House of Commons - Defence - Written Evidence

Select Committee on Defence Written Evidence

Memorandum from AMICUS

INTRODUCTION

1. Amicus welcomes the opportunity to respond to this consultation on "Delivering Frontline Capability to the RAF".

1.1 Amicus is the UK's largest manufacturing, technical and skilled persons' union. We have over 1.2 million members in the private and public sectors. We have members who work in the Ministry of Defence (MoD) and Government Departments and over 1,000 members who work at Defence Aviation Repair Agency (DARA) St Athan.

1.2 The best option for securing prompt and effective delivery of frontline capability to the Royal Air Force (RAF) would be to overturn the decision to roll forward Tornado GR4 maintenance and upgrade support to RAF Marham and, ultimately, BAE Systems.

1.3 The decision to roll the work forward to RAF Marham, originally made in September 2004 by the MoD, does not make any operational or financial sense. Moreover, the investment appraisal which informed this decision is too flawed to represent a robust case.

1.4 The decision will ensure the closure of DARA St Athan with the loss of 1,400 jobs and £80 million worth of taxpayers' money which was spent on constructing the state of the art aircraft hangar at the site.

1.5 The Welsh Assembly's Red Dragon project to promote the region as a centre of aerospace excellence is also now in jeopardy.

Facilities at Dara St Athan

2. On 1 April 1999, the Defence Aviation Repair Agency (DARA) was created through the merger of the Royal Air Force (RAF) Maintenance Group Defence Agency (MGDA) and the Naval Aircraft Repair Organisation (NARO). Although still part of the MoD, DARA was established as a trading fund exactly two years later. DARA offers a variety of aircraft modification and maintenance services including stripping, paint shop, replacing, repairing and rebuilding whole aircraft for military and commercial organisations.

2.1 DARA Head Office and Fixed Wing Operations are based at St Athan in the Vale of Glamorgan in Wales. DARA also has three other sites around the UK in Hampshire (DARA Fleetlands), Flintshire (DARA Electronics) and Tayside (DARA Components). In April 2005 a new £80 million aircraft hangar, paid for with tax payers' money, was opened at St Athan by Welsh First Minister Rhodri Morgan.

2.2 The new hangar has 45,000 square metres of hangar accommodation, 20,000 square metres of support workshops and office space and a roof span of 66 metres. It was designed to accommodate up to 48 fast jet aircraft and includes state of the art facilities which are the most advanced in Europe. The facility also plays a key role in the Welsh Development Agency's Red Dragon project which seeks to establish a world class aviation centre in the area.

2.3 DARA has now completed three years of trading and has consistently made a profit. In 2001-02 profits stood at £9 million, 2002-03 £6 million and 2003-04 £6.5 million. [1]Last year DARA met all its Key Targets for the third successive year and customer concerns fell, overheads were reduced, real term price reductions were made and an order intake target of £160 million was achieved. DARA has also proved that it can provide a competitive alternative to private sector industry by winning the deep level repair and maintenance contract for the RAF's Hawk Training fleet.

2.4 Despite the fantastic facilities at DARA St Athan, its 1,400 highly skilled and dedicated workers face an uncertain future as a result of a bizarre and dangerous decision by the MoD to award contracts for servicing and repairing Harrier and Tornado fighter jets to the RAF.

2.5 The Government has appointed an American investment bank, Morgan Stanley, to advise on the future possible sale of DARA as a whole and a possible sale of DARA St Athan. We believe that the outcome of this advice will result in a proposal of site closure for DARA St Athan by April 2007 in contradiction to earlier predictions of a future to 2009.

End to End (E2E) Recommendation 40 Follow on Work

3. On 2 April 2004, the MoD disclosed the End to End (E2E) Logistics Review study to trade unions. Management Accountancy Services (Army) produced the study, entitled "End to End Study Recommendation 40 Follow on Work," on behalf of the MoD. The study contains details of the investment appraisal on which the MoD based their decision to roll forward work to RAF Marham.

3.1 The incremental cost methodology used to justify the E2E was fundamentally flawed. Indeed, the authors of the study conceded that the data had been collected and analysed "within very short timeframes".[2] It further admitted that the majority of data including that from Defence Estates was collected on a "`Rough Order of Magnitude' (ROM) basis".[3] This simply does not provide a sufficiently robust methodology on which to base a decision that could ultimately threaten UK frontline capability.

3.2 The study further conceded that assumptions had been made about RAF Crisis Manpower Requirement (CMR) which took "no account of any possible future changes".[4] The study stated that factors such as different service culture, the future of the Red Dragon project, the future of DARA St Athan and operational considerations should be represented separately from the financial implications. Yet these factors all represent further financial risks and costs intimately linked with decisions regarding future depth support. Furthermore, even where certain costs have been included they have been grossly underestimated. For example, the study estimates that any decision to close the Fixed Wing Operating Unit (FOU) will result in "up to 800 redundancies",[5] but we now know that 1,400 jobs will be lost with the closure of DARA St Athan.

3.3 The study further admits that it had "been difficult to establish some costs, particularly infrastructure costs and task hours".[6] The premium of 24%[7] which the study has applied to all new infrastructure requirements is unlikely to be sufficient to bring infrastructure provisions at RAF Marham up to the standards required to properly service and support Tornado GR4 or Harrier.

3.4 In conclusion the study claimed that the "Roll Forward and Hybrid options are extremely close in value for money terms, Roll Forward offers better value for money by just £0.561 million or less than 1% of incremental cost. The Roll Back option is over £20 million more expensive than any other option".[8] However the study is so inaccurate, including incomplete data and flawed methodology, that these figures might as well have been plucked from the air. Moreover assumptions were made that the productivity and skill levels of RAF personnel would at least match those available at DARA St Athan. Yet no evidence, such as a skills audit, was put forward to back up this claim and the financial risks of getting this wrong were not considered. The costs of rolling forward work to RAF Marham are spiralling precisely because RAF service personnel cannot work at the same pace or to the same skill level as workers at DARA St Athan. The financial costs of getting this wrong also include damage to multi million pound aircraft.

Facilities at RAF Marham

4. RAF Marham does not have sufficient in depth maintenance facilities to support the Tornado GR4 aircraft fleet and certainly nothing that compares with DARA St Athan. For example, RAF Marham does not have a paint shop with plastic media strip facility. Given the local environmental conditions of the site and proximity to productive agricultural land, it is highly unlikely that planning permission would have been granted to build a new one. Instead we understand that the MoD are looking to move an old and obsolete plastic strip facility from DARA St Athan to RAF Marham.

4.1 RAF personnel are not as well suited to the work of servicing, modifying and repairing military aircraft as the civilian workforce at DARA St Athan. Most RAF service personnel did not join the service to work in civilian type factory conditions and they have not had the same rigorous apprenticeship and specialist training. As a result these service personnel cannot provide the required level of expertise necessary to deep service repair aircraft as technologically sophisticated as the Harrier and Tornado GR4. Prior to the establishment of DARA St Athan, service personnel were posted, to what was then MoD RAF St Athan, for two to four years to gain some experience of deep servicing on various aircraft type. If DARA St Athan is closed, the opportunity to benefit from this type of training will also be lost.

4.2 The much exalted Pulse Line Management introduced at RAF Marham is already under considerable pressure through supervisory overstretch and the posting in of inexperienced personnel, and likely to fail soon without additional service personnel or civilian workers.

4.3 RAF Marham is experiencing recruitment difficulties which are not just skills related. The site is comparatively isolated and the nearest rail station is 12 miles away in Kings Lynn. Accommodation facilities are also reported to be poor.

4.4 The decision to relocate support of Tornado GR4 aircraft from DARA to RAF Marham did not take account of the time and costs of retraining service personnel, properly refurbishing the hangars at RAF Marham, providing a paint shop with complete facilities, or paying agency workers should the service personnel be recalled to the frontline. Neither did it take account of the importance of the support workshop facilities at DARA St Athan which provide an immediate response to demands for the manufacture and modification of components.

4.5 The Government's response to the House of Commons Defence Committee's Fourth Report of Session 2004-05 on Future Capabilities, claims that the case for transferring Tornado GR4 support to RAF Marham was based on a "comprehensive analysis of the most cost-effective solution for maintaining the aircraft including a full comparison of investment options for both Defence Aviation Repair Agency (DARA) St Athan and RAF Marham".[9] Skills and facilities at RAF Marham clearly do not match those at DARA St Athan or the MoD would not now need to be seeking partnered support solutions to "provide a further layer of Quality scrutiny of RAF technicians".[10]

4.6 The recent consultation by the Defence Logistics Organisation (DLO) on Tornado Future Support Combined Maintenance and Up-Grade showed a significant increased in forecast man hours for Tornado GR4 maintenance and upgrade. For the financial years 2005-06 and 2006-07 predicted man hours have been increased from the current 400 million to 550-600 million. We believe that this rise is being used to hide deficiencies in capability following the transfer of work from DARA St Athan to RAF Marham.

RAF Cottesmore and the Harrier Contract

5. Before announcing the decision regarding the servicing of the Tornado GR4 fleet, the MoD transferred the contract to service Harrier aircraft to RAF Cottesmore. This resulted in the loss of 550 jobs at DARA St Athan and possibly a further 350 in the future. Despite claims by the MoD to the contrary, the RAF are already failing to carry out the Harrier work. True comparisons of percentage delay times for RAF Cottesmore and DARA St Athan reveal that in 2002 RAF Cottesmore incurred nearly 50% more delays than DARA St Athan.

5.1 It is our understanding that civilian agency staff have been used to overcome the skills deficit at RAF Cottesmore, and now substantially outnumber service personnel, and a number of aircraft have been sent to BAE Systems at Warton and back to DARA St Athan. The Harrier jets are running out of flying hours and the first aircraft will reach its limit in December of this year. Unless the Harriers can be properly serviced and more quickly, the fleet will be grounded. This may prove to be a pre-run of the fate of the Tornado GR4 fleet.

5.2 So far at least one Harrier aircraft has been seriously damaged during modification at RAF Cottesmore and has not been flown since December 2002. We now believe that this aircraft has been scrapped. The damage apparently occurred when the main stress beam longeron was removed as part of the modification which then requires the aircraft to be jigged and immobile. Unfortunately, the aircraft was subsequently moved causing significant damage. A further seven Harrier aircraft have also been sent to BAE Systems at Warton for major repair after having been damaged.

5.3 Meanwhile the Minister of State, Ministry of Defence (Mr Adam Ingram MP) claimed in a letter dated 7 June 2005 to the General Secretary of Amicus, Derek Simpson, that the new way of working at RAF Cottesmore had cut the number of days a Harrier spends in maintenance by 45 days. However, turn-around times at DARA St Athan were around 100 days with measures in place to decrease this to between 60 and 80 days. This was undertaken largely with a team of six craftsperson's working single shifts on a 37 hour week. The true turnaround time at RAF Cottesmore was actually in the region of 200 days but this has been recently reduced by around 45 days with aircraft teams of a similar size working two shifts throughout the week.

5.4 It could therefore be argued that servicing time has actually increased, not decreased, to around 155 days. It would appear that the RAF are not recording expanded man-hours accurately within this programme. In addition, the cost of servicing the Harrier fleet at RAF Cottesmore has increased to £17 million whilst the cost for DARA for the same work was £0.5 million. Not exactly good value for the taxpayer.

Outsourcing to BAE Systems

6. Despite basing the case for the roll forward of Tornado GR4 to RAF Marham on a requirement to protect RAF Core Manpower Requirement (CMR) it is clear to us, given the inadequacies of the poor facilities and lack of skilled workers available at RAF Marham, that the majority of the work was always intended to be contracted out to BAE Systems. We know that BAE Systems have been contacting technical experts at DARA St Athan for advice on maintaining and servicing the Tornado GR4. Furthermore BAE Systems have been involved in a pilot project working on the Tornado GR4 at RAF Marham and are intending to submit a bid later this year to service the entire fleet. [11]

6.1 Adam Ingram's written ministerial statement to the House of Commons on 25 May 2005 outlined plans for Tornado Future Support (TFS) including GR4 Combined Maintenance and Upgrade (CMU) which the Defence Logistics Organisation (DLO) are now consulting on. [12]The Minister made it clear that the MoD is seeking a partnered solution in the private sector and that contracts for TFS would be awarded to BAE Systems and Rolls-Royce Defence Aerospace. [13]

6.2 The Government decision to seek a private sector solution could potentially lead to an operational disaster. The House of Commons Defence Committee has previously commentated on the strategic importance of safeguarding the valuable work that DARA carries out, and has already identified the potential consequences of a private sector failure. In 2005 it stated: "We find it of real concern that if problems are experienced at RAF Marham, MoD may be dependent upon the original manufacturer of the aircraft to undertake repairs. One of the reasons why DARA was created in the first place was to provide `assured access to repair capabilities and a capacity for surge workloads in time of crisis'. [14]It is not apparent how the proposed arrangements at RAF Marham will meet this requirement. "[15]

6.3 Rolling forward the work to the RAF effectively enables the MoD and the private sector to avoid their obligations to workers at DARA St Athan under TUPE legislation.

Operational Risks

7. A large part of DARA's success story can be attributed to its highly skilled workforce. Many have been trained through in-house apprenticeship schemes at the onsite training facility, which has been operating over a period of 36 years, or served an initial apprenticeship in the RAF and undergone years of further specialist training. DARA continues to build on these skills with corporate wide programmes and improvement initiatives. If DARA St Athan is closed the apprenticeship training facility will also close with a loss of between 20 and 40 youth or adult trainees per year. The skills base will be eroded quickly, not least because skilled aviation experts, representing thousands of pounds of investment training, are much sought after throughout the avionics industry in Europe.

7.1 Many of DARA's ex-workers have already been snapped up by the aerospace industry based around Toulouse in the South of France. Should the Government find itself in the desperate situation of having to reopen DARA to cope with failure in the private sector, the skilled workforce will have long since departed and it will take years of investment and training to rebuild a new workforce to the same level.

7.2 During the last Gulf War conflict, DARA St Athan was able to meet additional frontline operational requirements at short notice by prioritising the Tornado GR4 fleet. The workforce demonstrated a massive show of effort and commitment which saw DARA St Athan working 24 hours a day, seven days a week. It is highly unlikely that a private sector company would be prepared or able to rise to such a challenge—and certainly not without a huge financial premium.

7.3 The continuing turmoil in international affairs during the last 15 years has seen the UK involved in military action in the Gulf, Afghanistan, the Balkans and peace keeping initiatives in Africa. Any significant delays or problems with maintenance turn arounds involving the Tornado GR4 fleet could potentially have a devastating impact on frontline capability.

7.4 Many private sector contracts have resulted in dramatic headline grabbing equipment failures, delays and cost over-runs. Ultimately, private sector companies are intent on making money for their shareholders and operational considerations will never be their top priority.

7.5 It would be a great tragedy, and a huge embarrassment to the Government, if any military aircraft, worth millions of pounds, were lost because of substandard work. Furthermore the political consequences of a failure of frontline operations because either RAF Marham, or the private sector, failed to properly and timely service the Tornado GR4 fleet is incalculable.

Financial Costs and Risks Associated with the Private Sector

8. DARA has successfully met its objective of providing an in house competitive alternative to the private sector industry. As a result, when tendering contracts for servicing, modifying and repairing military aircraft, the Government can use DARA as a benchmark against which to compare private sector bids. If DARA St Athan is forced to close, private sector firms will be able to charge whatever they like and the Government will be forced to pay. Whilst DARA has been established as a trading fund, it is still part of the MoD and UK taxpayers are the shareholders. Moreover, risk can never be fully transferred to the private sector because the cost of failure is so great.

8.1 The MoD's original investment appraisal used to justify the decision to roll forward the Tornado work to RAF Marham, based on a cost comparator of RAF Marham and DARA St Athan, did not take into consideration the cost of the £80 million loss to the taxpayer of closing a state of the art aircraft hangar, the training investment of the current workers at DARA St Athan, the full cost of the redundancy package for those workers, the economic and social impact to the local ex-mining community or the costs associated with seeking a private sector partner to carry out the work.

8.2 Whilst BAE Systems are keen to take over the work for servicing and maintaining the Tornado GR4 they do not have the comparable skills or facilities available at DARA St Athan. If the private sector fails to sufficiently maintain the Tornado GR4 fleet, the RAF will be forced to extend flying times for aircraft. Harrier flying time between servicing intervals has been already extended by 44%, and 37.5% on Tornado GR4. This will put crews and aircraft, worth millions of pounds, at catastrophic risk and may interfere with frontline operations.

8.3 There is already a history of private sector failures involved in servicing military aircraft. In 1994 one third of Hercules transport aircraft were grounded after 11 were damaged during modification. The work, which involved installing infrared missile defence systems, was being carried out by AirWorks, a private sector company. Damage to the aircraft included cutting away load-bearing stringers, omitting fasteners, deviating from drawings and drilling holes in the air frames in the wrong places. The company had been awarded the contract despite reportedly causing £100 million worth of damage to 18 Tornado aircraft during routine servicing just one year earlier.

8.4 Private sector contractors, and BAE Systems in particular, have already been involved in costs over runs and delays with other key defence contracts. Two years ago the National Audit Office (NAO) produced the Ministry of Defence Major Projects Report 2003 which identified a £3.1 billion overspend over the previous year. A significant proportion of the cost over-runs and delays, 144 months in total, were the result of BAE Systems contracts, despite the introduction of the MoD's Smart Acquisition initiative. [16]In 2004 the overspend was £1.7 billion and delays were 62 months. [17]A former BAE Chief Executive, Sir Raymond Lygo also reportedly revealed to the BBC that BAE System routinely underestimated project costs in order to win contracts from the MoD only to escalate the costs at a later stage, knowing that it would cost the MoD too much to cancel. [18]

CONCLUSION

9. We would like to see the decision to roll forward the work for servicing and maintaining the Tornado GR4 fleet to RAF Marham and/or private sector contractors reversed. Without this work, and the loss of other work including Harrier, DARA St Athan now faces closure which is bad news for its professional and highly skilled workforce and the Welsh Assembly's Red Dragon project. This is despite the fact that DARA has more than proved itself as a successful trading fund capable of servicing and maintaining the most sophisticated military aircraft to an excellent standard. Contracting this work to the private sector represents further costs, not savings, and presents a significant financial risk. Moreover, whilst DARA St Athan has a proven track record of delivering frontline support at critical times the capability of private sector companies to rise to the same challenge is unproven. This presents an unacceptable risk to the RAF's frontline military operations.

Derek Simpson

General Secretary

October 2005

1 DARA Annual Report and Accounts 2003-04. Back

2 "End to End Study Recommendation 40 Follow on Work" prepared by Management Accountancy Services (Army) (2 April 2004) paragraph 12. Back

3 Ibid paragraph 13. Back

4 Ibid paragraph 14. Back

5 Ibid paragraph 32. Back

6 Ibid paragraph 27. Back

7 Ibid paragraph 28. Back

8 Ibid paragraph 44. Back

9 "Future Capabilities: Government Response to The House of Commons Defence Committee's fourth Report of Session 2004-05" Crown Copyright (July 2005) page 16 Government response to Recommendation 36. Back