Examination of Witnesses (Question Numbers
Ursula Brennan, Air
Vice Marshal Simon Bollom and Air Vice Marshal Stephen
9 March 2011
Welcome. I do not think that we have met two of our witnesses
We are focusing this afternoon on just the Typhoon,
having briefly looked at the Typhoon previously in the context
of major projects. You will remember there that there was a question
mark over whether the MOD really required the third phase of that
contract, and whether we actually just went into it because of
the contractual commitment and the costs that would have been
incurred otherwise. So I suppose looking at the Typhoon now,
in the context of this NAO Report, we have got to ask the question
as to how important is the Typhoon to our defence capability,
and is it sensible to focus on it? I don't know whether Simon
Bollom might be the best person to answer that.
It's probably Stephen.
I would say that the capability is vital for defence. I say that
not necessarily from the perspective of the individual platform,
but looking at it in terms of the capability requirement. The
capability requirement is the combat air and the ability to control
airspace. In order to control airspace, you need a highly capable
and highly flexible platform such as Typhoon: to be able to safeguard
the UK sovereign airspace; to contribute to NATO as part of our
alliance commitments and to protect NATO airspace; to contribute
to, or to do, the air defence task in places like the Falkland
Islands; and also for those wider contingencies, which include,
for example, potential use in parts of the Mediterranean and the
Middle East, as we are seeing at the moment. That control of
the air capability is vital. What is also vital is that we have
a multi-role platform so that it isn't just capable of doing control
of the air; it is also capable of doing the air-to-surface mission.
The more tasks you can get in a single platform, the more efficient
and effective you are. From my perspective, Typhoon is a vital
capability that we need.
Therefore why did you consider cancelling the third tranche in
At that stage in 2004, the Tranche 3 capability was not defined.
We knew the numbers, but we did not know what we would actually
be able to get within the aircraft platform, itself. Clearly
there is the aircraft itself and then there is what it is capable
of doingwhether it is sensors or the weapons we put on
it. What was also not clear to us at the time was how we would
be able to develop the aircraft that we already own contract forthe
Tranche 1 and Tranche 2 aircraft. Those were uncertain factors.
What we did know was that we had a requirement for a number of
aircraft, which we defined there, but not the capabilities within
them; and also how that played out across the wider combat air
forces, for example in the Tornado force. As we then worked through
subsequently, the capabilities that we would be able to get from
the Tranche 3 became clearer and what we would be able to do to
upgrade the aircraft that we already had became clearer, and at
that point we realised that what Tranche 3 would give us was critical.
We're not going to spend too long on this, but it doesn't look
to me a very credible story, because of the evidence that was
given last time, and because in September 2007, we were so desperate
for these aircraft that we sold 72 to the Saudi Arabians. If
we needed them, why did we try and cancel Tranche 3 in 2004, and
why in September 2007, did we flog off 74 Typhoon aircraft, including
24 Tranche 3, to Saudi Arabia? So if you needed them for our
defence capability, why did we sell them?
The aircraft which we sold to Saudi were Tranche 2 aircraft, rather
than Tranche 3 aircraft.
24 of them.
24 of them.
I see, "including 24"you are right. But it would
be wonderful just to have a little bit of honesty around it.
It is wonderful that you tried to get out of Tranche 3, which
is the evidence we got last time, which suggested to us that you
didn't want it. In the Report we have today, we see that you
sold 24 to the Saudi Arabians, and yet you are trying to get us
to believe that, actually, this capability of what will end up
being 160 Typhoon aircraft at its maximum, was absolutely essential
to our defence capability.
Could I just attempt to put those various
different facts together and see if I can explain it a bit? In
the last hearing, we did discuss the MOU with Eurofighter with
the partner nations regarding the numbers and the amount of money
we had to spend on Typhoon, and we talked about the decision that
was made in 2004-05. When we are looking at Typhoon, we are looking
at it all the time in the context of the other combat air that
we have got. What the Air Vice Marshal was explaining was that
at the time that decision was taken about whether or not we would
buy into Tranche 3, there were a couple of factors that were important.
One was whether all the other partner nations were going to buy
Tranche 3. So that was a conversation that was going on with
all the partner nations: were we all going to go into Tranche
3, or were we going to stop where we were? The second question
was: what would we get out of Tranche 3? At that time, the capabilities
from Tranche 3 were not that clear. The ones we sold to Saudi
Arabia were Tranche 2 aircraft. Subsequently, as we discussed
in that previous hearing, those discussions internationally came
to the conclusion that we would all go into Tranche 3. We then
looked at our combat air requirement as a whole, looking at Tornado,
Typhoon and the intention to move on to Joint Strike Fighter in
due course, and we said to ourselves, "This is the amount
of money that we have to spend with the contract for Tranche 3.
Where does that fit in terms of our requirement?" The purchase
that we made met our financial requirement in the MOU, and it
also met our combat air requirement. If we had not bought those
Tranche 3 aircraft, we would have had to have done something else:
upgraded the Tranche 2s, which would not have been as good a deal
as buying the Tranche 3s, or buy some other aircraft.
I do understand that, but I have to say to you that it stretches
my credibility a little bit to think that, in 2004, you decide
that you don't want Tranche 3. I could understand if you sat
there and said, "The only reason we went for Tranche 3 was
that we were contractually committed. It would have cost us a
bomb to get out of that, and we then had to make the best of a
bad job and try and ensure that those aircraft served their purpose."
But put that together with selling to the Saudi Arabians, and
you are left thinkingback to my original questionwhether
we have the defence capability that we really need. I would really
like an honest answer in this Committee. I think it would help
us in then trying to understand the challenges you face. Then,
taking it forward, you have had to take some very tough decisions
in the Defence Review, and you have taken out the Harriers and
you are taking out Tornado, and I just wonder, in the whole context,
as the value-for-money Committee, how much cost-benefit you did
on that and how much was actually simply driven by the contractual
commitment, and whether we have actually ended up with what we
need, or what we have to have? I don't know, Stephen Hillier,
whether you can answer that just honestly; it would be really,
really helpful to the Committee.
Perhaps if I start, and then I am sure Simon will continue on.
I was involved in the Typhoon programme during this period, and,
as I outlined, we didn't know what Tranche 3 capabilities would
be in 2004, and we didn't know what we would be able to do with
our Tranche 1.
You didn't want it in 2004. It wasn't that you didn't know; you
took a decision which demonstrated you didn't want ityou
took the billion out of the budget.
I think to say that we didn't want it, implying that it was a
redundant capability, would be incorrect. We were in an arrangement
in respect of Typhoon with an expectation that we were going to
buy certain tranches. That agreement was entered into a very
long time ago when we did not know what would be in the different
tranches. We then got into a discussion with the other partners
in that consortium, where there was a general view that people
were not sure whether they were going to go into Tranche 3. That
being the case, if we had all decided not to go into Tranche 3,
we would have sat down and said, "How else are we going to
meet our capability requirements?" At that point in 2004,
it looked like people were not going to go for Tranche 3, and
therefore we took the money out of the programme, as we have said
previously, on a risk-based decision that in general people were
not going to go for Tranche 3.
Yes, and you agreed to sell 24 to the Saudi Arabians.
Twenty-four Tranche 2 aircraft.
Chair: It doesn't
It is very important, and perhaps Simon Bollom or Stephen Hillier
could explain the very significant differences between the different
I just think the decision to sell 24 aircraft
to the Saudis was actually a diversion of 24 Tranche 2 aircraft
to the Saudis, and there was an expectation that we would make
up the 24 when the Tranche 3 came along, which indeed we have
You didn't. I am sorry about this, and we are going to have to
move on from it, but when you had done that, you had, for whatever
reason, as Ursula Brennan said, taken the money out. You
were hoping to get out of Tranche 3. So someone had taken a decision
around defence capability, maybe influenced by budget considerations,
and said, "We'd rather not have Tranche 3," and you
decided to flog 24 to the Saudis.
Simon Bollom: If
I may, the other point that I think is essential is that the point
that we committed to Tranche 3 was the latest point at which the
nations were able to make a decision as to whether to buy or not.
At that point in timeso we are talking now about 2008
or 2009before any investment decision of that case, you
have to do a piece of operational analysis. As the PUS has mentioned,
by that time we knew more clearly what capabilities would be on
that aircraft and what the balance of force mix was that would
deliver the best capability. All I can tell you is that at that
time, the operational analysis and the supporting business case
showed that there was a requirement for Tranche 3 aircraft, and
that has been through all the usual scrutiny, through our Department
and through the Treasury.
Q9 Mr Bacon:
Can you just remind us: when you originally signed the contract,
how many aircraft did you think you needed?
Simon Bollom: It
Q10 Mr Bacon:
You are now going for 160, but you won't have 160 in service for
very long, will you, before it drops down to 107? How many years
will you have 160 in service?
Simon Bollom: I
haven't actually got the
Mr Bacon: Has anybody?
It will be until the Tranche 1 fleet goes out of service.
Q11 Mr Bacon:
Plainly the number will drop down then. That is a truism. I
am not asking why it will drop down; it is plainly because Tranche
1 will drop out. What I am asking is: for how many years will
you have the full complement of the reduced number of 160 in service?
It will be from 2015, when we take the delivery of the Tranche
3, through until approximately 2018-19, when the Tranche 1 goes
out of service.
Q12 Mr Bacon:
Yes. So in other words, for somewhere between three and four years,
you will have 160, which is already a reduced number from the
232 you originally said and thought you wanted when you signed
the contract. You are now going to have 160 for a mere three
to four years, and then you are going to drop down to 107. So
all this effort that has been going on since 1987or arguably
since 1971 or however longis going to result in 160 aircraft
for three and a half to four years, and then you drop down to
107 aircraft. That is correct, isn't it?
It is correct, but if I can just add that it is related to the
Tranche 1 aircraft, which will not only be in service for that
three or four-year period. We will have had service out of them
since the in-service date, which was 2003. So we will actually
have had, for some of the Tranche 1 aircraft, 16 years' service.
Q13 Mr Bacon:
Obviously, at the moment, the Typhoons that are already in service
have been alongside other aircraft like Tornado and so onI
understand that. I am really looking forward to the point when
you have only got 107 Typhoons, and some of the others will then
have gone out of service. It says in paragraph 1.13, "The
Department has acknowledged that there is risk that the eventual
fleet size of 107 Typhoons could result in shortfalls against
mandated capability levels." In a way, that is not surprising,
given that when you signed the contract, you thought you wanted
232, and now you are going to have 107. How do you manage that
risk? Do we just decide we don't do things because we can'tbecause
we have fewer aircraft than we thought we were going to have originally?
Well, it is a combination. In comparison with when we signed
for 232 to where we will be, our requirement has changed. The
threats that we are dealing with and our commitments have changed,
and they have reduced, so that allows us to reduce the number
of aircraft. Also, within the aircraft that we actually havethat
reduced fleetthey will be far more capable within each
individual platform than we assumed when we went for 232. They
will be able to do both the control-of-the-air missions and the
air-to-surface missions with a wide range of sensors and weapons.
There is always a numbers element, but within the numbers that
you have, the more capability and the more multi-role you can
get, the more you can reduce your fleet size and balance out the
operational and the threat risk against the financial consequence.
Q14 Mr Bacon:
Of course, even if the aircraft has all these different capabilities,
you have to have pilots who can fly them. At the moment you have
only got eight pilots who can do the ground-attack role, which
is a surprisingly small number. When will you have all the pilots
capable of flying all the roles?
At the moment we have eight pilots trained in the ground-attack
role because that is all we need. Each bit of training is clearly
expensive. Flying hours are expensive, so what we do not want
to do is apply flying hours to keep people with a particular skill
set that we do not expect to deploy in operations. It has actually
already increased from the eight that was in the Report. Time
moves on and people get trained. As we move to Tranche 2 multi-role
capability in 2012, the number will increase, and it will eventually
reach its peak in 2018, when we have the full Typhoon multi-role
capability, because that is the stage when we need pilots trained
in that wide range.
Q15 Mr Bacon:
Sorry, what is the answer to my question? When will all the pilots
be trained in all the capabilities?
Q16 Mr Bacon:
And that means you will have as many pilots trained as you have
aircraft by 2018.
They will never be exactly in match, because there will be experience
levels and there is a constant training task, but we will have
the number of pilots with the skills we need for the operational
tasks we have at that time.
It says in the Report that there are five pilots who are grounded
because they have not done enough training hours.
Q18 Ian Swales:
Can I just quickly expand on that? I don't know what the cost
is, but we are talking about assets here that cost £120 million.
It seems like buying a Ferrari car and then saying you cannot
afford driving lessons. It seems a bizarre calculation if you
have got this kind of hardware and you are saying that you cannot
afford to train the people to use it. It seems crazy.
I don't think the figure is £120 million per platform, and
the figure is as in the Report. I would see it from the other
direction: why would we use expensive flying hours to keep people
with a range of skills that we do not expect to deploy in operations?
I think that would not be a good way of doing business. It is
better to focus the hours on what we actually need at the moment,
and the focus for the Typhoon force at the moment is in the air
But why do we have airplanes that you do not need to fly? It
is completely mad. You have got eight guys who can run it, you
have got five grounded because they haven't got the training,
and you have got your 170 trainee pilots whom you are sacking.
Either we are wasting too much money on planesand I think
we'll come to an end with that questioning as we are not getting
a straight answer on itor you haven't got enough money
to have enough people to do the job as pilots.
Could I just come back? We have 48 pilots who are trained for
the tasks that we require them to do. Eight of them are required
to be trained for the multi-role task, and we have eight trained
in that role. We have 48 pilots overall.
How many of the planes can do multi-purpose stuff?
Tranche 1 aircraft at the moment, Simon?
Simon Bollom: Fifty-two.
You have got eight pilots to work on 52 planes, of whom, if you
take in sickness, holiday and so on, there are probably four or
five at any one time.
We just do not need those pilots to be operating the multi-role
Then you do not need the 52 planes.
We need them for the rest of the tasks. We need it for the air
defence of the United Kingdom and for all the other air defence
Can we just clarify that in relation to the whole of defence capabilities
and defence assets, there are capabilities and assets that we
are using in Afghanistan which are used all the time. They are
being used, they come back and they get repaired, and they go
back out and use them again. A lot of the role of the Ministry
of Defence is about contingency. It is about being prepared,
equipped and enabled, and having the capability. The capability
consists of having the equipment, the training, the doctrine,
the tactics, the weapons and so on. We have acquired the equipmentin
this particular instance, aircraftand we think of them
in terms of readiness. How ready do we need to be?
I think we think in terms of sweating the asset so that you get
good value for money. If you have got an asset of 52, rising
to 160 and going back to 107, and you are only sweating the 52
with eight qualified pilots at this point in time, it seems to
me to be very poor value for money.
Amyas Morse: There
are a couple of things to pick up on, if I may. One of them you
might have difficulty answering me very specifically about, but
I would like at least to ask you a bit about it: what is the viable
maintainable fleet size? Allowing for the fact that you have
deployable aircraft multiplierswe understand all thatisn't
it true that the size we are talking about is pretty low as far
as having a viable fleet? Before you answer that, I would just
like to also ask whether I heard you saying that we do not have
the right number per platform. There is a number in our agreed
Report. I may have misheard you there, Air Vice Marshal
Hillier, but I got the impression that you were saying that it
is not £120 million per platform. Was that what you
said, or did I pick that up wrongly?
Simon Bollom: Could
I come in there? That is correct. I think the MPR agreed figure
was £73.2 million.
Q24 Mr Bacon:
How do you calculate that into your summary?
Simon Bollom: That
is the production cost of the aircraft.
Q25 Mr Bacon:
What is £13.5 billion divided by 160? Production cost
is £13.5 billion, and you are getting 160 aircraft.
What is one divided by the other?
This is the conversation that I think we have had several times
about the distinction between whether you describe the unit cost
as the development cost
Q26 Mr Bacon:
No, I am not talking about the development cost. I'm looking
at paragraph 9: "The development costs of Typhoon have more
than doubled to £6.7 billion
These costs are fixed regardless
of the number of aircraft the Department buys". And then,
a separate sentence: "The production cost of Typhoon is £13.5
billion." I am asking purely about the production cost.
What is £13.5 billion divided by 160 aircraft please? I
have already done the sum. You have just said £70-something
million; what do you think it is?
Simon Bollom: That's
what I think it is.
Mr Bacon: Tell me
Simon Bollom: It
is £73.1 million.
Mr Bacon: Is it? Why
do I get £84.3 million, then? Dividing 13,500 by 160 gives
Tim, what is your figure from the NAO?
Tim Banfield: There
is a difference, I think, with Simon's number, because there is
a cost of capital number coming in, but that is a production number.
What we have talked about in our Report is the total cost of
buying Typhoon, which is development and production put together,
divided by the number of units. That is £126.25 million
per aircraft, if you take the £20.2 billion.
Q28 Mr Bacon:
I was just coming on to the £20.2 billion. If you divide
that by 160, you get £126.25 million. That is correct?
Tim Banfield: Yes.
Q29 Mr Bacon:
That is what I thought. And you are saying it is 70?
Amyas Morse: Can
we do the fleet size as well, please Chair? I did ask a point
about viable fleet size. I would be quite keen that we don't
Q30 Mr Bacon:
Yes, because if you divide £20.2 billion by 107, which
is the fleet you are going to have after only three and a half
years, you get a very different figure, don't you? You get £20.2
billion divided by 107aren't iPhones great?and you
get £188 million.
Actually, I think if you say, "We bought a certain number
and then over the years they decline", by the time they wind
out and there are only two left, you can divide your £20 billion
by only two aircraft. I think that it a slightly unfair calculation.
Q31 Mr Bacon:
You are right that it is slightly unfair, but it's not that unfair.
At the end of the day, you are buying a fleet of aircraft. You
are going to have 160 aircraft for only three and a half to four
yearsfrom 2015 to 2018 or 2019, as one of your other colleagues
said in answer to a previous question. So actually, you are buying
a fleet that will very soon be 107 aircraft. If you divide £20.2
billion, which is the development cost plus the production cost,
by 107, you get £188 million. If you divide it by 160, you
still get 84. So, either of them is a higher figure than you
are talking about. How do you get to your £72 million
Simon Bollom: That
is the unit production cost of the aircraft. We have had a long
debate about what should be included and what should not be included
in that figure, and the way production costs are traditionally
calculatedand you can look at any nation or any variantis
to accept that the development costs, which in this case were
£6.7 billion, are sunk costs. You then move into a
different phase of the programme where you do production investment
Q32 Mr Bacon:
But even on that basis, you get a figure of £12 million
per aircraft higher than yours. You get £84 million.
Simon Bollom: If
I may, I think as Tim has mentioned, this is the effect of the
cost of capital.
Q33 Matthew Hancock:
There is one really important thing on here, which is that there
have been accusations made, in this Committee and elsewhere, that
the MOD's pricing of assets and costing of assets is over-optimistic.
Would you say that that has been the case in the past?
When you say the pricing of them, you mean the forecasting and
The costing of them and the estimates of them in advanceexactly.
Certainly our forecasting and estimating
has been proven to be over-optimistic in the past.
Q34 Matthew Hancock:
And here is an example of choosing not to include certain costs,
which the NAO have included, in the cost that you state as your
base line. It is obviously the figure that you carry around in
your headI can see that, and it is important in your job
that you do have a figure like thatbut it is different
from the NAO's cost and, funnily enough, it is below it. Is that
not part of the cultural problem?
Simon Bollom: Can
I just come back there and say that I do not think there is any
difference between our assessment of the cost and that of the
NAO. It just depends on what you want to include in the unit
Q35 Matthew Hancock:
Yes, and you have chosen to include as little in there as possible,
to get the number to be as low as possible.
Forgive me, I think we really are confusing ourselves here. It
is the NAO that does not include the cost of capital, as I understand
it. I think the NAO don't use that 86-something figure. If you
calculate it without the development costs, the NAO similarly
arrives at the same place as we do, I believe.
Chair: Let us move on.
Q36 Austin Mitchell:
Actually, I want to get off figures. The prevarications the Chair
has talked about over the third stage are just the latest indication
of a project of which you have been trying to make the best of
a bad job from the start. The Eurofighter was designed for a
Cold War era in which our brave lads were going to be up there
fighting against MiGs in the sky in a speeded-up version of the
Battle of Britain, and protecting the Grimsby fishing boats in
the North sea by shooting down the Russian MiGs that came to harass
them. Now that has gone. How many air-to-air combats have we
been engaged in since this was agreed in 1985?
We haven't been engaged in any air-to-air combats, but that is
not to say
Q37 Austin Mitchell:
So the answer is none?
We have not been engaged in specific combats in terms of releasing
weapons and shooting down aircraft, but that is not to say that
we have not required the capability through the control of the
air. We have used it in the United Kingdom, the Falkland
Islands and Bosnia. We have used it in northern and southern
Iraq. We have used these capabilities because we need to be able
to control the air. I accept absolutely that the Soviet threat,
which was what was around when Typhoon was first conceived, has
gone, but the capability requirement to control airspace and to
have a highly capable aircraft to do that has not gone, and the
evidence has supported that over the last decade.
Q38 Austin Mitchell:
Okay, the combats it was designed for have not actually happened,
but it might have been useful. But to go back to 1985, it seems
to me that you had three alternatives: going with the Americans,
as we were offered, on the F-22, which is not yet in production
but has a greater stealth capacity, which is the thing we now
need in the new age; go it alone, like the French with the Rafale,
because they decided not to come in; or go for a co-operative
European venture, which predictably was going to be more expensive,
because European Committees always produce camels when they are
trying to design horses. Inevitably, European co-operation was
going to be more expensive. Why, of those three alternatives,
did we choose the most expensive one?
First, obviously, I cannot say what the decision making was in
the mid-1980s, but I think I would emphasise that we have not
picked the most expensive option. I do not know whether there
were any discussions
Q39 Austin Mitchell:
But all the problems with suppliers and spare parts seem to be
because it is a collaborative venture.
But the F-22, which you mentioned, is vastly more expensive, by
any measure you wish to use, than Typhoon. I cannot comment on
Rafale specifically, but within the four-nation construct, what
the four nations have done is built a superbly capable aircraft.
This is leading edge, and I think that is demonstrated by the
high interest in the export market. This is a very good aircraft.
It is not something that has absorbed a lot of money and is not
giving us good deal.
Q40 Austin Mitchell:
Yes, but you are now having to adapt it at enormous expense to
do air-to-ground and to go out and shoot wedding parties in Iraq
I do not accept that latter characterisation because I have significant
experience in the air-to-ground mission and the care that we take
in that air-to-ground mission. But, what we have done, I think,
is exactly what I would hope you would want us to do. As the
strategic environment changes, we have adapted an aircraft that
we have already bought to give it the widest range of capabilities
and allow it to participate in the maximum number of missions.
We delivered the air-to-surface capability in the Tranche 1 on
time and on budget for £160 million. Now, I know £160 million
is a lot of money, but actually to put the capability into an
aircraft in a programme of this size for that amount of money
shows that we have done well.
Q41 Austin Mitchell:
Okay, just to clarify, is it better than the Rafaleor whatever
the French did on their ownand the F-22, as it will be?
The Typhoon is a more capable aircraft.
Q42 James Wharton:
A quick question to start with, and I do not necessarily want
an exact answer, but I think you will be able to give me a rough
idea. Roughly how old are the oldest Tornados that you have got
in service nowthat you are using?
The Tornado went into service in 1983. I doubt very much whether
there any of those original aircraft are still in service, although
Simon might be able to help out there. But what I would emphasise
is that what we did with Tornado was to give it a mid-life upgrade
programme, at considerable expense, around about the late 1990s
and early 2000s. In effect, what we have done with the Tornado
is similar to the tranches of Typhoon. We took a basic aircraft
and we upgraded it to make sure that it was capable of seeing
through its life, and that it had the broader range of weapons.
Q43 James Wharton:
I am sure you can see where I am going. Is 16 years' service
from a Tranche 1 Typhoon a good lifespan for a modern military
aircraft of that type that has cost that much? Is it short, is
it long, or is it average?
I think there are two points, and I am sure Simon will come in
shortly. First, Tornado and Typhoon are different generations
of aircraft. The Typhoon is hugely more capable and also hugely
more complex. Generations have moved on, and the life you are
going to get out of the aircraft, in obsolescence terms, becomes
more of an issue. I think the other thing is that although we
have a planning assumption for Tranche 1, what we will aim to
do, absolutely, is to get the best out of these aircraft for as
long as we possibly can. We continually test and adjust our plans
to make sure that we get the longest life and the most capability
out of the aircraft, consistent with value for money. So we have
a planning assumption at the moment, but we will continue to test
and adjust that.
Q44 James Wharton:
So that 53 aircraft retired by 2019 is a planning assumption,
and if you got the opportunity to extend the life, you will look
It is a planning assumption. We have an obligation to get the
best out of the money we spend, so we continually test and adjust
But a planning assumption based on what? Based on what you think
your need will be then, or based on what you think the expenditure
that will be required will bewhat have you based it on?
Both those factors, together with our ability to prevent obsolescence
in the aircraft. This is a computer-driven aircraft and there
comes a point where it ceases to be value for money to continue
to run through on old equipment. So it is obsolescence, it is
the threat and it is the numbers of aircraft.
To pick up your point about the Tornado and the life of the Typhoon,
because the Typhoon comes in tranches, it enables us to say, "Is
it better value to invest in putting more into upgrading a Tranche
2 or a Tranche 3 than to try and do something with Tranche 1?"
The judgments that we make about how long we keep aircraft are
a mixture of the threats we face, the cost of keeping an older
one in service versus buying some more new ones or upgrading new
ones, the capability that we can get out of them and the extent
to which it is possible to put software on. We are perpetually
looking at those things and looking at the whole group of aircraft
that are available to us and saying, "What is the best way
of using these, and where should we be placing our investment
to get most out of the thing as a whole?" That is why we
have this concept of combat air, where we look at all the combat
air together, not just at one aircraft.
Q46 James Wharton:
I think you can say where my concern is going. I think we have
to be very careful not to measure the cost of an aircraft in terms
of, "That plane cost £80 million to get it on the
runway." If that plane lasts 50 years, that could be really
good value. If it lasts two years, it is terrible value. I just
think sometimes it is over-simplified.
The other issue that we touched on earlier was about
overall capability and numbers of planes. I appreciate we are
talking about a planning assumption that you are going to retire
53. Obviously, the Joint Strike Fighter is going to come in and
will complement some of the capability that will be lost through
the retirement of Eurofighter. How can you make those planning
assumptions when we do not yet know how many Joint Strike Fighters
we are going to buy?
You make assumptions about the numbers that we plan to buy, but
it is a constantly evolving process. As I say, it will be the
balance between the threat, the capabilities that we have between
Typhoon and the Joint Strike Fighter, and affordability. It is
the whole range of factors, and personally I think it would be
wrong to be absolutely prescriptive and say, "This is what
we will do," the best part of a decade in advance. We should
have a planning assumption and continually test and adjust it
from that perspective.
What is your planning assumption on the American fighter?
We do not need to make a planning assumption about how many we
buy for the Joint Strike Fighter at the moment, precisely because
it is a completely different kind of contract.
But Stephen Hillier said that in his planning he has got an assumption?
Are you willing to share it with the Committee? If you are not
willing to share it with the Committee, just say so. Again, that
will be easy.
We think about the Joint Strike Fighter in a different kind of
way, because we think about it in terms of buying it off the production
line from the Americans, and we don't have to decide how many
we are going to buy until much later than we would in something
where we have entered into it
Chair: Stephen Hillier
did say that, in his planning assumptions on this, he had a planning
assumption about how many Joint Strike Fighters you wanted. I
am just interested, because the balance is an obvious question,
Q49 James Wharton:
The thing that worries me is that you can plan to retire Typhoons
on the basis that the Joint Strike Fighters are going to be coming
in and so you will still have the capability, but you aren't planning
for how many Joint Strike Fighters are going to come in. How
are you going to be confident that you are going to have enough
fast jets to meet our defence requirements?
Simon Bollom: Can
I try to help here? In terms of our assumptions about Typhoon,
and as my colleague has already stated, in terms of the Tranche
1, we have looked at the obsolescence factor, and we have decided
that the value-for-money decision would be take them out of service
in around about 2018. For the Tranche 2s and Tranche 3s, which
is the balance of the 160, we are assuming that they will run
for their whole airframe life, so that will be through to
Q50 James Wharton:
The first tranche is not running its whole airframe life?
Simon Bollom: Correct,
because of the obsolescence driver. Tranche 2 and Tranche 3 will
run right through to 2030.
Q51 James Wharton:
Thank you, I appreciate it. So just to be very clear on that,
you have got 53 aircraft that have cost a lot of money which you
are not running for their whole airframe life.
Because we took a value-for-money decision that it was better
value for money to invest in the Tranche 2 and 3, rather than
try and upgrade to deal with the obsolescence in the Tranche 1.
It is the same type of decision, as my colleague said, that we
made in relation to Tornado. In relation to Tornado, you keep
those aircraft going to keep the airframes through to the full
extent of their life before they fall apart only by investing
a lot of money. It would have made no sense to invest more in
keeping an older airframe going than we could invest in a newer
airframe to get the capability.
Chair: I just make a comment
on this. If your obsolescence is an issue and a factor that determines
how you plan and what you do, you should note that this plane
took 20 years from planning to come in. You had approval for
Tranche 1 in November 1987 and Tranche 1 was only completed and
delivered in December 2007. Equally, this air-to-ground stuff
is only going to be in by 2018. This shows that the delays in
developing, producing and implementing the changes cost us even
more, because the stuff becomes obsolete. That is just a comment
that will no doubt be in our report, but it is an outrage.
Q52 Stella Creasy:
In making your assessments about value for money, what impact
does access to spares play?
Simon Bollom: A
very significant impact. In terms of the obsolescence issue,
it will be very much driven by the availability of the electronic
spares, and principally the processors.
Mr Bacon: Can you just
repeat that? The availability of?
Simon Bollom: Processors,
the air electronics and the avionics. You will understand that
the growth rate of processor technology is such that things have
a very short cycle in terms of obsolescence these days.
Q53 Stella Creasy:
I appreciate that, but can you see how worrying it is for us as
a Committee to note that, for example, in December 2008 you placed
an order for spares to support the deployment of the Typhoon to
the Falkland Islands, and by August 2010, nearly 30% of those
were either delivered late or outstanding?
Simon Bollom: If
I may, that is a separate issue.
Q54 Stella Creasy:
Why is that a separate issue? You are telling us that the availability
of spares plays a key role in achieving value for money on these
deals, but we are seeing consistently that spares are not being
Simon Bollom: Right,
the first bit is on the decision about supporting a fleet. So
the value-for-money judgment is made through life on the basis
of being able to supply the right technology and the right spares
to the aircraft in time. The piece that you referred to in the
note there was about the availability of those spares at the time.
So it is a supply chain issue. So it is slightly different.
The deficiencies that are referred to in that Report are about
production, not about the obsolescence and technology.
Q55 Chris Heaton-Harris:
If that is true, what have you done? I am very lucky because
I have been on the Armed Forces Parliamentary Scheme with the
RAF twice. In 2001, I was in Akrotiri and there were three Jaguars
on the floor being cannibalisedrobbed for partsto
keep one plane going for the northern no-fly zone over Iraq.
I was told at that point in time that there was going to be a
just-in-time thing around the corner that was going to guarantee
that future airframes would not have the same problems that airframes
had at that point. Eleven years later, you are telling us we
have exactly these problems again. That surely cannot be right.
Stella Creasy: You still
can't get the bits that you need to keep the planes in the air.
Simon Bollom: We
have a very complex supply chain that stretches all over Europe.
I won't try to pretend that that supply chain has been absolutely
seamless in delivering the parts exactly.
Q56 Chris Heaton-Harris:
Are there any Typhoons on the ground now that are being robbed
for parts to keep other Typhoons in the air?
Simon Bollom: Almost
certainly. Every aircraft fleet in the world
Q57 Chris Heaton-Harris:
We have planes that we have spent £70 million to £120 million
on. Can you understand my frustration that nothing has changedor
seems to have changedin the last 10 years?
The alternative approach to this would be to buy a hell of a lot
more spares at the front end, which would mean a much bigger initial
Q58 Stella Creasy:
Can I, with respect, suggest a third option: you negotiate late-delivery
penalties into your contracts for your spares?
Simon Bollom: Yes,
on the face of it, that would seem to be the right thing to do.
I think what I would say is that we have got a quadra-national
organisation here. We have got four nations involved in this,
four partner companies, and a whole raft of suppliers across Europe.
Q59 Stella Creasy:
You have had that since the start of the contract. What have
you learned in the various tranches? These problems are not unique
to the last couple of years, are they?
If you look in the Report, at paragraph 1.8, the NAO confirms
that we have been learning from the early experience of that multi-national
reliance on spares and certainly, in some cases, because of the
way that the aircraft is designed and built, the spares have to
come from international sources. But if you look at the Report,
it points out that we both have been improving our arrangements
with our partner nations and, where we have got contracts of our
own, getting better results out of those.
Q60 Stella Creasy:
So have you negotiated late-delivery penalty clauses in the contracts?
If you are learning from it, have you negotiated so that we can
claw back money if the fact that we are not getting parts means
that you guys can't get the planes up in the air or you have to
cannibalise the planes that you are flying?
Simon Bollom: That
is not the way we have set these contracts out. Can I just go
on to qualify what we have done? If you set up a contract of
that nature, there will almost certainly be a huge risk element
that you have to pay for in the capital cost of spares. The way
that we have structured this is to put in place an availability
service onshore with BA Systems and Rolls-Royce so that we incentivise
them, not necessarily to give us spares or repairs in separate
stove pipes, but to provide us with aircraft availability. We
signed up to that contract at the end of 2009, and what we anticipate
is that we will get very much improved availability of spares,
as well as technical support and aircraft out of maintenance.
What we are looking for is a holistic support capability.
Mr Bacon: But with respect,
Mr Heaton-Harris was being told ten years ago when he was at Akrotiri
that we were going to have a system that was guaranteed. You
have referred to the nature of the quadra-nation contract and
how that makes the supply chain more complex. For me, one of
the most surprising sentences in this report, Ms Brennan, is where
it says in paragraph 11, on page 7: "The Department did not
anticipate the potential of these arrangements"that
is to say the rigid, collaborative work-share requirements"to
drive additional cost into the project." Why not? Isn't
it blindingly obvious that if you do it in four countries rather
than one, and you have rigid, collaborative arrangements that
involve individual circuit boards travelling around Europe to
have other things done to them, it is going to have potential,
to say the least, to drive additional cost into the project?
Isn't that blindingly obvious?
Q61 Chris Heaton-Harris:
Can I reply to that? At the time when I was doing the Parliamentary
SchemeI am sorry, it was Interic, not Akrotiri, I apologiseI
went to Shrivenham where there was the joint training university
for the joint services, and I was sat in a room where people were
just drooling about what was going to come forward with the Typhoon
and thinking about these exact issues that we are talking about
today. So somewhere in the MOD, these thought processes were
going through; but when it actually came to the crucial point
of doing the contract and the ordering and all this project management
stuff, it disappeared.
Simon Bollom: I
don't think it did disappear. I would refer back to what I talked
about earlier about trying to put in place an arrangement, which
has actually been very successful on Tornado and Harrier. Indeed,
the NAO did an investigation into fast-jet support arrangements
and we saved something in the order of £1.4 billion. So,
going back to your Jaguar days, I believe we have learned from
that. We have implemented new logistic support arrangements on
Tornado and Harrier. The aircraft Typhoon is now at a sufficient
level of maturity, technicality and production that that is exactly
the sort of arrangement that we are going to capture on Typhoon.
Q62 Nick Smith:
So exactly how many Typhoon aircraft are being cannibalised for
spare parts today?
Simon Bollom: I'm
afraid that I couldn't tell you off the top of my head.
Q63 Mr Bacon:
What is the answer to my other question? Why didn't the Department
anticipate the potential of these rigid, collaborative work-share
arrangements to drive additional cost to into the project?
We are talking about decisions that we
made back in the 1980s. If you look back that far, I don't know
to what extent we had had much experience, frankly, of working
in collaborative arrangements.
Q64 Mr Bacon:
But isn't it blindingly obvious that if you have rigid, collaborative
arrangements where you share out the work in four different countries,
and you have, as I said, individual circuit boards travelling
around Europe to have an extra process added to them, that is
going to increase costs? You don't need much experience of that
to surmise that that will increase costs.
I think the point is not so much that people didn't think, "Will
involving four nations increase the cost?" It is the extent
to which people anticipated that correctly. It is worth noting
that in relation to the UK, we, as users of the Typhoon, have
a much leaner approach to support costs than any of those other
partners. So, we are in a multinational organisation, but
in support terms, we are actually working this aircraft more efficiently
and more cheaply than our other European partners.
Q65 Mr Bacon:
The whole point about these Kawasaki supply chains and all the
rest of it is that they work. You get it just in time. You don't
sit there grounding pilots because you don't have aircraft that
can fly, which is what you've got. It is all very well them being
lean, but they also have to workand they are not working,
It is not true to say that they are not working.
Q66 Mr Bacon:
They are not working adequately. In paragraph 1.10: "In
2010"that was just last year"the RAF temporarily
grounded five pilots." Why were they grounded?
Simon Bollom: I
can't disagree with what you have said.
Q67 Mr Bacon:
Sorry, what is the answer to the question? Why were they grounded?
Simon Bollom: I
was going back to what you said earlier. We didn't have enough
flying hours at that time.
Mr Bacon: No.
That is the answer.
Q68 Mr Bacon:
Sorry, you are talking about trained pilots?
Simon Bollom: You
asked me why they had grounded, and it was because we couldn't
generate enough flying hours at that time.
Q69 Mr Bacon:
You mean you didn't have planes that would fly?
Simon Bollom: There
were a number of reasons why.
Q70 Mr Bacon:
I am trying to get this in clear, plain English that I can understand
because I am not sure I understood your answer. The Report says:
"the RAF temporarily grounded five pilots." Why were
the pilots grounded?
The reason why we would do that would be because they were not
getting enough flying to maintain their currency and skills.
I should point out, though, that this happens not just with Typhoon;
it happens in other
Q71 Mr Bacon:
Okay, let's just pursue that for a minute. Why weren't they getting
enough flying hours?
I will ask Simon to step in, but it can be a combination of spares,
engineering manpower and just overall availability of the flights.
Q72 Mr Bacon:
Right, so when Ms Brennan said the lean supply chain is working,
it actually is not working, because if it was, you wouldn't be
grounding pilots due to lack of spares.
It is not working, perhaps, in all circumstances, but in terms
of context, the RAF has flown the same number of flying hours
as all other nations combined, so we are getting far more out
of aircraft. In that context, the spares and support arrangements
are working well.
Q73 Stella Creasy:
There is a much more pertinent question here, with respect. I
absolutely appreciate that the decision for the original contract
was made in the 1980s and you were not privy to it, but why has
it taken until 2009 for you to renegotiate a contracteven
with carrots let alone any sticks in itabout the spares
Simon Bollom: I
go back to what I said earlier. We went through a learning experience.
We pulled that through from Harrier and Tornado, and actually
getting in place the sort of commercial arrangements that you
are talking about that lock four nations and a whole raft of European
Q74 Stella Creasy:
So you are saying none of the other nations expressed concerns
about spares issues, and nobody, until 2009, thought, "Actually
we need to get to grips with this?"
Simon Bollom: Not
to the same degree.
We have been driving this.
Simon Bollom: I
think there is one important issue that I just want to refer to,
and that my colleague raised. We fly more flying hours than the
other nations put together. That just happens to be the case.
Q75 Stella Creasy:
In terms of the value for money of these contractsleaving
aside whether or not you should have some sticks as well as carrots
to deal with the under-supply of your supply base and your sparesto
not learn or deal with the difficulties in your supply chain until
2009, given that the contract has been running for 30 years, is
It is just worth saying that it is not true that we waited from
1985 until 2009 and then woke up one day and said, "Let's
renegotiate the contracts."
Q76 Stella Creasy:
So what stopped you doing it before?
There are two ways in which we have been seeking to deal with
support and supply arrangements in relation to Typhoon. One is
in relation to the international joint arrangements, and there
are certain things that we have to do jointly. This is a jointly
built and designed aircraft. That is the point about it being
a multi-nation capability. There are things that we simply cannot
do ourselves. So where we are talking about that multi-nation
capability, we have been working with the joint partners to seek
to improve the efficiency and effectiveness of that process, and
we have been working to reduce the number of contracts to get
the contracts working more slickly. The second thing that we
have done is to identify the areas where we can set up our own
UK independent contracts, and where we have been able to do that,
the NAO points out that we have done that in a way that is working
Q77 Stella Creasy:
Is that the cannibalising of other planes, then?
No, cannibalising planes is something that is in the RAF's bloodstream.
It is a thing they do with all their aircraft, because it is
the best way of ensuring, when you have aircraft in different
places of different natures to do different tasks, that you get
the best out of the fleet you have. I doubt if we will ever arrive
at a world where they won't want to take them apart and put bits
on other planes.
Q78 Nick Smith:
Can Air Vice Marshal Hillier tell us today how many of the Typhoon
aircraft are being cannibalised for spare parts?
I can't give you that, because it is a constantly changing picture.
Now, cannibalising could mean that you have two Typhoons on the
flight line, and one requires a very minor change of a part from
one aircraft into the other. That would count as cannibalisation
in this context. I don't think you would ever be able to put
in place a support arrangement that was as quick and as agile
as that. That is the immediate level. There is a broader impact,
which is aircraft which are cannibalised over a longer term.
But as I say, it constantly changes on a day-to-day basis according
to the needs. What the RAF engineers are extremely good at doing
is taking the assets available and maximising their utility and
service ability to get the most flying hours out of them. So
we can stop cannibalising aircraft and we would get fewer flying
Q79 Nick Smith:
Have you got a programme that reduces that to the very barest
minimum? What would be your target for as many aircraft to go
into the air as possible and not be kept on the ground? Because
using your example, one in two could be out.
Simon Bollom: The
alternative, if you wanted to guarantee that you would never cannibalise
an aircraft, would obviously be to buy a lot more spares upfront,
and those spares would be poorly utilised. So we have to balance
those two things. What we try to do is to get as lean a buy of
spares as possible, and then for exceptions you have always got
the option of cannibalising. Even the airlines do this. So when
do we think we will get to a steady state? Bear in mind as well
that we are approximately 50% of the way through aircraft delivery.
It won't be until 2015 that we get the last of our Tranche 3
aircraft. At that point we will have had all of the spares that
we have built into our calculations delivered. We are on an upward
ramp, and I would ask members of the Committee to bear that in
mind. We reach our steady state in 2015.
Q80 Chris Heaton-Harris:
So is there a guarantee that you can give the Committee? First,
I don't buy the minor parts thing at all. If UPS, DHL and every
other company in the United Kingdom rely on their logistics being
just in time, minor parts should be able to be shipped around
the world pretty damn quickly. But on major partsI know
that bird strikes come out of the blue and cause huge problems
for canopies and stuffI can understand the argument you
are making. Can you give the Committee a guarantee that not only
will things improve, but we will be in a situation where we do
not have to moan at you on this sort of thing in five or six years'
Simon Bollom: I
don't think we are in a position to provide a guarantee anything
in the future. All I can tell you is that we have put in place
the availability services and we have reformed the supply chains,
and I expect those to be able to deliver the output that we have
And they are delivering now. The ones that we have put in place
are currently delivering.
Q81 Ian Swales:
Just quickly on your comment about the output demanded, figure
5 in the Report shows flying hours achieved against your requirement,
and the situation has been getting worse. The number of hours
achieved has actually gone down in the last year shown here, and
while your requirement did go up, you took it down because you
slowed the rate of pilot training. But the gap between the two
is quite large, and has got worse since 2007-08, so clearly there
is an issue. I don't know what is going to happen in 2010-11,
but this is painting a terrible picture.
Simon Bollom: I
did take the precaution of checking 2010-11, which obviously closes
out at the end of this monththe end of this financial year.
Q82 Ian Swales:
What do you think the figures will show?
Simon Bollom: They
are back up at 10,800, so we are back on the upward climb, and
our plan for next year is 13,000.
Q83 Ian Swales:
What was your requirement this year? You think that 10,800 has
been achieved this year; what was your requirement?
Simon Bollom: That
is what we set out to do, and that is what we are on track to
Ian Swales: Okay,
that is good news.
Q84 Stephen Barclay:
Can I first just clarify something that was said to Air Vice Marshal
Hillier earlier? I do think a lot of care is taken on the air-to-ground
missions, and I think officers have to take extremely difficult
decisions. I wouldn't have wanted the Committee to have given
a misleading impression on that.
Can I come to the Report at paragraph 1.4 on page
16, which says that the Typhoon is unlikely to be the ground attack
of choice until 2018? Was that part of the cost-benefit analysis
that was done in 2009 when you made the decision on the Tornado
Sorry, is this air-to-surface we are talking about?
Stephen Barclay: Absolutely.
Let me clarify. In 2004, you took a decision to spend £119
million to upgrade the early Typhoons to deliver ground-attack
capability. That was introduced in July 2008, and yet the very
next year you took a decision to cancel the Tornado F3 and divert
the Typhoon, and spent a further £48 million upgrading the
Tornado GR4 in order for it to be the aircraft of choice
for ground missions in Afghanistan. You are now saying that it
won't be until 2018 that the Typhoon is the ground-attack aircraft
of choice. What I am trying to understand is, having spent that
initial £119 million to upgrade the Typhoon and then taken
a decision to divert it, what cost-benefit analysis was done in
If I can go back to 2004, first of all, because a cost-benefit
analysis was done then against the Jaguar force. What the RAF
wanted to do was reduce down the number of types that we operated,
because that's where you get significant savings, so we took the
decision to retire the Jaguar force early. In order to mitigate
the reduction in ground-attack capability, which we had resolved,
that was when we put in the plan to give Typhoon Tranche 1 an
air-to-surface capability. I think Jaguar went out of service
in 2007, and in 2008 we had that initial ground-attack capability
in the Typhoon. The ground-attack capability we put in Typhoon
at that stage was a generic one, and it was at a relatively low
level of ground-attack capability. At that stage, we were not
in Afghanistan in the way we are in Afghanistan now, so that was
all going to be in the future. When it comes to looking at the
forces required for Afghanistan, Tornado remains our most capable
ground-attack aircraft. Typhoon was not at the same standard,
and so Tornado was deployed to Afghanistan, and Tornado remains
our most capable ground-attack aircraft. In relation to 2008,
I was not involved in that decision making at the timeperhaps
Simon may able be able to help me out. We then made another decision:
if we run down the Tornado F3 force earlier and try and get it
out of service and therefore save us money, how then would we
mitigate the absence of the Tornado F3? The most cost-effective
way was to dedicate the Typhoon to that task, and therefore to
work it that way. So, what you have got is a Jaguar force, a
Tornado F3 and a Typhoon force, and we have tried to get ourselves
to the point where we just have the Typhoon force. We are focused
now on the air-to-air role, because that's what we needed it for.
We have got the Tornado to cover the ground.
Q85 Stephen Barclay:
What I am trying to understand is two things, really. First,
to what extent has that £119 million delivered value for
money, and to what extent have the Typhoon and those upgrades
delivered anything tangible? Secondly, the decision to then divert
the Typhoon in 2009 has, I suspect, delayed the multi-role capability
of the Typhoon. That has a knock-on effect on a whole range of
issues, not just deployment to Afghanistan, but, for example,
in terms of exports, which has a big impact on the production
cost and the unit cost. What I am trying to understand is: when
you took that decision in 2009 on the Tornado airfighter, to what
extent was the cost-benefit analysis picking up the points we
now see in this Report?
If I can take the points in order. On the money that we spent
on the Tranche 1 multi-role, clearly, the investment and the decision
was taken in relation to the retirement of the Jaguar. We delivered
that air-to-surface capability on time and on budget, and it mitigated
Q86 Stephen Barclay:
But you don't use it?
We don't require it at the moment. We could use it. It is at
readiness. If we want to deploy that aircraft on an air-to-surface
mission, we can do it. Why don't we do it in relation to Afghanistan?
Because it does not have the full range of weapons.
Q87 Stephen Barclay:
You have already got other kit that does that, so we have spent
£119 million delivering an extra capability that is less
than we already have on other planes, and we have those other
planes we can use instead.
But that is the world as we know it now. When we made that decision,
it was not just in relation to the capabilities on the aircraft.
We have a requirement for a number of aircraft capable in that
role, and it was the retirement of the Jaguar that meant that
we needed more aircraft that were capable in that role, and we
used the Typhoon. But as I say, we continually test and adjust
our plans. Threats change and operational requirements change.
As I say, we can use it in that role; we have just chosen not
Q88 Stephen Barclay:
Sure, but that role has been delayed, because it is now not going
to be until 2018. I am trying to understand the extent of the
delay as a result of the decision taken in 2009. If you took
the decision in 2004 to deliver ground capability for Typhoon,
had you stuck with that original decision, by what point would
you have expected, in your professional judgment, the Typhoon
to have become the ground-attack aircraft of choice?
The timelines that we will roll out are the timelines that I would
expect, because we have been talking about Tranche 1 aircraft.
Tranche 1 aircraft will only get to the standard they have got
now on the air-to-surface mission. At the moment we have an upgrade
programme running on the Tranche 2 aircraft to bring them up to
the multi-role standard. That will deliver next year, and you
will have Tranche 2 aircraft of that standard. Why isn't it earlier?
Because we need to approach it in an incremental-acquisition
way, to make sure that we do not add in too much technical risk
early on. It is also a four-nation programme, which gives us
better value for money because the cost is shared, and the four
nations need to align the requirements. As I say, we will deliver
that in 2012. Those later capabilities, which will bring us to
that full standard in 2018, is again part of that incremental,
multi-national upgrade programme, gradually increasing new weapons
capabilities as we go along. It is a technical issue and it takes
time to write the software, do the flight clearances and do the
trials work for this wide range of weapons, and we are doing this
in a measured, paced way, because that reduces the technical risk
and the possibility of failure.
Just to clarify, 2018 is not late; it was when we expected to
have the full multi-roles. We did not delay it. It was always
intended to build up to that point.
Do you really think the four-nation capability is good value for
If we weren't in the four-nation construct, we would not be able
to afford this by ourselves.
Matthew Hancock: That is a different
If you want sophisticated technology that is capable of combating
the threats that your assessment tells you that you need to face,
we could not have done that on our own. This was, therefore,
the best value way of doing it.
Might it have been better just to buy it from the Americans?
I think Stephen Hillier pointed out earlier that the American
aircraft was more expensive.
The particular example that was quoted will not be able to do
the range of multi-role missions that the Typhoon will be able
Q91 Austin Mitchell:
Given that we have more of them, that we are using them more intensively,
that we want to upgrade them for air-to-ground attack, and that
the major contractors are British Aerospace and Rolls-Royce, as
well the fact that there are delays in getting collaborative agreementpart
3 of the Report says, on page 29, that decisions on upgrades are
expected in 40 working days, but the others don't meet thatwhat
is to stop us from going it alone on the rest of the contract,
on the spares and the maintenance, and on the upgrading?
I will ask Simon to comment shortly, but it is a fact that the
UK does not have the full range of skills. It would be inefficient,
when you are in a four-nation programme, for all to duplicate
and have the same level of skills. We are simply not able to
do the upgrades without the co-operation of the other nations.
Q92 Austin Mitchell:
What are our deficiencies in this range of skills?
Simon Bollom: Very
simply, at the outset of the programme, 37% of the design is onshore.
The rest of it is offshore. So yes, British industry might have
the skill base to do that, but in terms of setting up the equipment,
the software engineering and training the people to do the job,
there would be quite significant costs there.
Q93 Nick Smith:
You missed some key costs in the original approval for support,
such as major maintenance. I see from the papers that the estimate
for that at the moment is £16.6 billion. How are you
going to stay within the cost approval for maintenance support
when some of it is dependent on the collaborative arrangements
you have already talked about? You talked about the complexities
and time delays in supporting aircraft that we would like to see
in the air. How are you going to make sure that you keep within
the cost approval?
Simon Bollom: We
have got a support approval that caps us at £13.1 billion.
The estimate at the time that this was done was that if we change
nothing, it would cost us £16.6 billion. So what we
have put in place is a number of support-chain improvements, and
I have mentioned one which is the availability service with BAE
Systems and Rolls-Royce. The other significant ones are changes
to the international contract that supplies us with avionic spares,
and in particular, the most costly sensors, which are the defensive
aid suites and the radar. I think we have got about 65% of the
high-value avionic spares under this new contracting arrangement,
which gives us a high degree of confidence that we will be able
to deliver the required output from within the approval afforded.
Q94 Nick Smith:
So you don't think you are going to come back to us in five or
three years' time, and say, "Actually, it has cost £20 billion."?
Simon Bollom: I
sincerely hope not.
The interesting thing is that these are the contracts with BAE
and Rolls-Royce, right?
Simon Bollom: The
first two that I mentioned are, and the other ones are international
Okay, but they were negotiated; they weren't tendered?
Simon Bollom: You
are absolutely right; they are single source.
How can you then satisfy us or yourselves that you are getting
value for money? Presumably you have put in tougher clauses to
ensure delivery. Also, how are you, in the current climate, negotiating
with BAE and Rolls-Royce to drive down costs? That is two questions.
Simon Bollom: In
terms of the first question, we came to the conclusion that given
the technology that we had got, and the way in which the work
share is constructed, a competitive approach to future support
was just not viable. There were no credible bidders into that
environment. It then becomes a case of: how do we actually sweat
the industry that we have already got and how do we drive best
value out of it? I think I would just observe that in getting
us down from the £16.7 billion to £13.1 billion,
we have actually made quite significant progress.
Chair: But you don't
still know. So you have driven it down.
Simon Bollom: We
have. We have still got to go further, yes.
Chair: I am just interested,
these are big sums and you have decided there is nobody to compete
in the market. How do you do comparisons?
Q98 Stella Creasy:
If you do not have anyone to compare tenders with, how are you
making an assessment when they come back to you and say, "Well
this is the revised price we can do."? You talked before
about using incentives rather than sanctions. I was wondering
if you could say a bit about what those incentives are.
It might be worth commenting on the principle of what we do when
we go single source, because for a significant, though minority,
proportion of what we do in defence, there is not more than one
supplier. There is only one place where you can get something
from, and we sometimes find ourselves negotiating a contract with
someone where they are going to be the only supplier. In terms
of this sort of thing, where you are talking about very high-end
capabilities, the reason it went multi-nation in the first place
was because we didn't have it within the UK. Then within the
UK, if you are talking about looking at UK suppliers, you are
going to be down to one. We have a regime under something called
the Yellow Book, which is the regime that guides contracts that
are done in government when they have to be done single tender.
There is a whole set of checks and systems that we go through
to ensure that when we do a single-tender contract, we do it in
accordance with those rules around transparency and around how
we are going to ensure that we get value for money. At the moment,
we are having a review of that Yellow Book to make sure that we
are getting absolutely the best value out of those single-tender
What is BAE's profit margin on it, then?
BAE's profit margin as a company?
Chair: From its contract.
If it is all transparent, what does it make out of it?
Stella Creasy: Does the
Yellow Book set a profit margin?
No, not the Yellow Book. I am just interested, because we need
comfort that in those negotiations with a single supplier, you
are eking out best value for the taxpayer. You said one of the
techniques used is transparency, so do we know how much money
BAE makes out of the contract?
Simon Bollom: Yes,
What is it then?
Simon Bollom: I
don't know the answer to that, sadly, now.
Could you let us have a note?
I will check whether that is information
that we can reveal to you in contractual terms. On that basis,
if we can, I will do so.
Chair: I don't see
why you shouldn't.
One of the ways in which we negotiate these contracts is to agree
progressive reductions in cost. We have actually identified reductions
in support costs that we aim to achieve through these contracts.
One of the things we do when we go single tender is actually
to say, "This is how the price must come down through efficiencies
from the contract over a period of years."
So what are the efficiencies on the BAE contract or on any of
the contracts: the Rolls-Royce one, the BAE one, the international
one? I don't mind which one. What efficiencies per annum are
you looking for?
We have identified £3.5 billion of efficiencies through
the support of this aircraft over its lifetime.
Chair: That is £3.5 billion
from the £16 billion?
Q104 Mr Bacon:
Is that basically the difference between the £16.6 billion
and the £13.1 billion?
Q105 Mr Bacon:
Yes, okay. Can I just pursue this, because as it says at the
bottom of that paragraph that is talking about the £16.6 billion
and the £13.1 billion, it makes the fairly obvious point
that as the number of aircraft has fallen by a third to 160although
of course it is actually going to go a lot lower than that; as
we have established it is going to go down to 107 quite quicklythe
unit cost of support per aircraft has risen by approximately a
third on a like-for-like basis. Of course, eventually it will
be more than that. That is where your efficiencies come from.
My concern is alluded to in paragraphs 13 and 11, and also in
paragraph 2.14 on page 27. Paragraph 13 states that if you are
not careful, the "costs of under-utilised industry assets
will be passed on to the Department on its remaining contractsnotably
Typhoon." Paragraph 2.14 says explicitly
Stella Creasy: "84%
of forecast support costs are not currently contracted for."
There are three distinct points that are
worth picking up quite separately there. On the latter point
about 84% of forecast support costs not currently being contracted
for, we are talking about over the lifetime of the aircraft until
2030. We would not expect to be on contract for some of those
costs now. So that is No. 1.
Q106 Mr Bacon:
I am sorry, I referred to paragraph 2.14 when I meant to be reading
from 2.11. I was going to come on to the 84% point, but the relevant
sentence is, "Unless industry is incentivised to restructure
to manage this reduced workflow, there is a risk that under the
existing arrangements, the costs of under-utilised industry assets
will be recharged to the Department on its remaining contracts,
notably Typhoon." In other words, that is what the current
contracts allow. You can be alert to that risk, but how will
Following the SDSR, we are engaged in negotiations with all our
major suppliers about liabilities. The Yellow Book regime indeed
provides for the presumption that if we have required a sector
of industry to keep going in order to provide us with a service
which we cannot get from anywhere else, the liability lies with
the Government at the end of that contract. That is part of the
deal of the Yellow Book. We have a review of the Yellow Book
under way at present to make sure that those conditions are as
effective and efficient as they should be. We have negotiations
going on with all our major suppliers, following the SDSR, to
identify liabilities and to ensure that the Government are getting
the best possible deal from its major suppliers in that context.
So across companies like BAE Systems and Rolls-Royce, and across
all of the things that they provide for defence, we are currently
engaged in negotiations.
Chair: God knows
how you are measuring it.
Q107 Matthew Hancock:
Following on from exactly that point, and without prejudicing
the review to the Yellow Book, do you think that it is sensible
that all the risk of under-utilising industry assets should fall
to the Government?
One of the things we do when we do a deal, when you have to keep
a capability going and you have had an end of life, is to ensure
that we don't simply end up where the production line stops and
thenbanga large amount of cost lands back in the
lap of the Government. There are all sorts of ways you can deal
with that. Some of them are to do with whether you are expecting
to have other equipments flow through the pipeline, and some of
them are to do with the way you incentivise industry to bring
those costs down over a period of time. There is a variety of
things that we have in particular contracts and that we are doing
across the various sectors as a whole, so this is a very live
Q108 Matthew Hancock:
You have just explained how you manage the fact that the risk
all falls on the Government, but my question was: do you think
it's sensible that all the risk falls on the Government?
Sorry, I didn't mean to say that all the risk falls on the Government.
If we say that we require industry to keep a production line,
and a design and development thing going, to provide us with sovereign
capability, we are paying for that, and if we don't do anything
about it, the Yellow Book will say that the risk falls on the
Q109 Matthew Hancock:
Yes. Do you think that is sensible?
Whether it is sensible or not, if we want that capability, we
have to pay for it. The review of the Yellow Book is to try and
get us to a generic different position. At the moment, we deal
with it in individual contracts and individual sectors. In the
submarine sector, the ship-building sector and the fixed-wing
sector, we deal with those costs across the piece, but we are
looking at the Yellow Book just to make sure that the rules are
as sharp as they could be.
Q110 Matthew Hancock:
And is one of the consequences of this rule that if you need to
change future capability, once you have signed a contract, the
cost of getting out of that contract can then be higher than the
cost of carrying on with it? That's where I want to get to.
Let me give you a more specific question: you described
quite eloquently how the threats have changed and therefore the
requirement for the numbers of units has come down from 232 to
160. You also explained how, because of the huge amount of time
that this was in gestation, capability per unit also went up,
and therefore I think there is a very understandable explanation
of why that number came down from 232 to 160. If that 160 number
needed to change for whatever reason, for instance because there
was an SDSR and you looked at the mix and wanted to change it,
are we constrained from making a change to fit the military strategy,
because of the contracts and the Yellow Book arrangements, which
means that we pay for these things whether we buy them or not?
When we are looking at choices about capability, you never have
two completely separate buckets, one of which is called, "What
would I like to have?" and another which is called, "Money".
You are perpetually looking at those two things together, and
all of the time, you are saying, in terms of the opportunity costs
of the money I have now, facing the challenges that we face, "What
would be the best way of spending the money?" If you came
to a point where you said, "We are at the end of the line,"
and suddenly aircraft are no longer needed
Q111 Matthew Hancock:
No, please, if you listen to the question and then respond to
it. I entirely accept that from a strategic point of view, but
the question is: are you not constrained in your strategic choice
by the contract and these Yellow Book arrangements, as opposed
to by the needs and the costs were you to have a more flexible
It is certainly true that more flexible contracts of the kind
like the JSF make it easier for you to turn the tap on and off,
and that is one reason why we are contracting in that way for
Q112 Matthew Hancock:
So do you wish that you had contracted in that way for this?
First, that option was not available when we contracted.
Q113 Matthew Hancock:
You could have written a different contract.
It wasn't open to us. Simply, as I have
said right from the start, the reason why this is a multi-nation
contract is because it wasn't possible for us to do this all on
our own. If we had, it would have cost us an enormous amount
more, so it wasn't possible.
Q114 Matthew Hancock:
You had influence in that; you can't pretend that nobody made
it up. Somebody wrote the contract.
No, but the point is that the JSF is an American-built aircraft
with a massive production line and it is possible to envisage
rolling them off in those kinds of numbers. You can do different
kinds of contracting when you are in that business. In this particular
instance, is it the case that, if we suddenly wanted to do something
different, we would be in a position where we would be tied up
in the contract? It is difficult to conceive of a circumstance
where you would suddenly want to turn something on and off. We
don't approach things in that way. It is very rare that a capability
suddenly ceases to be useful overnight.
Q115 Matthew Hancock:
Yes, but there are changes, which you described very clearly.
There are indeed changes, but the way we deal with that is precisely
by these negotiations that we have with suppliers and sectors.
We look ahead and we say, "Where do we think the fixed-wing
sector is going? Where do we think Typhoon is going?" That
is how we negotiate with our suppliers, so that we don't have
those cliff edges.
Q116 Matthew Hancock:
I would accept that, except for the fact that going to the big
picture, which I know that this hearing isn't about, that all
sounds a perfectly reasonable way of doing things, had you not
got yourselves into this situation where the supply tube was overcommitted
to the extent that it was as we have gone through several times
in this Committee? Do you see what I mean? When you come to
a decision about how to make sure that future cash and future
commitments are consistent with each other, you were heavily constrained
by the contractual and Yellow Book arrangements around Typhoon.
Is that not true?
I'm not sure that it is true. Are you going back to the Tranche
Matthew Hancock: I am
going back to the decision over whether to change the 160 number.
In relation to Tranche 3, we arrived at a point when we were clear
what the Tranche 3 capability was, and we had a set of choices.
We could have said, "Shall we stop doing this?" And
there would indeed be a liability in relation to the MOU with
Eurofighter. We could have said, "Let's pay that liability
and invest in JSF," but JSF was further offit is not
there yet. Conceivably, I don't know, we could have said that
we might have thrown some more money at Tornado, but that can't
be kept going forever. So actually, in practice, we did indeed
have a contractual arrangement in relation to the Tranche 3, but
it also happened to be that it was available at the right time
and in the right numbers to meet our capabilities. We didn't
buy it because we were forced to buy it. JSF, which might have
been another choice, is not available yet and is not yet flying.
I guess we could have said, "Do we want to invest more in
Tornado?", but Tornado can't be kept going out to 2030.
I know it might sound convenient, but it is actually the case
that our contractual commitment in relation to the Tranche 3,
and our requirement for capability, came together to make this
the right decision to make. That is why the business case made
this the right decision to make.
We hear that, but we are going back over old ground. This must
be our fourth or fifth hearing with the MOD and what comes up
time and time again is that you are locked into these contracts
or you are locked into expenditure, and that drives decision making.
Whether, as you are trying to justify to us now, it suited your
defence intent or not in this particular instance is open to question,
but you are locked into it, and it never appears that the MOD
tries to engage in a much more flexible way, which may cost more
in the shorter term, but at least gives you the flexibility over
time to adjust your programme to meet contemporary defence needs.
Time and time again we are saying, "Well, at this point,
it was an appropriate defence need." Ten years or five years
down the line it suddenly changes. You never have the flexibility.
I agree that the defence programme is indeed not a flexible programme
compared with programmes elsewhere. We do sometimes have the
opportunity to do things differently. We are doing things differently
with the JSF. Some of what we are trying to do with the Global
Combat Ship, which is actually to make it more modular, is a way
of dealing with those things. So, some of the things that we
have done in more recent years have been about seeking to do that.
One of the things, though, that I think this Committee sees time
and time again is that we are talking here about an aircraft that
was conceived in the 1980s. There is a sense in which we are
always coping with two different histories going along together:
things which started a very long time ago, where we say, "Faced
with the challenges we face today, what is the best way of using
this capability?"; and things where we are saying, "We
haven't invested this money yet; what is the best way of doing
it?" JSF and Typhoon are two really good examples of starting
at a later date. We are doing it in a quite different way with
JSF, but we cannot rewrite the history of Typhoon. What we are
doing with Typhoon is making the most efficient and effective
use out of it as an incredibly successful aircraft that we have
but that we ordered a long time ago.
Q118 Ian Swales:
On that link between the Typhoon and the JSF, we are saying that
we will have about 160 planes in service for four or five years
in the mid-teens. Some observers are saying that there might
be question marks over the Typhoon's operational radius or its
stealth capabilities, particularly against the JSF. Is it actually
credible that as the JSF starts arriving, these 107 planes will
still be in service in 2030, or are we going to find that we buy
more and more and more of the JSF and quietly retire these planes
much earlier, and therefore it is even less value for money than
we perhaps fear? In other words, I am talking about the capability
going forward, because we are talking long time scales here.
We are talking about a plane that had a genesis in the 1980s and
it running to 2030. That is nearly 50 years, which for a technological
product is unheard of in most other fields.
The answer is that Typhoon is a fourth-generation aircraft, and
JSF is a fifth-generation aircraft. There are certain characteristics
of JSF that Typhoon cannot have because of the design, such as
stealth, so you are absolutely right in that respect. As JSF
comes along, it will be a balance between both of those platforms.
The JSF is very well fitted to a high-end, stealthy, air-to-surface
mission. You will not always require that mission. There is
also a numbers business as well, which is that as JSF comes along,
we will need both fleets of Typhoon and JSF, which is our plan,
to cover the range of commitments that we have. Now, you could
say, "Well, why don't you go to a complete JSF fleet?",
but that wouldn't be getting value for money out of the very significant
investment we have made in the Typhoon force. So right through
to 2030, there will be a requirement for Typhoona multi-role,
agile, highly capable aircraftacross a range of scenarios.
There will be a certain set of scenarios, which are relatively
limited, that Typhoon will not be able to do, and JSF will be
part of that.
Q119 Ian Swales:
So how many JSF planes do you expect to have in 2030?
I think we had that discussion earlier on.
We don't need to decide that now.
They have, but they are not going to share it with us, Ian.
To be fair, 2030 is a long way off. We don't have to decide that
But I have to tell you, your colleague said he has a figure in
Not for 2030.
Q122 Ian Swales:
My question is what the overall capability is. As well as everything
else, we have obviously got to plan how much money we are spending
in total on aircraft over this period. I just have this sense
that we are going to find that JSF becomes the latest thing and
we will find that the Typhoons quietly
Obviously, I cannot foresee what the threats are going to be in
10 years' time and what the operating environment is going to
be. That is why we need to be flexible with how we do our planning.
As I say, I think it would be wrong to set out right now: "Here
is what we think is going to be right through to 2030."
But from what we can see at the moment, there is a requirement
for both platforms operating in a complementary way and in sufficient
numbers to cover the range of tasks that we need to do. We don't
need JSF to do every task. An example would be the protection
of UK airspace and Falkland Islands airspace. Typhoon will remain
immensely capable in that role right through to its out-of-service
Q123 Stephen Barclay:
The Report makes clear that the senior responsible owner does
not attend key meetings making strategic decisions, including
those relating to exports and that budgetary and managerial responsibility
is split between different parts of the Department. Could you
just clarify why the SRO does not attend key meetings?
The key meeting in question that I think you are talking about
is the Typhoon Strategic Steering Group, which is the one that
I chair. That very senior group is not a decision-making part
of the Typhoon project and programme. It is a group that brings
together people who are board memberspeople like the Chief
of the Air Staff and the Chief of Defence Matériel. Because
the Typhoon is such a capable aircraft and such an important part
of our inventory, export issues raise a lot of issues that are
not just to do with the airframe, but are actually to do with
our international relationships with partners. It is those kinds
of issues that get discussed. At that group, there are senior
people who happen to be the line managers of the people who are
actually the decision takers. In the classic way within government,
we are briefed by the people who are the experts, but actually
these are high-level discussions that are quite often about issues
that are as much to do with international security as with technical
Q124 Stephen Barclay:
If we take the high-level discussions, does there need to be a
culture change in the Department, in your view, on the issue of
I am not sure whether there needs to be a culture change. The
new Government have made a very strong drive in relation to exports,
and a lot of energy and effort is put into exports. There are
exports for Defence equipment. It is not done by the Ministry
of Defence, and export is not led by the Ministry of Defence;
it is led by UKTI.
Q125 Stephen Barclay:
Absolutely. I will come back to the SRO in a moment, because
the project history, once again, has not been provided to the
Committee. What I was picking up on was the evidence of Bernard
Gray to this Committee. I asked him about the different view
in his report to the evidence that General O'Donoghue had given.
Mr Gray said: "I am sad to report that General O'Donoghue
and I do not agree on all points", referring to exports.
You were just referring to the top team, and the top team doesn't
sound very united. I was just interested in your view as the
Sorry, from memory, wasn't that conversation about whether we
design in exportability early on into the life of the projects,
which is a completely different issue?
Stephen Barclay: It was
in terms of the capability and the way exports are factored in,
which obviously is very material in terms of the Typhoon.
Yes, the discussion that was going on there was about whether
within the Department, when we very first conceive of a requirement
for something, we have thought enough about exportability at the
start. We recognised that we didn't have that factored into our
early consideration to a significant enough extent. As a result,
sometimes the manufacturers are a long way down and we are a long
way down using something, and it becomes apparent that there are
serious export possibilities, and then there may be difficulties
about sovereign capabilities that have been built into the equipment.
As a result of that, we have changed the way that we do project
start-up so that there is a thing we now call the "Genesis
phase." When we are thinking about a new capability, one
of the things we have to say is, "Do we think there is a
likelihood for exports here? Is it something that we are going
to buying from a British manufacturer where there is a scope for
exports?" And if so, we ask, "Do we need to think about
whether there is a standard version of this and a modular version,
or is it something where that will not be relevant?" That
was what Bernard Gray and Kevin O'Donoghue were disagreeing about.
Q126 Stephen Barclay:
Okay, well, we can perhaps come back to that later. But in terms
of the SRO, I was trying to understand the role of the SRO and
the decisions that he took, and I submitted a parliamentary question
for the project history for the Typhoon project. The Department
has said that it won't be available for 10 weeks. This is a document
that your own guidelines say that you have. The four previous
ones I requested were all marked unclassified and didn't have
a single redaction on them. I was just wondering why that project
history is not available for us today.
We do indeed have this document. It is a large and detailed technical
document that has embedded within it a number of other documents
that do have commercial issues in, which we have had to redact.
It has simply been the time that it has taken to redact that
information that has unfortunately delayed our ability to let
you have it.
Q127 Stephen Barclay:
So that one has been redacted. Well, that is interesting because
the project history I requested for the last hearing took seven
weeks to produce, and that included the Nimrod project history,
which was a £4 billion project history, which I have
here. The project history runs to two pages. The project guidelines
by your Department actually run to eight pages. I am trying to
understand is why that project history was not available for our
last hearingit took seven weeks to produce, although it
has no redactions and is marked unclassifiedand we are
now finding that Typhoon is unavailable for today. Is that project
history compliant with your Department's guidelines?
Simon Bollom: The
problem is, as the PUS has mentioned, it is a very comprehensive
document full of embedded
Q128 Stephen Barclay:
It is two pages.
The Typhoon one is a much longer document.
Q129 Stephen Barclay:
This is the £4 billion Nimrod project history, and you have
eight pages of guidance as to what goes in it. I have got them
here. This is your project history. It runs to eight pages and
it lists all the things that should go in the document. It is,
in essence, a high-level audit. You can call it a project log,
or a project diary or a project historywhatever you likeand
some of the things it shows are who the SRO is, when key decisions
were taken and what the cost impact was. It was what I was trying
to drive at earlier in terms of, "On the Typhoon, one would
want to see what the decisions were and what impact they had in
2008-09 and in 2004." What I am saying is that the Nimroda
£4 billion projecthas a project history that
runs to two pages, and that took seven weeks to produce. I am
trying to understand why that took seven weeks when it is unclassified
and not redacted, and why the Typhoon, which I requested several
weeks ago, is not available today and will take 10 weeks to produce.
Can we deal first with the Typhoon?
I am sure that we could provide you with a two-page project history.
Q130 Stephen Barclay:
I don't want the two pages. This is a document your own guidelines
say that you produce during the life of the project. I actually
asked a further parliamentary question to say, "Was this
Nimrod document produced during the life of the project?"
I was quite surprised when I got the answer, "Yes,"
so it was obviously being produced intermittently during the life
of the project.
Simon Bollom: Yes,
you have asked for a copy of the project diary or the project
history. That is a very comprehensive document, and we are redacting
it in order to be able to present it to you.
Q131 Stephen Barclay:
Are you saying then, Air Vice Marshal, that the Nimrod project
history is compliant with your guidelines?
Simon Bollom: I
don't deal with it any of it.
Q132 Stephen Barclay:
Can I come on to a different question, then, because we touched
on the senior responsible owners, and I also asked for the list
of the SROs on the Typhoon and also projects such as Nimrod and
one or two others? It took 12 weeks for that to be produced.
It was produced on the last day before a recess, ensuring that
it missed our last hearing and also the Report, even though, again,
this is information that your own guidelines say that you have.
Can you clarify why it took 12 weeks to produce that?
The reason it took that time to produce is because, if I remember
correctly, you asked us not just for current SROs, but for SROs
Q133 Stephen Barclay:
Yes, I did. There were two questions. You answered the first
one on 25 November, in terms of current SROs in post, but
you didn't answer the question in terms of those that had been
in post previously.
Yes, sorry. All I meant was you are absolutely right that for
identifying current SROs, that information is not difficult to
obtain. In order to go back and identify the SROs going back
through history, it is necessary to go back to each of those individual
projects and get that information. That will take some time.
Q134 Stephen Barclay:
First, your own project history should have had those, but you
say it wasn't difficult to find the current ones in post. It
was a little surprising to hear that the dates you provided for
those currently in post differed from the answers you submitted
in the Library on 18 February. The actual dates differed
from the answers you gave me on 25 November; and the dates
further differed from the evidence that Vice Admiral Lambert gave
this Committee at our last hearing. Even with that one, the dates
you submitted in all three answers were different. Again, I am
trying to understand why that was the case.
Do you mean the dates that people were in post?
Q135 Stephen Barclay:
The dates of the SROs. If we take Brigadier Jaques, who was the
person I citedthis heroic figure covering £17.2 billion
of spend over six projectsthe date of his appointment varies
in all the three different answers submitted. Vice Admiral Lambert
said he had been in post for three years and was on his second
term, which works back to 2007. In the answer you gave in November,
you said he was appointed to all projects on 29 October 2009,
and you gave a series of different dates in the answer you submitted
in the House of Commons Library in February. I am just trying
to understand what is going on.
Quite why all those different dates were associated with Brigadier Jaques,
I am not sure.
I don't know for certain, although I can check, but we have been
going through process reorganisation, and some of the projects
and programmes that previously didn't have SROs were then appointed
SROs. So although someone like Paul Jaques may have been in post
in 2007, that doesn't necessarily mean that there was a project
at that stage for him to be SRO for. We have been going through
this evolutionary process. I just offer that as one of the possibilities.
Q136 Stephen Barclay:
Sure, but it took 12 weeks to produce an incorrect answer, or
an answer that was different from others. You didn't provide
the project histories for seven weeks, and we come to the hearing
today, where one wants to look at key decisions taken throughout
the life of the project, and once again the project history is
unavailable. It just doesn't smack of a very transparent and
I apologise for the time it is taking us to produce the project
history in relation to Typhoon. It is a comprehensive document.
Q137 Mr Bacon:
How many pages is the full comprehensive project historythe
one that you are redacting? How many pages is the comprehensive
one that you need to redact?
Simon Bollom: I
am told, in excess of 30.
Q138 Mr Bacon:
Thirty pages. Quite frankly, somebody could go through that in
a day or in a couple of hourscertainly in an afternoon
or a whole dayand pull out anything that was commercially
or militarily sensitive. Surely it is not that difficult.
Stephen Barclay: By way
of comparison, the aircraft carrier one, which incidentally had
no cost figure in the whole project history, which was quite interesting,
runs to 20 pages.
Mr Bacon: I thought for
a minute you were going to say 400 or 500 pages, which would be
an understandable reason why it has taken so many weeks not to
produce it. But it is just 30 pages.
Simon Bollom: As
I said, it is taking out all the references, all the links and
the embedded documents in there, and then it will be about 30
Q139 Mr Bacon:
It is the delete button on the PC that you need to find.
Stephen Barclay: Which
was not required for the other four.
The issue about the embedded documents is that in this project
history, what we have got is links to embedded documents, which
are commercial documents, and also to documents that have secure
information. What we have been seeking to do is to ensure that
we don't just delete all of that, but make as much of it available
to you as possible. However, that has required going through
and identifying each of those areas.
Ms Brennan, can I just make an ask from this Committee, which
I would like you to adhere to? We would like the note on that
history to be a note that we can attach to our report, which means
that we require it from you within a week of this hearing.
I think that the Minister has written
Simon Bollom: Indeed,
I believe Mr Luff has responded.
Chair: But it is
a bit late to get it after the hearing.
Stephen Barclay: The answer
he gave this morning was simply to say it would be put in the
Library before recess, which was where I got the 10 weeks from.
Stephen, let us just say we want it within a week so that we can
consider it as part of the evidence as we come to our conclusions.
If the Committee needs it within a week, I fear it will probably
have lots of blank spaces on it.
Chair: It is 30 pageshonestly!
All I am going to say is none of us can believe that. We read
reports and get our brains around 30 pages in a couple of hours.
Q142 Mr Bacon:
One point of clarification. The £13.1 billionor,
depending on which number you take, the £16.6 billionof
support funding was originally predicated on 232 Typhoon aircraft.
Is that right?
Simon Bollom: Yes,
Q143 Mr Bacon:
It was. So presumably one of the reasons why you are confident
you can live within that number, and perhaps live within the lower
original £13.1 billion number, is because you are now going
to be servicing a considerably smaller number of aircraft160
as the maximum for quite a short period, and then down to 107.
Is that the reason why you are fairly confident you can live
within that support number?
Simon Bollom: No,
I can tell you that the £16.6 billion estimate is what we
think it would have cost us if we had not taken the measures that
I have already explained. So, believe me, these are measures
that are real and that are commercial, in contracts, that will
have to get us within that £13.1 billion.
Q144 Mr Bacon:
Right, but the original £13.1 billion, when it was first
estimated, was to cover 232 aircraft, and it is now going fairly
quickly to be covering 107 aircraft by 2018. That is right, isn't
Simon Bollom: Yes.
It is true, but one of the things that is quite difficult is that
when you look at the support costs, there are no doubt washers
and things of a quite lowly level where the volume of aircraft
Q145 Mr Bacon:
Quite a few of them are fixed costs.
But there will be things to do with the avionics and so on where
actually the change in the nature of the aircraft from Tranche
1 to Tranche 3, in terms of the difference in the capability and
the difference in the software and all that kind of stuff, is
really very significant. So it wouldn't simply be the case that
if you went to the 232 aircraft and the 160, they would be the
same. If you take 160 aircraft with a much higher-end capability
versus the 232 at a stage when we hadn't designed in all that
complexity, it is not comparing apples with apples, but I take
Q146 Mr Bacon:
No, of course not. I appreciate that, but none the less the total
headroom you allowed yourselves was £13.1 billion, and
now it is going to have to cover fewer aircraft, albeit with more
advanced avionics and everything else. That is correct, isn't
Q147 Mr Bacon:
Two very quick questions, one of which is about SROs. Do you
keep a list of SROs, centrally?
We do, yes.
Q148 Mr Bacon:
Do you keep the dates that they start and are appointed and the
dates that they finish?
I don't know whether we keep the
Q149 Mr Bacon:
Because it would be quite easy, the Treasury does it for accounting
officers. They can tell us when accounting officers in your Ministry
have been appointed and when they have left their job and have
We keep an account of their training, for example. Whether somebody
literally keeps a list of their start and finish dates, I am not
Q150 Mr Bacon:
That is what interests me. It is so simple. As I say, the Treasury
will do it. Just knowing who they are, when they started and
when they finished seems frankly to be beyond the Ministry of
Defence at the moment, and it ought not to be. It could be kept
on one spreadsheet, and if you are not doing that yet, may I encourage
you to think about doing that? That was a nod, was it?
Q151 Mr Bacon:
Excellent, excellent. We are into nods in this Committee.
Finally, you will recall that your predecessor, Sir
Bill Jeffrey, told this Committee when we had a hearing on strategic
financial management, that he had made a conscious decision to
keep your Finance Director, Jon Thompson, aside from the role
of strategic financial management. Well, you are frowning, but
you can read the evidence. It was very, very clearit was
explicit. It was absolutely explicit that the Finance Director
was not having the role over strategic financial management as
it should have been in managing public money, and indeed, Jon
Thompson gave evidence to us that he would expect it to move towards
that position. Is that what is now happening?
Absolutely, from 1 April, but the only thing I caveat is
that it is not strategic financial management, which has always
been Jon Thompson's responsibility. We might have a debate about
that. It was planning. There was a distinction between strategy
and planning and finance. Jon Thompson is responsible for the
planning round as from the start of the new financial year in
a few weeks' time, and the staff have been notified that that
change is happening.
Chair: Okay, thanks very
much indeed. I am going to draw this session to a close, and
thank you very much for giving us your evidence.