Examination of Witnesses (Question Numbers
300-319)
SIR BRIAN
BURRIDGE, MR
IAN GODDEN,
MR IAN
KING AND
DR SANDY
WILSON
8 DECEMBER 2009
Q300 Mr Hancock: Could I, first of
all, start with two general questions. As individuals, were you
personally interviewed or consulted by Bernard Gray separately,
and what was your view of the process that he went through? It
would be interesting to hear if there is a different view on that.
What was industry's view generally of the consultation and the
efforts that were put in to try and make this as potent a document
as he could?
Sir Brian Burridge: I was certainly
consulted—
Q301 Mr Hancock: In a one-to-one
capacity?
Sir Brian Burridge: —individually,
by Bernard and his team. We went over aspects such as Through-Life
Capability Management in-depth, strategic partnering arrangements.
You will recall that the first strategic partnering arrangement
was with AgustaWestland post the Defence Industrial Strategy.
What were our views on that? The business of man-marking, which
was high on his list, and the depth of commercial and programme
management skills, and, from my knowledge and my company's collective
knowledge, we recognised that this was a suitably incisive methodology;
it would recognise where problems lay. We perhaps thought that
it may not come up with anything absolutely brand new, but it
would not in any way undermine it for the telling. That said,
it is a tough world in the public sector when you are dealing
in an environment of constant financial squeeze; so one is always
slightly reticent of continuing to beat up on the DE&S in
that respect. There are some things over which they have no control,
and the budget is one of them, but as a methodology, absolutely
no qualms.
Mr Godden: I would reinforce that.
I was interviewed one-to-one twice and then had a discussion towards
the tail end, so he consulted very effectively, and, in my opinion,
it was a thorough process, a thorough analytic background and
a set of interviews that was quite wide. Secondly, he did present
and discuss openly at the NDIC meetings and he was quite comfortable
with anybody calling him from DIC (Defence Industrial Council).
From that point of view, the consultation was very strong and
the implications from it were well discussed. It was very open.
It was behind private doors, obviously, but it was a very open
discussion about the implications and the nature of the problem.
The implementation issues possibly could have required some further
effort and time, but I think that was not necessarily timeliness
on his part, that was the timeliness to get the report to a certain
condition.
Dr Wilson: I also had a one-to-one
session with Bernard Gray. I did not major really on the source
of the problems, because a lot of that, I think, was pretty obviously
taken as read at the start of it, and concentrated more on where
the solutions might lie. However, we did comment on the commercial
process within MoD, the fact that there are certain aspects of
that that were somewhat more routine that could be streamlined
and our disappointment that that had not yet happened, and suggested
that that might be a way forward, but then focused primarily on
the so-called 80% solutions, the speed aspects, the risk aspects,
and we gave him a short paper on the differences, as we saw it,
between the standard equipment programme and the UORs and how
the two could perhaps be brought closer together in some new hybrid
procurement system. So we focused very much more, I think, on
potential solutions given that things had to change, get faster
and cheaper and with less risk.
Mr King: I had a one-on-one with
Bernard on this subject, and then we also agreed, as part of that
process, what other access he should have to the various people
in BAE Systems who were either involved in partnering or in other
programmes. So we gave him free access to everything he wanted.
Q302 Mr Hancock: What do you think
he missed?
Mr King: I personally think it
is a fairly comprehensive report, to be honest with you.
Q303 Mr Hancock: Industry is well
pleased, are they?
Mr King: I think we recognise
it is a comprehensive report which addresses the key issues that
have to be dealt with.
Q304 Mr Hancock: So industry is well
pleased?
Mr King: I am not sure that the
term "well pleased" is founded.
Mr Godden: I do not think that
reflects the sentiment in industry, as I read it anyway. It is
pleased that it is out in the open—some of these issues
that have been raised and developed—and I think there is
a big debate about how to achieve this, and there is a slight
fear in industry that it will be a document that will live as
a document and will not have the sharp implementation associated
with it. If you ask, "What does it miss?" perhaps it
misses the people, leadership and implementation issues in addressing
how this is going to become, not a change programme, but a reform
programme, and that is, I think, the worry.
Q305 Mr Hancock: Which is very different.
Mr Godden: Which is very different.
A change programme is one thing; a reform programme is another
thing. That is my personal worry about it, that it becomes another
change programme and it does not deal properly with the skills
issue and the reform required to make decisions much, much faster,
etc. So if there is a fear, the word "pleased" is not
the right word to use for the industry. It is pleased that it
is out in the open but it fears it being a wonderful report on
the shelf.
Q306 Mr Holloway: Does the MoD sometimes
make it more burdensome for industry? For example, I cannot remember
whether it was the Defence Committee or the Armed Forces Parliamentary
Committee, but going down to Westland, the engineers there were
fitting rifle racks for the SA80s on some helicopters, some Merlins
coming from Denmark or somewhere. There were two Westland engineers
fitting these rifle racks and there were seven or nine people
from Abbeywood down for the day inspecting that they were doing
it properly.
Sir Brian Burridge: Clearly these
things can happen, but, in terms of the way AgustaWestland at
Yeovil run, and you probably will have seen it, there is a combined
IPT. There are 200 MoD people integrated into the design, engineering
and quality staff within the factory and, frankly, when it comes
to dealing with either something like the Future Lynx programme
and things like the Integrated Operational Support for Merlin,
they are pretty seamless—it is one of the success areas—but
let us be under no illusion, design authority, the safety case,
particularly when you are doing modifications at speed, as you
are in UOR processes, does need to be properly audited.
Q307 Mr Holloway: Having tens of
thousands of people working for the MoD whose job is precisely
that, do you think sometimes it goes over the top?
Sir Brian Burridge: No. This is
interesting in the Gray report in leading to the conclusion of
a government-owned contractor-operated acquisition organisation.
What I would say is that the nature of the skills required, the
number of people that can be afforded in DE&S means that the
interface between the core of DE&S as an intelligent decider,
the interface with industry, is inexorably moving towards the
centre of DE&S. Complex programmes these days are likely to
require alliances, and so one large company will have to manage
the gorillas represented by the other parties in the alliance.
So the degree to which you need what was the rather old-fashioned
way of scrutinising every turn of the spanner has gone.
Q308 Mr Hancock: Do you accept that
industry itself has to have more realistic cost estimates in the
early stages of programme development, and how could this be best
achieved?
Mr King: I am sorry?
Q309 Mr Hancock: Do you accept that
you, as the industry, need to produce more realistic cost estimates
at the early stages of programme development, which would enable
things to be much more fair? We always seem to be blaming the
MoD for cost over-runs. They seem to accept responsibility for
everything and industry looks blameless, except they are the ones
who have charged more and taken longer.
Mr King: There are two comments
I would make to that. One is that sometimes in the early stages
of contracts we reach for a commercial structure and a price far
too early, rather than defining what is the solution you are trying
to provide, so it tends to lead to extreme statements of requirements
and not necessarily defining which party is best able to handle
the risk. You tend to find that in the first stage of estimates
it is very open-ended, all the risk largely sits with industry,
which tends to inflate what you put in terms of the cost because
that is the only option that you have to do. You would be much
better down-selecting somebody based on the requirements and capabilities
they have in the early stages rather than running a beauty parade
with a big cost attached to it, because it is very open-ended,
and then working with that party and really honing down to what
is an acceptable cost against an acceptable risk and capability
profile.
Sir Brian Burridge: Some reassurance.
The NDIC is working in partnership with the MoD to look at project
initiation and really examine what it is you need certainty on
before you proceed, because, as Bernard points out, a number of
programmes have launched into life carrying really quite high
risk which, had some attention been paid at the earlier stages
(which was actually one of the pillars of SMART Acquisition) that
could have been avoided. I think the key thing in any of these
things is to consult industry early so as not to close off options
or refine the requirement to the extent that it does impose additional
risk and additional cost. If there was a more collaborative approach
to these big capability programmes early on with industry so that
everybody is on the same page with regard to the complexity and
the cost and time aspects, then that would be a step forward,
and it is beginning to happen.
Mr Hancock: But going right back to the
initial statement about willingness to change and to bring in
SMART Procurement, seven or eight years have elapsed since secretaries
of state were making those statements, and yet there is still
this abject failure to achieve what you said was the key pillar—it
was the only pillar really—of SMART Procurement.
Chairman: We are just about to get on
to that.
Q310 Mr Hancock: It is Sir Brian's
point there about why this has not happened.
Sir Brian Burridge: I can give
a very short answer. What has made it more difficult has been
significant reorganisation along that time period. The three single
Service commands into the DLO was the starting point—the
DLO into the DE&S, the way in which the central customer was
created here—so organisational change. The other absolutely
consistent factor has been a budget which is insufficient to meet
the aspirations, and that really does influence behaviour.
Mr Hancock: What is your view on the
spiral option?
Q311 Chairman: Before we get on to
that, Mr Godden, you said you did not believe in this conspiracy
of optimism notion. Why not?
Mr Godden: It is the language
which I think is not quite right. It gives the feeling that it
is over specification and under budgeting that is at the heart
of this. The budget issues are clear, which we have just said,
but it is the shifting requirements and the indecision around
what the real requirements are and the changes to that.
Q312 Chairman: What Mr Gray says
on page 29 is, "Under current governance, while underestimating
the cost of a programme can lead to criticism and delay in the
delivery of the required equipment, it is highly unlikely to lead
to forfeiture of the desired equipment. As a result, the Forces
have an incentive to bid for as many equipments at as high a specification
as they can. They also have an incentive to underestimate the
cost of delivering this system." Do you think that is wrong?
Mr Godden: No, it is not wrong,
but it is incomplete in its view.
Q313 Chairman: Do not worry; there
is plenty more.
Mr Godden: I think, just going
back, it is the constantly shifting requirements as well. That
is the point I am making.
Q314 Chairman: So it is additional.
Mr Godden: It is not just that
there is optimism from the beginning. It is a requirement in order
to get the budgets through.
Q315 Mr Hancock: But it is a one-sided
argument, is it not? Once again, all the blame falls on the MoD.
They constantly change the requirement, but then, in some cases,
industry has not been able to produce what they originally set
out to claim to produce. The MoD have had to compromise because
industry has been unable to produce what they set out for. So
we have to be a bit equal.
Mr King: Absolutely.
Mr Godden: That is understood.
Mr Hancock: But Gray does not recognise
that.
Chairman: Do you think that is fair?
Mr Hancock: I do not think he recognises
the fact that industry sometimes cannot deliver what they say
they can. He does not mention it at all.
Q316 Chairman: We can ask him about
that when he comes in front of us.
Mr Godden: I had not noticed he
had not mentioned it, so you are pointing out something new, but
the idea that a complex engineering project of the nature that
we have got can always be on time and on budget because the risks
are fully understood, etc—the risk pattern is a double risk
and there is no doubt—and you see it in the scientific area—you
are not able to predict, so there is an element by which industry
will from time to time not have the right answers from the beginning.
Absolutely. That is a feature of the risk sharing that was talked
about earlier by Mr King. That risk sharing needs to be agreed
at the beginning or very well understood, otherwise we do get
into a "blame the other" culture, which is very unhelpful.
Q317 Mr Hancock: Were any of you
party to the suggestions that were being made in the report that
certain elements in industry were favouring the spiral approach
to development? What do you really see as the advantages and can
it really, actually, once again, be delivered? It sounds good,
but is it a deliverable option?
Dr Wilson: Could I start on that.
I am definitely a proponent of the idea of incremental procurement
and spiral development. You asked a question earlier which I was
going to at some point try and give an answer to. It was going
to be asked as a question. If you went and asked the Army what
they thought of the aspirations which had led to them not having
a protected manoeuvre capability after nearly 20 years of programmes,
perhaps they would suggest that they would be happy to have accepted
an 80% solution, which was your question. In fact, one of my colleagues
has had a conversation with a senior person within the Army, who
says, "Yes, we might well have been better to do that",
because they would have had something, they would have had that
early capability delivered and then see mechanisms for incrementing
it as the requirement changed. That is my very simple view of
why an early delivery of an initial capability will go down very
well with the Armed Forces in certain areas. I am not sure you
can do this across all platforms or across all technologies, but
I think it is fundamentally doable in quite a number of areas—armoured
vehicles is one, communication systems is certainly another—and
in those cases you can see ways in which incrementalism can help
you. You have to take a technology view of this as well, because
such things as computers, radios and other pieces of complex electronic
equipment tend to get smaller and more compact and more readily
adaptable to platforms over time and, therefore, there is no point
buying 15,000 of them at day one when you need maybe 3,000 for
the next few years and you can incrementally buy those at a constantly
upgraded capability. So I think there is a lot to be said for
incremental procurement and spiral development.
Q318 Mr Hancock: Is it deliverable?
Dr Wilson: Yes, of course it is
deliverable. We are currently doing that on the Bowman programme.
Q319 Mr Hancock: Go back, Sir Brian,
to when you were in a leading role. Would you have been happy
with that arrangement?
Sir Brian Burridge: Yes. I should
place on the record, I have never worked in acquisition, I have
always been an operational person, but it gives you certainty
on removing the previous capability, of the training programmes
you need, the infrastructure investment you have to make. There
is nothing worse than running on a fleet that you were not expecting
to have to run on. If I use the example of fast jet aeroplanes,
in the life of an aircraft like Typhoon, JSF, we are not going
to change the engine airframe combination. These are now so integral
that you will not see the progression that we saw, say, with the
Spitfire or even the Harrier—totally different aircraft
between the GR1 Harrier and the GR9. Capability in this era comes
from software, sensors and systems. These are at the heart of
capability, and all platforms ultimately will arrive at a point,
perhaps somewhere around 2050, when that is true. Armoured vehicles,
which at the moment are relatively unsophisticated, have more
and more sophisticated architectures, more integration, use electronics
in a much more sophisticated way. If capability is coming in that
way and the electronics, as you have heard, over the lifetime
of a platform inevitably has obsolescence about it, you have to
solve the obsolescence, and you can do that at the same time as
you increase capability: faster integrated circuits, etc, etc.
If you lay that on to an availability contract, you can do that
as part of the regular maintenance of the platform rather than
have these huge return to works programmes where, as a front-line
commander, you are denuded of your capability in sheer numbers
and, as a matter of cost, it is a relatively inefficient way of
doing it. So it is already happening with fast jet aeroplanes
and it has the potential, as all types of platforms move through
that sophistication curve, to be the way it is always going to
be.
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