Examination of Witnesses (Questions 100-119)
MINISTRY OF
DEFENCE
17 MARCH 2008
Q100 Nigel Griffiths: I think it
succeeded Clansman.
Sir Bill Jeffrey: The in-service
date was March 2004. It has been gradually rolled out across the
Army since then.
Q101 Nigel Griffiths: But by the
time it came in, it was some years late?
Sir Bill Jeffrey: It was, and
indeed this Committee, I think before you joined it, or rejoined
it, Mr Griffiths, had a hearing on that procurement, and there
was a period during which we had to recontract because the initial
contract was not satisfactory.
Q102 Nigel Griffiths: So figure 23
on page 32, which shows a zero delay, that is a zero delay in
what?
Sir Bill Jeffrey: That is a zero
delay, I think, within the year that the MPR 07 study is addressing,
and there has been no further delay during that period, but it
is a project which was much delayed earlier in its life.
Q103 Nigel Griffiths: So basically,
the clock was reset?
Sir Bill Jeffrey: It is not so
much the clock being reset as the way in which the MPR process
works, that each year we look at the change in cost and timeliness
within that year.
Q104 Nigel Griffiths: So on figure
21, where it shows a 6% cost variation since approval, that is
not since the original approval in the 1990s, is it?
Sir Bill Jeffrey: No.[7]
Q105 Nigel Griffiths: It has doubled
and doubled again in cost.
Lieutenant General Figgures: This
particular means of meeting the capability requirement I do not
think was approved until September 2001, when, following a competition,
GDUK was given the contract. So I think in measuring how much
things cost, until we have been to the Investment Approvals Board
for the main investment decision, it would be wrong to make a
judgment about cost increase. It is only when we have made the
main investment decision, and the Approvals Board have given their
authority for us to continue, that you can measure the cost. Prior
to that, there was an allocation—it was felt it might cost
something in the region of, but there was a degree of variation,
because of course we did not really understand what the nature
of this capability was going to be. We did not really understand
in the mid 1990s that you could have a Tactical Internet. We did
not understand that you would be able to achieve all the situational
awareness that we have been able to achieve from Bowman today.
Q106 Nigel Griffiths: Absolutely.
I mean, if I remember rightly, the price paid for not understanding
that was to hamstring our fighting forces with a rather out of
date walkie-talkie system.
Lieutenant General Figgures: Not
agreed that it was a rather out of date walkie-talkie system,
it was combat net radio which had capacity capable and necessary
for the time, but it was not satisfactory for the 21st century,
so we had to replace it.
Q107 Nigel Griffiths: I take it you
are telling the Committee the Bowman system is the system we need
now?
Sir Bill Jeffrey: Very much so.
Q108 Nigel Griffiths: So how do you
react to the summary in paragraph 1.18 that it is at risk?
Sir Bill Jeffrey: One of the key
user requirements, if I remember rightly, is described as being
at risk, but I do not think it impacts significantly on the roll-out
of Bowman.
General Sir Kevin O'Donoghue:
Can I offer a thought there? The latest package, the latest upgrade
to Bowman, called number 5, should be being rolled out fairly
quickly, and it needs trialling. That trial cannot take place
because the brigades that would have been trialling it are deployed,
and agreement between HO Land and myself is that we will delay
that. That is not an equipment issue, that is a commitment issue.[8]
Chairman: Thank you, Mr Griffiths. Your
last questioner is Mr Keith Hill.
Q109 Keith Hill: Thank you, Chairman.
In contrast to Mr Griffiths, I want to ask several rather broad
questions, and the first is: is my impression right that the general
history of defence infrastructure development has been characterised
by cost and time overruns, and if that is the case, why should
that be?
Sir Bill Jeffrey: I think it is
the experience of all defence departments in all advanced countries
that acquiring these normally leading-edge, technologically sophisticated
pieces of equipment is subject to cost and time overruns. I mean,
we are all in the business of trying to minimise these, trying
to build the skills of our staff, trying to adapt our procedures;
as my colleagues have been saying earlier, more intensively assessing
at the early stage in order that we can reduce risk, and in order
that we can minimise the likelihood that the thing will in the
end slip in time and cost as so many of these projects have in
the past. As we were touching on earlier, in one paragraph of
the Report, the NAO detects signs that the impact of technical
problems is reducing. We would agree, but we need to be cautious
about that, because it tends to be some way into the life of the
project before they become evident, but we feel we are gradually
getting better at controlling those.
Q110 Keith Hill: You anticipate my
second question by your reference to experience in similar countries.
It is the case, is it, that these kind of slippages in time and
in cost are experienced across the board by our allies and indeed
in other countries, as far as we can tell? Perhaps we could have
one or two examples of that.
Sir Bill Jeffrey: Indeed, we can
certainly supply the Committee with a note on that.[9]
We tend, in international surveys of this kind, to come out rather
better than most, in fact, but we know we still have a problem,
we know that we still need to work very hard to improve our internal
capability, and our ability to ensure that the industry delivers
in the way that we want it to. But internationally, I think it
is fair to say, Kevin, is it not, that other countries struggle
with the same issues?
General Sir Kevin O'Donoghue:
An example might be the C-17, the American aircraft, which had
quite a tortuous run early on in its life, very complex aircraft,
new aircraft; it is now an absolutely outstanding aircraft, but
they took the time and the money to get it right. May I offer
just three thoughts on time slippage? I believe there are three
basic reasons for slippage in time. One is because the technology
is more of a challenge than we thought it was, and what we need
to do about that is derisk these programmes before we actually
go to main gate on some of them.
Q111 Keith Hill: What do you mean
by derisk them?
General Sir Kevin O'Donoghue:
By sorting out what the technology is, by holding trials, by spending
more money upfront before we commit to a production run, taking
the risk of technological surprises out of it; so that is one
area. The second area, and A400M is a very good example, is international
collaboration, where actually, there is not a lot that we can
do about slippages when you are collaborating internationally
on a project. Still worth collaborating internationally, because
the prices are very much less than if we were trying to do it
all on our own. The third area for slippage is a deliberate decision;
the fifth package for Bowman, that I was talking to Mr Griffiths
about, is an example, where because the brigades are committed
on operations, we have made a conscious decision that that particular
programme would slip. So I think there are a number of different
reasons for time slippage. I would accept there are occasions
where it slips because we have not gripped the project, and there
are always examples of that, which is what I need to do something
about.
Q112 Keith Hill: Thank you actually
for that answer, I think there are all sorts of things that if
we had time, we would like to follow up in that, but let me just
follow up on this point about, as it were, international collaboration.
Am I right in thinking that for strategic reasons, and perhaps
also from time to time for narrower political considerations,
that we tend to place orders with British companies?
General Sir Kevin O'Donoghue:
Yes.
Q113 Keith Hill: What are the strategic
reasons for doing that?
General Sir Kevin O'Donoghue:
I believe we are one of the most open defence procurement organisations
around the world. We are happy to buy in most cases where the
capability can be got at the best value for money. There are not
that many occasions when we say, "No, we will only buy British".
Sir Bill Jeffrey: If I might just
add, Mr Hill, the caricature that one sometimes hears of the defence
industrial strategy is that it was principally a means of in some
sense protecting British industry. What tends to be forgotten
is that the underpinning principle is that we are driven by what
will provide the best capability and equipment for the military,
and that in the end is what matters. If that means, in a competitive
environment, going elsewhere, then subject to the exceptions that
are mentioned in the strategy, we are perfectly ready to go elsewhere,
and that is not true of every country in the world.
Q114 Keith Hill: Forgive me, but
in glancing through the list of the 20 major projects, what I
was not able to pick out was how many of those are actually done
by overseas companies rather than British companies.
Sir Bill Jeffrey: There are some,
if you take—I mean, some companies, these days, in the defence
sector, of course they are international companies, most of them
are, but in terms of companies that did not originate in the UK,
Kevin O'Donoghue has just mentioned the A400M project, which is
principally being delivered by EADS. We talked about Bowman earlier,
which has essentially been delivered by General Dynamics, which
is an American company. So it is a mixed picture, although particularly
in relation to the big platforms, like destroyers and submarines,
for reasons that are explained in the strategy, we tend to go
to the indigenous industry.
Q115 Keith Hill: Are there requirements
of our defence forces which are absolutely unique and quite distinctive
from those of other countries?
Lieutenant General Figgures: Should
I take that up? Clearly, we would be—yes, if you will indulge
me, I am not sure that I wish to get into specifics of requirements
that are unique to ourselves, and which are not shared by other
countries, and why would I say that? Well, because, of course,
we may have identified something that others have not, and therefore,
we would not wish to expose an advantage that we have. But for
example, the lightweight anti-tank weapon, the Javelin, there
we had a military off-the-shelf procurement, but we changed the
command launch unit, the means by which—you put the missile
on the command launch unit, you peer through the sight, you observe
the target and you fire. We felt that in order to make this more
effective, and to get the balance right in the battle group, that
we needed to improve our ability to see at range. So we improved
the capability of the thermal imaging sight, and it is interesting
that the work that we did with the contractor has now been picked
up by the United States. So that was a very good example of exploiting
a military off-the-shelf capability where our requirement actually
was accepted as the most cost-effective.
Q116 Keith Hill: That is very interesting.
In terms of learning from other countries, how do you measure
and do you attempt to measure the relative merits of defence equipment,
for example performance of a British-built tank vis-a-vis a
French, US or German tank, for example?
Lieutenant General Figgures: We
did quite a lot of work in preparation for the Defence Industrial
Strategy, and I think if you look back there, under the science
and technology piece, you see a graph which illustrates the technological
lead of the United States, United Kingdom, France, China and so
on. What it does illustrate is that investment in research and
investment in development gives you a lead; you have to invest
about 20 years out in the research side and about five years out
in the development side to maintain that lead. Underpinning that
was an assessment of individual equipments, so we looked at, say,
all the tanks in the world, made judgments of their effectiveness,
determined when the research and development had been put in place,
and we were able to therefore make judgments about the effectiveness
vis-a-vis other nations.
Q117 Keith Hill: I am hurrying you
up because I only have one minute left. But presumably, you systematically
do monitor the performance of others and seek to learn from their
experiences, and you would purchase if necessary?
Lieutenant General Figgures: Yes,
if there was something that met the capability requirement and
all other aspects were equal—
Q118 Keith Hill: I am sorry to interrupt
you, I know you want to come in, Sir Bill, but I just have one
final and rather nasty question to lower the tone of our exchanges
over the last nine minutes. How do you react to the suggestion
that MoD usually underestimates the likely cost and timescale
of projects in order to make them more palatable to politicians,
the public and perhaps the Treasury?
Sir Bill Jeffrey: I think there
is what some people who are more familiar with this area than
I am would describe sometimes as a conspiracy of optimism, in
the sense that it suits the supplier, the customer and indeed
the eventual user to assume that things will come in at lower
prices than would otherwise be the case. I think we have learnt
from that. If you take the other example, the LSD(A), which is
the subject of a separate Report which is part of these papers,
that is a very good example of us ending up spending on the project
what a comparative analysis by the NAO suggests is what we ought
to have spent on it anyway, but starting off by thinking that
it was going to be substantially cheaper than it turned out to
be. What we need to do, through the derisking work that the General
referred to, is get smarter and smarter at being realistic about
costs, and devising deals with our suppliers that tie them in
as effectively as we can tie them in, in the knowledge that we
cannot in the end completely transfer the risk to them.
Keith Hill: Thank you for that frank
and very fair answer. Chairman?
Q119 Chairman: Thank you, I just
have one question. I think we should ask you about The Landing
Ship Dock (Auxiliary) Project, volume III. If we look at page
9, figure 3, this is an absolute catalogue of errors, is it not,
General O'Donoghue? Can you give us an assurance that this sort
of thing will not happen again, what we saw with Swan Hunter?
General Sir Kevin O'Donoghue:
Yes, and the Permanent Under-Secretary has really just said it,
what went wrong there was we did not apply smart procurement.
Smart procurement is all about hands-off but eyes-on, and we took
our hands off and I think we took our eyes off it as well. In
the end, I think we got four ships at about the right price, according
to the NAO's analysis, but you are absolutely right, the lessons
learned from that were learned hard, but have been taken on board.
Chairman: They will not happen again,
good. I think Mr Bacon has a question on this.
7 Note by witness: The 6% variation shown in
Figure 21 of the Report represents the forecast overrun against
the "most likely" cost at Main Gate approved for Bowman Back
8
Note by witness: Large-scale trials of the latest capability
increment (Bowman CIP5) were affected by the high tempo of operations.
Despite this, the trials were successfully conducted in 2007 and
the roll-out to the front line has since begun. However, in light
of operational pressures, a decision has been taken to extend
the roll-out process. This decision was taken with the agreement
of the user. Back
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