Examination of Witnesses (Question Numbers
420-439)
MR QUENTIN
DAVIES MP, GENERAL
SIR KEVIN
O'DONOGHUE AND
VICE ADMIRAL
PAUL LAMBERT
15 DECEMBER 2009
Q420 Mr Jenkin: Will there be a competitive
tender?
Mr Davies: There will be an announcement
of intention.
Q421 Mr Jenkin: Will there be a competitive
tender?
General Sir Kevin O'Donoghue:
It is possible. If Finmeccanica from Italy could produce these
helicopters to the right standard, the right quality, cheaper
than Boeing can in the United States, then, of course, we would
consider that, but whether there will be a competitive tender
is a different issue.
Q422 Mr Jenkin: What is happening
to the Future Medium Helicopter? Is that being scrapped now?
Mr Davies: Yes, and that is exactly
what I intended to achieve in the summer and that is why I said
I had been working towards this for quite a long time, for many
months. In fact, we discussed it when I last came before this
Committee. It seemed to me some time ago, in the spring of this
year, I suppose, that the plans we had needed to be opened up
again to question, the plans we had, as you know, which would
procure the Future Medium Helicopter halfway through the next
decade, and meantime we should invest money in upgrading and lengthening
the life of the Sea Kings and the Pumas, and I thought there were
several problems about that. One was that if we were going to
procure the Future Medium Helicopter in the middle of the decade
we ought to be procuring it now much more quickly, and, secondly,
that maybe we could save some money by not going ahead with those
particular upgrades. Eventually I was persuaded that that would
leave an undue gap which we could not fill. We must not, of course,
leave a gap in helicopter capability so we have gone ahead with
the Puma upgrade but not the Sea King upgrade except for minimum
expenditure on Sea Kings for safety purposes to keep them flying,
and that is the intention. We have come now to an agreement and
I hope we will be getting on contract shortly 24 new Chinooks
which are the ideal helicopter we need for lift purposes.
Q423 Mr Jenkin: May I just ask Vice
Admiral Lambert does the scrapping of the Future Medium Helicopter
leave gaps that require to be filled in other ways in our capability?
Vice Admiral Lambert: No, it does
not. We had a careful look over the summer at the Future Medium
requirement and on detailed analysis what we really want is lift.
That is what is needed in Afghanistan, that is what is needed
in all theatres, and so we changed our strategy to provide maximum
lift. When we look at what is needed in the medium capability
we think that the Merlin fleet will suffice.
Q424 Robert Key: But, Chairman, the
Merlin fleet itself is not being upgraded as was planned. Only
30 are being upgraded, leaving eight not upgraded. Is it wise
to base the entire helicopter strategy on the need for Afghanistan's
purposes? After all, we are talking about the day when we withdraw
from Afghanistan. Surely you cannot say the whole of our helicopter
strategy is based upon our current needs in Afghanistan while
at the same time not upgrading Merlin and talking about abandoning
the Future Medium Helicopter.
Mr Davies: We are not doing that
at all, Mr Key. Rather, we are doing the reverse. The future of
Merlin will be as a naval helicopter. That is the future vocation
of Merlin as we see it and that is a very important vocation role
for Merlin. We are deploying Merlin at the present time in Afghanistan
and it is playing a very important role but over the medium term
we will be looking to the Chinook to provide lift and the small
helicopters we will have for lift in theatre will be the re-engined
Lynxes and then they will be replaced by the Wildcat. I do not
know whether Vice Admiral Lambert would like to add to that.
Vice Admiral Lambert: The 30 Merlin
helicopters you are talking about which we are upgrading are the
anti-submarine warfare helicopters. We will marinise the Mk3s
to give them amphibious capability.
Q425 Chairman: Minister, the Major
Projects Report out today, which I am just about to come on
to, says that as a result of your decision to upgrade only 30
instead of 38 Merlin helicopters the Merlin force will be unable
to provide simultaneous anti-submarine protection to more than
one naval task force, such as an aircraft carrier or amphibious
group, unless supplemented by Merlin helicopters used for training.
Is that right?
Mr Davies: That sounds correct.
If we had an anti-submarine threat against two task groups simultaneously
I think we would pull out all the stops to get all the helicopters
we could out there.
Q426 Chairman: So there is the additional
problem of having fleets of helicopters within fleets and the
logistic problems that go with having two different marques of
the same type of helicopter, which adds to the expense of maintaining
those helicopters?
Vice Admiral Lambert: One of the
things we have been trying to do is drive out first of all fleets
within fleets and also drive out the number of different types
of helicopters we have got. The strategy that was announced earlier
this morning drives out a class of helicopters, it reduces the
number of types of helicopters and it brings us into an era where
we can see four main helicopter types going forward with the Chinooks
doing the heavy lift, two types of Merlin, one which will be the
anti-submarine helicopter and the Mk3 doing the amphibious lift,
the Lynx helicopters with the Wildcat and the attack helicopters.
As an addition we are moving forward with the Puma to fill a particular
niche capability but it reduces helicopter types and we are trying
and drive out fleets within fleets.
Mr Davies: If I may summarise,
Chairman, we are trying to do exactly what you suggest and I am
very conscious of the need to do that. We are trying to minimise
the number of different types of helicopter. The result of the
strategy which was announced this morning will be to remove the
Sea Kings, which is a considerable simplification. The results
of the announcement I made in August, the investment in the Project
Julius and in the 714 engines for the Chinook, will mean that
all our Chinook fleet will be of one type—the same cockpit,
the same engines and so forth, so that is a considerable simplification.
Equally, we have got the Wildcat, which will replace Lynx, so
it is only in the Merlin going forward where there are going to
be two different variants of one type of helicopters. That is
not desirable but it is a very considerable improvement on the
present situation.
Q427 Chairman: As you know, Minister,
we are entirely with you on the Sea King—entirely. However,
it worries me at any rate that you are creating a fleet within
a fleet in order to save up-front costs in the Merlin fleet with
the consequent expense later on down the line, in other words,
making the precise problem that you are trying to resolve in other
ways.
Mr Davies: Yes, of course.
General Sir Kevin O'Donoghue:
If I may, Chairman, we have 38 Merlin Mk1s of which we are going
to convert 30. We will not then use the other eight for anti-submarine
warfare. We have 28 Merlin Mk3s currently flown by the RAF for
land use. We will need to modify those so they can operate off
amphibious shipping. We will probably need to convert the tail
rotors so they fold, certainly the main rotors will need to fold,
so we will in effect have one fleet of 58 Merlins, 30 of which
will be optimised for anti-submarine warfare and 28 of which will
be optimised for amphibious lift. Actually, the helicopters are
the same.
Mr Davies: Can I just add something
which will be of interest to Mr Jenkins and Mr Jenkin as well,
and that is that the work that General Sir Kevin has just described
on the tails and the heads of the Merlins and so forth, marinising
them, making them all suitable for naval work, will be work undertaken
by AgustaWestland in this country, so that is a positive contribution
to the Defence Industrial Strategy in terms of helicopters in
this country. I thought I would just make that point.
Q428 Chairman: I think I would describe
this start to the morning as rather tetchy because there was this
announcement about helicopters that was apparently released by
the Ministry of Defence at 9.30, it was sent to the Defence Committee
at 10.39 and you announced it in front of us after the release
but before it was sent to us. Let us get on to something different,
which is the Major Projects Report, which was released
at one minute past midnight this morning. It is pretty startling
stuff, I think you will agree, with the Auditor and Comptroller
General saying the current defence programme is unaffordable,
that the delays to the carriers reflect poor value for money,
that the Ministry of Defence has a multi billion pound budgetary
black hole which you are trying to fix with a "save now,
pay later" approach. Normally the Major Projects Report
is pretty bad reading for the Ministry of Defence and people
within the Ministry of Defence feel they are doing a bad job;
yet in this case it is quite plain that people within the Ministry
of Defence are doing a pretty good job because Mr Morse says that
the budgetary black hole gives a misleadingly negative picture
of how well some major projects in the MoD are managed, but overall
would you not say that it presents a pretty bleak picture?
Mr Davies: Chairman, I think it
presents a fair picture in the sense that we obviously do not
have ideal financial circumstances. We do not have an unlimited
amount of money. It would be very nice to have an ideal amount
of money.
Q429 Chairman: It sounds like the
statement of the Japanese emperor after the dropping of an atomic
bomb.
Mr Davies: I think he did say
something like that. I seem to remember the quotation. I think
the war had not gone entirely favourably for Japan or something,
but my responsibility is to operate within the constraints that
we have, which are perfectly understandable constraints. The defence
budget has been increasing, as you know, by 1.5% in real terms.
We cannot reasonably expect the taxpayer to pay more than that.
We have in addition got the UOR mechanism for financing current
operations and we make it a religious principle that we do not
deny anything to operations which commanders there require and
say they need. We have been living up to that. We have been providing
an enormous range of equipment for theatre. Just in my time in
this job we have purchased 700 new armoured vehicles for Afghanistan.
We have purchased completely new body armour. We have more than
doubled the helicopter hours available to us there and there will
be a 50% increase in helicopter numbers there between the summer
of this year and the summer of next year, for example. These are
very substantial changes. At the same time we have made some very
considerable progress which I am proud of in terms of building
up the nation's long-term defence capability, the carriers, for
example, which we have made a lot of progress in building now,
and we will come on to that in a second, the building of the escort
vessels, the Type 45s and Astute, which was launched the other
day, now in Faslane. There is the JSF programme which we are committed
to. We have bought the first three aircraft. There is Typhoon.
These are very important things. I have to say that I think it
would be quite unrealistic not to recognise the very considerable
achievements of the Defence Procurement Programme and I hope that
people do recognise them. Perhaps we are not good enough at blowing
our own trumpet in these respects.
Q430 Chairman: A multi billion pound
budgetary black hole.
Mr Davies: There are limitations,
of course; we cannot do everything. Part of my job is establishing
that we have got the right priorities. We continually review those
priorities. Sometimes we therefore have to say maybe we are going
to have to abandon something or else put it off or extend the
period of procurement of some new system. We did that in the case
of the carriers.
Q431 Chairman: At a cost of over
a billion pounds.
Mr Davies: No, no. If you look
at the figures in front of you—
Q432 Chairman: £1.124 million
in costs in subsequent years.
Mr Davies: But the cost of rescheduling
the carriers, of re-profiling the procurement, was actually £674
million, a lot of money, I know, and you will see that in the
report.
Q433 Chairman: Where are you going
to find that £674 million?
Mr Davies: That is part of the
new cost of the carriers, so we will be finding that over the
period of procurement of the carriers.
Q434 Chairman: Is that the "save
now, pay later" approach?
Mr Davies: I am not trying to
disguise from you that by deciding that we could not afford everything
that we wanted to buy this year we had to put some things off,
but principally the carriers, and I thought it was responsible
to do that with the carriers because we do not need the carriers
until the JSF is available to fly off the carriers and they cannot
be made available before 2016 anyway. That was a rescheduling
which involved no loss of national defence capability but, of
course, it involves a cost. When you push things forward it always
involves a cost and I do not dispute that and do not deny that.
It is a substantial cost, £674 million is over 10% of the
cost of the two carriers, which is about £5.2 billion.
Q435 Chairman: Which is what he describes
as a "save now, pay later" approach.
Mr Davies: I think that is a necessary
thing to do and it is a good deal better, Chairman, than cancelling
a major defence programme. I think that your party are indicating
that they want to cancel the carriers. We are not going to cancel
the carriers; we are totally committed to carriers; the carriers
must be built for the sake of the country's long-term defence
needs.
Q436 Chairman: As you know, I do
not speak for a party.
Mr Davies: I recognise that but
I make the point because that was an alternative. We could have
simply cancelled a major defence programme. I would not have wanted
to do that. The Government would not have wanted to do that. We
have not done that, but we cannot buy in year more than we have
the money for; I recognise that. We all recognise we have to live
under financial disciplines. Every family, every business in the
country has to live under financial disciplines, and if you put
off purchasing something when you do purchase it it may cost more;
that is a fact of life.
Q437 Chairman: How did it come about
that six months after you had done the contracts for the aircraft
carriers you suddenly discovered you needed to delay them by two
years?
Mr Davies: I do not think we discovered
we needed to delay them. We discovered that—
Q438 Chairman: You wanted to?
Mr Davies: I had to look through
the programme and see where we could make some particular adjustment
which would enable us to avoid cancelling important but long term
defence capability, and particularly to avoid not buying in the
short term things we urgently needed in the short term, including
for current operations. This is what I call priority setting.
It always involves difficult choices. There are never simple choices.
There is never 100% on one side of the equation; it does not work
like that. You just have to try and make sure you have achieved
the best overall solution. I believe we did achieve the best overall
solution. I believe that any solution would have involved either
serious loss of defence capability, which we have not done, or
some increase in the full life cost of the programmes that we
delayed. I accept that and we chose the carriers because, as I
have just explained, that involved no loss of defence capability,
and that was a very important consideration in my mind.
Q439 Mr Jenkins: Minister, I do not
think anyone is trying to blame you or this present week's or
year's Government. It is a long term problem. In fact, you may
remember that we sold the homes and the houses and the beds of
our sailors and soldiers and airmen to raise money to fill a black
hole in the defence budget previously, so it is not a new problem.
For 10 years I have been involved with PAC and looking at PAC
Reports where they constantly criticise some of the legacy projects
and have said why do they override them, why do they cost more.
No; it is the feeling that things just have not got better. I
do not feel assured that the Department is any better at turning
down some of the requests to go on the wants list rather than
the needs list and adding to the problem of pushing stuff to the
right and extending this date rather than knocking it on the head.
Do you feel that things are getting better? The Gray report has
come in to point out the weaknesses we have known for 10 years
or more. Why was it not done before?
Mr Davies: Mr Jenkins, let me
deal with both of those points, first of all whether this is a
constant feature of defence procurement and whether it has happened
in the past, and secondly whether things are now getting better.
There is no doubt in my mind that it is a constant feature of
defence procurement and there is no doubt that some of my predecessors
have taken the wrong decision. Take the Conservative Government
of the early 1980s when John Nott was Defence Secretary. They
tried to get rid of the carriers altogether because they found
themselves in a financial crunch, just a few months, as it happened,
before the Argentineans invaded the Falklands. The consequences
of such a deletion of major defence capability could have been
absolutely disastrous for this country. That is not what we have
done on this occasion. We have done the right thing. We have kept
to the programme; we have not cancelled the programme. We have
found other ways of resolving the matter though it does involve
a longer through life cost. As for whether things are getting
better, I am determined that they should get better and since
I have been in this job I have been trying to do that. We have
been taking a very careful look at priorities. I have set up a
new committee called the Procurement Policy and Priorities Committee,
which meets every month and involves, of course, my two colleagues
on either side and many other people, and we try to get a consensus—I
am a great believer in trying to get consensuses in organisations;
organisations work best that way—as to what our long term
priorities really should be. We are trying to accelerate the whole
equipment programme. In my view the major reason for the cost
overruns in the past has been excessive delays so I have tried
to get rid altogether of some of the more cumbersome and costly
and time-consuming procedures, particularly formal international
invitations to tender, which I have got rid of in a number of
cases. We have just talked about the Future Medium Helicopter.
I think I have talked before about the MARS procurement programme.
Similarly in armoured vehicles; we have got rid of that. We are
procuring the new reconnaissance vehicle and the Warrior upgrade
on a much faster track system. What I like to do is have competitive
dialogue, which is turning the thing round instead of specifying
what you want, which is the traditional way of military procurement.
You spend months but it is usually years and can occasionally
be decades with often an awful lot of expert and splendid people
spending two or three years in a job and then another lot coming
in for another two or three years, trying to specify some new
requirement and then you go out into the world and you say, "Would
you like to bid for this and have a year to conduct the tender
and we will spend a year evaluating it?". We have tried to
get rid of all of that. What I have tried to do is turn the thing
round and go for competitive dialogue, saying, "Look: we
need this requirement. You, industry, tell us how you think we
can best meet it". You do not get 100% satisfaction in all
the theoretical requirements that you might have dreamt up, but
you get something which is practical, something that is much more
rapid, something that saves time and something above all that
reduces technical risk. We are doing that in everything from armoured
vehicles to the MARS tanker programme at the present time, so
we are changing our procedures there. I was also very concerned
that no-one had individual responsibility for defence procurement
programmes. I come from the private sector. We would never dream
of running an organisation like that, so we have for the first
time now established that one individual, one man or woman, has
personal responsibility for the conduct and management of every
single project in our programme. There are about 30 of them and
we are making them chairmen of the programme boards, who have
all been appointed in recent months by Admiral Lambert, and we
are bringing them together in January as a matter of fact to go
through their new responsibilities. They have already been told
they are responsible. If something goes wrong, if there is some
sort of screw-up or mess-up of some kind, it is their job to bring
that to our attention, to do what is necessary to resolve the
matter. If it does not work it is their responsibility; if it
does work they get the full credit for it.
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