Examination of Witnesses (Questions 160
MONDAY 15 JANUARY 2001
WALMSLEY, KCB AND
160. What you are saying, since you have confirmed
just now that you would not have accepted these ships without
sonar and therefore they were pretty well useless until the sonar
had been put in, that had Sir Robert suddenly realised in placing
the order that actually he had used up his whole budget, what
you would then have done would have been to have diverted some
other money from some other budget.
(Vice Admiral Sir Jeremy Blackham) I would certainly
have had to think about it and, given the position I have taken
in front of this Committee on sonar, I think you can make your
own deductions. I believe that a sonar is an important part of
a ship, certainly.
161. A vital part of a ship, without which a
ship should not be accepted at all, is what you were saying. Not
just an important part but a sine qua non for accepting
(Vice Admiral Sir Jeremy Blackham) Indeed and it has
always been my objective that we should have a sonar and we shall.
162. Is it not slightly odd though to order
a ship and confirm the order before you had worked out whether
you were going to have to divert some other budget in order to
make that ship an acceptable ship for your Navy?
(Vice Admiral Sir Jeremy Blackham) I do not think
so. If I may just spend a little time on this. It would be very
difficult for me if that were the case. For a start, a ship has
not been fully designed yet, so I should be quite surprised if
every detail of it were settled now. Much more importantly than
that, given the rate of change of technology, given the lessons
we learn, it would be an impossible position for me if we could
not change the fitting of a ship in response to whatever pressure
arose during the next five or 15 or 20 years. It would not surprise
me in the least if in response to some operational experience,
what I like to refer to as the live laboratory, we actually learnt
something which made me conclude that some hypothetical capability
needed to be added to the ship and that I would be prepared to
pay for that from some other part of the equipment programme.
That is the nature of the world we now find ourselves in, both
the political and operational world and the technological world.
163. I am quite prepared to believe that you
actually take all sorts of decisions about changes to budgets
as you go on to take account of changes which are made to the
technology, but it does seem to me to be rather peculiar that
you could order three ships on 20 December without knowing whether
you were going to have to find some other budget in order to make
those ships acceptable into operation by the Navy. That seems
to me to be taking some risks with your other budgets, given that
you knew at the time that you would need the sonar, whatever happened
you said you would not accept these ships without sonar, yet you
did not know if you had the budget to pay for it.
(Vice Admiral Sir Jeremy Blackham) I have said that
I regard the sonar as a critical part of the ship which ought
to be there, certainly. I have always been confident that we would
find a way of putting a sonar in.
164. In other words you were always prepared
to find some money in some other budget, although you did not
at the time know which other budget or how much you would need
to find. You knew you would be prepared to do that, whatever happened
that would be your first priority above all other budgets.
(Vice Admiral Sir Jeremy Blackham) No, I cannot possibly
say that, because I hold budgets for an enormous range of different
equipments. What I am saying is that I would have regarded it
as something I would have wanted to get in and I would have looked
very hard both at the Type 45 itself, and at other things, to
see what we might do about it. But to say that it would be the
top priority of the defence programme would not be true.
165. I am sorry if I misled you there. I did
not mean to say that. What I meant to say was that you were so
clear that sonar was needed in order to bring these ships into
operation that you would have found some other money from somewhere;
it is that important.
(Vice Admiral Sir Jeremy Blackham) I believe I would
have had to find some way of doing it. I was also confident that
this was well understood by the IPT leader, who of course deals
directly with my Capability Director, that this was the subject
of an ongoing communication between them. I was equally determined,
as CDP was, to get the thing on contract so that we could actually
start to make progress, have a ship designed and start the process
of getting it to sea.
166. It just seems to me a rather odd way of
budgeting for things that you actually put the order in before
you know how you are going to pay for it. That seems to be in
this case what happened. It does not strike me as being the usual
process of budgeting for major contracts of this sort.
(Vice Admiral Sir Jeremy Blackham) We had a budget.
We seem to have got what we wanted within it.
167. You have, as it turns out, been able to
get the sonar within the budget, but you did not know that at
the time you placed the order and that is the important point.
(Vice Admiral Sir Jeremy Blackham) I expected it.
168. Can we turn to Sea Dart? I am interested
in paragraph 3.13, the one before the one we have been talking
about. We were talking earlier about the difficulties of getting
the update to the Sea Dart to work because of finding that paint
flecked off the front and that sometimes the sun came out from
behind the clouds, both of which were apparently unexpected and,
Sir Robert, you made it clear you could not explain why these
things were unexpected and you might have expected the scientists
concerned to have expected them rather more than they did. Who
therefore is going to pay for the delays which were consequent
(Sir Robert Walmsley) In terms of paying, the first
price which has to be paid is one of operational capability.
169. Yes; I am talking about the price in terms
of pounds, shillings and pence.
(Sir Robert Walmsley) There will have been a cost
attached to the changes which I explained as a result of the Silkworm
experience in the Gulf War. We will have paid for that. My memory
is that this is a fixed price contract, but I would have to check
that; in other words it would fall to the contractor.
170. The paragraph says, and I did not quite
understand what it meant, "It is currently forecast to come
into service in mid-2001 at a cost of £43 million".
That therefore is not the cost of the delay, that is the cost
of the total update.
(Sir Robert Walmsley) That is correct.
171. That presumably therefore is the fixed
price contract you were talking about.
(Sir Robert Walmsley) I am saying fixed price, but
fixed price would have included a variation of price and therefore
because it took longer we shall have been more susceptible to
it being uplifted for inflation. If it runs longer, there is more
inflationary uplift and I do not know what the variation of price
terms were in the contract. Sometimes in those days we used to
have variation of price arrangements which took account of the
so-called defence industry inflation which ran ahead of GDP. Therefore
the contract may have been significantly more onerous as it turned
out because it ran for longer than it would have been if it had
run to time. That is the qualification in my mind.
172. Since you seem a little bit uncertain,
I should be grateful if you could send us a note afterwards just
to confirm that was a fixed price contract and what the terms
of variation were.
(Sir Robert Walmsley) I should be very happy to do
173. May I turn briefly to Brimstone? In paragraph
3.2 we are now told that it has been delayed, put off, in order
to align the date of deployment of Brimstone with the Tornado
GR4 package 2 update. What advantage was there to our armed services
in having that alignment?
(Sir Robert Walmsley) The Brimstone system is of no
use unless it is integrated onto an aircraft which could be operated
effectively. That is self-evidently true. We started the Brimstone
programme on the basis that we would be looking at the Harrier
GR7 as the aircraft which would be the lead in terms of introducing
the capability. The Brimstone weapon requires what is called a
digital data bus and we had some difficulty in sorting out how
to fit the equivalent of a digital bus data in the Harrier GR7.
The delays to the Harrier programme, the Harrier modification
programme, became such that it was quite clear that the Tornado
was going to be the first aircraft capable of introducing it into
Royal Air Force service. The advantage to the frontline forces,
although I am nervous about describing it as an advantage, is
to reduce the delay for its introduction into service by choosing
the Tornado programme rather than the Harrier programme and the
Tornado programme itself then suffered a delay and it is the same
thing, it's software, it's avionics, the aircraft.
174. May I stop you there for a moment? May
I turn you to paragraph 3.2 where one sentence says, "Although
the missile could potentially be deployed and used on the aircraft
without the package 2 update"? That indicates to me that
you could have it on the Tornado, unless I have misunderstood
this sentence, before the update came into effect. In other words,
you could put it on the pre-update Tornado a year before you are
going to put it on the updated Tornado.
(Sir Robert Walmsley) That is undoubtedly what this
means. What I also know is that when you say "put it on",
it tends to mean that the weapon's effectiveness is very much
reduced and the pilot's workload is very much increased. A decision
will have been taken that it simply was not worth while introducing
this as an intermediate capability.
175. Although, according to this paragraph,
". . . the missile's full capability cannot be realised".
That does not indicate that there is a huge diminution in effectiveness.
(Sir Robert Walmsley) No, I agree.
(Vice Admiral Sir Jeremy Blackham) But it is in fact
a substantial limitation and the decision was taken not by the
DPA, but by the customer organisation in consultation with the
user, that it was not a sensible proposition to do this, given
that we expected to have the Tornado GR4 in service during the
current year, which indeed we did.
176. Paragraph 3.8 indicates that you may now
be trying to buy fewer of the missiles, but that it is a fixed
price contract. Was it a fixed price contract for a fixed number
(Sir Robert Walmsley) Yes. There were options to buy
more but it was effectively a fixed price contract for a fixed
number of missiles.
177. So buying fewer may mean that you do not
get any reduction in price. There is an indication here that you
are ". . . in discussion with industry over the level of
(Sir Robert Walmsley) That is correct. We are deep
in negotiation with industry. It was what is called a package
deal contract, rolling up both the development and production
elements. Clearly there is no saving in the R&D component
of the contract. The R&D component of the contract is something
approaching 50 per cent of the total contract price, so even on
a pro rata basis one is only going to be on about half
178. Are these discussions with industry still
(Sir Robert Walmsley) They are and we shall conclude
179. I have just two questions today for you
to finish off with. The first one really goes back to the infamous
paragraph 3.14. It just seems to me that you have put to us two
different theses. One is yours, Sir Robert, in which you effectively
said to us that the sonar was paid for out of contract savings,
or, to put it the other way round, if the contract price had been
a couple of percent higher there would have been no sonar. The
alternative point of view put to us by Vice Admiral Blackham was
that he was going to find the money whatever happened really.
(Vice Admiral Sir Jeremy Blackham) That is not a position
I put to the CDP until this meeting because I am in negotiation
with him. He did not know that.
8 Note: See Evidence, Appendix 1, page 36 (PAC