FSTA - Cancel PFI and buy outright?

[Roadster280]

I was laughing while reading the FSTA humour thread, and not wanting to subvert that thread, a question came to mind:

Would it be preferable to admit that the PFI is a crock, and take the MOD's option of withdrawing before the contract is let (knowing that it would impose a huge delay on fielding the replacement AT), or let it proceed on the basis that the ISD will be sooner than starting again, even though it's far from perfect?

If the decision is taken to show the door to the PFI, all the world's remaining Tristars could be bought up (for not very much), and used to prop up the fleet, I suppose.

It seems similar (to me) to the decision to can Nimrod AEW3 and buy E3. A tough decision, and also forced the Shacks to soldier on, as there was nothing else to do the task.

Is it better to bite the bullet now, or allow the PFI to proceed, and spend the life of the contract biting the bullet?

[BEagle]

Were anyone stupid enough to drag ancient TriShaws out of the desert, no doubt the FSTA bidders would cry foul - such an option was denied to them years ago.

PFI is, however, a crock as you say!

[pr00ne]

Whilst not disagreeing in the slightest that this PFI is a crock of smelly stuff, I think if the MOD canned it at this stage the resulting litigation would keep my sort gainfully employed for many a year and cost the MOD a small fortune.

On top of that you'd then have to go out and fund the purchase of the aircraft, the in life support, the training, the specialist refeulling kit, the conversion, the spares support etc etc etc etc. All of which was supposed to be paid for through the 27 year life of the PFI.

Can't have it both ways.............................

[Kitbag]

Can't have it both ways.............................

Obviously not but if this is right: http://www.pprune.org/forums/showthread.php?t=299661 then the whole financial justification and basis changes at which point the important thing will then become ensuring decent appointments for some VSOs when they retire.

[South Bound]

Think that no matter what the rights and wrongs of PFI are, fact is there is no cash in the bank for a capital outlay. That was given up years ago when they decided there was no requirement for AAR. Unless we give something else up or Gordon sells an oilfield or 2 there is no money and borrowing is the only way...

[LFFC]

Add this into the equasion as well!

Air tanker fleet is hit by credit crunch (http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article2602476.ece)

The government had expected the loans to cost 50 basis points (half of 1%) over Bank rate, but the banks wanted a full 1%, with an option to increase the interest if market conditions changed.

Defence Minister Goes Racing (http://news.bbc.co.uk/1/hi/uk_politics/7082833.stm)

[Art Field]

South Bound. I am somewhat mystified by your statement that they, whoever they are, decided there was no requirement for AAR [IFR], could you explain further please.

[South Bound]

We were all mystified. T'was many years ago and I don't recall the whos/wheres/whyfores but I am sure it is covered on another FSTA/PFI thread. Do a search if you need the detail...

[Kitbag]

Reading between the lines of the ToL article it seems that some UK banks are fearful that the government will be financially as well as morally bankrupt then. Maybe Drayson has a finely tuned sense of self preservation?

[Art Field]

The Invitation to Tender for FSTA, issued now many years ago, envisaged a need for Tankers running for twenty odd years, that hardly seems like a nil requirement.

[South Bound]

Yep, and that was after the money had been taken IIRC.

Bottom line is, no matter why there is no funding line to replace VC10 and the mighty big white party bus, there is no funding. To get the capability we need to:

1. Get extra money from treasurey, errrrrrrr unlikely methinks.
2. Offset other funds from the MoD budget to fund it, errrrrr anyone want to give up a coupla billion?
3. Come up with some fantasy, half-arsed way of getting someone to provide it to us.

No matter how difficult 3 is, no one will consider 1 or 2 again unless 3 is proven impossible...

[D-IFF_ident]

I don't blame Lord Drayson for following his dreams, or Square Wheels Filbey for taking a lucrative job post RAF career; we can all knock them but I bet most of us would do similar given the chance. As for the thread - I'm no economist but even I can clearly see that the PFI is a terrible idea and a dreadful waste of taxpayers' money. But buying outright is probably not an option either. So perhaps the question should be 'is there a realistic alternative?'

Given the opportunity I would investigate the benefits, if any, of changing the contract, that has not yet been signed, to make the agreement a lease-to-buy. Without looking into it I don't know if it's possible, but leasing to buy might appease those of us that don't like to just rent the aircraft, might persuade the treasury to find that extra half a percent and might still leave Airtanker with an agreeable profit margin. Maybe we could all be happy after all?

:8

[Alex Whittingham]

Square wheels?

[Brain Potter]

Please let's not raise the spectre of extra TriStars. We would be even more heavily dependant on Marshalls - who make BAE Systems look good. I remember a few years ago they quoted the cost of turning a $1m TriStar into a just a truck for the RAF as around £25m each.

I suspect that the Herrick airbridge will become the main motivator for the FSTA programme, with the AAR capability taking a back seat. It would be wrong, but not surprising, if this allowed some of the contractual obligations on AAR to be waived. The aircraft is already in just about the lowest AAR spec it is possible to have and the RAF could easily end up with another generation of botched tankers.

Contrast this programme with KC-X - the USAF's highest procurement priority. They know how crucial tankers are to any air campaign and their Generals seem to be interested in the actual capability and not just the cost.

[Roland Pulfrew]

Think that no matter what the rights and wrongs of PFI are, fact is there is no cash in the bank for a capital outlay. That was given up years ago when they decided there was no requirement for AAR.

Southbound.

I think you may be confusing a few issues with that statement. AAR is the primary role of FSTA (note strategic TANKER aircraft). What I think you are confusing is that fleet sizing for FSTA never took into account the AT role. FSTA was fleet sized on the UK military AAR requirement. The beancounters (DCRS - not sure what they are called today) always stipulated that the AT role would be done by FSTA if "value for money" could be proven but couldn't be used for fleet sizing. This was when certain woolley thinking within 2 Gp/DSTL and MOD assumed that AT would always fly into benign environments and therefore could be chartered......Doh!!

When the Govt decide that AAR could be PFI'd the funding line for a purchased replacement was diverted to other programmes - Doh! So now there is no chance that we could procure a replacement unless there is a MASSIVE increase in Defence spending. A procured replacement of 17 KC30s is circa £2.5B!!!!!!!!!!

[XV277]

And so long as it remians PFI it is off balance sheet.

[tornadoken]

Guide me pls on why PFI, inherently, is a crock of poo? Is your objection that you prefer to own title in kit? What does that matter? Or do you assume civilian involvement in the operation will screw it up?
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In days gone by we bought the kit and tried hard to turn it into capability. Kit is pretty, but is not itself of military value. PFI leaves ownership with the Provider, who may take it away when we're done with it and find residual value, where we junk things in Wales. Till then he gives us hoses dangling in defined places and times in the sky. We don't care how he does it, and don't pay him if he doesn't.
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You may respond that he very likely will not be there, where and when wanted. What makes you think an all-uniformed set-up, kit owned outright, would deliver airliner-types on task better than a joint operation? See: LTU TriStar 500: a fleet of 2 aircraft sustained daily Dusseldorf-Los Angeles, a 23 hour rotation, >15 years. >4,000 hr utilisation, p.a/c, p.a. Or, for the oldies, see Dan Dare putting more hours on Comet C.4 in 5 years than RAF had in 13. Sure, they had 5 crews p.a/c, bits sitting on Main Base, flight spares kits, pack-ups at frequent ports, and an Approved Maintenance Schedule tailored to the needs of the operation. But that's the whole point.
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Upfront capital outlay is part of the thinking. But you are another: uniforms are precious. You, alone, go in harm's way. You command more skill and resource than Grandpa-pilot ever did. Any task that can be competently discharged by a civilian should be. Same thinking as Teaching Assistant, Nursing Technician, Community Support Officer (those mini-Plods). Good thing, surely?
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If you think PFI is dearer, do a quick sum: Commander, cost per flying hour-in-command (or hour-on-shift, SEngO, or Logistician, or any uniform...)from Officer Selection Centre, net of wash-out, through active career, on through the >30 years you intend to draw pension.

[Roland Pulfrew]

tornadoken

I'll have what you are drinking!!

How much time do you have?

Firstly, we provide the crews and the majority of the techies. Why? Because, strangely, civvies don't like to go to the frontline that much unless you pay them lots. Therefore cheaper to keep military personnel. Secondly, because military personnel are inherently more flexible (well they used to be before child care and ......) therefore more likely to be available when you need them, even if that is for fireman's strikes, foot and mouth etc etc.
Thirdly, because we will always own the operational risk. Fourthly because Air Tanker will not be as flexible as the military AT & AAR fleets and crews because it isn't in the contract or we will have to pay more to get it in the contract. Next, I can't remember where I got to, there will be no residual value apart from scrap, once we have finished with the fleet - just like the VC10 and Tristar. Because you are mortgaged to the hilt with PFI; the programme will work out at an average of £500M per year through life. You can buy an awful lot of crews, spares, and aircraft for that. And before I burst a blood vessel, because AirTanker are in it to make a profit - which comes from the Defence budget and could be providing capability elsewhere. :ugh::ugh::ugh:

And relax!

[Pontius Navigator]

I think I know what Southbound was alluding to.

Was it not argued that FSTA could be used for commercial transport operations and only called in, and role fitted, for AAR should the need arise.

The need was to sustain Typhoon caps in the North Sea.

I am sure BEagle will be able to refresh our memory.

This entry is interesting as well:

http://en.wikipedia.org/wiki/Future_Strategic_Tanker_Aircraft

[South Bound]

Don't think I am confusing anything. It is a PFI because there is no money, it was never a PFI to free up cash for something else. There is no money because the line for a replacement AAR aircraft was taken out of the EP many years ago.

Beags, come and rescue me before they stone me!

[LFFC]

PN

I'm not sure if the Wikipedia entry is entirely correct; it implies that the contract with Airtanker has already been signed. However, this was the last progress report that I saw from the MOD:

6 June 2007
New RAF tanker and transport aircraft programme approved by MoD (http://www.gnn.gov.uk/Content/Detail.asp?ReleaseID=289631&NewsAreaID=2)

"The Ministry of Defence and AirTanker Ltd will now work together to secure financial and contractual close on a PFI deal as quickly as possible."

Have I missed something?

[Pontius Navigator]

LFFC,

I was not suggesting (I hope) that Wikipedia was accurate. I was hoping to find some earlier, or out of date, references to support SouthBound's contention that we were not planning an 'active' AAR capability but were seeking a contingent capability with the aircraft used for revenue when not needed for AAR.

I would love to have seen the scheduling plot. Given a civil utilisation of better than 10 hours per day it would follow that a given airframe would be fully employed when not on AAR and that short notice surge would be nigh impossible.

Of course unlike loaded and self-loading freight fitting and testing AAR kit might take more than 30 minutes!. How many AAR platforms would be needed? To guarantee an airborne AAR for a given mission would you need one or two tankers?

To maintain a UK Q do you need a tanker?

What about a trail etc etc?

[Roland Pulfrew]

South Bound

Ok nuances. Chicken and Egg. The original plan was that only if PFI could be proven to work would the EP money be given up. Now of course the EP is strapped for cash so the funding line for a conventional procurement was "withdrawn" which of course means that it can be diverted elsewhere. The fact is that AAR was/is still the priority and the fleet sizing was based on the UK AAR requirement.
All I was questioning was the original comment:

That was given up years ago when they decided there was no requirement for AAR Which is incorrect.

Where the confusion may lie is that a "core" fleet of FSTA will always be in RAF service and these will be tankers that do AT. If the UK Military needs more AAR or AT then this can be "bought in" to meet the additional requirement. These are the swing fleet a number of which had been planned to be released to the civil market when not required by the MOD/RAF. But then of course when the planning was done we weren't fighting 2 minor wars and needing every asset we had!!!

And LFFC you are correct. No contract has yet been signed!!!

[MrBernoulli]

fighting 2 minor wars

2 minor wars as well as Iraq and Afghanistan? Pray, do tell which minor wars those might be?

[FFP]

Falklands must be one of them......... ;)

(Remember the good old days Mr B......Engine change and fuel leak still is a war goer ;) )

[FFP]

Oh, and if we're talking of re negotiating / changing the contract / throwing in last minute injects in the vinegar strokes....

Any chance of throwing a boom on it and giving it a UAARSI ?(Credited to D-IFF_ident from FSTA - When ? Thread ;))

Those boys on the C-17 must be dying to do more than the usual cargo runs and a bit of low level NVG stuff. Plus, we could do plenty of US fighter / 135 stuff over the North Sea with our counterparts.

And it would save all those new / inept co's some face in the desert when they accept a flight of F-16's for a refuel :E

Just a thought.......

[BEagle]

The boom and girly-flaps UUARSI option is not part of the FSTA requirement. Neither will the OzAF KC-30B have a centreline hose.

I vaguely recall some FSTA conference last century which ststed that the requirement was to support one major (cf GW1) and one minor (cf Malvinas) operation, plus routine AD and AAR training and 'CPT' such as Red Flag. I think the Bennyland Air Bridge was also part of the assumption.

We pointed out to the high-priced help that ther assumptions for 'call-back' of FSTAs off bucket-and-spading were a crock - every liitle Bliar war has always needed everything on Day One. They didn't like that - it didn't fit their cosy assumptions...:rolleyes:

As for the Malvinas run - one 'bit of a bugger' is that the A330 has a wingspan 1 metre too big to fit in the Timmy hangar. Which means the de-icing had better be pretty good if the jet has to sit out in the open all the time... Perhaps that'll relax the Q tanker RS if the alternative is to de-ice it every hour?

Although an MPA-based A400M with a single CBT would be able to meet all the in-theatre task need for 1312 Flt.

[Art Field]

Beags, at the time you are talking about, the number of aircraft to be provided was around 24, the current figure is 13. If those tasks were and still are required to be met Air Tanker are not often going to have spare capacity for the bucket and spade trade.

[BEagle]

Arters, that was before the numbers were ever revealed. For the A310 or B767 it looked to be around 24 as you say.

But then someone evidently thought that with an aircraft carrying 110 instead of 73 tonnes, i.e. if you assume a 10 tonne t/o, reserve, approach etc total, then perhaps 24 x (63/100) = 15 might work. Less crews to pay, less ac to maintain, less hangarage needed....

Only one slight flaw with that plan - 'twas bolleaux.

One u/s jet out of 24 sitting on the line = 96% still available

One u/s jet out of 15 sitting on the line = 93% still available.

But since when did the RAF ever have only 1 u/s jet?

And, most important of all, it is quite common not to need 110 tonnes in any one place, but 55 in two places.....

[Brain Potter]

Although an MPA-based A400M with a single CBT would be able to meet all the in-theatre task need for 1312 Flt.

I think there is an obstacle to this idea in the FSTA exclusivity clause.

Let's see the A400M actually doing what we are buying it for before we think about using it as a solution to our tanker problem. It is showing all the signs of turning into another delayed, over-cost, Euro-political fiasco. How long before it reaches the same unit cost as the C-17?

At least we actually want the A330.

[Squirrel 41]

Well, yes...

But for three reasons - firstly, any kind of hire-purchase / lease is going to cost more than straight purchase as the cost of borrowing the capital by the private sector will be more than the cost of the government borrowing the money.

Second, any self-respecting private company will negotiate a watertight contract to protect themselves and to ensure that they can make some money at this game - all very sensible. This is where Pr00ne and his mates come in, and do a good job. The downside for the RAF is that any changes to contract will only be possible in exchange for some money.... lots of it!

Thirdly, at least one point of PFIs was to transfer risk to the private sector - if they didn't perform, then they didn't get paid. If they were more expensive than they thought, then they lost money on the deal.

All very sensible, except for one smallish issue: the Government has to be ok with binning a project if the company providing the service goes bust - like Metronet doing up the tube. The smallish problem occurs when the service is so important that the Government needs it done at almost any cost, at which point the Government is over a financial barrel becuase the service HAS to be provided, so the State will have to stump up the cash to bail out the service provider.... like in Metronet's case....

Seems to me that AAR is a rather vital service without which the RAF is um, well, stuffed, and therefore emphatically NOT suitable for risk transfer to the private sector.

And this is all before we get to the operational issues of where are the bucket and spade brigade going to be going when the RAF needs them, who (RAF!) is repsonible for maintaining commercial ETOPS clearance in the midst of TACEVALs and all the rest of it.

Pity, as I wonder how many we could've bought with the money that's been spent on the project to date...

Juat my 0.02.....

S41

[Roadster280]

Thanks for the debate guys, it echoes my thoughts. There's little chance of the contract as-is doing what's needed, and there's no money in the defence budget to change that.

Which comes back to the Treasury being asked to stump up. Which in itself requires someone with balls at the top to demand it, on pain of the dogs of war being unleashed. I don't see that happening either.

[Pontius Navigator]

Following on from Squirrel there is also round 2.

First time the PFI Contractor is in open competition. Second time round he has a firm grasp of the potential profit and loss and can rebid accordingly. In theory his bid may be lower than competitors as he now has experience of the real risks. OTOH it may be much higher because he knows the risks.

The counter bid may never materialise. We are X-years down market and competitors may have been taken over, change direction etc. In our last rebid out of 5 contractors one dropped out early 3 were chosen and one dropped out on the last day.

Both bids came in substantially above the budgetted figure. We could either redesign the contract to shave capability but it was already pretty thin or t ake services back in-house but that was not an option as we had shed capability. The contractor got his price. Already the writing is on the wall as we approach round 3. The contractor is already squealing as his margins are already squeezed. We are simply going to have to reserve more cash for round 3.

[tubby linton]

MayI suggest that when the 330 spec is written for the contract ensure that the third set of passenger doors either side of the aircraft are made full width passenger doors rather than narrow emergency exit type ones.Going for the latter reduces the max pax figure and makes the aircraft less desirable on the lease market.

[Squirrel 41]

PN, quite right.

This is the nub of the problem with contractorisation in this form; if there is no credible option to bring the "service" back in-house, then the MoD will simply have to pay whatever the market demands. The double-bugger of this is, of course, that you'd have to decide well in advance that you wanted to have the people and expertise avaliable in-house for this to be a realistic option - you've otherwise got to rely on transfering the existing staff into the MoD as civilians (possible, but expensive) or getting them all to join up (effectively impossible, even if it were desirable).

Given that FSTA is a 20+ year contract, it's less of an issue here, but the general point is right. Which leads to an interesting series of questions about MFTS....

S41

[Pontius Navigator]

Squirrel, little bird tells me that most contracts are going to get longer. It may enable them to discount the future more but wait for that sting in the tail.

Certainly from my little corner it is working provided it does not cost any money. A bit like the old days pre-human asset counting with spare manpower, being paid regardless, whether there was work or not. Good management could direct them to where it mattered.

Now, within one contract, flexibility is restored but you try to deploy contractor X to contractor Ys unit for a surge!

[LFFC]

Perhaps hurt by recent speculation, it looks like AirTanker are fighting back:

£13bn RAF tanker deal is ready for lift-off - Telegraph 11 Nov 07 (http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/11/11/cnraf111.xml)

Meanwhile, another report in the same newspaper suggests that FSTA could be toast:

MoD in £1bn battle to stay within budget - Telegraph 11 Nov 07 (http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/11/11/nmilitary211.xml)

The RAF and Royal Navy look poised to take the brunt of the squeeze with the possibility that projects such as the Eurofighter programme, the RAF's Future Strategic Tanker and the Trident replacement programme could be axed.
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Serious question marks exist over the future of the RAF's Future Strategic Tanker, a new air-to-air refuelling aeroplane, as some of the private companies involved in its production are struggling to raise cash for the project.

Looks like this is all going to get very messy or perhaps it's all part of the final negotiation.

[D-IFF_ident]

Off-topic alert....

The 'Square Wheels' nickname probably didn't stick for long - but I believe it had something to do with a Nimrod R1 at Wyton and why you couldn't, at the time, only do starred item checks when one Hyd system was out, or somesuch - as it meant that one would land with the brakes applied. Doing so can make the wheels somewhat 'square'. Allegedly.

[Roland Pulfrew]

And then of course this isn't going to help........

http://http://www.timesonline.co.uk/tol/news/uk/article2848830.ece

When are CAS and CINCAIR just going to say "NO". We cannot close airfields and disband squadrons just to save money!! :ugh:

[Squirrel 41]

Roland...

I take it that means, "No, I'm resigning over this and will publicly say why. And so's he, and so's he." (CAS, CINCAIR, AOCINCs 1Gp, 2Gp, 3Gp?)

No, thought not.

But if these figures are right, and they're serious about no more money, then this sort of force loss to protect Trident's replacement shows it's true cost. And IMHO, it's way too high: so faced with this, MOD should recommend binning Trident.

And then let's see what No 10 has to say....

S41

[Roland Pulfrew]

Squirrel

I wouldn't recommend going straight to the resignation phase. I would go via the overspend the budget stage first. Seems to work for the NHS. If the centre haven't given the frontline sufficient cash to run the current level of capability then there is something wrong with the budget. How can we be in a position to run X number of stations and Y number of squadrons last year but not this year? Same goes for RN ships and army regiments.

We need PUS and 2nd PUS to understand that there are no "savings" left to be had, we are now into cutting capability to save money. If we weren't then we wouldn't be looking at closing stations, mothballing half the E3 fleet, scrapping 2 GR4 sqns and getting rid of an entire fleet early.

I agree with you though - it is time that the centre put up one or two big ticket items for the savings measures. And tell the Govt that we cannot afford them without more funding. Sadly at the moment that has to be Trident and/or the carriers. Typhoon money is contractually committed so no savings there. FSTA, possible, but savings not that great unless looking whole life and we need AAR aircraft soon to replace the VC10 if not, yet, the Tristar. Army programmes.......? It has to be the Trident replacement and the carriers (and I am actually a fan of the carriers before I get accused of being single service-ist. Unfortunately there aren't any other programmes with enough £s attached).

[Kitbag]

It has to be the Trident replacement and the carriers


Just what the PM wants, it would fit in well with keeping his party membership on side and give him the opportunity to say:
'well I didn't want to, but my prudent friends in the military felt it was the best thing to do'.
Personally I'd be looking at gaining profit from the defence estate that is lying around empty. Perhaps rusticating the major departments in London?

[LFFC]

NHS private sector deals scrapped (http://news.bbc.co.uk/1/hi/health/7096437.stm)

In recent years, ministers in England have signed deals with private firms to provide NHS treatment and diagnostic centres in a bid to cut waiting times.

But ministers have now said some of them do not provide value for money.

So if the credit crunch increases the cost of FSTA (and a few other of MoD's PFI projects), what happens if that approach no longer offers value for money?