Copy of a letter from Air Foyle Ltd to
the Chief of Defence Procurement
I note that various questions on the STSA programme
arose during the Public Accounts Committee meeting on 17 January.
You will be aware that, being dissatisfied with the management
of the STSA procurement process, Air Foyle has referred the question
to the National Audit Office. I was therefore very interested
in your answers.
As you know, Air Foyle was invited to offer
the standard An-124 100 in the second phase of the STSA procurement
process. We were briefed that:
the performance of the An-124 100
was known to the MOD;
the MOD preference was for the C-17
but that the C-17, previously defined as "unaffordable",
must come within the available budget of 500 million pounds; and
"value for money is paramount".
Our own assessment of C-17 costs, made by a
number of experts familiar with MOD budgeting methods as well
as independent financial advisers, was that this target was a
financial impossibility. We therefore continued into the process
on the basis that we could offer a real "value for money"
alternative and had a fair chance. We have now been debriefed
by your Agency that the C-17 programme cost did indeed breach
the 500 million pound budget even without the additional items
still under scrutiny. It would therefore be reasonable for us
to expect to have won given that we satisfied all the other requirements
put to us. If the budget limit were not to be decisive then bidders
should have been advised exactly how much leeway was to be allowed
to the C-17. This would naturally affect their decision to proceed.
Air Foyle appears to have been misled on the
basis on which the decision would be made.
In your responses to the Public Accounts Committee
you twice confirmed that the An-124 "did not offer a guaranteed
solution. It depended upon Kiev and Moscow . . ." and that
the C-17 was chosen "for our guaranteed access to it".
As you also acknowledged, Air Foyle put a great deal of effort
into resolving MOD concerns about political risk. With our entirely
British solution covering ownership, registration, crewing, maintenance,
logistics and design support it is difficult to understand the
great weight you have given to an extremely tenuous residual risk.
You will also know of the letters from the Ukrainian
and Russian Prime Ministers as well as from the President of Ukraine
to the Prime Minister expressing their support for this project
and opening the means by which any such residual risk could have
been dealt with. In the joint programme of January 2000 between
Air Foyle, Antonov and DPA to develop further information requested
by EAC we specifically asked the DPA project team if they saw
any "show stoppers" particularly relating to political
risk. We were advised that there were none and this was confirmed
again during our debrief. During a personal conversation with
me on 20 July 2000, Baroness Symons, Minister for Defence Procurement,
stated "The politics was not an issue. We found a more capable
Air Foyle not only solved this problem but has
been repeatedly advised at every level that the political question
was not an issue. The scenario you painted of "dependence
for design authority and airworthiness issues" was specifically
addressed and resolved in our bid, the mitigation of any tenuous,
residual risk had the strongest possible political backing which
was not pursued and the picture you paint of "dependence"
is both inaccurate and subjective.
There therefore, appears to be a contradiction
between your response to the Public Accounts Committee and the
information provided to Air Foyle as a bidder.
You confirmed that some aspects of support for
the C-17 remain in American hands. On 21 November 1999, the Prime
Minister said in a radio interview on military capabilities, "But
supposing there are circumstances in which the US is unwilling
to act or unable to act for some particular reason". Can
you therefore advise what assessment criteria were used to compare
the political risk of the C-17 solution, owned by a foreign government
with maintenance and logistics support provided by a foreign military
power against the An-124 solution to which neither of these risks
apply? If the level of assurance provided by the totally British,
Air Foyle bid was unacceptable, then clearly the An-124 should
never have been invited to participate.
It appears that the MOD knowingly invited and
encouraged Air Foyle to participate in an unwinnable procurement
You further referred to the C-17 as being "hugely
cost effective for what it does". Again, Air Foyle has been
debriefed by your Agency that our bid met the requirement. Does
the C-17 do something not identified in the requirement briefed
to Air Foyle? It is the An-124 100 that carries twice as much
cargo for half the price of the C-17 and is "hugely cost
effective" and meets the "value for money is paramount"
criteria given to Air Foyle. Some justification of your highly
subjective remark would be welcome.
You advised the Public Accounts Committee that
the C-17 was not chosen for its tactical ability. Yet Air Foyle
has been debriefed by your Agency that a critical factor in the
decision for the C-17 was its ability to land in 4,000 feet. Your
own Minister referred to "a more capable solution" and
the Chief of the Air Staff has confirmed to Mr Christopher Foyle
on more than one occasion that the C-17 was chosen over the An-124
because of its greater tactical abilities. If this was a requirement
then why was Air Foyle invited to bid the An-124 100 when the
DPA were well aware that landing in 4,000 feet was never a possibility?
Your evidence to the Public Accounts Committee
contradicts the information given previously by your Agency and
your Minister to Air Foyle and by the Chief of the Air Staff to
Mr Christopher Foyle.
To summarise, Air Foyle has been repeatedly
advised that political issues were not a factor in the decision
yet you have informed the Public Accounts Committee that this
was the principal reason for the choice. The C-17 was apparently
preferred for political reasons but objectively has greater political
risk than the An-124. No effort was put into resolving those political
concerns relating to the An-124 that you have voiced to the Committee
in order to provide a true comparison. The C-17 programme breaches
the budget limit yet Air Foyle apparently has no recourse for
the misleading brief, which led us into this procurement process.
Either with the level of political risk which you reported to
the Committee as being decisive, or the performance requirement
which others report as critical, no An-124 bid ever had a chance
of success and should never have been invited.
I would very much appreciate your comments on
how your remarks to the Public Accounts Committee may be reconciled
with statements made previously to Air Foyle in the course of
the STSA procurement process during which we were promised a "fair
and open competition".
Please note that I shall be forwarding a copy
of this letter to Baroness Symons, Sir John Bourn at the National
Audit Office and to the interested members of the Public Accounts
23 January 2001