quite correct when he says, as of today, we have had approvals for release of information which allows us to meet the contract obligations. I think also as Commodore Henley said, because we have been testing the system through this progressive stretching of the envelope we have caused the system in the States to be tested in terms of speed of response, but it is fair to say that as of today we have all of the approvals we need to meet the contract.

  Q129  Mr Borrow: Could I just follow up on that. This is not so much the technology needed to construct the plane now but the technology that will be required for maintenance and possible upgrades. Evidence was given earlier on that decisions had not been made as to how that technology would be available for the UK and whether it would be within the MoD, within a UK company or whether it would remain within a US company contracted to the UK. I would be interested in your comments on my observation that it would go down very badly amongst those constituents of mine who work for BAE Systems if that technology were to remain within a US company and they were not to be allowed to have that technology to be in a position to maintain and upgrade the aircraft in the future.

  Commodore Henley: If I could perhaps lead off with the response to that, Mr Borrow. We are buying into this programme in a large way to provide an affordable solution for the UK's future needs and part of that affordable solution means that we want to be part of a 3,000-odd aircraft run, not have 150 one-offs in the UK. That means we intend to stay in the joint common configuration with all nations throughout, which means staying as part of the partnership we have at the moment. Therefore, the need for sovereign capability for the UK in the first place falls on the shoulders of Lockheed Martin as the prime for Team JSF. BAE Systems are clearly part of that partnership and are ideally placed then to act as the UK front end of Lockheed Martin's provision of support in the UK. We are in negotiation with both companies at the moment and the US Government to bring that partnership to fruition. How that ends up in terms of the division between government and industry and then the way JSF plays that out between their partner industries is still in negotiation.

  Q130  John Smith: Chairman, this is pretty fundamental stuff. I can understand the answers regarding the timeliness of technology transfer, as and when it is needed so it does not delay the project unduly. We do not want to see that; we want to see the in-service date met. However, operational sovereignty sounds pretty fundamental to me and not only the employees in BAE Systems, as my colleague rightly pointed out, but also the taxpayers of Britain are clearly going to be concerned. I have to tell you I am concerned if there is any question mark whatsoever over the operational sovereignty and independence we have on the second largest aircraft procurement project in the next decade. I would have thought this was something that should be resolved fairly early on because it will be too damn late when these aircraft are delivered or are in need of upgrade or major overhaul or indeed front-line maintenance and we are not in a position to maintain them. It strikes me as fairly fundamental.

  Commodore Henley: Mr Smith, I do not think my position would be any different from yours, not least because I wear a uniform and I am responsible for and have been responsible in the past for putting people into these aeroplanes and sending them out. I do not think anybody would say we are going soft or being soft on this approach. We have a strategy in place. I think Mr Burbage would probably turn round and say we have been extremely aggressive. We have some measures of success that we are measuring ourselves against to ensure that we are content with where we are going. That is precisely the briefing and where the Chief of the Air Staff is coming from.

  Q131  Mr Havard: I have a technical question about the matrix. The Ministry of Defence are saying you are doing this exchange of letters process and that you will jointly develop a UK/US technology matrix which sets this out in a very detailed letter. Is that a one-off shop and is it closed or is it going to be able to continue to be developed as you go, because if it cannot be then clearly these questions about future technology are a closed issue and the concern from us about protectionism from America, call it what you like (and I can go into the political invective if you like) is a question of confidence as to whether that is an open process or whether it is closed. Is the matrix now developed and shut or is that the vehicle you are going to use in order to continue for that to be an open process?

  Commodore Henley: The technology matrix is in place now and it is the vehicle around which we are conducting discussions at the moment. I do not regard it as closed because, as you say, the nature of the aircraft will change and the technology will change but it is right now the area where we have been able to reduce ourselves, if that is the right word, to a level of detail that allows genuine discussion to take place. When you are up at the high level it is quite easy to get promises; it is harder to see whether you are going to get real delivery. That is why we spend a great deal of time breaking this down into individual technologies and saying, okay, against this technology are we going to be able to get transfer? We have got to the level where we have been able to discuss at a technology level what the issues are that get in the way when the first look is, no, we are not very happy about that. We are making progress on identifying the stoppers to those technologies and then finding ways to work round those stoppers to get us to the capability that we need. I cannot understate the fact that sovereign capability for this aircraft is the most important aspect.

  Q132  Mr Havard: You have removed all the stoppers where they have popped up, have you?

  Commodore Henley: Not all to date but we are working on it and we have made significant progress.

  Chairman: We regard information sharing as absolutely central to this programme and we will be holding your feet to the fire and I hope you will be holding others' feet to the fire on this very important issue over the next few years. Moving on to production and support for the aircraft, Mike Hancock?

  Q133  Mr Hancock: Can I ask about the negotiations that are going on at the present time, which we were led to believe are taking place, with regard to the production and sustainment phases of the Fighter. How sure are we that we are going to meet the dates you gave for December 2006 for a memorandum to be signed on that?

  Commodore Henley: The memorandum that is under negotiation at the moment is a nine-nation memorandum and the time-line for it is driven by the US requirement to have the partner nations on board before the US Government then commits to the first low-rate initial production phase. Their commitment is roughly January 2007 and therefore the target date for negotiations is December 2006. We have had two formal negotiation sessions to date and at the moment there are no indications that we will not meet that 2006 time-line.

  Q134  Mr Hancock: You must have done a risk analysis of what the risk would be if that date was not met regarding the UK's capability.

  Commodore Henley: It depends on what the knock-on effect is into the US programme. If the US decided that the nations had not signed up but they would still authorise the first batch of low-rate initial production aircraft, which are only US aircraft, then the impact on us would be small. If it then knocked on to the whole programme then there would be clear implications for us.

  Q135  Mr Hancock: If the US do not get all the partners on board, what are the implications for us? Not having a plane?

  Mr Burbage: The UK airplane is the same as the US Marine Corps airplane. The only partner that is even looking at a STOVL airplane today is Italy and that is about 18 airplanes so they are very minor player in the STOVL configuration. The partners represent a block of airplanes that potentially could be between 600 and 700 aeroplanes for all seven of the partner countries, not counting the US and the UK. The US buy alone is of the order of about 2,500 airplanes so on a relative scale it is about a third as between the US and UK airplanes, so it is significant in terms of fly away cost, in terms of annual production rates and total quantities, but it really is not significant to the configuration or to the early production lots. The first two lots are US only. The third production lot is when the UK planes enter. There are a couple of international test airplanes in the third and fourth lots. The rest of the international airplanes are further out.

  Q136  Mr Hancock: It will not have an effect. So what can the UK expect to have in the way of build work and maintenance on these aircraft?

  Mr Burbage: This gets down to trying to capitalise on the economies of commonality and scale. There is going to be a global support solution in place to maintain—

  Q137  Mr Hancock: So we might repair the American Marine Corps aeroplanes?

  Mr Burbage: Quite possibly yes, sir.

  Q138  Mr Hancock: You answer the question.

  Mr Burbage: The plan is to put in an affordable and efficient support structure. Where partner countries want to have additional capability to that, that comes at their cost. Remember, the US/UK is part of a baseline programme so if additional international partners want to add to infrastructure that comes at their cost if it is not part of the baseline.

  Q139  Mr Hancock: But we are the only level 1 partner you have got so we must be entitled as of right to part of the build and some guarantee of the maintenance, surely? What are British taxpayers getting out of this?

  Commodore Henley: This is not a work-share programme. One of the things Joint Strike Fighter did to break the cost spiral of future aircraft was to say we would not be entering on the basis of work share. What we get for our level 1 partnership is that the UK requirements are embodied in the major contract. What we have got into the UK is because of the competitiveness, particularly of BAE Systems but other companies as well notably Rolls-Royce and Smith's, a significant amount of work, not on a work-share basis but on a global best value basis. They have been the best companies to deliver that into the programme. The result is to date for development and the low-rate initial production runs the UK is getting about $6.75 billion-worth of work back for our $2 billion investment.

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