Examination of Witnesses (Questions 180-199)
SIR PETER
SPENCER KCB, DR
IAIN WATSON
AND LIEUTENANT
GENERAL ANDREW
FIGGURES CBE
12 DECEMBER 2006
Q180 Chairman: I will change the
subject now on to the systems company. Dr Watson, do you have
the answer?
Dr Watson: I have a number of
stages in the answer. There was an agreed requirement at the point
of the initial gate business case which was in 2003. We agreed
a revised baseline in 2005 in the middle of the initial assessment
phase, that is normal business. As we get to each collection of
evidence then there will be a normal transaction between ourselves
and General Figgures' people to revise that as the evidence becomes
available to us. We will not firm this until we make the main
investment decision. Part of the assessment aim is to make sure
that we have a balance between how we are going to provide a solution
and the requirement itself. We do have a baseline we are working
against at any time and that baseline is revised as evidence becomes
available. It is a practical test rather than a philosophical
one.
Q181 Chairman: When do you expect
to make the main investment decision, Dr Watson?
Dr Watson: When we have done enough
assessment to be sure that we can make the main investment decision.
Mr Hancock: We will chase that one again,
shall we? We will get some hounds in for that one.
Q182 Chairman: The "Systems
House"—I will not go back into the main investment
decision, we have been through that with Carriers—what was
the purpose of appointing a "Systems House" and what
does a "Systems House" actually do?
Dr Watson: The main purpose of
that appointment was to provide us with a significant volume of
expert help in order to undertake the detailed engineering and
technical assessment that was necessary to define the solutions
base for the FRES requirement. Their principal work has been in
helping us with detailed system engineering and, indeed, with
risk assessment of meeting the FRES requirement and, indeed, in
managing the technical demonstrator programmes, of which there
are many involved in this phase of FRES.
Q183 Chairman: Why Atkins as the
"Systems House"?
Dr Watson: It was a competitive
process. We undertook an evaluation of a significant number of
bids. I think there were six at one stage and then three in the
final stage. They were required to be independent of the armoured
vehicles supply chain so that we did get advice that was uncoloured
by an interest in delivery.
Q184 Chairman: Uncoloured by experience
as well?
Dr Watson: Not uncoloured by experience.
Much of the engineering that we are looking for is generic and
it is further advised by the application of subject matter experts
that we draw from a variety of sources.
Q185 Chairman: What value has Atkins
added to the programme, would you say?
Dr Watson: I think they have added
a significant technical expertise. They have added some pretty
hard questioning of timescales and technical judgments. They have
also provided us with a more flexible resource pool than we would
have been able to provide from Ministry sources. They have been
valuable in giving us momentum and quality in study. Where they
have been asked to help us in areas such as defining the acquisition
process, frankly they have not been as strong.
Q186 Chairman: Would you go so far
as to say that their lack of connection with the armoured fighting
vehicles industry in some respects has been a positive benefit?
Dr Watson: That was one of the
goals that we were looking to achieve. It has been healthy. Clearly
there are opportunities for misunderstanding but those have been
relatively small. Overall we are very pleased with the quality
of subject matter expert they have brought to the piece.
Q187 Chairman: I think you said their
role in procurement has not been as strong.
Dr Watson: No. This is a scale
of programme which is influenced enormously by both an industrial
political environment and, indeed, by experience which they have
not got. We found them helpful but not incisive in helping us
to define the most appropriate way to buy the FRES capability.
Q188 Chairman: After the initial
assessment phase, what role will they have?
Dr Watson: We would see a continuing
role for the "Systems House". What we need to do is
to judge just how that fits with the other members of the Alliance
and to a degree we need the Alliance construct in place before
we can do that. Certainly they will help us in the evaluation
of bids and they will also be conducting further assessment work
on the later variants of FRES.
Q189 Chairman: The cost of FRES,
would you expect that to be around £14 billion?
Sir Peter Spencer: That is the
current rough estimate based on the sorts of numbers of vehicles
that are currently estimated by the Army to be what they need.
Q190 Chairman: Giving us that current
rough estimate, does that not give us a football to play with
in this place that if the cost goes up we then kick you around?
Sir Peter Spencer: No, because
we have not set the main gate decisions yet and you have asked
for an indication of the sort of scale of the programme.
Q191 Chairman: Why is there a difference
in principle between giving us the rough cost and giving us the
rough in-service date?
Sir Peter Spencer: Because that
rough cost is of no particular merit as the requirement will undoubtedly
change over time, whereas—
Chairman: But that is what you could
say about the in-service date, is it not?
Q192 Mr Hancock: That is what he
did say.
Dr Watson: Sorry, I would not
see that £14 billion as being significantly different from
early in the next decade, which is the sort of verbiage we are
prepared to talk about on ISD.
Q193 Chairman: So early in the next
decade pinpoints the genuine discrepancy between you and industry
because if Atkins is saying 2017 and you saying early in the next
decade there is obviously a difference.
Dr Watson: No, there is a wide
range of potential dates at which we might deliver a capability.
The key issue is which capability we stretch for and how we might
therefore seek to develop it. To take Mr Hancock's point, we might
take a vehicle off-the-shelf, for example, and put it forward
in its native mode, as it were. That would be a capability which
I do not think would be acceptable to the customer but it might
offer us the fastest possible route. We might, however, decide
that the best thing to do in terms of the development programme
is to reach for a much higher capability and we would then have
a much longer timescale. We need to understand the truth of the
technical solutions that are being postulated by industry, that
is partly by measurement, partly by examination of their documentation,
as I have said, and we then need to decide what it is that is
most appropriate to meet the initial capability. That will give
us a programme and that will give us a cost and we can then go
to the main gate decision and we can then confirm figures.
Q194 Chairman: In comparison with
that uncertainty you do have the idea that you have got 14 billion
to spend on this.
Sir Peter Spencer: No, we have
not. That is not a budget, that is a broad-brush order of magnitude
which sets the parameters against which we think is the scale
of the programme. That assumes that all three phases go through
over quite a prolonged period of time and it assumes a whole lot
of things which if we look back in the past could well change.
In terms of what the Ministry of Defence is held accountable to
in terms of the measurement of performance, that is the specific
parameters we set for specific projects at the main gate. As we
said earlier, this will be a phased programme so that very rough
figure is based on assumptions about the scale of the three different
families of vehicles. It also makes assumptions about the scale
of technology upgrade over life that you might imagine and then
we fill into that the whole-life costs of ownership in addition.
Those are the sort of broad parameters that we need to take into
account just in terms of how we scale the long-term programme
over three decades. It helps to inform us to the amount of effort
and care we need to put into the assessment phase.
Q195 Chairman: I understand that.
You seem though to be prepared within that field of broad assumptions
to say, "On those broad assumptions roughly the sort of cost
we are looking at is about £14 billion", but you do
not seem prepared to say that the soldiers need these vehicles
within this broad assumptions timetable.
Sir Peter Spencer: I am very clear
that soldiers need these vehicles as soon as we can produce them
but we have to produce something that is going to be acceptable
to the Army and we will be in a much better position to know that
at the end of 2007 when we have done the work which we have set
out.
Q196 Chairman: So if we asked you
these questions at the end of 2007 do you think we would get a
more precise answer?
Sir Peter Spencer: You will get
a more precise answer when the main gate submission takes place.
Mr Hancock: Is it possible to ask whether
there is a codebook available that we can have that allows us
to work out what these answers really do mean.
Chairman: You do not need to answer that
question.
Q197 Mr Hancock: I am afraid that
some of them really are contradictory and difficult to fathom.
It must be some sort of code that you are speaking in.
Sir Peter Spencer: I do not see
that they are contradictory at all. When the main gate capital
investment decision is made we will set out the parameters by
which we will be judged.
Q198 Mr Jones: This is perhaps not
worth it, I will not get an answer, but can you not see the concern
that the Committee has got. You cannot tell us an in-service date,
you cannot tell us what these vehicles actually will be and now
you are telling me, which must strike absolute horror in the Treasury,
that this figure of £14 billion is not an actual £14
billion but a possible £14 billion. It could be double that,
could it not?
Sir Peter Spencer: No, I think
it is highly unlikely it would be double that.
Q199 Mr Jones: How can you say that
if you do not know what you are going to produce?
Sir Peter Spencer: Because if
it were double you would be making an assumption about an extremely
large increase in the size of the Army and at the moment we can
only go on the basis of the defence planning assumptions we are
given.
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