The lessons of the A400M experience
1. Introduction
This report was written in response to a request
from the House of Commons Defence Committee that the Ministry
of Defence should undertake an exercise on the lessons to be learned
from experience with the A400M project.
'The MoD should provide us by the end of September
2010 a written evaluation of the lessons learned from the A400M
experience which will establish the most effective basis for future
collaborative projects'.[5]
The report was drafted by Professor Trevor Taylor
of Cranfield University at the Defence Academy, Shrivenham, with
his draft then being reviewed by senior staff at the Defence Equipment
and Support (DE&S) organisation at Abbey Wood, including the
current A400M Team Leader, Director Air Support and the Chief
of Defence Materiel.
2. Method and approach
The generation of lessons from experience is an inherently
subjective activity involving judgement: different individuals
and organisations can derive very different lessons from the same
experience. Risk appetites, personal roles and experiences, and
individual and organisation culture can shape the lessons that
may be identified. The UK and France were partners in the ill-fated
action against Egypt in 1956 but learned very different lessons
from that activity.
Particular care needs to be taken in deriving lessons
from 'projects' which by definition have significant elements
that make them unique. Projects also have internal features and
a particular context. Both are important. A lesson valid in one
context may not be valid for even a similar project which is taking
place in a very different context.
These considerations make it important to articulate
the process by which the lessons articulated below were generated.
The lead author sought to articulate lessons that could be derived
from the views of UK participants in the A400M project and endorsed
by senior MoD staff. Thus, around a dozen past and present officials
were interviewed. They were assured that their individual views
and information provided would not be attributed to them, and
then questioning took a broadly structured form. Interviewees
were asked what they saw as key elements of the wider context
of the A400M project, what problems they had encountered in their
roles, and then how they had dealt with those problems. Finally
they were asked to reflect on the lessons that might be identified.
The intention of the principal researcher was that lessons should
be based on logic and empirical evidence, bearing in mind that
those who later invited to absorb/learn a lesson are unlikely
to respect guidance on weak foundations.
The author was also able to use some internal studies
commissioned or undertaken by the DES over the past three years
and the written views of some former participants in the project.
These studies are not explicitly cited in the report because of
their sensitivity.
3. Provisos
Two timing issues affected the generation of this
report. First the process of setting A400M contract amendments
had not been completed. The unfinished nature of some discussions
made it inappropriate to interview either the representatives
of other A400M partner states or of Airbus and other industrial
partners. Second, like any defence system, the eventual value
of the A400M will become known only after it has come into service
and been in use for some time. The project management focus on
procurement time, cost and initial performance often loses prominence
once a piece of equipment comes into service. To illustrate, the
C17 is today a widely-admired aircraft, not least within the Royal
Air Force, but its development in the 1980s and 1990s was fraught
with technical problems, cost increases and delays, as reports
from the Government Accountability Office and Congressional Research
Service made clear.[6]
Only future events will demonstrate or undermine the value of
the procuring an aircraft with the characteristics of the A400M,
but the range of missions to which it can contribute is a positive
indicator.
This report offers 27 lessons, many of which are
applicable to defence projects as a whole and not just collaborative
cases. However, some are also lessons which the MoD could reasonably
claim to have identified before the A400M came to prominence.
4. Context
Political: a symbol of commitment to European
cooperation
In defence acquisition matters, the UK frequently
is drawn to either relying on the US for a solution (as in the
case of the C17), going alone (as with the successful Hawk project)
or collaborating in both development and production with other
European or friendly countries. UK involvement in the A400M was
and is in part a symbol of the UK's commitment to support for
cooperative European ventures and a vote of confidence in the
value that cooperation on the European level can bring.
Political: the project had limited domestic political
support within defence
In particular some senior staff in the RAF are perceived
never to have supported the project and, even into 2010, would
have preferred that resources be directed instead into additional
C17s. Some in the RAF leadership were reluctant to live with the
risks of a major development project when the C17 was available
from a mature production line.
Also, during the development of the A400M, BAE Systems
sold its civil aviation business, and with it responsibility for
the A400M's high-technology composite wing development and production,
to Airbus/EADS. Thereafter the UK's largest defence company ceased
to be prominently involved with the programme.
Political: Collaborative structure
The project has an unusually large number of partners
(six)[7], even for a collaborative
project. This raises the issue of the extent to which decision-making
should be based on unanimity, consensus or some form of majority
vote. Approvals and funding for the project on an annual basis
must come through six different acquisition systems.
Economic: The existence of a wider market for
the aircraft
Since the project's inception and the Future Large
Aircraft in the 1990s, the wider market for the A400M has been
in the minds of both Airbus and, to a lesser extent, the participating
governments. At one stage it was thought by Airbus that a there
could well be a civil market for a large, rugged transport aircraft
able to operate from poor airfields. In recent years this expectation
has faded, not least as military demands made the A400M more sophisticated
and so costly. However, there is growing awareness that the United
States has not generated a replacement for the C130 and therefore
there is a large potential global military market as C130s of
various versions are retired. This global market could well include
the US itself. Many collaborative projects have enjoyed significant
success in wider markets but the potential of the A400M appears
particularly notable.[8]
Technological/Economic: Implications for civil
industry
The UK civil aerospace sector has benefited greatly
from the rise of Airbus products, particularly because the UK
has been the base for the design and manufacture of the wings
of Airbus aircraft. Had the UK not taken part in the A400M, another
country could have obtained the task of developing and producing
the novel composite wings involved. That country would then have
been well-placed to take forward the application of composite
wing technology on to future commercial aircraft.
Economic/Technological
Airbus was and is an industrial organisation that
had demonstrated an ability to succeed in difficult circumstances,
developing a family of aircraft which had successfully taken on
US competitors and which had come to gain approximately an equal
share of the large civil aircraft market alongside Boeing. It
was an organisation in which governments could feel confident
and which had grounds for confidence in its own ability.
5. Current state of the A400M programme
The fixed-price development and production contract
for 180 aircraft was signed in May 2003, and by 2007 Airbus was
publicly recognising problems with keeping the project on schedule.
The problems became more pronounced in 2008 and, at the beginning
of 2009, Airbus went public in announcing that it would require
amendments to the original contract. More than a year of complicated
and hard negotiations followed with the partner governments, before
there was an agreement in principle that the partners would provide
€2 billion in extra funding and €1.5 billion in loans
in spring 2010. Thus the A400M fell three years behind schedule
and Airbus had to make loss provisions of €4 billion in connection
with the project.
However the first A400M aircraft flew in December
2009. Flight tests thereafter went well and the manoeuvrability
of the aircraft, even with a significant load of test equipment
on board, was demonstrated at the Berlin and Farnborough Air Shows
in 2010. By the end of November 2010 more than 800 hours of test
flight had been completed and construction of a fourth test aircraft
was near complete. An amended contract, to replace that originally
signed, had been initialled and was in national capitals for confirmation,
the partner nations having earlier agreed in principle on the
way forward once the aircraft had flown successfully.
The revised schedule is for first delivery of a production
aircraft to France in 2012, with the UK receiving the first of
its planned 22 aircraft in September 2014. Under the revised deal,
the UK will not being paying a higher sum than was previously
envisaged, with the government having decided to reduce its purchase
from 25 aircraft to 22.
The team does not expect serious problems in remaining
flight tests, although clearly some risk remains. There will also
be some production risk once the aircraft moves into the full-scale
manufacture stage. But throughout 2010 the picture was encouraging
and the UK Government is hopeful of a smooth period to entry into
service.
The recently introduced DE&S 'Sentinel' project
health tool shows the A400M in good shape with more than 75% of
the indicators involved showing 'green'.
6. Lessons
1. The various partners in a collaborative project
see different mixes of defence, economic and political benefits
in participation, and the UK needs to understand although not
applaud the different drivers involved. Participants with somewhat
varying motives are likely to react differently to changes within
the project and in its wider context. The motives of the different
players should be explored and, if appropriate, treated as a risk.
2. It is important to appoint the right sort of people
to collaborative projects, to prepare them thoroughly, to leave
them in post for at least three years, and to recognize their
value. Staff appointed to collaborative projects should be psychologically
comfortable with the politics of a project with a wide number
of stakeholders and drivers. They should be properly prepared
in terms of training and education and left in post for at least
three years to gain familiarity with the complications of their
post, so giving them the chance to exploit their understanding.
Personnel who operate successfully on international projects should
be recognized as having the capacity to work in a demanding context.
Consideration should be given to allowing people to be promoted
in post, especially if it can be shown that a collaborative project
has moved to a new more demanding phase. Retention allowances
are a valuable tool to encourage people to stay in post longer
and the A400M project has been helped by OCCAR postings normally
lasting for four years.
3. Foreign language skills among UK personnel are
an important aspect of being able to build close relationships
with foreign stakeholders, although the official A400M project
language is English, not least because of the number of partner
countries.
4. Collaborative projects ideally address clear shared
needs/common requirements for which no off-the-shelf solution
or near solution is available, although this means the adoption
of some managerial and technological risk. Ideally collaborative
projects should target significant 'gaps in the market'.
5. As with any major defence development project,
the early stages of a potential collaborative project should be
fully staffed and resourced, so that the project can be appropriately
defined and de-risked. Both governments and industry appear to
have committed to A400M delivery dates, costs and performance
before proper appreciation of many important risks. The degree
of protection for governments provided by a fixed price development
and production contract for a very large project should be recognised
as limited.
6. An agreed (government and contractor) and thorough
risk register should be completed as a key element before firm
commitment to the project is made. Clearly such a register would
need constant review and updating.
7. A procurement approach should reflect the risk
appetite of both the government and the company/companies. The
single phase development and production contract approach used
in the A400M required governments to tolerate a significant risk
that the company would fall short in some respect. Governments
with a lower risk appetite should opt for a staged approach to
a project in terms of detailed commitment to performance, time,
cost and numbers to be bought.
8. Payment arrangements agreed in very large contracts
should be based on the contractor's demonstration of specified
progress, preferably in the framework of an Earned Value Management
(EVM) structure. Deferring a significant element for a final payment,
while sensible, may not of itself assure that the contractor will
maintain commitment to a specified time, cost and progress schedule?
However, in ambitious projects involving significant technical
challenge, governments should recognise that they may have to
demonstrate flexibility in the application of written agreements.
An EVM scheme should not be thought of as a 'fire and forget'
instrument.
9. Different national systems for requirements setting,
approvals and funding hinder the smooth progress of collaborative
projects. European countries most commonly involved in international
development projects should consider the development of a common
acquisition system, including a common approach to requirements
engineering and to staged approvals for such projects.
10. A prime contractor accustomed to operating in
the civil commercial sector may struggle to understand fully the
military requirement and the centrality of fixed price development,
and governments should undertake a major educational effort to
ensure this does not occur. The change of mindset required in
a company may well involve change in organisational culture, and
the effort to bring about such a transformation should not be
understated. The Ministry of Defence needs to recognise the risks
of dealing with a contractor which operates primarily in the civil
sector and should communicate clearly with the development team
as to what it has diagnosed as key technological challenges and
the importance of cost control in the development phase alone.
Communication should be verbal and informal as well as written,
and be directly aimed directly at the numerous staff doing development
work.
11. The scenarios against which a proposed system
is judged are central to the evaluation of that system and so
must be selected and assessed rigorously. The range of tasks against
which a proposed system is judged should be assessed by an independent
authority without close ties to any particular branch of the armed
forces. In major defence development projects, the scenarios that
appear most relevant can change over time. The UK evaluation of
the relative value of the A400M compared with other aircraft changed
between the original decision to take part in the project and
the project review in 2009-10, not least because of experience
in Afghanistan.
12. Seeking to incorporate varying national requirements
into a single programme brings risk but can generate a system
with the flexibility and adaptability needed in the 21st
century. Had the UK procured an aircraft that simply met its own
perceived requirement at the end of the 1990s, such an aircraft
would not have been as useful as the A400m is expected to be.
13. In estimating costs and risks, consideration
should be given to the experience of other companies and governments
in developing comparable systems, and there should be no assumption
that the UK can avoid the problems that comparable programmes
experienced. The A400M development might have been expected to
run into significant technological challenges, given experiences
in the US with the C17 and the C.130J. Credible means to manage
the risks of problems met by others should be articulated.
14. A fixed price development and production contract
does not negate the need for a full dialogue between customer(s)
and supplier as the project advances. OCCAR and Airbus, in addition
to the revised contract, should consider a code of conduct to
direct their behaviour with regard to transparency, honesty and
trust. More generally there is value, especially when dealing
with a new supplier, in generating an early MoU/MoUs between customer(s)
and the prime contractor (and major sub-contractors) articulating
how all sides will behave as the project advances.
15. A fixed price development and production contract
does not negate the need for the MoD to make contingency provisions,
especially for large projects including significant technological
and managerial risk. This constitutes a further argument for the
establishment of a central MoD contingency fund as proposed by
Tom McKane in his Enabling Acquisition Change report of 2006[9].
Such a fund could play a valuable role, especially when there
is a shared approach to risk management.
16. There is widespread awareness that decision-making
on collaborative projects is normally easier with a small number
of partners, with two being the most attractive number. For some
projects, such as the A400M, a larger number of partners are needed
to create a viable project. Because decision-making in very large
multi-partner collaborative projects can be protracted, the UK
should seek to establish a leadership role, normally with one
other partner, early in a collaborative project's life. Two states
could then establish the key elements of the project, which others
who joined the project later could not change. The UK and its
partner would need a shared conception of what 'leadership' entailed,
including recognition that it could not be a matter of presenting
others with a 'take it or leave it' set of propositions.
17. Contracting with a single-project company, such
as Airbus Military Societad Limitada (AMSL), which was set up
to deliver one contract, even with parent company guarantees,
was not an encouraging experience. The MoD should wherever possible
contract with a well-resourced prime contractor, even for collaborative
projects.
18. In evaluating development and production offers,
the MoD should take account of all the development commitments
of the prime contractor and the leading companies involved, and
assess them as a risk.
19. Even companies which have developed large and
challenging development and production projects do not necessarily
have high project management skills throughout the organization.
Government contracts personnel should work hard to identify and
communicate with those who will actually deliver a project.
20. The A400M customers' management structures (Abbey
Wood project team, OCCAR team, Programme Committee and Programme
Board) could cope with the stresses of what for a defence project
was a sudden onset crisis brought about by Airbus demand for a
re-negotiation of the contract in 2009. The sources of this ability
to cope should be explicitly recognized. The effectiveness of
the Programme Committee and Board was founded upon the members
of these bodies being :
a) known to each other for some time, which supported
their ability to interact frankly, honestly and with trust;
b) intellectually and psychologically comfortable
in addressing an international project with major defence, industrial,
financial and foreign relations implications; and
c) aware of the limits of their delegated powers,
ready to make choices within those limits and content to pass
up even to the ministerial level matters that lay beyond their
delegation.
In addition other positive factors were:
d) the internal communication system and relations
within the relevant UK groups that meant that the UK team could
maintain coherence when matters at some points were being dealt
with (on a part-time basis) by the minister for Defence Equipment
and Support, CDM, a 3* RAF officer, and a 2* civil servant, as
well as the full-time A400M team leader;
e) The generation within the UK of a clear sense
of the financial-military value of the A400M in comparison with
other aircraft, and of the minimum extra funding that Airbus would
need in order to maintain its commitment to the project. The UK
was able to adopt a shared appreciation of what an acceptable
outcome would comprise.
f) the happenstance of a UK minister who, because
of his exceptional language skills, would quickly communicate
freely with other partner representative.
Dealing with the crisis, however, owed nothing to
any prior thought or planning about crisis management as a specific
area. Whereas planning for crisis management is widely advocated
at the organisational level, at the project level it is assumed
that 'issue management' in which particularly difficult questions
are pushed upwards through the sponsor and even the board, can
cope with any occurrence.
21. Continuous transparency between supplier and
customer reduces the probability of a sudden onset crisis in a
major defence project, and the signing of a fixed price development
contract does not mean that a customer should not work to maintain
full awareness of progress (see Lesson 14).
22. Rigorous commercial and military logic, alongside
expertise in areas such as logistics, programme management and
technology, matched with political acumen, may be needed to rescue
a struggling project, and crisis management needs to be able to
draw on such skill sets.
23. When a major defence project encounters technical
and managerial challenges, having a collaborative basis should
not be entirely bad news, since it has access to a broad range
of expertise and several parties are available to share any extra
cost burden.
24. The A400M demonstrates that Europeans can move
away from strict application of the juste retour principle although
governments still require a sense that their economies will enjoy
an appropriate return from participating in a collaborative project.
This should not be regarded as an overwhelming disadvantage of
collaborative projects. Workshare arrangements should be viewed
a risk and managed accordingly. They do not constitute a risk
that can be completely avoided. The sub-contracting process for
the A400M was clearly preferable to that for Tornado or Typhoon,
demonstrating that Europeans can learn to improve collaborative
performance.
25. It is difficult to find the right amount of empowerment
for the international governmental team managing collaborative
projects. A balance among the following factors must be found.
a) A significant national team is needed to clearly
define and found the project. Project expertise can bring influence
disproportionate to the size of a country's planned off take.
b) The more a collaborative project contains
individual national requirements above the common base requirement,
a larger national team is likely to be needed.
c) The better founded and defined the project,
the smaller the home team that should be needed during contract
implementation. However, when things go wrong, a body such as
OCCAR is unlikely to be given much power to resolve issues.
d) Slow decision-making is inevitable if the
international project management team has only very limited discretion.
The OCCAR model appears as the best international project management
developed so far.
e) Throughout a project's life, home team staff
are needed to ensure consideration of Defence Lines of Development
(DLoDs). As a project matures, more home staff should be needed
to deal with detailed and integrated delivery of all (DLoDs).
If a project is novel and not simply a replacement for a similar
system, DLoD issue will loom larger.
The MoD understands the advantages and risks of empowered
international contract authority. Those charged with managing
those projects on behalf of governments should be experienced
and sufficiently senior that they can command maximum confidence
in national capitals.
26. The UK can gain influence from being a second-ranked
but significant partner when it enjoys a reputation for impartiality
and expertise. This is because the first rank partners may have
significant doubts about each others' motives and drivers. The
UK 2* and 3* representatives have been chosen to chair both the
Programme Committee and Programme Board.
27. 'Be careful what you wish for' is a useful adage.
The governments were anxious to pass financial, technical and
perhaps reputational risk to a prime contractor while the prime
contractor was anxious to avoid excessive customer intervention
in the development process. In the event, the customers experienced
significant operational and financial problems, and arguably suffered
reputational damage, while the contractor ended up in a supplicant
position vis-à-vis the customers seeking contract modifications.
The contractor also incurred significant extra costs. Large defence
projects are truly complex, and can evolve in ways that cannot
easily be anticipated.
7. Conclusion
This report identifies a significant number of lessons
from the A400M experience, derived centrally from the views and
experiences of the staff involved.
It is clearly a separate task to make MoD and other
governmental staff who may become involved in defence acquisition
to be positively aware of these lessons and persuaded of their
relevance. This clearly needs to be done alongside thinking that
has emerged from experience with other international projects.
The Committee invited the MoD to search for 'the
most effective basis for future collaborative projects' but the
A400M is a reminder first that every collaborative project has
its own characteristics. This project accommodates a range of
national defence, industrial and commercial, and foreign policy
interests which evolve constantly rather than remaining constant.
It could thus reasonably be described as a complex task in which
significant risk is unavoidable, but where the potential rewards
are great.
Most, but not all, officials contributing to this
study recognised that the alternative to a collaborative project
is not usually a national project but to procure a foreign piece
of kit, often from the United States. In the case of the A400M,
there is of course no equivalent US piece of equipment, and collaborative
projects with this attribute should have particular resilience
providing they meet a real need in Europe.
The UK staff at all levels who contributed to this
project see the A400M as good value, not least because UK expertise
and operational experience has led to a design solution with a
very close fit to UK-specific requirements, yet the UK has incurred
only about 14% of the programme costs. The £850 million development
cost to the UK of a tailored solution is viewed as worthwhile.
The officials who helped to shape this study also
saw that, if the UK is to sustain a defence industrial capability,
have any aspiration for 'operational sovereignty' and avoid dependence
on a major outside supplier, collaborative projects will be needed.
They need to have their difficulties understood and to be managed
as well as possible in the political context of their time. Thus
the most important A400M lesson may be to work to run collaborative
projects better and not expect to be able to avoid them.
Professor Trevor Taylor
Cranfield University
Defence Academy of the United Kingdom, Shrivenham
20 December 2010
5 House of Commons Defence Committee, Defence Equipment
2010, Sixth Report of the Session 2009-10, London, the Stationery
Office, 4 March 2010, p.23, http://www.publications.parliament.uk/pa/cm200910/cmselect/cmdfence/99/99.pdf,
accessed 25 October 2010. Back
6
The Wikipedia report on the Boeing C17 Globemaster is authoritatively
referenced: see http://en.wikipedia.org/wiki/Boeing_C-17_Globemaster_III,
accessed 25 October 2010 Back
7
Luxembourg is the seventh country involved but it is procuring
its one aircraft through Belgium. Back
8
While Malaysia is the only firm customer for the aircraft, Airbus
was reported in July 2010 to have talks with 36 countries interested
in the aircraft, Amy Wilson, 'Airbus holds talks with 36 countries
…' Daily Telegraph, 4 July 2010. Back
9
Enabling Acquisition Change: an examination of the Ministry
of Defence's ability to undertake Through Life Capability management,
A Report by the Enabling Acquisition Change Team leader, London,
MoD, June 2006, paras 1.9 and 6.30 Back
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