1 Decision making on the Typhoon project
1. The Eurofighter Typhoon (Typhoon) was originally
conceived in the 1980s during the Cold War to perform mainly as
an air-to-air fighter.[2]
It is highly capable in this role and is now being used to defend
United Kingdom and Falkland Islands airspace.[3]
It has also been part of recent efforts to impose a no fly zone
in Libya. Changing operational requirements mean the Department
is upgrading Typhoon to become a full multi-role fighter aircraft
that can perform both air defence and ground attack missions by
2018.[4] The anticipated
total cost of buying, upgrading and supporting Typhoon is £37
billion, of which £18 billion had been spent at the end of
2009-10.[5]
2. The Department originally approved an upper
limit of £16.7 billion for the development and production
of 232 Typhoons in 1996.[6]
These costs are now forecast to be £20.2 billion, £3.5
billion more than was approved, even though the Department is
buying only 160 Typhoons, 30% fewer aircraft than originally planned.[7]
This increase reflects the Department's over optimism when
estimating how much Typhoon would cost - an issue that has been
reported previously by the Committee on other equipment.[8]
3. Most of the £3.5 billion cost increase
on the Typhoon project has been on development costs which have
more than doubled from £3.2 billion to £6.7 billion.
Production costs have remained within the original approval of
£13.5 billion, though 30% fewer aircraft are being procured.[9]
4. The Department excludes certain elements when
reporting the unit costs of Typhoon. It bases its unit cost on
production costs alone on the grounds that development costs are
sunk costs from a separate phase of the project. It also excludes
the cost of capital. The Department calculates Typhoon's unit
cost as £73.1 million which is significantly lower than if
development and cost of capital were included - which would give
a unit cost of £126 million. Therefore, excluding development
costs does not present the full picture of the cost increases
per aircraft.[10] If
all costs are included, costs have increased by 75% per aircraft.[11]
5. The Department has made decisions on other
types of combat aircraft which have affected how it plans to use
Typhoon. In 2004, the Department decided to withdraw its fleet
of ground attack Jaguar aircraft early and to spend £119
million to install ground attack upgrades on early Typhoons to
cover the resulting capability gap.[12]
The Department said that it had carried out a cost-benefit analysis
of this decision in 2004, but there is no evidence of this in
the project history. The Department declared this ground attack
upgrade to be combat ready in July 2008, on time and budget.[13]
In 2009, the Department decided to retire its other air defence
fighter, the Tornado F3, early to save money.[14]
Consequently, the Department re- prioritised Typhoon for air defence
tasks at the expense of the ground attack capability introduced
only the previous year.[15]
The Department was unable to demonstrate that it had conducted
a thorough cost-benefit analysis to justify these decisions on
the operational use of its air combat fleet, even though Typhoon's
use has significantly altered as a result.[16]
6. The Department signed a contract for 16 additional
aircraft in July 2009 - the third phase - to bring the total ordered
to 160. The Department made a judgement, based on the balance
of affordability and operational risk, not to order 232 as originally
planned; believing that 160 aircraft balanced its defence needs
against severe pressures on the wider defence budget. The Department
considered that buying this number of Typhoon aircraft fulfilled
its contractual obligations with the other partner nations.[17]
By 2019, the Department intends to have retired the 53 oldest
aircraft leaving 107 aircraft operational. The Committee was not
convinced that the Department had conducted sufficient cost benefit
analysis to underpin difficult decisions made on the Typhoon fleet,
for example in deciding fleet numbers.[18]
7. The 53 oldest aircraft will still have life
remaining in their airframe when the Department retires them.
The Department has decided it that it will be better value for
money to spend the funding it has on upgrading the 107 newer aircraft
to give them greater capability and stop them from becoming obsolete.
Obsolescence has been exacerbated by Typhoon not becoming operational
until two decades after the project started.[19]
2 Q 36; C&AG's Report para 1.2 Back
3
Qq 1, 37, 39 and 41 Back
4
Qq 51, 84 and 88 Back
5
C&AG's Report Figure 8 Back
6
Q 9; C&AG's Report para 2.2. Back
7
Qq 23 - 32 Back
8
Qq 33 -35; Committee of Public Accounts, Twenty-third Report of
Session 2009-10, Ministry of Defence: Major Projects Report,
HC338, 2009-10 para 9 Back
9
Q 26; C&AG's Report, para 2.2 Back
10
Qq 23 - 35 Back
11
C&AG's report, para 2.2 Back
12
Qq 84 - 85 Back
13
Q 85 Back
14
Qq 84 - 85 Back
15
Qq 22 and 86 - 87 Back
16
Qq 84 - 85 Back
17
Qq 2 - 8 and 116; C&AG's Report Fig 1 Back
18
Q 5 Back
19
Qq 43 - 44 and 49 - 51 Back
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