Select Committee on Defence Appendices to the Minutes of Evidence



ContractorContract Type Procurement Route
Eurofighter GmbH Airframe consortium comprising: Alenia, BAe Systems, EADS (Deutschland), and EADS (CASA). Fixed prices for airframe and aircraft equipments, with a target cost incentive arrangement for aircraft equipment integration. Non-competitive, but with international sub-contract competitive elements, the value of which amounts to some 30% of the overall value of the prime contract.
Eurojet GmbH Engine consortium comprising: FIAT, ITP, MTU, Rolls Royce. Fixed price.Non-competitive, but with international sub-contract competitive elements, the value of which amounts to some 10% of the overall value of the prime contract.

ContractorContract Type Procurement Route
Eurofighter GmbH Airframe consortium comprising: Alenia, BAe Systems, EADS (Deutschland), and EADS (CASA). Overall maximum prices for production investment and production of airframes. Overall firm prices for production investment and production of aircraft equipment. Non-competitive, but with international sub-contract competitive elements, the value of which amounts to some 30% of the overall value of the prime contract.
Eurojet GmbH Engine consortium comprising: FIAT, ITP, MTU, Rolls Royce. Overall Maximum prices for production investment and production of engines. Non-competitive, but with international sub-contract competitive elements, the value of which amounts to some 10% of the overall value of the prime contract.

Breakdown of Procurement costs
(All figures at outturn prices in £m)
Estimate at 31 March 200018,832
Estimate at time of MoD approval—November 1987 17,364


  Reasons for variation from cost approved at MoD approval in November 1987:




378 Difference in annual price uplift between industry specific indices and GDP deflator for development (+£224m) and production (+£154m).
Changed requirement239 32Provision for integration of new weapons and sensors not contained within original approval. Includes: Conventionally Armed Stand-off Missile (CASOM), Advance Anti-Armour Weapon (AAAW), Low Level Laser Guided Bomb (LLLGB), Thermal Imaging Airborne Laser Designator (TIALD) (+£239m)

Deletion of gun (¸£32m).
Technical Factors316 Higher than expected development costs, notably for equipments.
Contracting Process108 165Reprofiling and adjustment of anticipated Tranche 2 and 3 Airframe, Equipment and Engine prices (+£103m). Introduction of benefits to be assumed from planned implementation of Smart Acquisition processes (¸£165m). Reassessment of the cost and timing of integrating new weapons (+£5m).
Procurement Strategy413 German withdrawal from certain equipments (+£106m); Reorientation costs (Development Assurance Programme to bridge gap between development and production investment, (+£28m); extension of the Integrated Logistic Support programme (+£45m); Eurofighter/Eurojet GmbH management costs (+£30m); contract price increases £87m); risk provision (+£117m)).
Accounting Adjustments477 218Changes in accounting rules, to include intramural costs (+£275m); transfer of costs of industrial consortia management activities from production phase to support phase (¸£218m); derivation of approved cost on a resource basis (+£202m).
Exchange rate variation 48Improvement in exchange rate since production approval given.
Total balance1,468

  Expenditure to 31 March 2000:  £4,367 million.
ApprovalDate Explanation
First Approval1984 Feasibility Study
Latest Approval2000 Through Life Support

Years of peak expenditure:2001-02 and 2002-03
Further expenditure in clear prospect, at outturn prices: Nil
Unit production cost at outturn prices: £57.8m
Quantities required:232
April 2000


  Meteor is an all-weather, beyond visual range air-to-air missile to equip Eurofighter, which is being procured from Matra BAe Dynamics (MBD) in collaboration with our Eurofighter partner nations (Germany, Italy, and Spain), France, and Sweden. It was selected in May 2000, following an intensely fought competition between MBD and Raytheon Systems Ltd. Contract negotiations with MBD, and discussions with our partners on a Memorandum of Understanding, are now being completed, and it is intended to sign both documents around the middle of this year. Meteor should come into service on Eurofighter around the turn of the decade.


  1.  The requirement is for a medium range air-to-air missile for the Eurofighter. Initial planning assumptions were based on the ability of the AIM-120B Advanced Medium Range Air-to-Air Missile (AMRAAM) to meet the longer-term threat, but changes in the operational environment led to the issue of a revised Staff Requirement in June 1995. It underlined the need for the fighter to achieve a large "no escape zone" against manoeuvring targets during beyond visual range air-to-air combat, and to maximise the number of firing opportunities. The Staff Requirement also employed the principle of "performance objectives" as opposed to "essential criteria". This was designed to prompt bidders to propose innovative solutions and as wide a range of options as possible.


  2.  The missile should possess the capability subsequently to upgrade major missile sub-systems as a result of more cost-effective technology and evolution of the threat. The Staff Requirement sought to encourage the designers to share the risk by matching and trading the performance requirements to a realisable and affordable design solution.


  3.  ***


  4.  The BVRAAM programme was considered during the Strategic Defence Review, when the difficulties of achieving the in-service date were assessed. It was concluded that BVRAAM remained a key capability.


  5.  Meteor will be the primary air-to-air weapon for Eurofighter. It will provide a key capability in achieving and maintaining air superiority wherever Eurofighter is deployed. Meteor will allow Eurofighter to engage multiple and manoeuvring targets simultaneously, at greater range than before, in all weathers, day or night, and with a greater level of survivability.


  6.  Meteor will not specifically replace any other programme. Instead, it represents a new generation of weapon designed to equip a new generation of fighter.

  7.  The original "most likely" ISD for BVRAAM was 2005, but this moved in the SDR, partly because the technology was insufficiently mature, to a planning assumption of around 2008. More recently, however, in assessing the BVRAAM competition, it was recognised that this 2008 assumption for meteor was unrealistic. Under the new approvals procedure, a 90 per cent confidence ISD of August 2012 was approved for Meteor at Main Gate; the expected (50 per cent) date is September 2011. Until Meteor comes into service, Eurofighter will be armed with the Advanced Medium-Range Air-to-Air Missile (AMRAAM), manufactured by Raytheon. An interim buy of AMRAAM missiles would have been required whichever BVRAAM solution was chosen.


  8.  Competition has been maintained throughout the project, both at prime and sub contractor levels, to ensure best value for money. Bidders were required to submit firm prices for an initial five-year period from award of contract and fixed prices thereafter.

  9.  A Request for Information was issued in February 1994 to a wide range of national and foreign government agencies, potential prime contractors, and major equipment suppliers. Responses received by the MoD in late 1994 suggested that a project was technically feasible and capable of completion within a suitable timescale. Four potential partner nations, Germany, Italy, Spain, and Sweden, agreed in principle in 1995 that the UK BVRAAM specification broadly met their baseline missile requirements for Eurofighter and, in the case of Sweden, JAS 39 Gripen. These nations were invited to assess the bids jointly with the UK, with a view to agreeing on a common solution. In July 1999 France joined the programme, having identified that the BVRAAM specification broadly met their capability requirements for Rafale.

  10.  An invitation to tender was issued in December 1995, requesting bids for the full capability missile, as well as proposals for a staged capability (ie an interim capability missile with the potential for upgrade). Two companies, Raytheon Systems Ltd (formerly Hughes) and Matra BAe Dynamics (MBD), submitted bids. Raytheon submitted proposals for a Future Medium Range Air-to-Air Missile (FMRAAM), a full capability missile, and the Extended Range Air-to-Air Missile (ERAAM), with a proposed growth path to full capability. MBD proposed only a full capability missile, Meteor.

  11.  Assessment highlighted areas of major technical risk in each bid, and it was decided not to award an immediate Development and Production contract. Instead, contracts for a Project Definition and Risk Reduction phase were placed with the two bidders in August 1997. Revised bids to meet the requirement were received in May 1998, and these were followed by an additional, unsolicited offer of Raytheon's ERAAM+ under the umbrella of a joint UK/US collaboration. Best and Final Offers were received from both companies in September 1999 and, following Ministerial consideration, a decision to buy Meteor was announced on 16 May 2000. Since then, negotiations with the company have progressed well, and a formal contract signature is expected around the middle of this year.


  12.  No suitable "off-the-shelf" missile was assessed as being able to meet the BVRAAM requirement. Options considered in the early stages, but deemed not to have the required performance, were the Matra MICA, the Alenia Aspide, and the British Aerospace Dynamics Active Skyflash.


  13.  Meteor is a collaborative project in partnership with Germany, Italy, Spain, France, and Sweden. The partners signed a Statement of Intent in June 1998, confirming their decision to explore a co-operative development and production programme. The UK are leading the programme, with industry responsible for defining work-share based on technical excellence, manageable risk, and best value for money, rather than any predetermined formula. It has been agreed that the Meteor collaborative development and production contract will be placed by the MoD under UK contracting law. The UK intend to place a combined full development and production contract with MBD, with production options included to cover potential partner nations who do not wish to commit to production from the outset. A Memorandum of Understanding (MoU) is now close to being finalised, setting out the contractual, financial, and management arrangements for the programme. The other nations then need to commence their own formal national approvals processes. It is intended that these will be concluded to enable signature of the MoU just ahead of the contract signature. A formula for cost share is being developed which would be fixed at the start of the development phase.

  14.  All our European partners have shown strong political support for the programme, both during the bid assessment and following the announcement of the UK decision. Missile requirements and in-service dates (ISDs) for the other nations have yet to be advised. An International Joint Project Office (IJPO) has been established within the MoD Defence Procurement Agency under the UK's BVRAAM Integrated Project Team Leader. The salary cost of partner nations' representatives are being borne by their governments.


  15.  Meteor has excellent prospects for sales, particularly as part of an integrated package on Eurofighter. The opportunities for overseas sales could be widened by possible sales of Gripen and Rafale.


  16.  Industrial factors were taken into account in the assessment of bids. Meteor offered particular advantages in terms of the quality and sustainability of the jobs involved. MBD stated that a total of 2,400 jobs would be created or sustained in Europe; 1,200 of these would be in the UK.


  17.  The BVRAAM invitation to tender invited companies to provide alternative proposals for a staged approach to meeting the requirement; indeed, Raytheon offered both a full capability missile and a staged approach to achieving full capability. Bidders were also advised that the MoD was prepared to consider other innovative proposals, including a PFI arrangement.

  18.  The Meteor programme embodies Smart Acquisition principles. The decision process considered whole life costs and the contract will include incentives to reward good performance as well as penalties for failure to meet agreed targets. The IPT has also entered into a partnering agreement with the Prime Contractor. Emphasis is being placed on continued delivery of value for money, and gain-sharing potential will be kept under continuous review. In addition the contractor has agreed to a series of four key technological milestones, to demonstrate successful progress during the development phase. If the company fails to achieve any of these milestones, against clearly measurable acceptable criteria, termination of the contract can be initiated, with all money being returned to the partners.


  19.  The acquisition phases are shown in the table below:

Date Activity

February 1994 Request for Information issued. Cardinal Points Specification issued (April 94). Invitation to tender issued (December 95).
Project Definition and Risk ReductionAugust 1997 Reduction of major technical risk.
Assessment of tendersMay 1998 Included Best and Final Offers in September 1999, to reflect the late involvement of France.
Prime contractor selectionMay 2000 Contract negotiation. Drafting of Memorandum of Understanding.

  20.  The assessment of the Meteor proposal identified four key technological risks, detailed in the table below, which, should they be manifested, could result in the inability of MBD to deliver a sufficiently robust solution to the BVRAAM requirement. The "key milestones" principle described in paragraph 18 corresponds to successful demonstration that these risks have been overcome.

Key Technical Risks

The ability of the missile motor to operate in a reliable and repeatable manner throughout the launch envelope.

The ability to maintain sufficient control of the missile to ensure that it intercepts its target.

The ability to minimise missile/launch aircraft navigation system errors.

The ability of the missile to achieve target intercept in a defined set of countermeasure environments.


  21.  It is anticipated that the UK will be in a position to sign the Memorandum of Understanding with our partner nations around the middle of this year. This will be followed by contract placement. The development phase will contain four technological milestones as described above.

  22.  Expenditure up to 31 March 2000 was £21 million (VAT incl at 1999-2000 prices). The total approved (90 per cent) acquisition resource costs at Main Gate in May 2000 is £1,440 million, including the purchase on interim AMRAAM missiles. The expected (50 per cent) cost is £1,368 million. The years of peak expenditure are likely to be 2001-11 and 2011-12.


  23.  The aim of the Meteor Integrated Logistic Support strategy is to minimise the support costs whilst maintaining weapons availability. The weapon is being designed under an "all up round" principle to reduce through life logistic support. MBD will be responsible for the first 10 years of logistics support, covering spares, repairs, Post Design Services, and a Surveillance and Life Extension Programme. Very little maintenance will be required on the Meteor system, with the missiles and support equipment being returned for repair to MBD once any fault has been confirmed. Contracts after the initial 10-year period will be subject to negotiation.

  24.  Provision of initial operator and maintainer training and the associated training package are likely to be the responsibility of MBD, with future continuation training being undertaken with RAF resources. A number of ground-handling training missiles and explosive ordnance disposal training missiles will be procured. A full suite of technical publications required to operate and maintain Meteor will be produced in full electronic format.

  25.  Discussions between the UK, MBD, and our partner nations on support philosophies are underway as part of the contract negotiation discussions. All partner nations have indicated that they would like to pursue a collaborative support contract for Meteor with the benefit of greatly reducing each partner nation's support costs. The draft support contract is being worded to enable any partner nation to join in this combined support contract as they commit to production.


  26.  Current plans for operational missiles require *** to be placed in storage and *** to be allocated to Main Operating Bases. This includes telemetered rounds ***.


  27.  The BVRAAM programme was conceived exclusively for Eurofighter, where the main carriage method is semi-recessed under the fuselage. This represents a prime driver in the missile design. Meteor will also be integrated with Gripen and Rafale by Sweden and France respectively and will therefore be interoperable with these nations in addition to our Eurofighter partners. Whilst the extant UK requirement provides only for integration on Eurofighter, integration issues with respect to the Joint Strike Fighter variant selected as the UK's Future Carrier Borne Aircraft will also be assessed.


  28.  Meteor has a required 25-year design life.


  29.  Through-life development of the missile will be considered as the project progresses.

April 2001


  The Advanced Short Range Air-to-Air Missile (ASRAAM) is a highly agile, passively guided anti-air weapon, which is due to be deployed on the Tornado F3, Harrier GR9, and Sea Harrier FA2 to replace the Sidewinder AIM-9L missile, and will also be fitted to Eurofighter. Although ASRAAM was originally conceived as a collaborative project, our partners withdrew when the programme encountered difficulties. ASRAAM was re-endorsed as a national programme in 1990. Contracts for Full Development and Production were let in 1992.


  1.  The requirement for a highly agile missile with good infra-red countermeasure resistance was driven by the need for short-range air superiority in visual combat. Such a missile would provide Eurofighter with a substantial advantage against the forecast threat at the turn of the century, and would be complementary to Skyflash and Meteor (see separate memorandum).[3] The missile would, additionally, be an important factor in the overall capability of the Tornado F3 and the ability of offensive air support aircraft, such as Harrier, to defend themselves effectively.

  2.  Initially, the UK sought to meet the national requirement for a short-range air-to-air missile through participation in a collaborative development for a family of weapons. In accordance with a Memorandum of Understanding between the UK, the US, and Germany, signed in 1980, a tri-national Staff Requirement was agreed in October 1984. Subsequent budgetary pressures, technical and management problems, and changes to US requirements caused our partners to withdraw from the project. The Staff Requirement was re-endorsed as a UK national programme in 1990 without any significant changes since the original approval.


  3.  Although the programme has encountered some technical difficulties and slippage, the UK's Staff Requirement, as re-endorsed in 1990, has not been altered. However, in the event that the specified performances cannot be achieved in every respect by the due date (see paragraphs 8 and 9 below), reconsideration of the performance, time, and cost balance will be necessary.


  4.  The original NATO stockpile requirement for *** missiles as at December 1987, was ***, with options on a further *** in September 1990, as a result of changes in the threat assessment and in the Eurofighter programme. Following a review of the operational and training usage of ASRAAM missiles, based on planning assumptions for Eurofighter and Harrier GR9, a second tranche, *** missiles was approved in January 1994. A further review of the requirement, in 2000, ***. Of these *** will be for full operational use and *** will be telemetery missiles for trials firing ***.


  5.  The Strategic Defence Review did not affect the requirement or existing orders.


  6.  ASRAAM will provide a significant contribution to achieving and maintaining air superiority, as well as providing critical self-defence capability for a variety of current and future UK air assets. It will be employed in the full spectrum of air operations from air policing to peace support through to high intensity conflict.


  7.  ASRAAM will replace Sidewinder AIM-9L on Tornado F3, Harrier GR9, and Sea Harrier FA2 in a programme due to start this year and is the planned short-range air-to-air weapon for UK Eurofighters. Sidewinder is currently due to remain in service until 2018 on the Tornado GR4, but we are considering whether to integrate ASRAAM on to all combat aircraft in order to rationalise air to air missile stocks and realise savings by withdrawing Sidewinder from RAF service earlier than anticipated. This assessment will be informed by examination of the costs of integration, the capability enhancement ASRAAM may provide, and the final missile numbers we require.

  8.  Details of the In-Service Date are given at Annex.[4] However, the prime contractor, Matra BAe Dynamics (UK) Ltd (MBD) has not yet achieved the missile performance level required by the Department. The company has encountered a number of technical problems, which have caused some delay to the programme and mean that ISD will not be achieved. While MBD has continued their efforts to improve the missile performance, the Department believes that the performance currently offered is below that required by the contract *** and is not prepared to take delivery of any missiles until MBD can show that an acceptable standard can be met.

  9.  The Department is working closely with MBD to resolve the problems and seeking to agree with MBD a credible and robust programme that will achieve the required level of performance, even if this means changing the current design and takes some time to implement. Only when there is confidence in a robust incremental route to full operational capability might the Department accept limited numbers of missiles to an interim standard for ISD, in line with Smart Acquisition principles. The aim is to ensure that MBD devise the necessary solutions to identify a clear route to full capability, which would then enable a new in-service date to be set. This route map should be agreed with the company during the summer. It is therefore not possible to define a new ISD at this stage. Until ASRAAM is accepted into service, the Tornado F3 will continue to be fitted with the Sidewinder AIM-9L missile, which is effective against the threat in current Gulf operations. The Harrier GR9, which is primarily used in the offensive support role, and the Sea Harrier FA2 will also continue to carry Sidewinder. The current delay will have no impact on Eurofighter's operational capability.


  10.  Under the provisions of the 1980 MoU, the US was to develop an advanced medium range air-to-air missile, and the UK and Germany, along with Norway and Canada, who had subsequently joined the programme, were to develop the short-range system. The European programme was managed by a joint project office, with Bodenseewerk Geratetechnik GmbH and British Aerospace Dynamics Ltd as the principal contractors. The programme encountered difficulties over the missile configuration, the establishment of effective collaborative arrangements in industry, and the identification of an affordable product. Germany withdrew from the programme in 1989 and the US, Norway, and Canada in 1990.

  11.  Once ASRAAM had been re-endorsed as a UK national programme in 1990, an invitation to tender was issued on 1 May 1991. It called for a package deal, covering development, production, and associated logistic support of the missile and its associated training variants. We also stipulated the minimum use of Government Furnished Facilities and Equipment, and the earliest possible ISD.

  12.  A number of candidate weapons were considered. British Aerospace Defence Ltd; Raytheon; a consortium of GEC, Marconi, and Matra; Bodenseewerk Geratetechnik GmbH (BGT); and Loral Aeronutronic all expressed an interest in the competition. In the event, Raytheon and Loral did not respond to the ITT. The BAe bid of ASRAAM, the GEC Marconi/Matra bid of MICA ASRAAM , and the BGT AIM9L IRIS were considered as options in early 1992. Other weapons, including a further BGT bid, the AIM 9LI (an improvement over the standard AIM9L) and a number of US options either in service or in development were also considered, but were not assessed as capable of meeting the UK requirement.

  13.  The BAe bid met the Staff Requirement and offered a number of advantages over the BGT and GEC Marconi/Matra bids. BAe Defence Ltd (now Matra BAe Dynamics Ltd) was awarded a fixed price contract on 31 March 1992.


  14.  ASRAAM won its first export order in December 1998 when it was selected for the Royal Australian Air Force. There is also interest from a number of other nations, including Greece, Switzerland, Spain, and South Korea. This type of missile has historically sold in the tens of thousands. Missiles with similar capabilities are being built in the USA, Germany, Russia, Israel, France, and South Africa.


  15.  The decision on the main development and production contracts took account of the employment implications for the UK. Matra BAe Dynamics estimated that more than 80 per cent of the work in total would be in the UK, securing some 7,000 jobs. The GEC Marconi/Matra bid offered only 50 per cent of work in the UK, although they estimated that this would rise to 70 per cent if potential sales were achieved.


  16.  Matra BAe Dynamics Ltd proposed in September 1998 a number of Smart Acquisition "gain sharing" initiatives. These included the introduction of a more powerful processor into the missile, enhancing the potential for future performance upgrades and eliminating an obsolescence problem at no cost to the MoD, and better alignment of missile production deliveries with candidate aircraft platforms. A contract amendment was agreed in September 1999.


  17.  The acquisition phases are shown in the table below:

Date Activity

January 1981 Endorsement of UK support to NATO operational objectives for ASRAAM and AMRAAM
FeasibilityJune 1982 Systems studies including IR detectors, transparent materials and sub-systems
Project definitionDecember 1984 Design of prototype missile and launcher sub-systems
Project Definition Amendment (re-definition 1) December 1987Confirmation of image processing algorithms; manufacture of inert safety and arming units and design of strap down software
Project Definition Amendment (re-definition 2) July 1988Study into detailed proposals for an integrated missile configuration and more efficient management structure
Development and ProductionMarch 1992 Full development and production of ASRAAM starts

  18.  Completion of design and development of the seeker software remains the most critical of the programme risks and has resulted in the programme failing to meet the currently approved ISD. Much of this work is dependent on flying and firing trials, conducted at the US Eglin range. Mathematical modelling has shown that the system performance does not yet meet the requirement and MBD are being required to establish a means of overcoming the performance problems to reach acceptable standards.


  19.  Approvals for the development stage are listed above. Details of expenditure to 31 March 2000 (now presented at outturn prices) are provided in the table at Annex.[5] (This mirrors the information provided to the Public Accounts Committee in the Major Projects Report 2000.)

  20.  Delays to the programme reached a point where liquidated damages became due; the majority of these have already been collected in the form of consideration payments totalling some £19 million. The amended contract (see paragraph 16) makes provision for further liquidated damages, a maximum of 6 per cent (approximately £23 million) of the value of delivered items, against delivery of the new processor missiles.


  21.  ASRAAM is an industry-supported missile, with the bulk of its maintenance to be undertaken by the prime contractor. Although Eurofighter aircraft delivered to Germany, Spain, and Italy will be able to fire ASRAAM, these nations are not committed to buying ASRAAM. At least initially, therefore, in-service support costs will fall to the UK.

  22.  Most of the support equipment and handling procedures for ASRAAM will be the same as for the current AIM-9L weapon. However, as the design has been completed under the "all up round" principle, there will be a substantial reduction in routine servicing requirements at the front line and all major servicing will be undertaken by industry. Storage is a potential bottleneck, as ASRAAM stocks are built up without equivalent reductions in AIM-9L stocks. A Weapon Loading and Storage Study is addressing these issues. Since the operational and training missiles both have classified software, unlike the current air-to-air weapons, of which only the operational weapons are classified, modified handling procedures will be needed.


  23.  Current plans for operational missiles require *** to be placed in storage and *** to be allocated to Main Operating Bases. The remainder are telemetered rounds.


  24.  ASRAAM has demonstrated its compatibility with earlier AIM-9L launch equipment and interfaces. It is capable of being carried and fired, with minimum modification, by all UK and other allied air forces' aircraft that can carry and employ AIM-9L, including Sea Harrier. The system is compatible with the new rail launchers on Harrier GR9 and on Eurofighter. It is also designed to be employed using multiple sensors, such as the infra-red search and track systems and helmet-mounted sights planned for Eurofighter, as well as radar.


  25.  Surplus Sidewinders may have potential for resale. Missiles that cannot be sold will have no operational use and will be scrapped.


  26.  ASRAAM is planned to be in service for 25 years.


  27.  It is intended to establish a programme of through-life development, and the potential to collaborate with Australia is being actively pursued. Early discussions have been extremely positive and encouraging. The programme is primarily to ensure a useful service life of 25 years and could involve the acquisition of emerging technology on an incremental basis.

April 2001

3   See p 54. Back

4   See p 61. Back

5   See p 61. Back

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