Examination of Witnesses (Question Numbers
360-379)
SIR BRIAN
BURRIDGE, MR
IAN GODDEN,
MR IAN
KING AND
DR SANDY
WILSON
8 DECEMBER 2009
Q360 Mr Hancock: It did not come
out in this, did it? There was nothing hard-hitting saying, "We're
going under if you do not do something".
Mr King: The actions are stronger
than the words. We have announced 3,000 redundancies across sectors
of our business.
Q361 Mr Hancock: I know, my constituents
are some of them.
Mr King: We do go to the MoD and
talk to them about the consequences of decisions. For instance,
on the decision around FRES slipping, or Warrior slipping, we
said we would have to cut back on resources. You are quite right
on the carriers, for a long time it was on/off and it does affect
our employees and shareholders because they keep on listening
to the rhetoric and you have to keep on saying, "This is
a committed programme, we are building this programme and if we
continue to build uncertainty into it, it will no doubt increase
the risk profile which inevitably increases over time which inevitably
increases cost".
Q362 Mr Hancock: Is it possible for
you to help that situation by informing Parliament regularly of
where you are as companies with these various projects? I am thinking
of in my own constituency where we have redundancies in the aerospace
industry, layoffs in the dockyard, et cetera, all due to, one
way or another, the Government being blamed for their lack of
a coordinated approach to defence spending—you make your
excuses. I am interested to know how you keep your employees and
Members of Parliament informed of the problems you are experiencing.
We have to be part of that answer somehow, do we not?
Mr King: We do. We are committed.
We give our employees a state of the nation assesment in terms
of programmes, and then particular information on their own business,
which is why, across the air sector and the land sector, we have
announced what will happen over the next two years, whereas perhaps
traditionally we would have done it over a shorter timeframe because
we think we are being disingenuous to them if we are not telling
them where the nature of this business is going.
Q363 Chairman: Then you get criticised
for being too close to Parliament.
Mr King: That is fine.
Q364 Mr Hancock: I would rather you
did that. Say on the carrier project where you have got loads
of SMEs who are waiting for the decisions to be made—
Mr King: We have committed to
the SMEs.
Q365 Mr Hancock: You have?
Mr King: Where the design is mature
enough on the programme we have made full programme commitments
to these people.
Q366 Mr Havard: On this issue about
longer term planning, certainty and all of that, what is your
view of this idea that the Ministry of Defence will have a 10-year
planning horizon with the Treasury? Is that a set of golden handcuffs
or is that a positive move?
Mr Godden: I think the industry
view is that it is long overdue, that is one of the answers, but
if you set that at a time of depressed economic conditions and
say 10 years in a depressed time you get into an argument about
whether the cyclical nature of the economy and the needs of the
nation have been cemented in at the wrong time. We would assume
a 10-year plan is then refreshed quite regularly as most 10-year
plans can never survive the 10 years. The idea of an SDR every
five years and a DIS as a follow-through to that is a sensible
thing to do with a 10-year programme where you can make decisions
about bringing things in and out of it and have to adjust, as
all corporations do, to changing circumstances.
Q367 Mr Hancock: Could you live with
that?
Sir Brian Burridge: Yes, we could.
Absolutely.
Q368 Mr Hancock: Knowing that it
was definitely going to happen?
Dr Wilson: Yes.
Q369 Mr Havard: Are there positive
benefits in it?
Mr Godden: Huge benefits. For
all those that live and work in the US, and there are lots of
things wrong with the US and we can always bash ourselves versus
the US, but the US is much less efficient than we are here in
our opinion, the one thing that is absolutely clear is their commitment
to longer term programmes and commitment to R&D associated
with it is of great benefit.
Q370 Chairman: Do you see any difference
between the 10-year rolling budget proposed by Bernard Gray and
the 10-year indicative planning horizon suggested by the Secretary
of State?
Sir Brian Burridge: Yes. We need
to go back some many years to see when we had a 10-year equipment
programme and, in parallel, a government intent on the way defence
expenditure would be managed in that timescale. Not Treasury commitment,
but intent. Without that your 10-year plan is not going to stand
contact with the enemy. There needs to be a much clearer view
of what proportion of national wealth is a government willing
to commit to defence and security. It is as simple as that.
Q371 Chairman: In practice, can one
not look at the Bernard Gray report and the Government's reaction
to it and think that the Government has diluted it to the extent
that it sounds as though they are bringing in something similar
to Bernard Gray, but it is not Bernard Gray-like so much as just
a tinge of Bernard Gray at the bottom of the glass?
Sir Brian Burridge: Until we see
the colour of their money, in other words what they really do
bring in, it is hard to comment. Your analysis so far is correct.
Q372 Mr Hamilton: Is it not the case
that an MoD/Treasury remit in a review would be wrong because
surely the other part of that should be BIS?
Sir Brian Burridge: That is absolutely
right.
Q373 Mr Hamilton: If we are talking
about a skills base it must be wider than that double-edge. That
is part of the problem we have got.
Sir Brian Burridge: This is a
national strategic resource and it has not been acknowledged as
such, the degree to which both Government and the MoD in particular
misunderstand or have failed perhaps to define accurately what
they mean by "operational sovereignty", which is not
really a good term, and the degree to which they need indigenous
capabilities in order (a) to support the defence industry and
frontline forces, (b) to generate the spin-offs in the wider economy,
and (c) the connectivity with our university and education system.
We have had a market approach to this for a very long time in
the UK and this is at the core, the definition of what do we regard
as an indigenous capability and why. It is not just about defence
equipment.
Q374 Mr Havard: There is an interesting
discussion around all of these things in other parts of the world,
not the least of which in the United States, on where and what
is agnostic acquisition in relation to all of that, but we have
not got time for that at the moment. The 10-year planning process
seems to be a positive, but what that does not do in America is
solve some of the other problems we were talking about earlier.
It seems to me their percentage change of increase in expenditure
from main investment to the end of the programme does not deliver
any better in terms of timescale for delivery. Lots of the process
issues that you discussed earlier about implementation of mechanisms
are as equally deficient anywhere else. I notice Bernard Gray
said: "There is no magic formula for acquisition reform".
Thank you very much! I do not know how much that cost! That is
true, however, is it not, that planning process will not necessarily
resolve your other problems?
Mr King: There is no system that
you can go to in any place in the world and say, "You can
import that into the UK" and that solves all those problems,
you are quite right.
Chairman: When you say you do not know
how much that cost, as I understand it Bernard Gray did not charge
for his review.
Mr Havard: I do not know about that.
Pro bono work for the Tories now! I do not go to that club.
Q375 Mr Hancock: To follow up Dai's
point, the very last sentence that Gray wrote was the one that
Dai started to explain: "No evidence yet of a magic formula
for acquisition reform that has been shown to deliver its intended
benefits. Only time will tell in all these cases". There
is not a single suggestion in here about where the future will
be, is there? He says that he cannot find a solution, but he does
not actually give too many ideas. Where were your ideas in this
to help him try and find that? It is a pretty startling final
paragraph, is it not? It is on page 229, the very last sentence
in the book.
Mr Godden: Some of the comments
were made earlier and if we try to summarise them maybe it sounds
like a coherent set of recommendations. The comments about the
fact that we made progress, IPTs, et cetera, and using those as
case examples for driving those into the 200 programmes and getting
the best practice in through that, that is one mechanism for doing
this. Secondly, the skill issue that we talked about, to really
address that subject. That needs some heavy lifting to get it
to happen in a way that is not discussed in there. Thirdly, the
decision-making process and the risk-sharing. Those are three
or four of the things that we believe are absolutely essential
for this to go forward. You asked earlier whether we are pleased
with the Bernard Gray report, and we said we are pleased that
it is being used for this type of debate to go to the next stage.
That is as far as it goes but, you are right, it does not go far
enough.
Sir Brian Burridge: Perhaps one
of the criticisms is that it is easy to get hung up on the acquisition
of equipment because the numbers are large and quite startling,
but the ratio between the purchase price of, say, a fast jet aeroplane
and its through life cost is 1:4. In interacting with Mr Gray,
we made the point if you take a whole life view, which you must,
then your support solution, availability contracting, is absolutely
vital and that takes a long-term relationship, not only with the
prime, who is the design authority, but also constructing the
supply chain in a particular way. If you have a long-term relationship
then you can run as a team and you can all put your skin in the
game, as we say, you can all manage your bit of risk, but you
cannot do that on a short-term basis.
Q376 Mr Hancock: I hate to use this
expression, but would the four of you say that things can only
get better?
Sir Brian Burridge: You never
know until you know.
Q377 Mr Hancock: Would your impression
be that we are now about to turn a corner which will improve this
situation?
Dr Wilson: There are a number
of suggestions now on the table which, if implemented, would make
things better. I will point out a sentence in Bernard Gray's report
on page 31, paragraph eight, and he is talking here about incremental
procurement: "Many senior figures in the military and industry
are keen on this approach, but unless significant steps are taken
to subsequently reduce the pressure within the equipment programme
it is unlikely to become a viable way of working". So we
come back to that basic point.
Mr Hancock: He did not say how that could
be done. I read that paragraph and I thought, "Where is his
suggestion?"
Chairman: I want to get on to research
and development.
Q378 Mr Havard: Can I ask one other
question related to that. I happened to see him on telly last
night, by accident, and he said, "One thing the MoD has not
got is anybody at the centre who can deal with scheduling"
and that is the problem, this business about what is in the programme
and what is not and how you make these decisions about entry,
exit and those sorts of issues. What is your view of what that
scheduling process should be? Where should that be? Is that not
a political set of questions as much as it is an economic or capability
set of questions?
Sir Brian Burridge: There is some
process aspect in that. The Ministry of Defence has a very elegant
acquisition scrutiny process culminating in the IAB where they
sign off on a particular acquisition solution to a capability
or an equipment, but what they do not do is manage the integration
of that into the broader financial programme. That is not seen
as their job. That will end up with the Defence Management Board.
I think Mr Gray takes some trouble to point out that the Defence
Management Board is often not best placed to make those sorts
of decisions.
Q379 Mr Havard: So who should be?
Sir Brian Burridge: It should
be the IAB. They should judge affordability not only in value
for money but in profiling and insertion in the programme and
then deal with scheduling as required. This was one of the tenets
of SMART Acquisition, that the Joint Capability Board would, in
a sense, do this on behalf of the IAB, but where you are in a
position of really tight resources, which we are now, it takes
the higher level body to do it. The Defence Management Board is
not particularly well placed to do it.
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