Examination of witnesses (Questions 120-139)|
WEDNESDAY 2 MAY 2001
WALMSLEY KCB AND
120. If you had to go through this again, would
you recommend PFI for this project again and would you recommend
PFI for a similar project in the future?
(Sir Robert Walmsley) For a ship which has a commercial
employment as part of its operational service, it seems to me
entirely appropriate to recognise they are merchant ships. Given
that the great skill in reducing the cost to the MoD lies in managing
the ships in such a way that they are saleable in the commercial
market place, in terms of cargo carrying capacity, it seems entirely
reasonable to me therefore that we need to give as much freedom
as possible to the owner and manager of those ships. What that
means is that private finance, from my point of view, is absolutely
the right way of doing it, because we do not want to own the risk
of securing that employment in the commercial market place for
those ships. We only need four for day to day work. We have two
spare. The costs are offset to us by those ships earning revenue
for their owner in the commercial market place. That is not a
risk the MoD wants to have. The answer is yes, although it will
be a mighty long time before we need another sealift ship. I do
not support PFI for warships or any of that nonsense.
121. I wish Harland & Wolff well, having
been the minister responsible for its privatisation, but I know
that it has been bedeviled in the past by technical complications,
particularly of the SWAPS vessel in the North Sea and the AOR.
It seems clear but can you confirm that the Ro-Ro vessels will
not provide any sophisticated or technical difficulties which
are likely to cause delays, because there has been a record of
unexpected technical problems which have delayed and caused difficulties
for Harland & Wolff. Are you fully satisfied that the Ro-Ro
contract is fairly straightforward?
(Sir Robert Walmsley) I am fully satisfied and what
is more these North Sea vessels ended up costing a colossal amount
more but they were not late. They have done a very good performance
on delivering ships. We are quite satisfied that, given that this
is a proven design, a design coming from Flensburger, and that
there are very good information flows not just promised but actually
happening now between Flensburger and Harland & Wolff, and
because I have seen what is happening at Harland & Wolff with
my own eyes and seen their schedules and their method of managing
projects, I am absolutely confident that they can build it.
Mr Viggers: I must record that a number
of vessels have been seriously late, including the SWAPS, but
there is no point in pursuing that.
122. Will insisting on British manning for the
Ro-Ros present any employment difficulties, given that this is
not a warship?
(Sir Robert Walmsley) No, because we plan to use sponsored
reserves. There is quite a complicated new regime, which is one
of the reasons why signing the PFI contract is taking us much
longer than I would have expected. It is something called tonnage
tax which I have yet to have an absolutely lucid explanation of,
even from those who are real experts in this market place. What
tonnage tax means is that, in exchange for entering into the regime
for a period of ten years, the company will both train and employ
British seamen on a British flagged vessel. That gives them certain
tax benefits. We expect Andrew Weir Shipping to enter into the
tonnage tax regime and that will provide therefore, not just through
the sponsored reserve scheme, British seamen employment and training.
The crew of a Ro-Ro ferry is about 19 or 20 people. These are
not big numbers The current estimate, which we asked for before
we came to this hearing, of British seafarers is 28,000.
123. Even a ship with a British flag and 20
sailors on board is a plus and must not be scuppered. I wish there
(Sir Robert Walmsley) What people have been concerned
about is are there enough British seafarers to man the Ro-Ros.
124. 28,000 seafarers? What categories of people
are you adding up to make that because there are nothing like
28,000 merchant seamen.
(Sir Robert Walmsley) I have not the slightest idea.
125. For a former secretary of the Parliamentary
Maritime Group, that is a hell of a lot bigger than the Merchant
(Sir Robert Walmsley) That is the figure.
126. Before we leave ship building, I would
like to declare a constituency interest, like other south coast
MPs, in the type 45 destroyer. Now that we are some way into the
programme, do you still hold to the view that you expressed when
you came before the Committee two years ago that competition for
the follow-on production order is necessary to give ship yards
the incentive to improve their performance? Are you satisfied
that the collaboration between Vosper Thornycroft and BAE Systems
on the design is effective and progressing well?
(Sir Robert Walmsley) The answer to the first question,
is competition necessary, is that it remains my preferred method.
It is not the only method. If I cannot have competition, I would
rather have the ships and get them by some other way. In terms
of cooperation between BAE Systems and Vosper Thornycroft, in
the design office which is undertaking the top level design of
the ship, the staff of the two ship yards are working together
hand in glove. I think you would find it quite difficult to tell
who came from where. At that level it is working well. What I
had not envisagedand it is just as well to own up, I think,
sometimes when you fail to predict something strategicis
the huge tensions which would develop between the more senior
components of the two companies as each of them, for all the perfectly
respectable and understandable commercial reasons, tug the tablecloth
as hard as they can to themselves and are terrified to let go.
They are trying to tug it with one hand towards themselves and
trying to shake hands with the other. I had not quite understood
how enormously difficult that would be. It has worked elsewhere,
it is not working as well as it should do here. Does that mean
it can never work? No. Does that mean we should not have tried?
I do not think so. I still think it is a good idea not to put
all one's eggs in one basket, if I can put it as crudely as that.
What we have obviously been subject to, and I think it is as well
to get this out in front of the Committee, is quite a deal of
alternative procurement strategies being put forward by various
people, all of whom have got a good axe to grind and why should
they not. I think these alternative ideas deserve a great deal
of careful consideration. The truth is that people like me get,
I think, quite committed, you know, I thought of the original
idea and it is quite difficult sometimes to step back from it
and be absolutely clear in your own mind that you are being as
objective as you want to be. I want to do the right thing, not
just what I first thought of. So, with my Minister's very strong
support we have, yesterday, informed the companies involved in
this that we are going to seek an objective third party view of
the advantages and disadvantages of various procurement strategies.
I commissioned the work using RAND Europe. The reason is that
they did some remarkably constructive work on the Joint Strike
Fighter Procurement Strategy head on competition: is this the
right strategy or should we be spreading the work out between
people. They have done similar work on US carrier programmes,
they have done similar work on US submarine construction programmes,
all of which are potential head to head competitions. Is that
a good idea? Is it not? They will not determine the answer. They
will provide us with objective advice on the advantages of various
strategies, including some new ideas that we have had and put
to them. We want to bring that work to a conclusionlet
us just put it like thisin the coming weeks.
127. Covering which projects?
(Sir Robert Walmsley) I have some careful words for
this. Certainly covering the Type 45 but in the context of our
total warship building and indeed warship repair because of the
connection between the Type 45 programme and Portsmouth Naval
Base and the operation of that. So, looking at the Type 45 in
the context, taking into account the current programme, it is
no good if we have not got somewhere to build all the modules
for the carriers and then bring them together somewhere, it is
no good if we do not preserve enough capability to construct attack
submarines. So Type 45 we want a very detailed piece of work on,
and we want it done in the wider context over our programmes for
the next ten years.
128. You talked about this tension, but surely
this tension has arisen because of the lack of symmetry in the
positions taken by the two firms in that BAE Systems has put in
an unsolicited bid for all the destroyer orders whereas Vosper
Thorneycroft has, at best, only been hoping for a share to enable
the competition to proceed.
(Sir Robert Walmsley) It is indeed asymmetric but
that unsolicited bid was, of course, BAE Systems' choice. There
was nothing I could do about that. Martin Jay from Vospers, who
is a very close collaborator with me on a huge range of defence
programmes, has already had it made clear to him, and he has always
understood that he too could make an unsolicited bid. I simply
think that if you look at the capacity of the two facilities it
would be very, very unlikely that any shipyard that Vospers were
imagining wanting to open would be capable of pushing through
12 ships but if they want to make such a proposal that is up to
them. I think it would be a great pity but they have taken so
long to do it. All I can say is that our communications with both
companies at the shipyard level and with the prime contractorI
am separating very carefully BAE Marine from BAE Systems prime
contractour communications remain open and what seems sometimes
like pretty near continuous.
129. Thank you. It seems to me that if the Ministry
of Defence and your own organisation can collaborate with the
French on the production of an aircraft carrier that two British
companies co-operating on the building of British warships ought
to be a doddle. I really find it rather intriguing the senior
management of two British companies
(Sir Robert Walmsley) I do not think we have proved
we can collaborate with the French on an aircraft carrier, Chairman,
but I absolutely accept the thrust of your remarks.
130. Any idea just of the timescale for the
(Sir Robert Walmsley) I did say in the next few weeks,
by which I mean not next year, sometime this summer.
Chairman: If this Committee, a strange
bunch of people, can collaborate, I hope Vosper Thorneycroft and
BAe will be able to.
131. It is quite clear from Sir Robert's remarks
that he is not just looking at the Type 45 procurement but also
at the wider range of competition within the warship building.
Nothing less than a review of the old system whereby there were
preferred warship builders at a time when there were a large number
of yards and some were preferred for the construction. Would Sir
Robert be prepared to send a copy to this Committee of the terms
of reference of RAND?
(Sir Robert Walmsley) I would just have to look through
them. I will send them to the Committee and when I have looked
through them I will have to decide under what terms I have sent
them to the Committee. There is no difficulty at all. I cannot
remember what is in them, detailed enough, to say whether we would
be happy to have them published.
132. If you wait ten days, Sir Robert, we will
not be able to read it.
(Sir Robert Walmsley) I will do it.
Chairman: I am sure you have thought
of that. Right, the last group of question will be on the lessons
133. One of the lessons of Kosovo was the need
for precision guided bombs that utilise GPS capabilities when
weather prevents laser designation. Could I ask what progress
you are making with the procurement of Enhanced Paveway missiles?
In particular, whether the software and other difficulties in
upgrading the Tornados to GR4 standard are likely to hinder the
acceptance of Enhanced Paveway?
(Sir Robert Walmsley) I think you have listened to
me quite enough actually over the last hour, I will ask Vice-Admiral
Blackham if he would like to respond.
(Vice-Admiral Sir Jeremy Blackham) As far as the Paveway
laser guided bomb is concerned, we have started the process and
we expect to have the weapons in service later this year.
134. You are still expecting to have it in service
during the course of this year?
(Vice-Admiral Sir Jeremy Blackham) Yes. That is an
interim solution, that is the Paveway decision. Of course, we
have a programme for a full precision guided bomb capability that
we had intended and still intend to bring to service by 2006.
135. Yes. I was just going to come to that.
You are only going to buy a fairly small stock level because you
are only five years away from Staff Target (Air)1248?
(Vice-Admiral Sir Jeremy Blackham) Yes. Though of
course the source of that stock may very well still be available
to us if we use them.
136. Indeed. Just a wider question, which is
very much for you, Admiral. The Enhanced Paveway is one of a growing
number. I am thinking of Maverick, Brimstone, Storm Shadow and
of course you have the big Tomahawk missile. There seems to be
a growing inventory of precision guided weapons, some of which
were gapstoppers while we were waiting for others and so on. Do
you think there is a need to reassess whether we have rather a
large inventory for a small country with all the costs involved
in having that? It is beginning to look like our helicopter, if
you forgive my going back to a sensitive subject, Sir Robert.
(Vice-Admiral Sir Jeremy Blackham) I am very aware
of that last point. There is a cost in all of these and, naturally,
I am not interested in having greater costs than we have to have.
That said, there is a range of very different circumstances in
which these weapons are employed. The circumstances of a conflict
in, let us say, a desert environment against armoured vehicles
are rather different from those of the sort of operation that
was conducted in Kosovo. The targeting will be different, the
targets themselves will be different, and the rules of engagement
will be different. It is that really that leads us to have a range
of different weapons so we can be sure that we can attack the
right target with the right weapon in the right circumstances.
That is a rather bland statement, I can give you more specific
details if you like. At the moment I am satisfied the weapons
we have got each have some unique capability which we need.
137. I hear what you say but it is extraordinary
that we seem to have such a range of relatively small numbers
that we are buying of all these different precision guided anti-ground
missiles, while at the same time I think we are the only serious
military power that does not have a medium range anti-air missile.
That is the case, is it not, there is no other major military
power that has no weapons at all other than that short range group?
(Vice-Admiral Sir Jeremy Blackham) A ground based
138. A ground based anti-air missile.
(Vice-Admiral Sir Jeremy Blackham) We do have ground
based air defence missiles.
139. Only short range ones.
(Vice-Admiral Sir Jeremy Blackham) We have one of
the most effective ones that there is. There are other longer
range weapons. I could not say with any certainty that we are
the only nation that has not got medium to long range weapons
but certainly we do not have any. As I have said twice, and I
apologise for boring you again on this subject, we are always
addressing what it is we are trying to achieve and what the overall
capability outcome we want is and there are various ways of cracking
these different nuts. In our case offensive air is one of the
ways in which we intend to deal with this, so is our overall air
defence capability, both ground based and airborne.
1 Note by witness: A summary will be provided
in due course. Back