Select Committee on Defence Minutes of Evidence

Examination of Witnesses (Questions 120 - 139)



  120. That is taking a dockyard out?
  (Mr Coles) Oh, no. For example, the naval base might have a machine workshop in some other dockyard company, if they have both got machine workshops which are not utilised, let us use one and not both because they are on the same site, that is the sort of thing which will happen and should happen too.

Mr Roy

  121. Job losses would be included in your 750?
  (Mr Coles) Indeed they would be, that is part of it. People have made an assessment of those sort of activities unless, of course, the companies can generate additional revenue in which case some of them would not go.

  122. On this matter of savings again. We had a letter from Adam Ingram, the Minister of State, which I will quote. He says "In total these changes will achieve a saving to the Department of £327 million over the period 2002-07. This is higher than our original estimate of £237 million over the same period . . .". That is a difference, and that is a huge difference, of nearly £100 million and reflects in particular an increase in the level of savings to be achieved at the naval bases. I am sure you will agree that it is absolutely massive, £100 million saving. Where are you going to get that at the naval bases?
  (Mr Coles) As I mentioned, if you take out 750 jobs over five years that is a huge premium to take out. Utilisation of assets—

  123. If I can stop you there. 750 jobs would have been in the original estimate anyway. That is really not pertinent to finding where this other £100 million is.
  (Mr Coles) The precise number of jobs when the original proposal was put forward, £200 and whatever it was million, was not precisely known at that time. This has come out subsequently.

  124. Presumably you must have had some indication?
  (Mr Coles) Sure.

  125. Presumably you did not say in the original there would be no job losses?
  (Mr Coles) Oh, no.

  126. That would have been absolutely ridiculous, I understand that.
  (Mr Coles) Yes.

  127. Why have we suddenly got an extra £100 million? I am an ex steel worker and I remember management telling me about the rationalisation programmes and how they found the extra money and only three or four years down the line guys were made redundant in their thousands. I feel as though £100 million to be found from naval bases that was not already projected is a step too far for a lot of people and I am trying to find out what is that step.
  (Mr Coles) I do not believe it is all from naval bases, I do not think that is quite right. Of course as the companies put their proposals forward they became more refined, more things came in scope and less out of scope, so as the thing unfolded through debate and dialogue and consultation and the proposals these things came in scope so bigger power to draw from. Secondly, of course, the companies' initial discussions would have pushed them hard on profit rate, on rate of return and those things were driven down so a lot of things happen as you go through in clarification. We were pushing them very hard. These are quite attractive long term contracts. They were clearly going to hold back in the initial phases.

  128. On a point of clarification, my question was what is the £100 million? If they have suddenly found this extra £100 million presumably they must know where it is coming from.
  (Mr Coles) Sure.

  129. You must be able to tell me it is from a particular area?
  (Mr Coles) Estate rationalisation, doing the estate rationalisation much more efficiently than we have in the past, a huge saving actually in the way we do the business on the common site, focus on utilities and utility uses, engineering maintenance not duplicating things, lower numbers of structures of people, layers of management. The whole activity has been looked at from top to bottom from an output perspective and clearly when you start this process people are going to hold back and we are going to push them harder. "If you want these contracts what are the savings? What are we actually going to get out of this?" so it is pushing hard at every point in the activity.

  130. I will try to be a bit geographic. Do you know how the new 327 million, which includes this £100 million, was suddenly found? Can you tell me how that would divide between Devonport, Portsmouth and Rosyth/Faslane?
  (Mr Coles) About half of it is related to the naval bases. I do not have the figures in front of me precisely but I think I can say as you go from north to south to the west the savings increase or decrease, the greatest savings are in the north as you go down to Portsmouth and then on to the West Country.

  131. With respect, I am looking at a figure of £327 million.
  (Mr Coles) I do not have the figures to hand but I can send you a note on that in the round.

  132. How sensitive are your projections of possible savings to variations in the volume of refit work? We heard Sir Robert say earlier on he was aware of geographical and social implications. Are you aware of those social implications?
  (Mr Coles) I am sorry, I missed the question.

  133. Are you aware of those geographical and social implications?
  (Mr Coles) Yes, I am.

  134. Is that a part of your thinking when you looking at the projections?
  (Mr Coles) The refits that will be up for competition will be significant and, again, it will be for the companies to actually bid for those refits and to win them whether they are in Rosyth, Portsmouth or Devonport. It is a competitive process.

  135. Could I be a wee bit parochial, if you do not mind. The dockyards and naval bases are co- llocated at Devonport and Portsmouth, but how are the synergies going to be possible in Scotland, where Faslane is on the west coast and Rosyth is on the east coast? How are these synergies going to work bearing in mind one is at one end of the country and one is at the other?
  (Mr Coles) It is the managerial skills that are needed to be brought to the base at Faslane in a commercial sense, not necessarily in that case the facilities and the things the company have done at Rosyth to bring down the overheads for the ship refitting programme, which have been very considerable.

  136. Can I move on slightly. I am still interested in our previous discussion on the proposals, I would like that clarified in my own mind. What was the final breakdown of the two proposals from a naval base efficiency perspective? What are the differences and savings between the naval base benchmark, the companies' proposals and, for example, the in-house alternative at each of the naval bases?
  (Mr Coles) I think I said a little while ago I will try and send you a note on that that gives you a broad picture of that, if I can, because it is different obviously at different naval bases.

  137. You said you will send a note on three geographic areas and the synergies but this is slightly different. Would you be able to send a note on the bids as opposed to the naval base benchmark, which is slightly different?
  (Mr Coles) Whether I could send the bid information, because all the information, other than the naval base bids themselves, is commercially confidential, the TUs, if you like, are confidential because they have their own view about this as well as the companies themselves, whether I could release into the public domain commercial information, I would have to look at what we could release. I will certainly try to give you a broad indication.


  138. Thirteen minutes to go. Clearly, the new nuclear submarine refit facility being built at Devonport will be essential for keeping our increasingly diminishing submarine fleet serviceable. But what other dockyards, or dockyard facilities, do you regard as strategically vital in the longer term? Are any sufficiently important that you would prevent the contractors closing them?
  (Mr Coles) Clearly you talk about the nuclear facilities. In the final analysis we would have to have a view on if there was a shrinking of the current shape and size about what we would need to support the Navy both at the naval bases and in the industrial sector. While its shape and size as it is at the moment I do not have a worry. If it did shrink significantly we would have to look at that for the same reasons about competition and preservation.

  139. At the moment we have three naval bases. You spoke earlier about estates rationalisation but there is nothing, I hope, in anybody's minds about changing the number of naval bases?
  (Mr Coles) No, there is not. We do need three naval bases.

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