Examination of Witnesses (Questions 40
- 59)
WEDNESDAY 8 MARCH 2000
MR KEVIN
TEBBIT, SIR
ROBERT WALMSLEY,
VICE ADMIRAL
SIR JEREMY
BLACKHAM AND
MR JOHN
OUGHTON
Mr Campbell
40. "Throughout this period, the aircraft
was kept in operational service"—we are talking around
the period 1993-94—"A Chinook MK2 pilot later recalled
`it was quite a concern to us ...[but] we were told to get on
with it.'"
(Mr Tebbit) He may well have said that.
41. That does not concern you?
(Mr Tebbit) It does not concern me now, no, because
we know that the system, as I say, was safe.
42. Okay, I may come back to that. I want to
move on.
(Mr Tebbit) I cannot comment on how pilots were discussing
these sorts of things afterwards. I understand why people should
have said those things.
43. I may want to come back to that. Which do
you think is most important for the MoD when they are deciding
on procurement, cost or value?
(Mr Tebbit) It is a combination of time, cost and
quality, all of those add up to value and it is a matter of balancing
those three considerations.
44. Let us have a look at some examples, p14,
figure 5, the Single Role Minehunters, HMS Bridport and HMS Inverness.
The Report says one of the shortfalls was the recovery of the
Remote Control Mine Disposal Submarines proved problematic in
certain sea states. I understand these are commonly referred to
as "yellow submarines". As a result of this shortfall,
did we lose or mislay any yellow submarines?
(Mr Tebbit) I hope not. I think this is a general
problem in Navies and care does need to be exercised and I saw
them at Vospers last week. Perhaps Sir Robert, who is our expert
on this, could comment on that.
(Sir Robert Walmsley) I have personally been to see
this in a ship because it was a concern of ours. It was quite
difficult to see where the hook from the crane was getting into
what you have called a yellow submarine but what is usually called
a PAP, a Poisson Auto Propulsé, French equipment
and bright yellow so you can see it easily, but they are only
just breaking the surface and with the ship rolling you are trying
to do two things. You are trying to stop the PAP bouncing into
the ship and damaging either the ship or itself and you are particularly
concerned with the safety of the person who is leaning over the
side of HMS Inverness or HMS Bridport when it is rolling seriously
to try to engage the hook from the crane into the eye of the PAP.
45. So we have now rectified the problem. What
was the cost of rectifying the problem?
(Sir Robert Walmsley) I am afraid I will have to let
you have a note on that[14].
We have rectified the problem. In the seven new build ships and
we have to back fit it in the existing five SRMH. I think four
are now left in service.
(Vice Admiral Sir Jeremy Blackham) That
is correct.
46. Can we move on to page 46 and the rather
nice picture of HMS Ocean. There was a landing platform for helicopters
which I believe cost the taxpayer £200 million. It was built,
as I understand it, at VSEL and partly at Kvaerner-Govan. When
was the order placed for HMS Ocean?
(Vice Admiral Sir Jeremy Blackham) 1992[15].
47. And how late was it?
(Vice Admiral Sir Jeremy Blackham) About a year late.
48. I understand that the Department can invoke
damage clauses in the contract if this is the case. Did you invoke
those clauses in the case of HMS Ocean?
(Vice Admiral Sir Jeremy Blackham) Yes.
49. As a general guide the figure for that is
two per cent which on my mathematics would be some £4 million.
Do you think that is a sufficient safeguard for the taxpayer?
(Sir Robert Walmsley) Probably not. Two per cent would
not be my general figure. It is related, I agree, to the production
cost of the item and separately negotiated for each contract.
What we are trying to do is to assess the cost to the front-line
armed Services and particularly to the Deference Logistics Organisation
of continuing to maintain the existing equipment in service. We
try to work backwards from that to assess a nominal percentage
in relation to the delay on the new equipment coming into service
and we then express the clause as so much per cent per month for
the equipment being late. What we have learned from this Committee,
as a result of the Major Projects Report 1997, is that we should
collect those damages as they become due rather than waiting to
the end when we collect the lot. There is nearly always a limit
on that which is where numbers like two per cent come in. They
might accrue a quarter of a per cent a month or half a per cent
a month, but we nearly always want to cap them. There are very
few contracts with an uncapped liability on them which you do
not know until you have pay for it up front in the price. That
is our approach.
50. Can we turn to Box 3 on page 21 and the
Royal Fleet Auxiliary Fort Victoria which I understand was built
at Harland and Wolff and the contract placed in 1986. When was
Fort Victoria due for delivery?
(Sir Robert Walmsley) I think it was 18 months late.
(Vice Admiral Sir Jeremy Blackham) In 1990.
51. When was it accepted into service?
(Mr Tebbit) 1993.
52. It was fitted out at Cammell Laird, was
it not?
(Sir Robert Walmsley) Yes it was.
53. Is that usual practice?
(Sir Robert Walmsley) Absolutely not. We were very
unhappy about the final period of time of this ship at Harland
and Wolff. The Report makes clear that Harland and Wolff did not
really understand or appreciate the Ministry of Defence acceptance
process. The Chairman earlier spoke about a culture of low standards.
We raised 13,000 defects on the Fort Victoria. In a way I worry
that that actually shows that we are ready to pursue this process
ad infinitum and past the point where it is sensible. Lots
of them were paint splashes, scratches, this sort of thing. What
we need to do is to focus much more on the real defects and make
sure they are fixed and deliver the right performance at the right
reliability.
54. There was something else pushing you towards
acceptance and it was writing off half of the 13,000 defects because
there were very strong rumours that Cammell Laird was going to
be closed and if Cammell Laird was going to be closed and your
ship was in its yard then presumably you could not get it.
(Sir Robert Walmsley) That was not the purpose of
removing the ship from Harland and Wolff, to finish off the work
at Cammell Laird. We wanted to do it as quickly as possible. We
thought Cammell Laird offered the best prospect of that.
55. But you are reassuring the Committee that
half of the 13,000 defects were written off and there was not
a rush to get it out of Cammell Laird because of the rumours about
what was happening to Cammell Laird?
(Sir Robert Walmsley) I cannot answer that question
explicitly. What I can say is that we would not write off defects
in order to rush a ship out. If we wanted to rush it out we would
say we can hold those defects over and we move the ship out.
56. Yes, but these are exceptional circumstances,
are they not?
(Sir Robert Walmsley) Our contract was with Harland
and Wolff. There would be no question of us writing off defects.
We keep a log of the defects. The question is were they all sensible.
My contention is that with 13,000 we are beginning not to see
the wood for the trees.
57. You mentioned that the original contractors,
Harland and Wolff, said that they were not aware of the Department's
acceptance criteria and you are smiling so presumably the MoD
did not accept that as an explanation.
(Sir Robert Walmsley) I am smiling because I think
it is astonishing that we should have taken the ship contract
so far through its process before we discovered that the ship
builder, who had recently completed the immense task of refurbishing
the Royal Fleet Auxiliary Argus was still able to claim absolute
ignorance of our acceptance procedures. The reason I am smiling
is I find it hard to credit, but the facts are there.
58. What is also quite worrying is that I think
I am right in saying that the inspection of the weaponry on the
RFA. Harland and Wolff in a sense complained because they said
that the inspection had been carried out to the latest designs
and yet the contract said that the weaponry had not to be to the
latest design. If I as a taxpayer am helping to pay £240
million for a ship, why is it not getting equipment to the latest
design?
(Sir Robert Walmsley) I think this is one where I
would like to say I think Harland and Wolff had a degree of fairness
on their side. It is just a fact that weapons, as was reported
to this Committee in the recent report, are always being modified.
Any big weapons system will have a modification at least once
every six months. Because the ship took so long to build—and,
of course, you have to contract against a firm specification and
during the period of construction modifications are coming out
all the time—it seems to me very unfair on the ship builder
to expect him to give you a fixed price for including modifications
and we did not keep a careful enough record of what the specification
was at the date of order in order to measure the delta in cost
that would have been fairly payable to the ship builder. It was
a dispute. My view is that the fault was on both sides.
59. I understand that £5 million was retained
because of the large number of defects. I am going to ask you
the inevitable question, why did the MoD pay the £5 million
and then have to recover it? They did intend to pay it, did you?
(Sir Robert Walmsley) We did not intend to pay it.
I think I can remember the afternoon we discovered the error.
We moved very quickly to try to get it back. It was an aberration
on our part, it was not an intentional payment and the Report
records it fairly.
14 Note: See Evidence, printed with 44th Report
from the Committee of Public Accounts (HC 319 (99-2000)). Back
15
Note by Witness: The year was, in fact, 1993, not 1992. Back
| 
