Defence equipment chiefs emphasise the need for flexibility

By a special correspondent

Flexibility must be the main focus in defence procurement, MPs heard today. The Defence Committee heard evidence today as part of their inquiry into defence equipment from:
- General Sir Kevin O'Donoghue, Chief of Defence Material, Ministry of Defence
- Dr Andrew Tyler, Chief Operating Officer, Defence Equipment and Support, Ministry of Defence,
and,
- Rear Admiral Paul Lambert, Capability Manager and Controller of the Navy, Ministry of Defence.

Opening the session, Chair, Conservative MP, James Arbuthnot, asked about assessments for equipment and recuperation. Sir O'Donoghue said assessments were underway but that they were not yet ready to report on this.

Rear Admiral Lambert said this assessment was carried out on a continual basis. He did not think there were capabilities gaps as a result of operational pressures.

The defence support group was continually involved in defence equipment and training Gen. O'Donoghue said, describing them as experts in recuperation.

Until the costs of recuperation were known, it would be difficult to assess who would be responsible for funding, he added.

Dr Tyler described the challenges as a moving target given the changes of the threat being faced.

Pressed on costs, Dr Tyler said the debate was ongoing about who would meet which costs and recuperation, stressing that they focused on ensuring equipment was in place.

Gen. O'Donoghue was not confident that the cost of recuperation would be met from contingency reserves, however he said that debating the issue was difficult until the full cost were known.

Questioned about timescales and costs by Conservative MP, Brian Jenkins, Gen O'Donoghue outlined some of the costs that were paid for from the Contingency funds, adding that other costs were difficult to assess.

Labour MP, David Burrow, asked the panel if there was still a debate about costs related to equipment removed from theatre and who pays for this. The panel agreed that there was.

Turning to the Harrier forces, Gen. O'Donoghue said this equipment was being replaced to give the forces adequate rest and was not an equipment issue.

Responding to this, Rear Admiral Paul Lambert said wider training was also needed for the Harrier forces as operations in Afghanistan had been very specific.

Questioned about Departmental Expenditure Limits by Conservative MP, Robert Key, Gen. O'Donoghue said the MOD's focus was on ensuring that troops had the right equipment. If he had a wish list he would press for more strategic competences in the air, but asserted that commanders were satisfied with the equipment they had. On air ability, he noted that the air bridge was successful, describing aircraft planning as hub and spoke. He outlined a number of alternative options at the MOD's disposal in terms of air capability.

Turning to Urgent Operational Requirements (UORs), Dr Tyler informed the Committee that improvements had been made on their operation. The increasing challenge was the technical complexity and scale of requirements, he added. UORs must receive priority Dr Tyler said adding that he felt they were going well.

Asked about the procurement process involved, Dr Tyler said time was a critical variable in UORs which meant they differed from other core projects. This often meant projects were not sufficiently integrated within the wider infrastructure.

Dr Tyler was cautious about unintended consequences if processes were changed too widely.

Asked by the Chair if the UOR approach meant the vehicle fleet was less coherent, Dr Tyler agreed that it did.

Rear Admiral Lambert described this as almost inevitable, adding that they were considering how to make improvements.

Gen O'Donoghue said that they were scrutinising UORs was improving, however emphasised to the Committee the different nature of UOR operations and the time scale involved. He said an open architecture and incremental changes must be the focus, adding that he would be disappointed if improvements were not made in the next few years.

Disagreeing with accusations raised by Conservative MP, Bernard Jenkins, that the Government was in the pockets of big companies, Gen O'Donoghue said they could not always buy equipment off the shelf that would meet all of their needs.

Arguing that this would result in coherence, he stressed that the MOD does go through value for money in detail. He added that off-the-shelf procurement often lacked stretch potential.

Also responding to this, Dr Tyler said the UK had some of the best defence manufactures in the world so this was somewhat inevitable, and argued that retaining sovereign capability also made this important.

Gen O'Donoghue agreed that sometimes procurement was over-specific but said the nature of defence requires planning.

Dr Tyler referred to technological changes which meant greater scope for the MOD reaching all of its specifications.

Questioned about political aspect of procurement, by Conservative MP, Adam Holloway, Gen. O'Donoghue said the Defence Industrial Strategy (DIS) outlines which needs can be met aboard and which must be kept within the UK. He pointed out that in some instances there were no other suppliers available.

The Chair asked who was in charge of this strategy, referring to comments raised by Mike Turner and the impressions among industry. With regards to DIS II, he said a lot fell on his shoulders, but agreed, after some confusion, that there was no one person responsible.

The Committee heard who the DIS was implemented and taken forward from Dr Tyler, who disagreed with suggestions that defence industries thought the DIC was no longer a concern stating that they were involved with the work being carried out.

Gen O'Donoghue told the Committee that the DIS was not ready to be published. He added that industry would rather that they stuck with the original DIS.

Labour MP, John Smith, raised concerns that there was a conflict of interest when senior civil servant became board members in defence companies. Gen O'Donoghue said there was a cabinet system in place to prevent this. He went on to describe the UK's defence procurement system as one of the most transparent in Europe.

He dismissed claims that relations between civil servants and industry were 'cosy'.

Describing the MOD as "agnostic" when it came to defence procurement, Dr Tyler said this only became an issue when the supplier formed an integral part of the contract, but he did not think there was a serious issue here.

Dr Tyler went on to state that there were huge benefits in having this exchange of knowledge.

In response to fears raised by RUSI about underfunding, an issue raised by the Chair, Gen O'Donoghue disagreed saying that he thought these estimates were based on the MOD's aspirations. Noting that every department would like bigger budgets, he said there was a balance between aspirations and need, and on this the budget was adequate, with requirements tailored to the DIS. He suggested that underfunding fears were based on these aspirations and not need.

Asked about the short examination of equipment programme currently being carried out, Gen O'Donoghue said he hoped the Secretary of State would announce this before Christmas. He informed the Committee that he was involved with this examination.

Turning to trading time, Rear Admiral Lambert described this as one of the traits in the totality of the system. He told the Committee that in every planning round, 'must have' items were prioritised.

Staying with planning, Gen O'Donoghue said that meeting future needs requires that abilities are not lost in the present. In his opinion manufacturers agreed with this, though he admitted that it may not sit comfortably with them.

In agreement, Rear Admiral Lambert said the current spending must consider the long term, adding that there were concerns regarding aircraft.

Pressed on spending, Gen O'Donoghue told the Committee that the contingency fund paid for extras to fight operations, stating that the MOD £16bn finances were safe.

Questioned about equipment and the impact of operations, Dr Tyler said the length time equipment was in operation was as predicted. Gen. O'Donoghue added that equipment in the field was serviced appropriately.

He went on to state that aspirations were always greater that budgets, and the planning round was aimed to ensure these were aligned. Asked to clarify the distinction between aspiration and need, Gen O'Donoghue said a degree of flexibility was required as needs and threats changed.

Asked for planning figures, by Labour MP, Mike Crausby, Gen. O'Donoghue said this would be easier once the PR09 was carried out, adding that he hoped this would be finished by the next financial year.

He disagreed that planning rounds merged into one, stressing that he had clear control targets to meet.

Turning to the November memorandum published in the Financial Times, Gen O'Donoghue said that a commitment regime would remain until the PR09 was decided. He stressed that spending must focus on priorities.

Asked what the term 'commitment regime' meant, Gen O'Donoghue said it was about managing the budget on an annual basis, something that he had always done. He agreed that the publication in the FT was unusual, but noted that he usually sends out such internal memos. An MOD inquiry would not be necessary, however, since the document was not classified, he asserted.

Gen O'Donoghue supported this accounting period and 6 month review, stating it ensured the MOD came in on budget. A procedure that was fully supported by Dr Tyler.

Dr Tyler disagreed with concerns raised by Mr Jenkins that certain programmes were not being supported, stressing that they were not stopping all commitments, but a minority number of activities.

Gen. O'Donoghue disagreed with suggestions from the Chair who said the Defence Industry considered defence procurement to be in 'limbo'. 10 projects had been considered with 9 going through, he informed the committee.

Responding to the issue of the extended lifetime of type 23 frigates and delays in equipment, Rear Admiral Lambert said their sole concern was future capability.

Dr Tyler stressed the need for compatibility with other equipment.

In agreement, Gen O'Donoghue said their concern was about meeting needs not taking arbitrary decisions.

On Future Rapid Effect System (FRES), Gen O'Donoghue said that commercial discussions were ongoing and that he was not in a position to comment in great detail. Pressed on this, he said armoured personnel vehicle (APV) would be one aspect of this.

In the wider issue of FRES, he said buying must conducted to include stretch potential to met future challenges, arguing that this was part of a process they were already conducting. Future challenges facing the MOD were now medium-weight vehicles, he said.

In agreement, Dr Tyler said the focus must be on intrinsically flexible vehicles with the ability to be adapted, and not overly specific.

On the specific of Mastiff, the Committee heard that this was not funded out of emergency funds, not did it met FRES requirements.

Turning to defence inflation, Gen O'Donoghue noted the differences between input and output inflation, stating that output had needed to become more sophisticated to meet new threats. He stressed that the MOD sought competition in procurement.

Dr Tyler argued that the cost of delivery was negative.

Questioned about delays to the A400M, by Labour MP, David Burrow, Gen O'Donoghue said there was a 9 month delay announced so far with an in service delay of 2 years. He was not able to comment further until the company provided details about the delivery schedule. However, he informed the Committee that a number of plans were being considered for when this was received.

He said he would be both disappointed and surprised if the delivery schedule took longer than a few months.

Gen. O'Donoghue informed the committee that he was confident tests were being carried out sufficiently, and adding that they planned to buy 3 Joint Strike Fighters (JSF). He noted that technology transfers were taking place on the timescale originally agreed stressing that there no uncertainties regarding the JSF.

In terms of the costs involved, Dr Tyler said they had seen US costs, but that this information was confidential. He assured the Committee that costing was reasonably stable.

Adding to this, Rear Admiral Lambert said the aircraft would be tested through the operational valuation process.

Asked about the marinised typhoon, Gen. O'Donoghue said this was not being considered.

Dr Tyler said that there was strong support for the STOVL element of the JSF programme, stating that there was no sign from the US that this would change.

Pressed on this, Gen. O'Donoghue agreed that is the STOVL element went the carrier version would be considered.

Rear Admiral stated that they would consider all options.

Questioned about carrier capabilities, Dr Tyler observed that part of their design was to allow expansion.

Gen. O'Donoghue noted that no financial commitment had been made to the US. While Dr Tyler said that there were 8 countries in the programme and none of them had yet received government approval.

Returning to the issue of technology transfers, Gen O'Donoghue said there had been agreement at the government to government level.