House of COMMONS










Tuesday 12 December 2006



Evidence heard in Public Questions 1 - 202





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Oral Evidence

Taken before the Defence Committee

on Tuesday 12 December 2006

Members present

Mr James Arbuthnot, in the Chair

Mr David Crausby

Linda Gilroy

Mr Mike Hancock

Mr Adam Holloway

Mr Bernard Jenkin

Mr Kevan Jones

Willie Rennie

John Smith


Memorandum submitted by Ministry of Defence


Examination of Witnesses


Witnesses: Sir Peter Spencer KCB, Chief of Defence Procurement (CDP), Dr Iain Watson, Operations Director of Information Superiority, and Lieutenant General Andrew Figgures CBE, Deputy Chief of Staff (Equipment Capability), Ministry of Defence, gave evidence.

Q1 Chairman: Good morning and welcome to this evidence session on FRES. Sir Peter, I wonder if you would like to introduce your team for the record.

Sir Peter Spencer: General Figgures, whom you all know, represents the sponsor for the requirement as DCS (EC), and Dr Iain Watson is the Operations Director in the DPA who has the FRES team in his cluster of projects.

Q2 Chairman: And DCS (EC) means Deputy Chief of Staff (Equipment Capability).

Sir Peter Spencer: Correct.

Q3 Chairman: And can you break down exactly how your roles relate to the FRES programme please? Would you like to each explain your own role in relation to the FRES programme?

Lieutenant General Figgures: I am a sponsor, in our parlance; so what does that mean? It means I am responsible for establishing the requirement in the context of our defence capability and balancing the resource that I put to that requirement against the resources required for other requirements across the defence capability. So I have two things to do: identify the requirement and ensure that we have optimised it; and then ensure that I put enough resource, enough money to it to ensure that we deliver it when it is possible to deliver it.

Q4 Chairman: And, Sir Peter, what is your role exactly in relation to FRES in comparison with General Figgures?

Sir Peter Spencer: In comparison with General Figgures I provide the resources in the DPA to deliver against that requirement and I take the money which he gives to me and we then deploy that on the various contracts. I delegate that responsibility to the IPT leader who works for Dr Watson, who is Operations Director, and he oversees the delivery of that work. As Chief of Defence Procurement I play a major role in agreeing the procurement strategy. I am a member of the Investment Approvals Board so I am part of a team of five who consider the proposals which come from the project sponsor and the team leader.

Q5 Chairman: And Dr Watson, what is your role in this?

Dr Watson: As Sir Peter has said, the IPT is within my cluster of IPTs. I act as the line manager. Principally my role is to mentor and ensure that the team is undertaking its work in accordance with best practice, to carry out periodic review and assurance to make sure that we are actually achieving our goals as we set out.

Q6 Chairman: What is DSTL's role?

Dr Watson: DSTL is the Defence Science and Technology Laboratory. They are a support to the technical investigations that we undertake in delivering any programme. In the context of FRES, their principal areas are in armoured vehicle engineering, in associated systems, and in the operational analysis to support the requirement. So they are advisers to the ITP.

Q7 Chairman: How many people in the DPA are working on this project?

Sir Peter Spencer: 42 today; that is 29 civilians, 13 Army and that team will build up as we go into next year.

Q8 Mr Hancock: To what level will it build up?

Sir Peter Spencer: At the moment we are looking at an uplift of 14 posts but that is only the DPA component of the team. If you add the DSTL and the systems house and the various embedded members from the military community and from industry, then the team itself is 125 as an integrated team with industry.

Q9 Mr Hancock: The ones you are recruiting to come into post next year; what is their purpose? What would they be doing specifically that is not being done now?

Sir Peter Spencer: What they will be doing is, as you will have seen with the acquisition strategy - and we are going to be launching four competitions - they will be preparing the documentation which initiates those competitions; they will be involved in the assessment of the tenders that come back; and they will be involved in putting together the detailed sets of proposals which the IAB will subsequently take as the next stage of this programme.

Q10 Mr Hancock: So how long will that take and should not some of these posts have been filled before now? That work seems to me to be the sort of work that should have been done by now.

Sir Peter Spencer: No, I do not think so.

Q11 Mr Hancock: You do not think so but I am just asking why it has not.

Sir Peter Spencer: Because we have needed to understand in considerable detail precisely what the requirements are going to be and what technologies are going to be matured, and to determine the right balance between meeting the long-term requirements as well as a relatively early introduction into service, and to get the right sort of incremental strategy in place. That has required us, if you recall from the brief we sent to you, to understand the outcome of nine technology demonstrator programmes.

Q12 Chairman: We will come on to what the requirement is going to be in a few minutes. General Figgures, would you describe yourself as in a sense the "customer" for this vehicle?

Lieutenant General Figgures: Yes I would.

Q13 Chairman: And how do you ensure that your requirements are going to be met? In what forum do you argue the case for the customer?

Lieutenant General Figgures: Well, first of all there is the establishment of the requirement which is a balance of demand and supply. There is no point in asking for something that cannot be met from our potential suppliers. The first part of that is establishing the requirement with respect to the Army, and it is not just the Army Board but we establish the requirement through the director of the arms and services, through the front-line command, and so there is an element of balancing what is required in terms of a perfect solution and what is required in terms of a robust solution that meets all those individual users. That having been done we then discuss with the DPA, in particular the integrated project team leader, and the obs director, and finally at my level with the Chief of Defence Procurement, just how we are going to balance that requirement against the ability to meet it and the time-frame in which we are going to meet it. How do we test that we have got it when we eventually get it? We build up an integrated test evaluation assessment plan which addresses all the lines of development such that when it does come into service we can test it to see that we have got what we intended to get or we are aware of any shortfalls which we can develop over time through a through life capability management plan.

Q14 Chairman: Do you know what you expect to get?

Lieutenant General Figgures: Do I know in terms of the acceptance criteria?

Q15 Chairman: I mean in terms of the vehicle, do you know what you expect to get?

Lieutenant General Figgures: I know what I expect to get in terms of the characteristics of that vehicle.

Q16 Chairman: Can you explain that to us?

Lieutenant General Figgures: The characteristics that we are looking for are survivability, capacity, tactical and operational mobility, the ability to generate power and the ability to deliver information to the crew, and the overarching piece is the ability for growth through life because what is required today will change over time, and we have seen that in our recent experience.

Q17 Mr Jones: General, you are the advocate for the customer I think you described to the Chairman. With no disrespect to yourself because you are a General of long standing (although possibly coming up for retirement soon); where does the front-line squaddie, the people who actually use these vehicles fit into this process?

Lieutenant General Figgures: He fits in at several stages. He fits into the requirement catcher.

Q18 Mr Jones: And how do you do that?

Lieutenant General Figgures: By the requirements being drawn together under the Director of Equipment Capability, who does that through the arms and services director, who has at his disposal subject matter experts ---

Q19 Mr Jones: That is the point. I am asking about the people who use the equipment?

Lieutenant General Figgures: Yes we do. We employ soldiers in the requirement catcher, we employ officers and soldiers in the integrated project team, and we employ soldiers in the armoured trials and development unit, soldiers who have significant operational experience, and we employ soldiers, both individuals and informed units, when it comes to accepting it into service.

Q20 Mr Jones: So are you saying that throughout this process you have got somebody of the lowest rank who uses this equipment as part of that process?

Lieutenant General Figgures: Throughout this process we have people at all levels who have a valid view on the requirement.

Q21 Mr Jones: That is not my question.

Lieutenant General Figgures: Well, I can answer your question: we have drivers, we have gunners, we have infantrymen, we have radio operators, we have command post operators; everybody is engaged in terms of determining the requirement.

Q22 Mr Jones: And their input is on an equal par with yourselves and other senior officers or are they dismissed if it is not something that you agree with, for example?

Lieutenant General Figgures: I would not dismiss an opinion of a private soldier with respect to his area of competence.

Q23 Mr Hancock: General, I was very intrigued by your opening answer where you said that they could not ask for something that could not be delivered. I am interested to know who makes that judgment and how do the people who are doing the asking know what can be delivered if somebody is not telling them what is available or what the time-frame you are working in is? To me it seemed a bit of a strange response to give.

Lieutenant General Figgures: Well, in the first instance I would turn to the Defence Procurement Agency and I would turn to the scientific community. They in turn would look to industry. I think then this becomes Sir Peter's part of the ship and he would be best to answer that. In terms of the scientific community, I run a research programme which enables me to prove in principle technology which I can then put forward as a proposition to the DPA to mature such that it can be incorporated into the supply base.

Q24 Mr Hancock: You went on to explain what your requirement was because you explained what would be expected of this vehicle. There must be a factor where that vehicle can either be supplied or it cannot. I want to know when does the decision have to be made, by whom, and what is taken into account? Is it simply at the end of the day that cost is the prevailing factor, that at the end of the day you cannot have it because it costs too much to do what you want it to do? It cannot simply be that it is not available or cannot be done because if the price is right people will do it, will they not? Defence procurement has a track record of proving that point.

Sir Peter Spencer: This is what the assessment phase is there to do. It is a fact that today the requirement that is asked for could not be bought off-the-shelf from anywhere in the world. So what we are looking at is the balance between ---

Q25 Mr Hancock: Sir Peter, my question is not what can be bought off-the-shelf. If the requirement is known, and this is what our Armed Forces need, and it cannot be bought off-the-shelf, is price then a key factor in delivering what the Armed Forces want; yes or no?

Sir Peter Spencer: Price is always a factor. It is never the only factor because, as you well know, we balance performance, time, cost and risk. My point is that if you cannot buy something immediately off-the-shelf you then have to look at the degree of development which is required against a sensible timescale. This is the whole purpose of what we have been doing during the assessment phase.

Q26 Chairman: You were asked if price was a key factor and you said it was a factor but not the only factor. So from the sound of things you are saying yes, it is a key factor.

Sir Peter Spencer: There are four key factors - performance, time, cost and risk. Neither dominates.

Q27 Chairman: So cost is one of the key factors?

Sir Peter Spencer: As with any other procurement activity.

Q28 John Smith: The General referred to the capability requirement. To what extent has that requirement changed over the last eight years, five years, or whatever it is, and in what way?

Lieutenant General Figgures: I think one must consider the way that we carry out our procurement. We have a concept phase and then we have an assessment phase. We are now in the assessment phase. We started our concept phase in 2000-2001 and we got to the start of the assessment phase in 2003. We did a lot of work in the concept phase on whether this was going to be one single family of vehicles, whether it was going to be a single family of sub-systems, whether they were all going to have the same level of survivability, the same capacity and so on and so forth. I will not say we came to firm conclusions but we narrowed it down such that there were a number of questions that could be sensibly answered in the assessment phase. We did not have a firm requirement and at the start of the assessment phase we had some, you might say, headline requirements which as a consequence of the assessment phase we can firm up such that when we actually decide to make the investment in this capability we can judge the outcome against it. I think one has to understand that this is an area during assessment when we are looking at the risks, we are looking at how much it would cost to buy at those risks to give the required performance, and we have to make some trades in it. Just to go to the ultimate absurdity, if we wish to provide protection against every known anti-armoured weapon we would end up (and it is absurd) with something that might weigh 160-odd tonnes. That is of no military use so we are going to have to make some judgments about survivability, capacity and so on, against what is possible and what has military utility in the hands of the soldiers. They would not thank us for that.

Q29 Mr Jones: I think I am a bit slow. If you do not know what you actually want, how can you then say you cannot buy it off-the-shelf?

Lieutenant General Figgures: We want survivability ---

Q30 Mr Jones: You have just said you do not know what FRES is. I get this all the time. I had it off the previous Secretary of State. If you do not know what it is how can you then tell the Committee ---

Lieutenant General Figgures: We do know what it is.

Sir Peter Spencer: We do know what it is. It is the medium weight component of the future armoured structure for the LS (?) force. We have a very clear understanding of the sort of thing we want. The requirement has changed over the last three years in terms of the level of protection which is required because of the experience of current operations. When you took evidence from me two or three years ago with General Fulton, General Fulton explained that he felt that the sort of weight we were going for was 17 tonnes. At that stage the aspiration was for a single family of vehicles. As we have matured our understanding of the technology which will be required, we have discovered we could not deliver FRES as a single family of vehicles. It will be three families of vehicles with a high degree of commonalty at the sub-system level to take advantage of economies of scale. We have also recognised that we will have to go for a weight which is very much greater - between 27 and 30 tonnes - for the utility vehicle. That is a direct consequence of the requirement being iterated in the light of operational experience, which is a perfectly respectable and legitimate activity in the assessment phase to make sure that we understand what is needed and we do not commit to procurement too early against the wrong requirement.

Q31 Mr Jones: While you are employing all your civil servants at Abbey Wood people are actually dying in action.

Sir Peter Spencer: 30 per cent of the IPT are military, as I said just now. It is not just civil servants.

Q32 Mr Jones: Do not just say that. If you have not clearly defined what it is, how can you tell us that you cannot buy this off-the-shelf or there is not some technology out there that could be ungraded?

Sir Peter Spencer: Because we do have quite explicit statements of what the customer wants to have by way of levels of protection as the capability is introduced into service, and we have clear statements of the amount of growth over time that they wish to see in those levels of protection. What I am telling you is that you could not go and buy something off-the-shelf today which would meet that. We have tested it. We did the research, we held a fleet review with the Army, with representatives of all parts of the Army who had an expert view on this, and presented to them what the products available today are. On the utility variant the Army unanimously said that it did not want to go for one of those products. It wanted us to go for something which could be developed to give greater capability, which is what the whole point of the assessment phase has turned into now.

Q33 Mr Holloway: That is the front end but at the back end in 15 years' time you have spent huge amounts of money tailoring a completely new thing and then the threat has evolved, so it is a bit like going to a tailor and ordering a suit ten years ahead with a brand new material and new styling when every few years you could buy it off-the-peg relevant to requirements.

Sir Peter Spencer: Which is why we explained in the note that we gave to you that this is an incremental procurement process, so that we go for the 80 per cent solution on day one with the ability to tailor it through time. In terms of the amount of money which has been invested previously, this Committee has actually pressed the case as to where do we stand in terms of under-spending in the assessment phase and has said there is a benchmark of 15 per cent; where do you stand on that? We are looking at an initial acquisition bill of well over 10 billion so you would expect us to spend a lot of intellectual effort and a lot of money researching so that we understand the technology and we understand the requirement, and what we are putting together is an incremental approach which will manage those risks.

Q34 Chairman: Sir Peter, one of the requirements to start with was that these vehicles should be transportable in the C-130J. Is that right?

Sir Peter Spencer: One requirement was that they should be air-transportable and an aspiration was to be transportable in a C-130J. There is no nation in the world today that has a plan for being able to produce a vehicle that light which has the degree to be able to be transported in a C-130J and to be able to have the protective mobility when it is deployed and goes on operations.

Q35 Chairman: What about in the A400M?

Sir Peter Spencer: We are still planning at the moment to be able to make the utility component airportable.

Q36 Chairman: In the A400M?

Sir Peter Spencer: In the A400M.

Q37 Chairman: How would that be affected by any delay in the A400M programme?

Sir Peter Spencer: It would self-evidently be affected by the fact that we would not be able to transport them until the A400M comes into service, but we would have C-17s to be able to transport them pro tem.

Q38 Willie Rennie: You have talked about having the flexibility to have incremental changes as time goes on as the requirement changes. I presume that is subtle changes in the requirement. What happens if you face a substantial change, as you have already recognised that you have had in the last few years?

Sir Peter Spencer: This is the whole point. We are aiming to be able to absorb the consequences of quite major changes in requirement because our history has told us that over a period of 30-odd years we will have major changes in operational environment, so we will be looking for something which has the physical and functional margins to be able to adapt over time. One of the major drivers will be to be able to update the airtronics packages and the sensor packages, which is why for economic reasons we are looking for a vendor-independent, open system of architecture so we design for that flexibility from the outset and we do not become captive to a single supplier.

Q39 Willie Rennie: Why was that not recognised at the very start of the process? Why has it taken you this long to recognise that?

Sir Peter Spencer: It was recognised that we needed to improve the logistic support and we needed to improve the logistic footprint, and this is just the articulation of the detail of one of the ways in which that will be achieved.

Q40 Willie Rennie: You said that you had a substantial change in circumstances because of your experience in Afghanistan, et cetera. Why was that not recognised before, because these conflicts are not new, these conflicts have been going on for years?

Sir Peter Spencer: Because we are in the assessment phase and the whole premise of the assessment phase is to make sure that we do understand what the threat is likely to be and we do understand the sorts of operations that we are likely to be conducting in the future. The strategic circumstances have changed in defence. When this was first conceived in 2001, it was conceived largely to be a capability which would be used in conventional, high-intensity operations. What we have seen over the last few years is a much greater use of this sort of capability in peace-keeping and peace enforcement operations. It puts you into a totally different position vis--vis your ability to defend against a threat, and we have uncovered a whole lot of much more difficult threats in the last few years than had previously been anticipated. Fortunately, we have not committed to the main gate investment decision otherwise we would be in a mess, would we not.

Q41 Willie Rennie: Who else runs a process like this in the world? Why has it taken eight years to go through that process?

Sir Peter Spencer: If I can just put this into context. To correct the General on a point he made, we did not start the assessment phase formally until 2004, so we have been in the assessment phase for two and a half years, and a two and a half year assessment phase for more than 10 billion initial acquisition programme is quite a short space of time and that compares with anybody else doing this sort of business if they are starting to tackle this sort of degree of challenge in their capability. We have benchmarked how long it normally takes to bring a new armoured fighting vehicle into service and the timescales that we are driving towards compare very favourably.

Q42 Mr Hancock: General, you were asked a question and you were just about to answer when Sir Peter eagerly jumped in and gave us a definition of what the requirement was. I was rather surprised that you did not tell us as you were the person who tailored the Army's requirement and you did not seem to know what the requirement was and you seemed to be unable to answer the question. I want you to clarify just where you are with your view of what the requirement was.

Lieutenant General Figgures: I am reassured that my supplier knows the requirement otherwise I would be lost.

Q43 Mr Hancock: I am not reassured as to why you did not answer the question.

Lieutenant General Figgures: I am in danger of repeating what he said but FRES is required as a replacement armoured vehicle in the armoured brigades and to equip the medium weight brigades, now known as the three mechanised brigades. It is required to enable the armoured brigades to fight conventional wars, rather as we saw in Telic 1, and it is required to enable the mechanised brigades to both support the armoured brigades with what we in the Army would say a manoeuvre support brigade, and also to be deployed in peace-keeping and peace enforcement operations. So there is a balance of capability between those two and the tactics, techniques and procedures which are used in those instances are subtly different because of the rules of engagement and so on and so forth.

Q44 Mr Hancock: We can be absolutely sure that when you retire you will not write and say that the DLO did not produce the vehicle that you required? You are in common agreement now that the product they are seeking to give you is exactly what you want?

Lieutenant General Figgures: We are in common agreement.

Q45 Mr Jones: Sir Peter, you said that it is remarkable that this assessment phase has taken two and a half years and how far you have got. Can I just go over the history of this programme. There was a non-competitive contract let to Alvis Vickers to lead a FRES assessment phase with an in-service date of 2009. Can I ask what that cost and why it was ditched?

Sir Peter Spencer: That predates my involvement. Put it this way: when I arrived in 2003 this Committee asked me questions about FRES; FRES had been the subject of an initial gate submission.

Q46 Mr Jones: You actually let a contract to Alvis Vickers.

Sir Peter Spencer: I will go back and research it for you. What I am explaining to you is from personal knowledge. The submission for the initial gate was then resubmitted to the IAB towards the end of 2003. The approval was not given until 2004, so we did not start the assessment phase until spring of 2004. I have no recollection of an assessment phase contract being given to Alvis Vickers but I will certainly go away and look up the detail and if I am wrong I will send you a note.

Q47 Mr Jones: You are wrong because it did take place.

Sir Peter Spencer: In which year?

Q48 Mr Jones: 2002.

Sir Peter Spencer: I am sorry, but this was before the initial gate so it was not an assessment phase contract full stop. It may have been a pre initial gate contract. There may well have been some concept phase work.

Q49 Mr Jones: So when you came in it was year zero on FRES, was it?

Sir Peter Spencer: In terms of the ---

Q50 Mr Jones: Come on. Was it year zero? When you came to your desk ---

Sir Peter Spencer: --- Year zero on FRES ---

Q51 Mr Jones: --- was it a blank sleet of paper on FRES? Is that what you are saying? No work had been done before then?

Sir Peter Spencer: No, I am not saying that. I am saying there is work that takes place before an initial gate which is done usually by the future business group and it looks at applied research, concept work and technology demonstration.

Q52 Mr Jones: Can I say, Sir Peter, I find it absolutely remarkable that you can come here today in charge of this programme and say that you did not know about a non-competitive contract let to Alvis Vickers. I know about it; industry knows well about it.

Sir Peter Spencer: You called it an assessment phase contract and I challenged the fact it was an assessment phase contract.

Q53 Mr Jones: That is changing it. Are you aware of any non-competitive work given to Alvis Vickers in 2002?

Sir Peter Spencer: I am aware there was non-competitive work done before the initial gate.

Q54 Mr Jones: What was that?

Sir Peter Spencer: It was simply pre initial gate phase work.

Q55 Mr Jones: What was involved in that?

Sir Peter Spencer: To set out what the options would be.

Q56 Mr Jones: A minute ago you told us you did not know about it. Now you are trying to describe what went on.

Sir Peter Spencer: I am sorry, I do not mean to be pedantic but you asked me about an assessment phase contract; it was not an assessment phase contract.

Q57 Mr Hancock: What was it then?

Sir Peter Spencer: For the third time, it was a pre initial gate concept phase contract.

Q58 Mr Hancock: What did you get out of that?

Sir Peter Spencer: You get a broad understanding as to the sort of capability, the sort of aspirations that the customer has, the sort of technology which needs to be matured in order to move towards a solution. It is a perfectly normal part of the cycle. It is unexceptional.

Q59 Mr Jones: Sir Peter, that is not true, I am sorry. If you are sitting here today and telling us that that was just part of this entire process, that is not the case. Alvis Vickers were livid when you severed that contract because they were under the impression that FRES was going to be a non-competitive process and that work was part of what they thought was the start of the actual process. I understand - and they can supply the information to us if you want - that something like 14 to 20 million was spent in that phase. What happened to that work? It is no good coming here trying to wriggle out of it and say to this Committee firstly that you did not know what was going and the next thing trying to explain what went on.

Sir Peter Spencer: Chairman, do I have to be on the receiving end of quite so much provocation? We could have quite a sensible and illuminating discussion.

Q60 Mr Jones: We could if you answered the questions but you do not.

Sir Peter Spencer: It is the way they are framed, I am afraid, which is extremely provocative.

Q61 Mr Jones: I am sorry, but you cannot come to this Committee if I ask you a question and say to me firstly it did not exist and then in the next breath, when you start trying to wriggle out of it, try to say to me that you were completely aware of this.

Sir Peter Spencer: I am not trying to wriggle out of anything.

Q62 Chairman: Sir Peter, you are drawing a distinction between ---

Sir Peter Spencer: I answered a question which was given to me which was an assessment phase contract and plainly because it predated initial gate it was not an assessment phase contract.

Q63 Chairman: What about the work that was done before you came into office? What about the TRACER programme, for example?

Sir Peter Spencer: The TRACER programme work has fed into this work. The Americans pulled out of TRACER and there was no international programme for us to be a part of, so that work was picked up and fed into the pre initial gate.

Q64 Chairman: In what respect was it fed into this programme?

Sir Peter Spencer: Because the project teams that were available at Abbey Wood would have drawn on the documents and the information which was learned from that work and used it as part of the foundation evidence as they built up their fund of knowledge as to what the requirement was and what sort of technologies were going to be needed to meet it.

Q65 Chairman: We seem to be in a programme of constantly shifting sands with the requirement being a series of ideas which are being traded off against each other with nothing actually descending into a vehicle at all. It seems to have been going on for many, many years.

Dr Watson: Can I ---

Q66 Chairman: Is this not the way it seems to you?

Sir Peter Spencer: No, it is not. What seems to me is that this is a perfectly typical piece of procurement where we do some pre initial gate work and we then decide what the parameters are going to be for the assessment phase. It is no use you shaking your head, Mr Jones. Perhaps if you came down to Abbey Wood we could explain to you again what the process is. This is a perfectly legitimate way of putting in place the understanding of the technology which is required to deliver a solution. Previously this Committee has been critical that we have not done enough work in establishing our understanding of the technology. This is precisely what we have been doing ---

Q67 Chairman: This Committee has also been critical of programmes being started like TRACER, MRAV and Boxer and being abandoned halfway through.

Sir Peter Spencer: Neither was abandoned halfway through. Both were abandoned because the end user decided, in the case of the Americans TRACER was not what they wanted and we were left stranded, and in the case of Boxer the British Army decided that against the evolving threat this was going in the wrong direction and was not the right vehicle for the medium weight force, so from a procurement point of view we responded to that and we exited from that programme and then we ramped up the work on FRES.

Q68 Mr Jones: How much money was actually expended on TRACER and MRAV?

Sir Peter Spencer: I will send you a note because I do not have it.

Chairman: Could you send us a note.

Q69 Mr Jones: Could we also have the figures of how much was spent with Alvis Vickers, I would appreciate that as well. You say, Sir Peter, this is the way we do things. Does it not seem remarkable to you that we are now eight years into this and we have not even got a final concept of what we want? How much longer do we have to wait? Can you really sit there - and I know you are retiring next year - and assure us that FRES will not go the same way as both TRACER and MRAV have gone?

Sir Peter Spencer: I cannot give you an assurance as to whether or not the operational circumstances will change in the next 12 months but it is highly unlikely, and it seems to me that we now know much more about the technical options available to us, and you will have seen from the acquisition strategy that we have launched we are now ready to accelerate the whole process. We have been putting into place in the two and a half years that the assessment phase has been running ---

Q70 Mr Jones: It is eight years.

Sir Peter Spencer: You can be in the concept phase for quite a long time before you go ahead and that is where we are. In the two and a half years of the assessment phase we have now established much greater clarity than we thought possible. We have got a project which draws upon the attributes that we discussed quite recently about what makes the project more agile - which is an incremental approach, which is to go for something which is either on-the-shelf or is being developed on-the-shelf so you reduce the amount of innovation, and we will very definitely be involving the front-line particularly in the "trials of truth". All of those areas are building on best practice. We have also spent a substantial amount of money on technology demonstrator programmes during the assessment phase, all of which you have commented on favourably in the past.

Q71 Mr Holloway: I just do not understand defence procurement generally. Why is it that consistently we have these projects that take a very, very long time? We design things absolutely from scratch to an unknown party 15 years hence and you end up with things like Typhoon and Bowman; late and inappropriate and not the best thing available in the end. Are we not doing the same thing here and compromising between manoeuvres stuff for armoured divisions and peace-keeping roles? Why not just buy the best available at the time, which is three years late rather than 15 years late, which is what you are in danger of being?

Sir Peter Spencer: This is not late because we have not set the parameters yet. We are producing a procurement strategy which will go faster and incrementally and manage the risk. It is not true to say that Typhoon and Bowman have no operational utility; quite the opposite.

Q72 Mr Hancock: I just want you to confirm that there is currently no vehicle off-the-shelf readily available that the British MoD can buy, from whatever source, which will fill 80 per cent of the capability of what is required because your vehicle will only deliver in the first phase 80 per cent of the capability. I want you to confirm that and I would like to know what the world will say when you give your answer, Sir Peter. You said that the Army rejected all of the off-the-shelf proposals and that nothing could deliver 80 per cent of the product. If that is true, why would you use these vehicles in the trials of truth?

Sir Peter Spencer: Because the vehicles we are using are those which are still in development and therefore have the opportunity to be further developed to put in place the stretch potential we need to deliver the long-term capability.

Q73 Mr Hancock: I would like you to answer the question about there not being a single vehicle available today that you could buy because while troops are being bombed and blown up in Afghanistan and Iraq they will be heartened by the fact that we are eight years down the road and we are still at a stage of refreshing the look at what the requirement is and they are still maybe ten years away from having a vehicle delivered to them. You are going to answer that question, are you not, that there is no single vehicle available anywhere in the world that we could buy that would give you 80 per cent of the potential that you require?

Sir Peter Spencer: And be able to then be delivered to meet the longer term requirement.

Mr Hancock: You are saying that as a categorical no; there is not a single vehicle anywhere available?

Q74 Chairman: So the issue is about upgrade-ability.

Sir Peter Spencer: The issue is about upgrade-ability because what the Army did not want to have is something which was of no use to them within a few years of having purchased it.

Q75 Mr Hancock: So can you explain to us what is the 20 per cent you cannot deliver in the first phase?

Sir Peter Spencer: The long-term protection against an increasingly demanding threat.

Q76 Mr Hancock: That would be the same with any vehicle, would it not? How can you say that these vehicles are not capable of the same sort of development?

Sir Peter Spencer: Because if you are thinking in terms of the ways in which you protect, a great deal of it comes down to armour and weight, the question of the strength of the chassis, the engine, the drive shaft, braking systems and all the fundamentals which establish the ability of that vehicle to grow in weight over time.

Q77 Chairman: General Figgures, do you have a view on that?

Lieutenant General Figgures: If I may amplify Sir Peter's remarks and really try to simplify it. If one looks at CVRT, the armoured reconnaissance vehicle with the 30 mm gun, that came into service at about seven tonnes; it is now 11 tonnes. We should be thankful to our predecessors that they introduced a vehicle which we have re-engined, we have put new sensors on, we have uparmoured and so on and so forth, which was capable of development and is capable of being of some operational use today. If you take Warrior, it came into service at 25 tonnes; it is now 32 tonnes, and we have improved the sensors on it, we have introduced thermal imagery on it, we have improved the armour and so on. So in the light of what we want to use these vehicles, for the Army is very firm that they need to have growth potential because we cannot foretell the future. So we are looking for something in the order of between ten and 15 per cent that we can increase the weight.

Q78 Mr Hancock: So none of the vehicles that you have so far looked at is capable of what you want to do? It is a very important question to soldiers on the front-line.

Sir Peter Spencer: As far as I am aware - and a tremendous amount of work is being done on this - if you say off-the-shelf, that means in service today, they are not capable of sustaining that type of weight increase and they do not have the necessary electronic architecture to enable us to upgrade them as we anticipate we will have to in what we see as a very different battlefield in the next 20 years.

Q79 Chairman: General Figgures, Sir Peter said that the Army changed its requirement in 2003 when it withdraw from the MRAV programme. Do you think that that is a correct assessment of what happened?

Sir Peter Spencer: Yes because I was present and party to that decision and I can tell you from my personal experience in Iraq that I would thoroughly underwrite that decision.

Q80 Chairman: Do you think that it would be better to have had in place now vehicles that have been developed over the last six/eight/ten years so that we would not be looking at a far off in-service date for this programme?

Lieutenant General Figgures: In part we have and I have spoken about Warrior. We have upgraded the 430 Series to produce the Mark III which we have uparmoured and called Bulldog. I have had recent experience of that in Iraq and the Green Jackets speak extremely highly of it, but it will only take us so far. We are introducing into service and have introduced into theatre the protected patrol vehicles and we are bringing into service a Mastiff which provides protection, but these are not armoured fighting vehicles, which is what we aspire to, so we are dealing with the most pressing part of the requirement, the need to save lives, but we are not providing the means to deliver offensive action. You cannot just save lives; you have got to be able to strike at the enemy to ensure that you can conduct and fulfil your operational purpose.

Q81 Mr Jones: My final question on this issue to you is you are telling us that we cannot buy a vehicle today which would deliver, in a reasonable time, an off-the-shelf requirement; a vehicle that could be in theatre within six months of purchase that would give our troops what they require today, not what they might require in ten years' time? I want you to give me a firm assurance that your evaluation of this is that there is no vehicle that we can buy today which will give them something that they require today within a year from now?

Lieutenant General Figgures: I may not have been clear and my apologies for that. We have measures in hand through uparmouring Warrior, uparmouring the 430 Series, bringing into service the protected patrol vehicle, and bringing into service the Mastiff to deal with the most pressing requirement today, which is protection.

Q82 Mr Hancock: And what is the latest that any one of those four would be in service?

Lieutenant General Figgures: They are already deployed now and they will be in service in 2007.

Q83 Mr Hancock: All four of them?

Lieutenant General Figgures: All of those, yes. However, none of them will enable us to fight as we wish to fight in the next 20 years.

Mr Hancock: Fine.

Chairman: Getting on to the in-service date, Kevin Jones.

Q84 Mr Jones: Originally in 2003 ministers told us that the in-service date was going to be 2009. In 2005 when we had General Jackson before us I managed to get him to admit it was going to be 2010. It is now between 2010 and 2012. Is that still realistically the in-service date?

Sir Peter Spencer: We will announce the in-service date when we make the main gate investment decision, as with any other project.

Q85 Mr Hancock: How far away is that decision?

Sir Peter Spencer: I am not prepared to say.

Mr Hancock: The main gate decision; how far away is that?

Q86 Mr Jones: Wait a minute, we have had ministers sat where you are - the previous Defence Minister, General Jackson - giving in-service dates for FRES. Are you saying now you cannot give us that date?

Sir Peter Spencer: Yes I am.

Q87 Mr Jones: So is the assessment Atkins come up with 2017-18 more realistic?

Sir Peter Spencer: We will announce the in-service date when we make our main gate investment decision, as we do on any other project.

Q88 Mr Jones: Can you comment on Atkins' submission that it is going to be 2017-18?

Sir Peter Spencer: I think it rather depends on what set of assumptions you are making about the acquisition strategy.

Q89 Mr Jones: No, I am not asking you that question. That is what they have put in a submission to us. They are the people you have employed to do this work. They are suggesting a date of 2017-18. Are you disagreeing with that?

Sir Peter Spencer: I am noting it.

Mr Hancock: It is not very helpful, is it?

Q90 Mr Jones: It is not very helpful.

Sir Peter Spencer: It is why we do assessment phase work and when we get to the main gate and we then understand the programme in detail and we understand the costings, then we will set the performance, time and cost parameters

Q91 Chairman: At what date, Sir Peter, did you decide to abandon the 2012 in-service date?

Sir Peter Spencer: I did not say we had.

Q92 Chairman: You are not committing to it, are you?

Sir Peter Spencer: We are not committing to anything until the main gate.

Q93 Chairman: At what date did you decide not to be committed to the 2012 in-service date?

Sir Peter Spencer: I have not decided not to be committed to 2012. I simply have not yet committed to a date.

Q94 Mr Jones: It is very serious what is being said here because we have had Secretaries of State before us giving in-service dates, we have had General Jackson giving in-service dates, and now we have got a policy where the head of the Procurement Agency is saying he cannot give an in-service date on this. I think this is a very serious thing that we need to take up with Ministers, to be honest.

Sir Peter Spencer: I agree with you because the Minister would wish you to take it up with him rather than me.

Mr Jones: You are just being evasive, which is an accepted part of it.

Q95 Chairman: When you saw the Atkins submission that it was likely to be 2017-18, what was your view about that submission, as opposed to just noting it? What is your view about it?

Sir Peter Spencer: My personal view is that it was pessimistic and that we ought to be able to do better, but how much better we can do will depend upon the further work we do in the next 12 months.

Q96 Mr Jones: So are you saying, Sir Peter, when we had Ministers before us who give us in-service dates for FRES, including General Jackson, that they could have picked any figure out of the air and what they told us was untrue?

Sir Peter Spencer: No, I did not say that.

Q97 Mr Jones: Well you are.

Sir Peter Spencer: No, I did not. Let us just put this into context. When I arrived in this job ministers had made a habit of announcing in-service dates before they finished the successful phases and then found themselves in political difficulty when they announced changes. So ministers were very clear in this defence line that in-service dates would not be announced until a main gate decision was taken. I am afraid you will have to take that up with the Minister directly because I am not empowered to give you a definite date.

Q98 Mr Jones: Well, let us go back to January 2005 when I asked General Jackson and he said 2010. He did not give us any of this nonsense that you are giving us about the fact that it was a policy change or anything like that. The Chairman's question was quite a good one. When did this idea change that somehow you are not going to be able to give an in-service date for FRES? We have had ministers sitting there giving us clear dates, we have had General Jackson giving us clear dates, and now you are saying you are not prepared to do that and that is obviously a major change in policy.

Sir Peter Spencer: It is.

Mr Jones: It has major implications in terms of whether this is absolutely feasible because to date, if you have gone through eight years and you say you cannot give an in-service date, frankly we would be very sceptical about even hitting the 2017 date.

Mr Hancock: Why is it a change in policy, Sir Peter? I am interested in the concept that there is a change in policy. A change in policy to tell this Committee the truth or to ----

Chairman: No, that is not an appropriate question.

Q99 Mr Hancock: It is an appropriate question, Chairman, because it was said to us, and hopefully the Minister and former Chief of the Army were well briefed, and when they gave us that answer presumably they believed it to be correct. Sir Peter says it is a change of policy and I think it is a legitimate question to ask when was that policy changed and what does this do for industry trying to plan for what you are trying to deal with? Where does industry stand in this?

Sir Peter Spencer: Industry gets very clear indications of the sort of date for planning purposes that we have in mind. What ministers have found is that if they utter those dates before they have enough information to set them with such confidence it simply becomes a question of debate in this place.

Q100 Mr Hancock: That is unfair, Sir Peter. I was in the room when General Jackson made that comment, he was gung-ho about making that, it was in the context of saying what was going to be delivered for the British Army because he required it for his troops. It was a specific, clear point that he put over and this Committee welcomed it even though we thought at that time it was still some way off. He was very convincing in putting that date to us. I am rather surprised that could slip considerably.

Sir Peter Spencer: It slipped for the reasons I have been explaining, which is that our understanding of the requirement has developed and, therefore, our understanding of the technical challenge has developed.

Q101 Chairman: Sir Peter, would you suggest that in-service dates have been used in the past by the Army to try to hold some sort of a lever over the Ministry of Defence in buying them equipment?

Sir Peter Spencer: No, I do not think so at all. What we have learned over the last four years is we have to be more sensible in the way in which we regard in-service dates for planning purposes because until we have matured our understanding of what the procurement is about we simply do not know enough about the time and cost parameters, so we declare those formally when we make the main gate decision. The surplus answers are identical to those surrounding the Aircraft Carrier and we have had that debate previously.

Q102 Chairman: We have. Would you say that the Aircraft Carrier debate that we had was the first occasion on which abandonment of in-service dates became public?

Sir Peter Spencer: I do not think so. If you look at the Major Project Review no main pre-gate projects now have an in-service date recorded.

Q103 Mr Hancock: Typhoon did.

Sir Peter Spencer: That goes back a long way. I am talking about the most recent Major Project Review. This is really a question for ministers, I am afraid.

Q104 Mr Jones: No, it is not, Chairman. Less than a year ago in January 2005, General Jackson sat there and gave us the in-service date. You have just told Mr Hancock that industry will be told when the in-service date is.

Sir Peter Spencer: No. They get an indication where for planning purposes we would like them to be aiming.

Q105 Mr Jones: Why can you not tell us?

Dr Watson: Sorry, can I intervene?

Q106 Mr Jones: Why can you not tell us?

Dr Watson: Can I intervene?

Mr Jones: No, wait a minute. Why can you not tell us? If you are prepared to tell industry what your estimate of the in-service date is, why are you not prepared to tell the House of Commons Defence Committee what your estimate is?

Q107 Chairman: Are you prepared to tell industry what your assessment of the in-service date is or what the planning assumptions are?

Sir Peter Spencer: We provide in confidence dates to aim for for industry to get their feel for how realistic that is and to see to what extent proposals can come forward.

Mr Jones: Why can we not have that?

Q108 Chairman: Are you prepared to provide those planning assumptions to us in confidence?

Sir Peter Spencer: I would be prepared to take the question back to ministers and ask if they are prepared to release that information to the Committee.

Q109 Mr Jones: I am sorry, Chairman, I think that is bang out of order. We have got a civil servant here telling us basically that he is not prepared to give elected Members of Parliament who scrutinise the Ministry of Defence information which he is quite happy to give to outside industry. I think it is disgraceful.

Sir Peter Spencer: It is a question of how you describe ----

Q110 Mr Jones: Absolutely disgraceful.

Sir Peter Spencer: No, it is not disgraceful.

Q111 Mr Jones: It is.

Sir Peter Spencer: It is a question of how you describe the date. There is a difference in the date for planning purposes and in terms of what could you do in this sort of region and a date which then gets announced publicly by the Department which is then used as a benchmark against which to get a whole lot of questions when, frankly, we are still at the stage where we are deciding.

Mr Jones: How are we supposed to scrutinise this?

Q112 Chairman: Sir Peter, can you say whether there is a discrepancy between the planning assumptions that you are using for the in-service of these vehicles and the planning assumptions that industry is putting forward to you?

Sir Peter Spencer: I can say that is what we are going to put to the test in the course of the next 12 months.

Q113 Chairman: Is there a discrepancy? Do you know whether there is one or not?

Sir Peter Spencer: I do not know that there can be a discrepancy until we have got the additional information we need over the next 12 months because we have not yet firmed up finally what the requirements are going to be and until we have made that decision setting a date becomes a rather academic exercise.

Q114 Chairman: So when you say you have not firmed up what the requirements are going to be, what you are really saying, it seems to me, is that you do not know what FRES is.

Sir Peter Spencer: No, I am not saying that at all. This is a question of degree of detail and in terms of the rate at which we can deliver against the long-term capabilities which the Army wants. It is a question of forming a judgment as to how much you can deliver the initial operational capability and then how you frame the incremental steps thereafter to deliver in the longer term.

Q115 Mr Hancock: We are obviously not thinking straight, are we, because 40 minutes ago you told us what the requirement was and told us that you will achieve 80 per cent? I am at a loss to understand how you cannot now tell us when you will expect to get the first phase.

Sir Peter Spencer: It rather depends which vehicle you choose in the trials of truth to see which bit of the requirement is going to be delivered first, and it may be different from another one.

Q116 Mr Hancock: The General told us what he requires first.

Sir Peter Spencer: He does it in the broad sense but when we do this in detail this breaks down into a very large number of different bits of specification, all of which need to be examined quite carefully and put together in an integrated solution.

Q117 Mr Hancock: But you would assume, would you not, and maybe I am completely missing the point here, that the first priority that the General outlined was the safety of the people in the vehicle and its ability to do that. I am at a loss now that you seem to be confusing that answer by saying that other things will be taken into consideration.

Sir Peter Spencer: Protection is not the only requirement parameter here and in the short-term, as is explained, there are other programmes which are dealing with that. This is the longer term capability and investment in something which will be in the inventory for 30-plus years.

Q118 Mr Hancock: I understood that when you answered, Sir Peter. What I am interested in is the first tranche of a vehicle that is 80 per cent fit for requirement. Why can you not tell us when you expect that to be in-service? I accept entirely your point, and I think you are justified in suggesting that you take further time to develop the capability, but why is it not possible if you know that you are going to get 80 per cent of this capability that you cannot give us that date? It is unbelievable that we cannot have that.

Sir Peter Spencer: I am sorry if you cannot believe it but we need to make sure that we test and understand the proposals from industry, that they hang together in a programme with a manageable amount of time and cost. That is the work of the next 12 months.

Q119 Mr Jones: I have two questions I want to ask you on the record because I want your answers. How long after the in-service date would the FRES utility vehicle become fully operational?

Sir Peter Spencer: The in-service date will be defined in such a way that there is a number of vehicles that are operational. There will be an initial operational capability date ----

Q120 Mr Hancock: Simultaneous?

Sir Peter Spencer: ---- which means that everything which is needed to operate those vehicles will be in place, including the logistic support.

Mr Jones: Once you have got the in-service date how long will it be after that that the vehicle will become fully operational?

Q121 Chairman: Would there be a gap between the in-service date and the operational availability of the vehicle?

Sir Peter Spencer: No. The in-service date will be defined to be operational capability.

Q122 Mr Jones: Fully?

Sir Peter Spencer: Fully. It depends what you mean by "fully". If you are going to have a programme which is incremental both in quantity and quality then the procurement activity will continue for many years as we roll out. We will not build more than 3,000 vehicles all in one year.

Q123 Mr Jones: There are a number of different vehicles. For the light and the heavy vehicles, what is the operational capability, is it going to be in different phases?

Sir Peter Spencer: We will roll out the utility vehicle first. The expectation is that the reconnaissance variants will come next and the heavy variants will come after that in a phased programme.

Q124 Mr Jones: What timescales are we talking about?

Sir Peter Spencer: That is work which is still being done in the assessment phase.

Q125 Mr Jones: Can I make one point to you, Sir Peter. Can I ask you a question: how should we, as parliamentarians, scrutinising your Department be able to see whether or not you have been successful in delivering this programme to the date which you have not yet come up with, which you are quite prepared to share with industry but not with us, if we are not going to get this information? Do you think it is very difficult for us to try to get the bottom of this if you are being as evasive as you are?

Sir Peter Spencer: I am not being evasive on anything other than the date, which I am not empowered to give. I am very happy to take that message back and I am very happy, through ministers, to provide you with the information that you are asking for if they agree. In terms of where we are going on the assessment phase then you have got ample information in terms of what we have given you to demonstrate the progress which has been made in the assessment phase against the key dates which were set out.

Q126 Mr Jones: The key date is the in-service date, surely.

Sir Peter Spencer: Not during the assessment phase. The assessment phase is the gradual understanding and agreement of what the capability requirement is. We have had Fleet Reviews of the Army which has been an incremental process. We have now informed you as to what the Acquisition Strategy is going to be and that there will be a great deal of activity over the next 12 months which will then lead up to the first decision which will be to go into the demonstration phase for the utility variant in timescales which in armoured fighting vehicles compare pretty favourably with anywhere else that you could find. Certainly they compare favourably with our history in this nation where the average time has been longer. I do not think the pre-initial gate phase counts towards the programme timescales because we are not committing to any dates at that stage, we are just looking at technology. We have concept phase work going on in all sorts of areas.

Q127 John Smith: I just wondered what the military consequences of a considerable slip to the in-service date of this vehicle are. The General tells us that there is a clear military requirement for this concept vehicle but if it slips into 2018/20, are there going to be any capability gaps and what are the general consequences?

Lieutenant General Figgures: Yes, there are going to be gaps and it then becomes my responsibility to manage them as best we can. I think I have given an illustration of where we dealt with the short-term operational requirement in terms of the protected patrol vehicle and Mastiff. We would have to run on the 430 series uparmoured and spend more money on that. It would mean that we would not realise our investment in our command and control and information systems network enabling capability that we would propose and that goes back to my point about we would not fight as we would wish to fight. I go back to the point that the Army, my organisation and the DPA are very closely engaged in this. It is a judgment in which the Army, the Chief of the General Staff and those responsible for delivering the capability of the Army are heavily involved in making that assessment, so a year, two years, are we capable of managing the gap, that we will get something which we can bring into service and which will enable our soldiers to execute their duty in the manner in which they have been trained to do and would wish to do, it is worthwhile.

Q128 Mr Holloway: General, would there be any gaps between yourself and the Admiral's department? Within your organisation is there a more immediate requirement, a greater hunger for this, than perhaps there is with the DPA?

Lieutenant General Figgures: No, because there are people like me in this uniform in the DPA.

Q129 Mr Holloway: Can you answer my question?

Sir Peter Spencer: We follow the requirements which are set by the military. We do not have a view on pace and priority, we resource our drive to the expectations of the military, so why you would imagine that there is a difference between us I find incomprehensible.

Q130 Mr Holloway: I will tell you why. Having served in the Army, often finding oneself with the wrong equipment, and speaking to soldiers now who find themselves with the wrong equipment, I think it is an entirely reasonable question.

Sir Peter Spencer: So much of the DPA has military people, all I can say is that people are doing their best at the time.

Lieutenant General Figgures: I do not think there is any lack of a sense of urgency. There have been many occasions when in order to provide what is required, urgent operational requirement, integrated projected teams, both in the DPA and the DLO, have worked seven days as many hours as they can, you just eat, drink and get a bit of sleep. There is no lack of will to get what we want. After all, we are all human, we cannot magic these things.

Q131 Chairman: You said there is no lack of a sense of urgency. The talk of the 2017 in-service date will make the soldiers who are serving currently feel that is exactly what is going on there, will it not?

Sir Peter Spencer: The whole purpose of next year will be to see to what extent we can improve on that and we expect to improve on it substantially, but I am not in a position to tell you by how much.

Q132 Chairman: To what extent, General, would you say that the Army will need these vehicles for the idea of 2017 or earlier, if it can be brought back?

Lieutenant General Figgures: I think I have explained - at the risk of repetition - we need them in order that we can fight as we would wish to fight. I believe it was on 19 January that the Army Board, the Chief of Defence Procurement and my predecessor spent the best part of a day scrubbing through all this so we all understood the requirements, the means of satisfying the requirements, the trades we might have to make. Of course, military men are impatient to get things done. Yes, we want it tomorrow but we do recognise we are dealing with a very complex area and it is the art of the possible. I am in no doubt that the Defence Procurement Agency is under no illusion about the need to bring it into service as quickly as is possible, but which satisfies our requirement. There is nothing worse than having a piece of equipment to which one has looked forward for some time, in which one has invested time and money, and it does not meet the threshold requirement.

Q133 Chairman: Is there not a risk that over the years we will need so many urgent operational requirements and things will be needed so much now that we will end up with a fleet of completely disparate vehicles that are there to solve the immediate problem and all the money will have been spent on Cougars and Mastiffs and we will not have the FRES at all because the best has been the enemy of the good.

Lieutenant General Figgures: I share your concern. The logistic support of the vehicles that we procure to fill gaps complicates the business of the Defence Logistics Organisation and the field army deployed in support of those vehicles, hence I think our sense of urgency and the sense of urgency of the DPA to bring this in as soon as is possible. There is no point in promising us something unless there is a high confidence of it being delivered and, therefore, I respect Sir Peter's reluctance to commit to something that he cannot sign up to in blood.

Q134 Mr Hancock: I do not have a problem with Sir Peter's point of view, I think it is a legitimate one and is based on his integrity, is it not, to not give us information that he does not believe at this stage he can accurately predict, and I think it is right for us to challenge ministers. But we were sent a memorandum by General Dynamics and they raised the issue of the Piranha vehicles and it states quite clearly here that it has an outstanding survivability, considerable growth potential, it is 26 tonnes, it is capable of doing nearly everything you have asked of it, and we have properly evaluated the suitability of this vehicle and we have turned it down as saying that it will not meet our requirements, just the 80 per cent of the requirements we have at the present time. Reading this memorandum, it seems to me that it is clear that this vehicle has everything that we require plus the potential for future development and I am at a loss to understand how you dismissed it from your thinking.

Sir Peter Spencer: They are in the business of wanting to sell us equipment.

Q135 Mr Hancock: Of course they are.

Sir Peter Spencer: They will be judged alongside everybody else. All I can tell you is in terms of their current products they do not have the available potential. They will have the opportunity to compete in the trials of truth and demonstrate that they can produce something which has potential.

Q136 Mr Hancock: No. You told us you had dismissed these vehicles and that is why you were going for this refined vehicle that we were going to design and build ourselves. We were going for a completely new vehicle. You told us you had already done this evaluation and this vehicle was ruled out. It would be interesting from this Committee's point of view if you would supply us with the evaluation that you did of this vehicle which allowed you to discard it.

Sir Peter Spencer: We can do that. That would be very sensible because it would clarify your own understanding.

Q137 Chairman: That would be extremely helpful.

Dr Watson: May I interject on Piranha. It is the case that in early January we went to the executive committee of the Army Board with the outcome of the Fleet Review. That Fleet Review covered a large number of different ways of trying to meet the FRES requirement. Included in those different ways were a selection of vehicles starting from military off-the-shelf, that is to say vehicles which are in operation today, vehicles which were in current development, that is to say they are not in operation but we are part of a committed programme, and new design and build vehicles. The conclusion of that review was the area we should be operating in is current development vehicles. These are vehicles which are in various stages of maturity which have the opportunity for enhancement to meet the specific needs of FRES but which require additional investment and, critically, proof of their current capability. Piranha 4 falls into that category. We expect to see General Dynamics as one of the bidders offering us a Piranha variant into these trials that we intend to conduct next year. That will provide us with material proof as to whether or not the vehicle is as capable as suggested and, incidentally, the design background to tell us whether we can stretch that vehicle and in what ways, and a proposition for that stretching. We intend to go down exactly this path but we do not know the outcome until we have measured the results. When we have measured the results we will then know what the level of investment needs to be and the timescale. We may then be able to reach an ISD.

Q138 Mr Hancock: Many of the countries who have bought these vehicles are in NATO, allies of the United Kingdom. The latest Piranha that is actually in-service could deliver most of the capability that we have been told the Army require.

Dr Watson: That is not so. The latest variant in-service is the Piranha 3 and it does not meet the protection, mobility or capacity needs that we require.

Q139 Mr Hancock: So their statement that the survivability rate is very high and it has growth potential is not correct?

Dr Watson: You can see this clearly in operations in Iraq where Stryker, which is a variant of Piranha and derived via a complex development route, is heavily enhanced in a very ad hoc kind of way in order to meet the current threat.

Q140 Mr Jenkin: Could I ask General Figgures what impact recent operational experience, particularly in Afghanistan and Iraq, has had on your perception of the requirement for FRES?

Lieutenant General Figgures: I think the principal impact has been in the area of survivability. I think it was suggested that we would have known about the threat of hollow charges and so on, and indeed we had done a considerable amount of work prior to this with respect to the threats in a war fighting scenario and, indeed, the hollow charge and the medium-range anti-tank guided weapon are the greatest threat. In a war fighting scenario one does have the option of great freedom of action and the ability to deliver lethal force, ie prophylactic fire from the cannon, so you gain a measure of survivability from being able to strike first so you can deal with likely missile posts or you can deal with likely fire positions from which you might be engaged by RPGs in a way that you cannot in peace enforcement or peace support operations. Furthermore, there is the complexity of improvised explosive devices. It is not to say that we have not had experience of those in Northern Ireland, however both the means by which these are initiated and also the nature of them have been very much more demanding than perhaps we had experienced in Northern Ireland, so we have had to take that into account.

Q141 Mr Jenkin: How does that actually impact on the FRES programme or the FRES requirement?

Lieutenant General Figgures: It means that we need to pay attention to hollow charge, explosively formed projectiles, etc.

Q142 Mr Jenkin: Is it this kind of alteration to the requirement that affects, for example, the in-service date and sets the whole programme back?

Lieutenant General Figgures: It is inevitably going to have an impact on when we can match that problem with a particular solution and bring it into service. We are back into Sir Peter's area of how quickly can industry provide that.

Q143 Mr Jenkin: Does that not mean that every time we go on another operation and face a different set of threats we are going to be disrupting this programme again? That seems to be what has been happening.

Lieutenant General Figgures: If one would look at Warrior - Warrior is a very good example - we have developed the protection survivability of Warrior and have plans to continue to do so. Warrior has growth potential. Why does it have growth potential? It has growth potential because we can load the chassis more heavily than we did, and similarly the CBRT. We need something that gives us freedom of action to develop it. If we have freedom of action both in terms of weight and these days in terms of electronic architecture it is easier to integrate counter-measures and all the rest into it and we do not have the problem of rewiring the thing and so on. It is foresight. Foresight costs money, it is technologically difficult, hence our previous discussion, but, my goodness, if you have a problem that you did not anticipate you can deal with it in a relatively short space of time.

Q144 Mr Jenkin: Now that we have acquired Vector and Mastiff in quite considerable numbers, does that not actually provide some of the capability that FRES is intended to provide and undermine the need for FRES altogether?

Lieutenant General Figgures: No. I go back to my point of we intend to use FRES throughout the spectrum of conflict, from war fighting down to peace support operations. Vector and Mastiff are really tailored for the type of operation. They are not armoured fighting vehicles, they are a means of conveying people from A to B such that we reduce the risk from these various threats that I have explained, so they would not do what we require from FRES. They would not be able to carry out offensive action in the way that we would anticipate.

Q145 Mr Jenkin: Can I ask a more financially oriented question and it may be more appropriate for Sir Peter. How have these urgent operational requirements been paid for in terms of these two vehicle purchases? Presumably that has to come out of somebody's forward budget. We published a report last week which contained the evidence: "Everything has to be paid for, it is all about money", and I am sure you have looked at the report. Where does the money come from for the forward support of these vehicles? Does it come out of the FRES budget?

Sir Peter Spencer: It has come out of the FRES budget. In terms of UOR action, a great deal of the finance comes additionally from the Treasury in support of the current operation and we make a case out for that.

Q146 Mr Jenkin: I understand that, but of course when the operation is over these vehicles will still be on the inventory and they will have to be paid for.

Sir Peter Spencer: We then have to manage that, correct.

Q147 Mr Jenkin: Presumably you do not have an urgent operational requirement approved until that forward liability has been taken care of which has to come out of an existing allocation, it does not come out of a new allocation. Where does the money come from for those sorts of things?

Sir Peter Spencer: The money comes from the budget in the Defence Logistics Organisation for managing in-service assets.

Q148 Mr Jenkin: So these in-service assets will have to be paid for instead of what other in-service assets, presumably future armoured fighting vehicles of whatever type that might include FRES?

Sir Peter Spencer: No. These are two different budgets. One is the equipment programme budget and one is the resource budget for running the current requirement.

Q149 Mr Jenkin: The reason why these requests arrive so rarely on ministers' desks for approval is because the whole question of financing the forward liability of these vehicles, helicopters or whatever we are trying to put in the front line, gets bogged down in this forward budgeting process. Surely this money which is now going to be spent supporting these vehicles will not be available to support other armoured vehicles, new armoured vehicles under FRES, or will you have you to throw them away, write them off?

Sir Peter Spencer: We will have to manage the consequences in the normal way.

Q150 Mr Jenkin: You are saying you can give me an assurance that this has had absolutely no impact on the financing of FRES whatsoever.

Sir Peter Spencer: These UORs have not impacted on the budget for FRES, full stop.

Q151 Mr Jenkin: They will have had an impact on other budgets somewhere else?

Sir Peter Spencer: Some UORs have limited life and others will come into the inventory and need to be managed and across the whole spectrum of defence within the Defence Logistics Organisation a judgment will be made on something which is of much lower priority which will have to give.

Q152 Mr Jenkin: Exactly, something else has had to give to fund that. Just returning to the whole question of the disruption that these urgent operational requirements have created and the in-service date, I understand that the Stryker programme in the United States took pretty well 24 months from assessment to in-service date. Are you not rather jealous of that kind of achievement? Although Stryker might not be the ideal vehicle, at least it is rough and ready and it is there. Does there not need to be a change of gear when we are effectively at war rather than at peace? Do we not need to move to a much more urgent system for developing capability so that it is there when we need it rather than just a theoretical capability at some very distant date?

Sir Peter Spencer: I think the equivalent will be what we did to Bulldog and the speed with which Vector and Mastiff were provided. As we said earlier, when we looked at something like Stryker it was not the solution that the Army wanted to meet the long-term need and the Americans themselves will not be able to support Stryker for very much longer because of the limit of its development potential.

Q153 Chairman: Arising out of questions that Bernard Jenkin was asking about urgent operational requirements, you say that future servicing costs will have to be managed. Is this one of the main reasons that money has to be found from within the Ministry of Defence budget thus shoving a whole large number of procurement projects to the right?

Sir Peter Spencer: As I said earlier, we do deal separately with the equipment programme and with the resource programme, the short-term programme and capital investment programme. There has been no impact on FRES as a result of this UOR activity.

Q154 Chairman: But the money has to be found from somewhere?

Sir Peter Spencer: Of course.

Q155 Chairman: So when there is an urgent operational requirement there is not a commitment from the Treasury to fund that new equipment through its life, it is just the initial phases that get committed to by the Treasury, is that right?

Sir Peter Spencer: Yes, and then the Department makes a decision as to whether or not it is going to take something into its inventory and because it is a high priority it will then reassess its priorities to spend elsewhere, in which case it will continue to look after it. There are certain cases where something is much less expensive and has a limited life and is no longer used.

Q156 Chairman: Then we will no doubt criticise you for allowing procurement projects or other logistic projects to take longer than they previously would have done because of this urgent operational requirement.

Sir Peter Spencer: Each year as the operational circumstances unfold the Ministry of Defence has to reassess its priorities to spend.

Q157 Chairman: I have one other issue arising out of something John Smith said. If, because the in-service date may turn out to be 2017, unless you can bring it back a little earlier, you will need you said, General Figgures, to upgrade the existing vehicles, the older the vehicles the more that will cost presumably.

Lieutenant General Figgures: Subject to the nature of the upgrade.

Q158 Chairman: Has the cost of upgrading the existing vehicles been taken into account in assessing the FRES programme?

Lieutenant General Figgures: Chairman, in respect of aggregating it to the total sum of the programme?

Q159 Chairman: In respect of getting better value out of getting equipment in early you save money on upgrading the existing vehicles, an increasing amount of money because these vehicles are so old. Has that been taken into account in the budgeting for FRES?

Lieutenant General Figgures: This is partly on my side of the house and partly on Sir Peter's. In terms of our planning we make judgments about that and then, having taken a view, we put it to the DPA and, again, it is the art of the possible.

Sir Peter Spencer: The point you raise is central to the new arrangements on accounting and the enabling acquisition change recommendations make the point that in future we should plan on through-life capabilities, so these questions are addressed more methodically than they have been in the past. At the moment the General's organisation is drawing up through-life capability plans for armoured fighting vehicles as a class group. When the DPA and the DLO merge to form Defence Equipment and Support, each of the project groupings will then be through-life. We will be announcing quite soon the name of a newly created two star post to be the group leader for all armoured fighting vehicles. He will begin in January on the FRES programme as part of the increase to put the right degree of focus and drive into beating the dates the industry have indicated to us might be almost achievable. There will be a challenge set over the next 12 months to see by how much we can bring forward a sensible date to roll out the initial capability. That will be done very much on the basis of whole life because it will be that individual inside the new organisation dealing with his equivalent in the General's organisation who will be looking at the totality of the budget and ensuring that when timings are being looked at we will look at the downside of what happens to the in-service capability if we delay getting to a new capability. It is because of those considerations that we are determined to drive this programme as hard as we can now that we have got a better understanding of some of the technological issues than we had previously.

Q160 Mr Jenkin: Can I ask you a very general question about what is known as the "procurement bow wave". Does that affect the speed at which these programmes go? If there is a pile-up of carriers, Joint Strike Fighter, Typhoon and so on, is there room in the budget to do FRES in a shorter timeframe if we wanted to or is it just that we do not have enough bunce and that is one of the reasons why the in-service date is slipping? May I just say I think you have been very honest with us about the in-service date and if you do not know what the in-service dates are you are quite right not to give us in-service dates.

Sir Peter Spencer: The bow wave has been a major problem in the past. Four years ago when we looked at why the McKinsey reforms had not been implemented consistently, one of the major shortcomings was over-programming which led to a tendency to try and under-call the costs of programmes which then ended in disaster once we had made the main capital investment decision. In the last planning round a great deal of that over-programming was taken out. We are just in the middle of the latest planning round and it will be very important that we get realistic costings on the table so that we do not go back into previous habits of deceiving ourselves about how much a programme will actually cost. This is something which will need to be acted on because the Department will have to determine how it is going to sequence its major investment decisions.

Q161 Chairman: In which year do you see the greatest problems arising in relation to this bow wave?

Sir Peter Spencer: I did not say that there was a bow wave at the moment because we are still putting the programme together. What I am saying is we need to make sure that we do not allow there to be a bow wave and we construct the programme in a different way.

Q162 Chairman: Can you not see in the early part of the next decade a large number of programmes suddenly coming on stream at the same time and suddenly requiring a lot of money?

Lieutenant General Figgures: Chairman, it is my business to manage that to ensure that I match the ability to supply with the ability to pay. To go back to Mr Jenkin's question, have we made an appropriate allocation in the plan, my proposal in this planning round is that we will have enough money to achieve what Sir Peter is capable of achieving, if that is not too Delphic.

Q163 Mr Holloway: What are the Americans doing in this area? How tied in are we with them?

Lieutenant General Figgures: In terms of understanding their future combat system we have very close links with them. In terms of understanding their requirement and understanding the means by which they have generated that requirement and the means by which they have traded and so on, as you might expect from allies we have had good visibility. In terms of the procurement side I will defer to Sir Peter on that. We have had good linkages in terms of co-operation with the United States.

Q164 Mr Holloway: Are we determined to create our own vehicle?

Lieutenant General Figgures: I think this goes back to the discussion we had previously.

Sir Peter Spencer: We are buying a capability which consists of three families of vehicles and 16 variants and, as you will know professionally, the Americans fight in a very different way, their doctrine is different, so we are responding to a requirement which is set by the British Army and there will be a lot of the technology which is potentially relevant, certainly it is vital that we remain interoperable, but there are no plans at the moment to do a co-operative programme based on FCS with the Americans.

Q165 Mr Holloway: Why not?

Sir Peter Spencer: Because we do not believe that it solves the requirement of the British Army.

Q166 Mr Holloway: The Bradley is not desperately different from the Warrior and the Challenger is not desperately different, essentially they do the same job. Why do we always have to create our own things from scratch?

Sir Peter Spencer: We do not always have to create our own things from scratch.

Q167 Mr Holloway: We are in this case.

Sir Peter Spencer: No, because we are looking at vehicles which are already in development elsewhere, so we are not creating something from scratch at all.

Q168 Mr Holloway: That does not answer my question though. If the Americans are developing something that in the end will be broadly similar to what we do, why have we got all this expense?

Sir Peter Spencer: It will not be broadly similar because the requirement is very much more ambitious than the American requirement and it is not something which the British Army has said that it wants to do. I respond to the requirement as it is set out for us. We will look at those areas which we have in common with the Americans, and it is quite possible that American technology will feed in and will be appropriate, but it is quite possible that technologies from other countries will feed in as well because armoured fighting vehicles are designed and made elsewhere in the world. Furthermore, we are not just looking at the vehicle as a vehicle, we are looking at its total capability, particularly communication, data, sensors, defence systems, and the ability to integrate. All of that NEC type integration into the order of battle for the rest of the assets in defence has to be optimised to be integrated with the UK but remain interoperable for coalition operations.

Q169 John Smith: Do you anticipate, therefore, any intellectual property rights issues? Will we want UK sovereignty in terms of the intellectual property rights for this product? Will there be any technology transfer issues? We have already heard that major American companies like General Dynamics could be a principal bidder. How are we going to avoid any JSF type issues?

Sir Peter Spencer: That is a very good point to raise. As you will have seen in the addendum to the memorandum which we sent in which describes the Defence Industrial Strategy, IPR is central to this and operational sovereignty is central to this, so there will be preconditions as to access and use of technology and IPR and if those conditions are not met then somebody who wanted to bid would be ineligible. The intention is to ensure that we secure the necessary IPR to deliver operational sovereignty through-life.

Q170 John Smith: You mentioned through-life management and support which fits in with the Defence Industrial Strategy. During this assessment phase, have you reached any conclusion on how that will be delivered by the winning company, a joint effort with the MoD?

Sir Peter Spencer: We certainly expect from the outset to define what our requirements are going to be over and above just delivering the vehicles and the other capability to the Armed Forces. Looking at the models which have developed in the Defence Logistics Organisation we would anticipate to be contracting for availability and capability over life and to make the economies that have already been scored in existing programmes. It is also going to be important that we design into the vehicles from the outset those things which will give us economies and logistic support to make sure that we do get high reliability, to make sure we do get the right sort of instrumentation, do the right sort of instrumented upkeep and maintenance and to go for open systems architecture for the electronics so that we can be vendor independent and have "plug-in" in play as we go through life to respond to changing circumstances.

Q171 John Smith: You mentioned in response to an earlier question about not being held captive to a single line supplier. Is that also being addressed in terms of through-life logistical support and maintenance support?

Sir Peter Spencer: That is certainly a major component. It is particularly important in terms of upgrades. We will want to partner through-life with an industrial entity which will provide us with support. There will always be in any partnership exit criteria if it does not turn out well.

Q172 John Smith: Export potential: is this something that is also being considered in the assessment phase which you are now going through?

Sir Peter Spencer: Yes, it is. As the Acquisition Strategy makes clear, the first priority is to meet the needs of the Army and the second is to maximise export potential. The export potential of this type of capability is judged by the head of defence export sales and by various companies as being very promising.

Q173 Chairman: Talking of the Acquisition Strategy, could you possibly make available to us the letter from the Minister for Defence Procurement to industry which outlines the strategy?

Sir Peter Spencer: I will obviously have to ask him to agree that, yes.

Chairman: If you could I would be grateful.

John Smith: On reflection, do you think FRES was the correct acronym - Future Rapid Effect System - in light of the evidence we have heard today about timetabling, in light of the vehicle changing from a 17 tonne highly mobile vehicle to a 30 tonne vehicle? I wonder whether there is a case for renaming this project.

Q174 Chairman: Do you wish to answer?

Sir Peter Spencer: I think the central part of the doctrine remains unchanged, which is that if you are dealing with heavy armoured it does take much longer to deploy into theatre of operations. The "Rapid" here applies to deployment, not to the acquisition phase, which I think is the point you are making; a nice touch of irony. The fact of the matter is we would be able to deploy into theatre quite rapidly some very capable vehicles. In the business of preventing something from getting worse in terms of fire fighting the opportunity to do that still has a very high value in military thinking, but clearly that would be the first phase potentially of something we would need to follow up. Even if you are deploying by sea, the logistic deployment of FRES vehicles will be very much less and easier to manage than the logistic footprint of Challenger 2, for example.

Q175 Mr Hancock: You were reluctant to give us the in-service date and I think at least half of the Committee is probably supportive of your reasons why, but can you give us the actual date when there was an agreement between you and your customer of what it was they actually wanted? That is the first question. I want to know the date when you agreed ----

Sir Peter Spencer: Can I clarify that I understand the question. What they wanted in terms of capability or what they wanted in ----

Q176 Mr Hancock: When there was agreement between both of you that you both understood exactly what you wanted and that you could deliver. It would be helpful if we could know that agreed date of when that process then started the clock ticking. My second question, if Dr Watson is trying to find that date for us, is there a general reluctance on the part of the Ministry of Defence and your agency to buy off-the-shelf solutions to significant problems as opposed to smaller issues which are readily acceptably coming off-the-shelf? Is there a pre-emption on your part that it is always better to develop rather than buy in?

Sir Peter Spencer: No, quite the reverse.

Q177 Mr Hancock: Is there evidence to support that approach?

Sir Peter Spencer: C-17 aircraft.

Q178 Mr Hancock: Nobody in the UK ----

Sir Peter Spencer: Tomahawk missiles, Chinook aircraft. We do buy substantial platforms from other nations and avoid incurring the non-occurring expenditure where we can. I respond to the requirement. If the requirement is stated in a way that an existing capability does not meet it we then have to make a judgment as to whether or not we do a programme nationally or enter into some co-operative arrangement with like-minded nations. There is no predisposition against it. In fact, from a narrow perspective of how we deliver procurement results we are much more likely to deliver on time and on cost with an off-the-shelf solution than we are with something which has a substantial amount of development in it.

Q179 Mr Hancock: Is part of the problem the length of time it takes for your customer to decide exactly what it is they want? Your predecessor told us that time and time again things were delayed because one or other of the Armed Forces continuously changed the parameters of the equipment they were seeking him to deliver for them. Is that part of the problem, that they are not clear enough?

Sir Peter Spencer: I have not detected that here. I think there has been a journey which we have gone on together over the last two and a half years where we discovered that the degree of protection needed was very much greater than originally anticipated and that challenged the fundamental concept of rapid deployment. In the case of the C-130, as was pointed out earlier, it meant that frankly it was something which was not achievable. Nonetheless, we have continued to test the extent to which this type of capability remains relevant, and all of the operational analysis demonstrates that it does, but it has taken us that time to define those parameters in greater clarity formed by ongoing operations in the Middle East.

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 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.

Q200 Mr Hancock: You might as well pick any figure out of thin air.

Sir Peter Spencer: No. Planning long-range is an iterative process. You have rather demonstrated the conundrum any department finds itself in: you press and press for an answer and when you get an answer you then start beating people around the head with it. Why would we want to commit to anything until we understand the problem? We do not yet understand the problem. The problem in terms of procurement will be a series of capital investment decisions which are taken in a better understanding of what it is we are going to do and of the timescales properly risk-adjusted so we can set the parameters we are going to meet.

Q201 Chairman: I think the worry we have is that there are so many variables flying around in this programme that the people who are suffering in the long run are the Armed Forces while these decisions and trade-offs are being made. I think that will continue to be a real concern until some of these variables can be nailed down. It would be helpful if you could help us in that process to nail down the variables.

Sir Peter Spencer: I can assure you that we are about to select the process next year. We have been in the assessment phase for two and a half years. The intention is to drive it very hard and not to accept at face value the date that you have been quoted by the 'Systems House'. A very challenging target will be set but we will not go public and commit to it until we better understand the reality of the situation and whether or not there are products out there that can genuinely be further developed to meet it. We will be in possession of that information in a year's time and then the lead-in to the main gate will give the opportunity for that to be announced.

Q202 Mr Jenkin: Having listened very carefully, the conclusion I have come to in my own mind is that there is a trade-off between having a very broad and perhaps rather idealised concept for some future programme, which like the hunting of the Snark, you can never really define because it does not exist and everybody is attaching their own ideas and aspirations to it, alongside what actually happens on the frontline which is you suddenly have to produce a vehicle now to deal with the protection of the Armed Forces. Does it not beg the question, given this started out as TRACER and has been going for a number of years, we are looking at an assessment and acquisition phase that stretches over nearly two decades and this has only got to be something that you can bolt other things on to? It seems that the process that we have got bogged down in is so complicated and so divorced from the relatively simple things that these vehicles are going to need to do, this may be the wrong way of going about it. It does lead to an enormous amount of frustration from frontline officers and soldiers who complain that the Defence Procurement Agency and the way we go about procuring things is just so divorced from reality it is never going to deliver what the soldiers actually want.

Sir Peter Spencer: It is fine to keep on using the Defence Procurement Agency as the whipping boy and, as I said to General Jackson, "If you know the shop that sells what you want, I will go and buy it tomorrow as long as you like the requirement like that". That did not happen. What we have seen over the last three years is an outbreak of reality. We are now getting more real about the art of the possible. We are narrowing that down rapidly and we will continue that acceleration through 2007. We have set out what the Acquisition Strategy is, why do you not judge us by our ability to deliver during the next 12-18 months.

Chairman: Gentlemen, thank you. We have kept you long enough. We have given you a fairly hard time, we are grateful for your answers. Thank you.