Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses(Questions 160-179)



160.  Because these resources which would have been deployed elsewhere are free to you for this exercise.

  (Sir Kevin Tebbit) I would not put it that way. We would be employing these people and we would be using the defence infrastructure in any case, whether in this exercise or elsewhere. If the troops had not been here, they would have been exercising somewhere else or they would have been in barracks or they would have been in Germany or wherever. Therefore, certain things are constant. The cost of the manpower would have been the same whether we exercised or not. The reason we use extra cost is to capture the real cost of this activity in relation to other things we might be doing. This is why we use extra costs.

161.  I understand that a vehicle has depreciation and if I run a vehicle for an extra 10,000 miles in an exercise it gets used up, burned out and just written off. So that is an additional cost. We do not actually cost manpower and the depreciation of manpower in any way shape or form because in exercises people get used up and burned out to a degree, do they not? Is there no evaluation of this cost at all?

  (Sir Kevin Tebbit) No; they would have been just as burned out or used up doing other things. The people who went to Afghanistan found that quite arduous as well. When we do an operation for real, we receive money back from the Treasury for the actual operation's extra costs. That is the system we use, it is the one they have told us to use, it is the one we implement. We operate our training and exercise programme on the same basis, so we capture the extra costs.

162.  I notice in the report that the final out cost of the exercise, that is the marginal cost, the additional cost, should be known to you by July 2003. You give a prediction of a total cost of £85 million.

  (Sir Kevin Tebbit) That is my current guess of how it seems to be coming out at the moment. I asked people before I came to the hearing what it looked like.

163.  What assurance do I have that this way of costing that you have, with additional costs and marginal costs is accurate, and will not be fudged and money will not be put from one heading to another heading and lost in the equation back into mainstream costing rather than being identified as the original marginal cost of this exercise?

  (Sir Kevin Tebbit) The assurance I can give you is that we use exactly the same costing system for this as we do for real operations. For real operations the Treasury are prepared only to give us the additional cost of the operation, not a subsidy of core costs. They are not prepared to pay us double from the main budget for general activity and then from the reserve for an operation. So the Treasury patrol this extremely carefully on a detailed basis, item by item with my staff. This exercise used the same costing approach. Therefore the assurance you have is that the Treasury are not in the business of giving departments double. They will only give us the true extra cost of any activity.

164.  I shall no doubt keep a record of that because I should like to go back and talk to the Treasury at some time about their inability to control some of these costs.

  (Sir Kevin Tebbit) It is my duty to control these costs.

  Mr Jenkins: I think the Treasury need to look at it.

Jon Trickett

165.  I want to go back to the tank again, although I want to ask you about vehicle support as well. When I read this report it occurred to me that there was negligence by the supplier of the tank in the sense that they were failing to meet the design spec which was 14 hours in the worst possible conditions of zero visibility. Then I read Figure 10 which tells me that the Challenger 2 was purchased for a north-west European theatre of operation and that you were perfectly well aware in fact that it was not going to work under desert conditions. If that is the case, then clearly they were not negligent and neither were the design authority on whom you seem to rely to defend your own position. The fact is that you knew these tanks were not going to work in desert conditions and you even allocated money to make them ready for desert conditions yet you failed to spend the money. Is that not the case?

  (Sir Kevin Tebbit) We certainly knew that they were not `desertised'. You are quite right that we did not put that modification on when we bought them. We did have assumptions which were given to us by the design authority about the filters. We have discussed all of that. Life is a series of making judgements about where we put our money and where we spend our money. Earlier we decided not to spend on desertisation. The full cost of desertisation, if we wanted to fully `desertise' our tank fleet, and that includes air conditioning, things like that, would be about £90 million. There are different variants.

166.  I rely on the report which you have agreed.

  (Sir Kevin Tebbit) We judged. I have accepted that and said that we made the wrong call and we should have done some more of this.

167.  It says here in Figure 10 that for £464,000 you could have prepared 116 Challenger 2s in terms of new seals, dust strips and track guards. We now know that a filter costs £1,000. So for 400 filters you could have gone a long way towards preparing over 100 Challenger 2s. It says you even made the money available following the decision that we would need to use these tanks on a worldwide basis rather than just in north-west Europe. That being the case, the money was found and the Strategic Defence Review required you to prepare these tanks and you failed to do that. How many filters did we actually use in the operation?

  (Sir Kevin Tebbit) It was an exercise. I do have the number. I am not sure I should be giving it in open session, but I can certainly give you the number in writing afterwards.[8]

  Mr Williams: A note would be welcome.

Jon Trickett

168.  Twenty thousand filters cost £20 million and that was the sum of money—

  (Sir Kevin Tebbit) Nothing like that.

169.  Four hundred thousand is the figure here, but I am not going to go fishing for information which you are going to provide us with. I simply do that in order to draw to the attention of yourself and the rest of the Committee that in terms of some sort of cost benefit analysis, it might well have been worth judging the amount for filters against the cost of preparing for desertification. Let me move on and ask you about the design authority, which you said was PALL Aerospace. Do you have a contractual relationship with them?

  (Sir Kevin Tebbit) Yes, we do.

170.  Have you considered that they may well have been negligent in the advice they have given you since they were saying a minimum of 14 hours for a filter and it turned out to be one third of that? Have you considered whether they are in breach of contract?

  (Sir Kevin Tebbit) No, we have not judged them to be in breach of contract.

171.  Have you considered whether they were in breach of contract? Have you taken legal advice?

  (Sir Kevin Tebbit) No, I have to say that it is true that we have been more concerned to up the production rate of the air filters. We have not considered whether they are in breach of their contractual arrangements.

172.  Was their advice inaccurate to a startling degree?

  (Sir Kevin Tebbit) I was not going to say the precise number of things but you are wildly inaccurate—it is not your fault, because how should you know? A figure of 600 or 700 would be more accurate in terms of how many air filters we used.

173.  So three quarters of a million.

  (Sir Kevin Tebbit) Yes, that is right. I am not even trying to make the argument that it was sensible or the best call. In the light of our experience—

174.  With all due respect, I have moved on now. I am now talking about the contractual relationship between the design authority and yourselves. Obviously you have a contract with the supplier. As I understand it, the performance of the tanks is partly underwritten by the design authority. You have a contract with them. It seems to me that they have given you really poor advice. Have you considered whether or not they are in breach of contract? I think you have said no, you have not done so.

  (Sir Kevin Tebbit) It is a very good question. I know people criticise me for commenting on the wrong type of sand, but it was only in this one very specific place that we had a problem.

175.  Fourteen hours with zero visibility.

  (Sir Kevin Tebbit) It was above their expected figure.

176.  If Mr Williams agrees, that is a line we might ask you to reflect upon and give us a note on that as well.

  (Sir Kevin Tebbit) I may say that we were more concerned, given the judgements of operational efficiency and cost-effectiveness, to up the production level of these filters.[9]

177.  I understand. Referring to Mr Williams' comment on the global supply of filters, I notice on the same page that the exercise requirements effectively exhausted the global supply of air filters.

  (Sir Kevin Tebbit) I ought to comment because you are trying to get to the truth here. I know you are making points and they are all very valid, but may I just comment on this one? Again I must apologise, because I let this through. A lot turns on the word effectively. We never exhausted the global supply of air filters.

178.  I think we can draw our own conclusions from the wording of the report. I want to move on to the care of potential combatants. I accept that this was an exercise. It is curious that we relied on Dutch nurses. As you are probably aware, I have tabled questions. I am referring now to paragraph 2.38. Thirty-five nurses from the Dutch army were provided to look after our personnel. In terms of a medium-scale war, you talk about the possibility that you would require about 2,300 medical staff and presumably that is partly a lesson drawing on this particular exercise. I have asked questions of both yourselves and the Department of Health to try to discover how many doctors, nurses, consultants you actually have on staff and how many reservists you have. So far I am not making much progress. I wonder whether you can help me?

  (Sir Kevin Tebbit) Firstly, let me say that I would feel very uneasy about suggesting that it was not a good thing to have other countries with us on training and operations.

179.  I am not suggesting that.

  (Sir Kevin Tebbit) The co-operation with the Dutch is not just a one-off thing, this is part—

8   Note by witness: The number of air filters issued for the exercise was in the region of ***, although not all of these were used. The air filters are treated as `consumables', so that after they have been issued to the units no track of their use is kept by the central stores system. In the event of the units not using all the filters they can either be returned to the depot, at which point they would be registered on the stores system as returned, or retained by the unit. Our current IT systems do not allow us to determine the exact number that have been retained by the unit unused. Back

9   Ev 26-27. Back

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