Examination of Witnesses (Questions 60-79)
GENERAL SIR
KEVIN O'DONOGHUE
KCB CBE, DAVID GOULD
CB AND LIEUTENANT
GENERAL DICK
APPLEGATE OBE
29 JANUARY 2008
Q60 Mr Jenkins: Therefore, things
are getting better?
General Sir Kevin O'Donoghue:
They are certainly better.
Q61 Mr Jenkins: Can you tell us what
the benefits are of through life capability management?
General Sir Kevin O'Donoghue:
Through life capability management is all about bringing together
all the lines of development: doctrine, manpower and training,
not just equipment and equipment support. If we go down the through
life capability management route properly the equipment capability
area—the main building—will pull together those various
strands and take account of all of them when making decisions
about capability. In the past we have bought things, supported
them when they have come into service, thought about the manpower
needed, the doctrine, and the infrastructure to house whatever
it is in a not very coherent way. There are some good examples
from the past, but by and large it has not been done very coherently.
Through life capability planning and management will bring all
of that together in a plan owned by DCDS(EC) and directors of
equipment capability and managed by the IPT.
Q62 Mr Jenkins: So, what is the benefit?
General Sir Kevin O'Donoghue:
The benefit is that we are not wasting money by buying something
that is too big for the garages or we do not have soldiers trained
for it, that is, buying something that comes into service next
year and we have not trained the soldiers to be ready to operate
it at the same time. It is a matter of coherence.
Mr Gould: An example is the patrol
vessel HMS Clyde which we have not bought from Vosper Thornycroft.
We are buying from them five years' worth of ship time. What Paul
Lester at VT says is that he believes the cost of building that
ship to make it reliable so he can meet the terms of the contract
is probably in the region of 5% higher than it would be to sell
ship time. One of the big benefits of Through Life Capability
Management and through life management plans for projects is the
ability to invest upfront in something that will be cheaper and
easier to maintain and subsequently to modify and improve throughout
its life. When you do not have a through life approach you do
not have a mechanism for doing that trade which says you should
invest early for long-term benefits. We also plan with our suppliers
how to provide support. Therefore, on the A400 aircraft which
I am sure we will return to even before the first one has been
built we are looking at what arrangement we shall put in place
to support and maintain that aircraft through its life rather
than doing it as an add-on later in the programme. In terms of
total equipment plan even for that there is an enormous benefit
to come. If we also look at training, doctrine, use and so forth
we shall also make sure that we get the benefit out of the equipment
in military terms more quickly than we can by doing all these
things sequentially which was what tended to happen.
Lieutenant General Applegate:
I think that from a user's perspective we cannot have confidence
that we will be able to grow incrementally if there is no plan
in place. Therefore, it would be difficult for me to say to the
front line user he should trust us because what he is getting
is only the first step and later on there will be improvements.
He may ask me to prove it or show him how we have prepared for
that. Do we have a technology road map which will identify where
it is possible to introduce that? Is the electronic architecture
capable of enabling that to be brought in? Do we have the necessary
skills? Is the relationship with the industrial sector right or
does the industrial sector even exist to do it? What do I have
to do in order to confirm the requirement and when I might want
it? What difficult choices might I have to make about whether
to invest in the upkeep of a particular system or its replacement?
I think that through life management planning is fundamental to
the development of improved trust between members of the defence
team rather than something which in the past was too adversarial.
Q63 Mr Jenkins: Therefore, something
like the acquisition of Apache helicopters some of which were
placed into a big hangar and somebody was paid £24 million
to wipe the dust off them and keep them maintained because we
had not trained the pilots could never happen again?
Lieutenant General Applegate:
I would hope the chances of it happening again are hugely reduced,
but I never say "never". Unfortunately, the world has
a tendency to surprise one.
General Sir Kevin O'Donoghue:
It should not happen by default. In future we shall know and make
decisions on what we want to do.
Q64 Mr Jenkins: This was a great
idea which came up in the defence review of 1998. Why has it taken
so long to get it imbedded in the MoD?
General Sir Kevin O'Donoghue:
I think the defence review in 1998 referred to through life equipment
planning and management. That was what the DPA and DLO attempted
to do. I do not believe that it concerned the whole capability
or all the defence lines of development. DPA and DLO were trying
to do through life management planning of the equipment and its
support through life, with some success in some areas. A very
good example is special projects and those have been through life
IPTs for a long time. With the best will in the world, with an
acquisition IPT in Abbey Wood and a support IPT in Wyton for aircraft
or Andover for vehicles, to create that through life equipment
plan was quite a challenge. That has been enabled by putting together
the two organisations and sorting out the budgets.
Q65 Mr Jenkins: I am glad you have
gone to budgets. Do you have in mind a programme that has not
gone down this route and one that has? What are the financial
benefits, or any other benefits, of going down this route? Can
you give an example of where it has paid off?
Mr Gould: An example of a programme
that has not gone down this route is Apache. You have referred
to a very good example of what happens when you do not do a proper
through life plan and get the brief right at the early stage of
procurement. The pressure was to spend the money to get the aircraft
and then the rest of the problems could be sorted out later. That
might be the right decision but it has a consequence. If you do
that you know what the consequence is. A good example of through
life planning and technology management, production, logistics
support and constant technology refresh in response to threat
changes in the area of special projects is electronic counter-measures
to which General O'Donoghue referred earlier. All of that derived
from work in Northern Ireland. By having a constant stream of
technology work and refresh we were then able to make adjustments
and do modifications or build new systems to cope with threats
that emerge very rapidly in today's operations. If you do not
have that long background of technology management and planning
how do you manage the equipments, distribute them and get the
information into the equipments that make them effective on the
day? If we did not pay attention to that all through life we would
not be able to do what we are doing today. Therefore, today's
through life success depends on long-term equipment and technology
planning from the past. I would say exactly the same thing about
nuclear, biological and in particular chemical protection equipment
which is a good example. What we are able to do today is the result
of a very long-term technology programme that also produces projects
in future.
Q66 Mr Holloway: To pay up front
to support the kit in the future sounds absolutely marvellous,
but how on earth are you supposed to do that when most of your
budgetary considerations are short term and everything is rather
over-heated? By way of example, the carriers cost £3.9 billion.
Is that the through life cost?
General Sir Kevin O'Donoghue:
No.
Mr Gould: That is the demonstration
and manufacturing cost.
Q67 Mr Holloway: Is what you have
been talking about for the past five minutes more an aspiration
than what you are actually doing?
General Sir Kevin O'Donoghue:
It is an aspiration in that the Defence Acquisition Change Programme
started 10 months ago, but the offshore patrol vessel (OPV) referred
to earlier is a very good example of this. We need to instil this
in everything we do as we go forward and to recover some of the
programmes already in existence is quite difficult.
Mr Gould: But DE&S has a very
detailed through life management plan to go with it.
Q68 Mr Jenkins: I understand that
you are discussing methodology here and how systems work. While
I appreciate that a big and complex programme needs this device
do all programmes require it? Where is the cut-off point? When
do you decide that it is not suitable for a particular programme?
General Sir Kevin O'Donoghue:
In my view all programmes need a through life management plan.
The detail of that plan will vary. If it is a big, complex project,
for example the carriers, it will need a detailed plan; if it
is a small project it still needs a through life management plan
but it could be relatively simple.
Q69 Mr Jenkins: The MoD is now moving
on to "improved through life costings using simple models,
to support through life decisions". When will the improved
models be developed? When will they be implemented and used? If
we are to look at through life costings with the use of these
models, which programmes will they be and how much do you see
going towards the original manufacturer to maintain the through
life programme on our behalf under the defence industry strategy
approach that you are now developing? How do you see it developing?
General Sir Kevin O'Donoghue:
If I may answer the second point first, I do not see industry
running our through life management programmes; I see them being
done jointly. To go back to the start of a project where you are
competing for a particular programme, we will have our project
team and each competitor will have his project team. As soon as
you go to the preferred bidder you should co-locate those project
teams so that geographically they are in the same place. As soon
as you sign up to a contract you should merge those teams into
a joint team. The through life management plan will then be held
jointly. Industry has a big part to play in it; it is not something
that you hold at arm's length from industry.
Q70 Mr Jenkins: Therefore, in future
as far as the first part is concerned you do not envisage the
transfer of some of these functions and therefore the nuclei of
the bodies in the MoD into industry?
General Sir Kevin O'Donoghue:
Not those functions, no.
Q71 Mr Jenkins: That is not part
of the plan?
General Sir Kevin O'Donoghue:
No.
Q72 Mr Jenkins: Does the structure
and expertise you get depend on the nature and amount of the programme?
If you cut the programme will it have an effect on the size and
cost of the team?
General Sir Kevin O'Donoghue:
Yes.
Q73 Mr Jenkins: Therefore, if there
were eight Type 45 destroyers on the books but we had placed orders
for only six would it have implications for the viability of the
team?
General Sir Kevin O'Donoghue:
I am sorry; I did not understand. No. You change the numbers from
eight to six. You have a through life management plan and you
know when you will insert technology and when various things have
to be changed either for reasons of obsolescence or to upgrade
because of the threat. If you doing it to eight instead of six
the cash numbers will be different but the plan in words will
be the same.
Q74 Mr Jenkins: If we have the carriers
and the nuclear submarine replacement on the books and you hope
to do this for both big projects how do you get the manpower and
skills required in place, or what plans do you have to put it
in place?
General Sir Kevin O'Donoghue:
Some of the skills we need to draw in from outside. As far as
the successor programme is concerned there are not many places
to draw nuclear engineers from outside. We need to train our own,
and we are doing that. We are drawing in people and looking at
universities that produce nuclear graduates, but some programmes
come out like the carriers and other programmes diminish; they
are either in steady state or the equipment is coming out of service
and people can move across.
Mr Gould: They are quite different.
As you know, in the case of the carriers we have built an alliance
of a number of companies to do that programme because it must
be thought of as something that we do perhaps once every 50 years.
It is not a continuous programme. This country has never built
a 65,000-tonne warship, so it is quite unusual. We have a core
team comprised of DE&S direct employees, both service and
civilian engineers, but added to those most of the design work
is being done by alliance partners. The production engineering
work will be done by people in the shipyards which will have to
augment their people while they do that phase of the project.
But as one goes through the manufacturing phase into final assembly
and introduction into service those numbers will diminish. We
will have a small core team that continues and around that alliance
partners will change over time. Submarine building, whether it
is for SSNs or SSBs—ballistic firing or attack submarines—is
a specialised business both for us and industry. It includes not
just nuclear engineers but engineers who have familiarity with
and main knowledge of submarine building. It is quite unlike anything
else. In that area I have to plan on the basis that we will keep
a group of submarine people in the cluster—the people who
build all the submarines—at pretty much a constant level.
That will be a group of several hundred people who have long-term
expertise, memory and training and new people will come in; and
the same is true in industry. They need to keep a core workforce
of about 3,500 at Barrow which is our specialised yard. It must
be tuned to that; you cannot allow it to vary too much or you
will literally forget how to build a submarine and when you start
to try to do it again you get into big trouble.
Q75 Chairman: That depends on orders,
does it not?
Mr Gould: It does. You take a
very big risk if you have erratic submarine orders.
Q76 Chairman: You do not know what
the orders will be, do you?
Mr Gould: But I have a very good
plan. We now have three contracts on the Astute class; we have
a fourth where initial contracts are already being placed. We
have a design for cost reduction contract and long lead items
on the reactors for the fifth boat. We need to keep going at that
rhythm to use the Astute learning to build into the successor
programme to make sure we do not lose those skills and collective
memory as we go through.
Q77 Robert Key: I want to turn to
costs. In our report on the MoD annual report and accounts published
yesterday we noted that the Defence Procurement Agency had met
all its key targets in 2006/07 for the second consecutive year,
which was very good news. Do you expect that the DE&S will
meet the former DPA targets for 2007/08?
General Sir Kevin O'Donoghue:
We will meet the cost and performance targets but I do not think
we will meet the time target, for which there are good reasons
that I can go into if you wish.
Q78 Robert Key: The MoD Autumn Performance
Report stated that the major programme showing cost growth at
present continued to be Nimrod MRA4. What is going on with that
programme?
Mr Gould: We have something which
usually happens on aircraft programmes, that is, an overlap of
production with flight trials. As you know, we have let the production
contract for MRA4. The flight trials are going well but what happens
is that you finally discover some things that need subsequent
modification as you go through the production programme. There
has been a problem of pitch on the aircraft, which is not unusual;
it happened also on the MRA2, but the MRA4 has much bigger wings
and more powerful engines. We cannot solve it in the same way
and so we will have to make a stability modification on the production
aircraft to deal with that problem. That accounts for about half
of the cost growth referred to in the interim report. The other
half is the cost of converting the three trial aircraft. There
are three prototype aircraft doing the trials and the plan is
to convert those to the production standard. The total we are
talking about is £100 million which is just a little less
than 3% of the total programme cost.
Q79 Chairman: You say it is not unusual.
If it happened with the earlier version this was predictable?
Mr Gould: It was predictable,
but you cannot do any kind of system or flight trial test, or
the test of any sophisticated equipment, until you have built
the prototype; that is the first time you can test it against
reality. I am quite sure that all sorts of simulations, wind tunnel
tests or anything else you can think of were gone through in this
programme and the problem was not identified at that point. Therefore,
although it occurred on the MRA2 it would have been a low probability.
Unfortunately, low probability but high impact risks occur during
testing.
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