Letter to the Chairman of the Committee
from the Secretary of State for Defence on A400M (19 December
I am writing to let you know that, yesterday
evening, I signed an inter-Governmental Memorandum of Understanding
to allow the A400M contract to be placed. The contract itself
was also signed yesterday by the Organisation for Joint Armaments
Co-operation (OCCAR), on behalf of the partner nations, and by
the contractor Airbus Military Company.
The contract provides for the development and
manufacture of 196 aircraft in a single launch order. The UK's
share is 25 aircraft. OCCAR will manage the programme to standards
agreed by the partner nations.
The A400M contract will enter into force once
final Bundestag approval has been given to the German commitment.
The German Government is confident that this will be forthcoming.
The agreement of other nations, including the UK, is subject to
the German signature becoming effective. If this has not happened
by the end of January 2002, these authorisations will lapse, providing
a further opportunity to review the position.
I am content that the programme now agreed with
Airbus Military satisfies the conditions that I set out in my
announcement to the House on 16 May 2000 for our participation
in the A400M programme. Specifically:
Programme commitments from partner
nations now total 196 aircraft, well above the notional level
of viability of 180 aircraft.
The price negotiated with Airbus
Military is affordable and represents value for money;
Achievement of contract signature
on 18 December is consistent with the UK's In-Service Datethis
is now planned to be 2010; and
The commercial terms and conditions
of the contract are acceptable.
All in all, contract signature last night represents
very welcome progress on this important project, which should
provide the RAF with a highly capable and flexible aircraft to
replace the Hercules C130Ks.
The A400M programme embraces the Airbus "commercial
approach". Airbus will be free to select, through fair competition
open to the suppliers from all nations according to cost and capability,
so that the programme can be organised and managed as cost effectively
as possible in accordance with best aircraft manufacturing practice.
Allocation of work, including that for the support package, will
be determined by Airbus to achieve the best value for money, taking
into account the off-take. The Prime Contract contains provisions
to ensure maximum transparency on work allocation. We understand
that workshare at the level of the Airbus partner companies is
comparable with UK offtake and, as Airbus is incentivised to achieve
best overall value for money for the customer, so the genuine
competitiveness of UK suppliers will stand them in good stead
for additional work.