Examination of Witnesses (Questions 180-199)
GENERAL SIR
KEVIN O'DONOGHUE
KCB CBE, DAVID GOULD
CB AND LIEUTENANT
GENERAL DICK
APPLEGATE OBE
29 JANUARY 2008
Q180 John Smith: You must still have
some numbers in mind in terms of what capability you predict in
the next 10 years?
Mr Gould: The figure of 150 is
the one we still have in mind, but when we get to the Main Gate,
which we have not got to on JCA, that will be the time when we
start to determine what the production numbers are. The great
opportunity with JCA is that we do not have to make up our mind
on the total at the start.
Chairman: I think we ought to move on
because we must still cover FRES as well as other matters.
Q181 Mr Holloway: The design of the
utility vehicle has not yet been chosen, but I think you held
trials in the summer. When is it likely to be announced?
General Sir Kevin O'Donoghue:
Very soon.
Mr Gould: A recommendation has
been made.
Q182 Mr Holloway: The MoD memorandum
refers to a System of Systems Integrator and "one or more
UV Integrators". What are the integrators going to do, and
could it become more difficult if you have too many?
Lieutenant General Applegate:
As to the System of Systems Integrator, if we go back to some
of the past weaknesses we have not been very good at developing
people with the necessary skills and to think about the way a
variety of individual equipments come together and interact with
one another—in other words, a system of systems—in
order to exploit those to maximum advantage. Similarly, because
we have a number of vehicles with multiple roles we need the necessary
expertise to consider how best to integrate common solutions throughout
those roles, where that is appropriate, and what might be, for
example, common electronic architecture, making sure we have the
appropriate inclusion of technology to drive down the whole life
cost. There are some skills that we are not particularly good
at and so in the short term we need the System of Systems Integrator
to give that overview and provide us with specialist expertise
to manage the complex mix of individual requirements and look
across the technology so we have the many strands of technology
that we require not simply to bring in the individual equipments
but to do the upgrades through life that we talked about earlier.
There are some quite specialised skills in that area and there
are not many around. That is the reason we have asked for the
system of systems integrator to support us in this work. It is
not a lead systems integrator as the Americans have with the future
combat system because we have learned the lessons from that particular
programme. With the lead systems integrator there was effectively
a hand off to that LSI to conduct the activity on behalf of government.
It is the SOSI as part of the internal alliance, the core team,
which supports us in our work. The System of Systems Integrator
is also there not to continue to be the experts for ever and keep
us in ignorance, but one of the tasks placed upon it is to bring
those skills back into the Ministry of Defence so we become better
at this over time.
Q183 Mr Holloway: We were told that
the Army, the front line as it were, would have an input into
this. Can you take us through what input it has had so far and
also confirm that the Army's preferred option is the one that
you will be announcing?
Lieutenant General Applegate:
To start with the second part, the Army has been involved throughout
this and supports the design decision.
Q184 Mr Holloway: But is that the
Army's preferred option? Did it support it?
Lieutenant General Applegate:
Yes. The reason is that we briefed the Army accordingly, with
appropriate caveats as to names and things like that, about what
we had found in the various trials and the implications of the
analysis we had done in terms of issues such as timeliness, the
ability to grow through life, levels of protection and confidence
in the nature of the company. How has that been done? Clearly,
there are Army people within the project team. On the assessment
panels there have been representatives from both the Army in London,
if I may put it in those terms, and also the front line user.
They have scored on those assessment panels and have been fully
involved in all of that technical work. The analysis was then
taken to the executive committee of the Army Board which was briefed
over a number of hours on the outcomes that we found. It was posed
a series of questions and asked whether it agreed with the recommendations
and to clarify some of its priorities. That work was then taken
forward and formed part of the recommendation of the way forward.
There was a lot of engagement. In the case of FRES over the most
recent period the user has been very much involved as part of
the team, understanding the cost of some of the requirements and
being willing to trade where it made sense once the evidence was
provided. Evidence of that would be the way in which we step back
from the C130 requirement in terms of the ability of the vehicle
to sit in a C130 because, to be frank, it was not technically
feasible to do that considering the levels of protection we would
wish to have. I hope that gives you the answer. It has been heavily
engaged throughout.
Q185 Mr Holloway: General O'Donoghue
talked about the joint strike fighter pulling stuff off an existing
US production line. Is there an argument even at this stage to
scrap the FRES project as it is currently configured and buy the
best available thing off the open market at the time and not in
such huge quantities and at such gigantic cost?
Lieutenant General Applegate:
No.
Q186 Mr Holloway: Why not?
Lieutenant General Applegate:
Basically, because if we pulled something off the production line
today we would be spending a huge amount of money to upgrade it
to meet the conditions of today. For example, the Americans have
found huge problems with the LAV3 that has been used in the past
in upgrading it in order to make it relevant for today's missions.
We also spend somewhere in the region of £650,000 per vehicle
that we put into the operational theatre in order to equip it
with new armour, communications and electronic counter-measures
simply to bring it up to the standard of today. That is the reason
we have taken the pragmatic course of looking at something that
we believe is capable of being developed into the system and can
grow through life. If we were to buy off the shelf a combat vehicle
rather than a protected vehicle such as the Mastiff, which is
another matter you may have in mind, there would be nothing in
the market place to meet that particular need for the Army considering
the range of missions that it has to complete.
Q187 Mr Holloway: Notwithstanding
your comments about adapting it through its life, you are buying
something now against a range of threats as yet unknown which
tries to do absolutely everything. Surely, given the gigantic
cost of this I still do not understand why you would not be better
off getting the best available thing at the time in specific numbers?
Lieutenant General Applegate:
What we have done is to identify what we believe is the best available
developmental vehicle in the market place that has a future. The
alternative is to buy something that is basically a cul-de-sac
and goes nowhere; it cannot be upgraded and cannot meet the threats
over time. We believe that we have now identified that particular
preferred design for the utility vehicle and we are confident
that in conducting what is an aggressive programme to deal with
some of the technological risks to produce something as early
as we know the Army wishes which will provide a level of capability
that is far in excess of what we have today in order to meet those
threats and, importantly, that it would have growth. If we bought
something now literally off the shelf effectively we would have
to shoe-horn in, as we do on UORs at the moment, a series of sub-components
in a very poor fashion and it would have very limited life, so
it would be a bad decision. The Army is quite convinced about
that, and there is a decision as to whether you literally buy
off the shelf, assuming there is the ability to ramp up production,
or have something that gives the Army confidence will grow through
life. We must have that confidence if we are to grow. One of the
things we have noted with the current range of vehicles is that
we tend to have them for a long time and increase their capability
over time. We also have tended to increase their weight, their
demand for power, the levels of protection and the other elements
we put on them. To try to do that with an off-the-shelf system
at the moment would be a recipe for disaster. We and the Army
are content with that.
Q188 Chairman: General Applegate,
rather meanly towards the end of last year I congratulated David
Gould on down selecting from three to three. You may already have
dealt with this and I have missed it. When will you make a decision?
Lieutenant General Applegate:
With regard to the design?
Q189 Chairman: Yes.
Lieutenant General Applegate:
It is imminent. We have made the recommendation to invest in that
and push forward aggressively.
Q190 Chairman: Is there any truth
in the stories over the weekend that when we are buying American-armoured
vehicles we are being placed in the back of the queue?
Lieutenant General Applegate:
No. I have a very good relationship with my American colleagues
and they have provided us access through their joint allocations
board in order to meet our needs.
Q191 Chairman: General O'Donoghue,
you have painted a pretty bleak picture of life in your area of
work at the moment. It is an area of uncertainty. As all these
reviews take place how is that uncertainty affecting the people
who work for you?
General Sir Kevin O'Donoghue:
I had not intended to paint a bleak picture. I think it is rather
exciting at the moment and there is a golden opportunity to move
forward, which is what we are doing. It is unsettling people.
We will come down to some 20,000 people over four years. People
need to know who is staying, who is going and who will have early
release. There is a degree of uncertainty in some areas and in
others which support current operations people are very busy and
working hard. They have seized it and are going for it, which
is very impressive.
Q192 Chairman: As to uncertainty
over the equipment programme, how is industry reacting to that?
General Sir Kevin O'Donoghue:
I think industry would say it would like to see an affordable
programme and fewer projects properly funded, if that is what
it takes, than a lot of projects not properly funded. I have heard
industry say that at gatherings. Industry would like us to settle
the programme and we know that we go through this every two years.
They are just waiting to see what comes out the other end.
Q193 Chairman: So, what they want
in that respect they have never had?
General Sir Kevin O'Donoghue:
I do not think we have had a properly affordable programme for
many years.
Q194 Chairman: What are you doing
about that?
General Sir Kevin O'Donoghue:
This is PRO8 and the planning round that we are going through
at the moment.
Q195 Chairman: Is there a sense that
industry is delaying investment because of the uncertainty over
the programmes?
General Sir Kevin O'Donoghue:
I do not know.
Mr Gould: I think it is bound
to do so. This will not be fixed until it sees the certainty of
something coming through. It is very patchy across different sectors.
Where we have been able to put in place good partnering arrangements
we see signs of investment particularly in people. Industry has
the same problems with skilling, upskilling and retaining skills
that we have. Very often the same sorts of skills are in short
supply. Therefore, when industry invests in people, which we see
when partnering arrangements are in place, that is good, but clearly
investment in infrastructure and technology can take place in
industry only if it can see an outlet in the market for that.
If it sees growth in a certain sector of the market—UAV
is a case in point—private investment goes in because it
is dependent not just on the MoD. If it is investment that is
dependent on just the MoD it will happen only when industry sees
decisions coming out from the department.
Q196 Mr Jenkins: I do not see the
bleak role that the Chairman sees; I see a challenging and exciting
one. One aspect on the industry side—I recall this from
a previous existence—was that when it came for an order
you would say it would have its research and development costs
over the run of the order. I would say, no, it will not; it will
be paid upfront because it will not get the run of the order.
Is it true that in the past we had to pay the research and developments
costs of programmes that we knew were short, cut or were never
implemented? It cost us a lot of money for the security and stability
that industry required?
Mr Gould: It is probably wrong
to try to characterise the whole of industry in one sentence.
Different parts of industry behave very differently. One matter
I have looked at carefully over recent years is what proportion
of the free cash in a company, if you like its profit, is ploughed
back into the industry in terms of R&D. In some companies
you see figures like 10% or more. I am sorry to say that in some
of the very big ones you see figures of 2% or less. A lot depends
on where these companies are in the supply chain. If you are to
compete and get yourself into the supply chain of BAE Systems,
Lockheed or whatever it is you have to spend money on R&D
to improve your products. Therefore, mid-size companies tend to
have a better record on R&D spending than the very big ones.
I find that disappointing. One thing that we are trying to do,
particularly through my colleague Paul Stein who is now the Science,
Innovation and Technology Director in the MoD, is to see whether
we can use not just our research budget but the way we commission
research to get a better result in terms of both pull-through
and the participation of companies that are good at innovating
in the defence programme. Defence Enterprise Gateways as they
are called try to set up clusters of good practice involving big
as well as small companies centred perhaps on a university or
a technology centre to improve the process. That is quite encouraging.
Ultimately, what people spend on R&D will depend on how they
perceive the market conditions. If the market conditions are not
good or they are uncertain it will be very hard for R&D directors
to get money out of finance directors, just as it is inside the
MoD.
Chairman: Let us turn to urgent operational
requirements (UORs).
Q197 Mr Jenkin: General Applegate,
I want to ask about lessons learned. Obviously, you have been
a great success story and I shall turn to you in a moment. First,
I want to ask about the technicality of this. The memorandum says
that the total number of UORs until December 2007 was 796 and
the cost was £2.6 billion. Is that since the start of Afghanistan
and Iraq?
Mr Gould: Yes, of that order.
Q198 Mr Jenkin: Is the £2.4
billion the capital cost of those UORs or does it represent the
lifetime cost?
Lieutenant General Applegate:
Clearly, the problem with UORs is that their life is quite short.
Although there are many benefits in the UOR process, which we
should exploit—I know the Committee has looked at this—there
are some significant shortfalls especially where one is fighting
long campaigns.
Q199 Mr Jenkin: If you buy Mastiffs
they will outlast the campaign, will they not?
Lieutenant General Applegate:
At the moment the funding we have is enough to keep them for the
period of a UOR; in other words, the UORs last for a year and
you must make a decision then as to whether to bring them into
the core programme, that is, find new money or get rid of them.
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