NAO Reports on FSTA

[Squirrel 41]

According to Radio 4, its poor value for money:

Delivering multi-role tanker aircraft capability (http://www.nao.org.uk/publications/0910/tanker_aircraft.aspx)

Will read with interest!

S41

[Roland Pulfrew]

The MOD began the planning process with the assumption that the FSTA project would be delivered using a private finance deal, and therefore "off-balance sheet". This assumption was driven by affordability pressures and the prevailing policy to use PFI wherever possible. The selection of a PFI option was made without a sound evaluation of alternative procurement routes to justify why the PFI route offered the best value for money. - NAO

"I told you so". :(

[Jackonicko]

Audit office slams MoD's PFI nightmare
• Airbus refuelling craft can't be used in war zone
• Five-year delay will raise cost by hundreds of millions


Richard Norton-Taylor
The Guardian,
Tuesday 30 March 2010

A £10bn defence deal turned into a "bureaucratic nightmare" after the government insisted on using private finance to keep the cost off the national balance sheet, according to a highly critical National Audit Office report out today.

The Ministry of Defence signed the deal for a fleet of multi-role RAF tanker and passenger aircraft – which has been delayed for more than five years – without properly considering any alternative option, parliament's financial watchdog concludes.

Affordability, rather than value for money, led the MoD to negotiate a PFI deal for the future strategic tanker aircraft, says the National Audit Office. As a result, it says it is unable to conclude that the ministry achieved value for money in procuring the aircraft.

It warns there could be years of further delays, at a likely extra cost of "several hundreds of millions of pounds", if the MoD decided the aircraft should be "retro-fitted" with flight deck armour and other protective equipment to enable them to operate in Afghanistan.

Delays in the planned redevelopment at the RAF base at Brize Norton in Oxfordshire could lead to even more delays, the NAO warns.

When it first drew up plans for a new multi-role tanker aircraft, the MoD did not envisage the aircraft flying into such "high threat environments" as Afghanistan, the report notes.

The deal with the AirTanker consortium is to provide 14 Airbus A330-200 aircraft. The first is due to enter service in October next year, and the rest of the fleet by 2016. AirTanker's shareholders and subcontractors include EADS, Rolls-Royce, Thales, VT Group and Cobham.

The 27-year contract is due to end in 2035 and amounts to £10.5bn, but the overall cost to the MoD is estimated to total £12.3bn, according to the report.

Delays have meant the RAF has had to rely increasingly on old and unreliable Tristars and VC10s to carry out air-to-air refuelling and to transport troops to and from Afghanistan. The ministry has had to spend £23.5m replacing flight management systems and cockpit displays on the Tristars.

The report criticises the MoD for failing to carry out a "sound evaluation of alternative procurement routes". It says there had been the "assumption" in the ministry that the aircraft would be provided through a private finance deal – thus keeping them off the balance sheet – due to "affordability pressures and the prevailing policy to use PFI wherever possible".

Edward Leigh, Conservative chairman of the commons public accounts committee, which oversees the work of the NAO, strongly criticised the use of PFI and said the MoD should have foreseen the aircraft would need to operate in warzones.

"By introducing a private finance element to the deal, the MoD managed to turn what should have been a relatively straightforward procurement into a bureaucratic nightmare," he said.

"It is hard to believe that, when drawing up the original specification for this tanker and transport aircraft, the MoD didn't envisage that they might have to be used in high-threat areas."

Liam Fox, shadow defence secretary, said: "Because the contract was shrouded in secrecy, it is only now that we learn that the planes will not even be fitted with defensive aids to enable them to fly into war zones." He described it as "one of the most absurd procurement decisions taken by this Labour government".

Bob Ainsworth, defence secretary, yesterday confirmed a further batch of procurement projects, the third such package within 10 days.

He said A400M partner nations had reached agreement with Airbus Military for a revised contract for 22 of the military transport aircraft, rather than the 25 ordered initially. The MoD has also signed a £120m contract with BAE Systems to maintain the UK's Hawk T Mk2 aircraft,the Advanced Jet Trainer, and an interim Partnering Agreement with MBDA in the UK to develop future air-launched weapons, known in the MoD as the "complex weapons" programme.In timing denounced by Fox as politically-motivated, the MoD last week announced plans to build armoured vehicles and light tanks for the army in a deal potentially worth £9bn.

[Impiger]

Blame HMT! Quite simply PFI was Government policy and the HMT stance was off-balance sheet or it ain't happening. Small wonder then that the MOD decided to save money by not evaluating other procurement routes which it knew would not pass the HMT's first question of 'Is this off balance sheet?'

Perhaps the NAO should audit the decisions of HMT from time to time ...

[Roadster280]

When it first drew up plans for a new multi-role tanker aircraft, the MoD did not envisage the aircraft flying into such "high threat environments" as Afghanistan, the report notes.

In a 27 year contract, noone thought that military aircraft would be required to operate in a high threat environment? At any time in the 27 years?

I find it difficult to believe.

[tucumseh]

Quote:
When it first drew up plans for a new multi-role tanker aircraft, the MoD did not envisage the aircraft flying into such "high threat environments" as Afghanistan, the report notes.
In a 27 year contract, none thought that military aircraft would be required to operate in a high threat environment? At any time in the 27 years?


Precisely the same failure that led to the C130 not being fitted with adequate self protection.

When the Tories introduced PFI all project offices had an "out". There was a simple assessment form to fill in. For example, if there was no overseas sales potential, you ticked that box and ignored PFI. (How many Apache simulators have we sold overseas?). Those who did gave themselves a fighting chance of delivering to time, cost and performance. Those who chose PFI didn't deliver to T, C or P; but did get their promotions.

As usual with Edward Leigh's committee, they scrape the surface but don't drill down a level so miss the important issues. You almost feel sorry for the FSTA guys - the real problems lay at their 2 and 4 Star.

[dallas]

To be fair, TELIC and HERRICK are the first ops that have seen strat AT routinely land in hostile environments. The C130 fleet should always have had defensive aids because of their tactical role, but it's a little unlucky to have a new requirement to send passenger jets to land into hotspots.

[Cows getting bigger]

To be unfair, it isn't/wasn't just the AT fleet that suffered from the same mentality.

SH - armour plating & DAS
Muds/AD/Comms fleet - DAS
Muds - weapons systems/fit options

Some of us remember the situation where whole fleets were like the proverbial army officers' uniform; no two aircraft were the same. :}

[Frustrated....]

To be fair, if we had specified a self defence suite when the deal was done it would be out of date for today's threats - just like what has happened with both the Sentinel R1 and Nimrod MRA4.

The SDS on Nimrod and Sentinel was specified in the original contract and needless to say we need to spend a huge amount of cash bringing the SDS on those platforms to state when they can handle more modern missile threats.

As long as we specified in the FSTA contract that we CAN fit a SDS then we are OK. If not, then we will be up the creek without a paddle just like we are with the Boom refuelling requirement now that we have E-3, C-17 and Rivet Joint that use the Boom method.

Frustrated....

[Art Field]

I wonder what Air Tanker think of all this. On the one hand it means more money to fit the extra kit but it also will complicate the use of some frames for the bucket and spade market which I reckon they were counting on to get fat on at the RAF's expense. I wonder whether there are any restrictions to using them in the civil world with defensive kit. There will also be a weight gain of course. At least the aircraft are getting closer at last.

[Squirrel 41]

Frustrated....

You're not the only one in that position. It's not clear from the report if the contract allows for the fitting of DAS, and I appreciate that the threat may be evolving - but not to fit anything is little short of scandalous. I wonder who'll get sacked for this one? Ah, not to worry - nobody, of course.

The more interesting question is the size of the profits that AirTanker will make: we seem to be spending £390m a year with them, £60m of our own money FOR 27 YEARS - at a time when the much more capable KC-45 (boom, receptacle, freight door, freight floor, blah) was offered to the USAF at $189m a copy (say £120m give or take) and now EADS are saying that they can do it for LESS because.... NG were charging too much profit..... err, what? :confused: (See: EADS Nears KC-X Decision | AVIATION WEEK (http://www.aviationweek.com/aw/generic/story_generic.jsp?channel=defense&id=news/asd/2010/03/30/02.xml&headline=EADS%20Nears%20KC-X%20Decision))

<<Rant Mode: ON>>

So how much are our uber-vanilla A330Ks really worth? And how much are we paying? And why on earth was there no Plan B? Who are these imbeciles, and who was sacked and lost their pension?? Ah, of course - NOBODY.... :ugh:

Given this, how the hell can MoD claim that they got a good deal? :* As usual, the front-line and the poor bloody taxpayers have been shafted by MoD incompetence.

<<Rant Mode: OFF>>

S41

(Edited for missing link)

[Marly Lite]

If the NAO thinks FSTA is a PFI bureaucratic nightmare, I'd love to see what it thinks of the MFTS shambles. (Or do I mean sham?):(

[Toddington Ted]

and to add to that again there's Defence Trg Rationalisation (DTR), a massive £multi billion PFI and that keeps moving to the right.....

[tornadoken]

NAO is saying it would have been cheaper/quicker to buy upfront. In my view cost/time drift is not due to incompetence, either at MoD or Treasury: it's incompatibility.

If Govt. buys anything it must charge the cash-out against taxes/borrowing in that year. So 14xK-A330 would be charged against the 7-or-so build-years' tax-income. Bring in the owner of a balance sheet to amortise capital-spend over >20 years, and presto! lower outlay in years 1-7. Cost (interest+profit) of City money is higher than Govt.'s cost of capital, but the business skills of commercial chaps are tighter than those of bureaucrats, innit, so..even stephens. If K-A330 had been bought for upfront cash (like by RAAF/RSaAF), some-other-MoD-thing would not have been bought.

The incompatibility is that capital Providers must be able to measure their exposure: "risk" not in a military sense, but financial - default, bankruptcy. So MoD agrees to pay extra if User "misuses" the kit in operation outside the Approved envelope. MoD's first PFI deal, 1996, was DHFS/Shawbury helicopter training, by Bristow/SERCO/Flight Refuelling: X ready-hours per month at £X p.hr. MoD did not tell Seller how to do it; if MoD's Trainee has finger-trouble, MoD pays up for the damage.

FSTA added the wheeze of joint Use of the assets: MoD specified they would not (normally) be flown in harm's way, and bought X ready hours a month. Contractor has access to "spare" hours-a-month: 14 platforms are more than RAF needs in happy times. This is no more nor less than airlines' Quick Change pax:freight options. Like that, though, the real world is fraught: over-stress/temp, dodging a SAM...quick once-over in the hangar, then cart Gran-and-the-kids to the sun...

[GLGNDB]

Quickly skimming through the NAO report, I noticed a few things

1. If the MOD cancel the contract, as well as whatever contract cancellation fees at that point, they need to pay Airtanker £75mil for each aircraft that has been accepted into service.

2. If the MOD need to charter in an aircraft, they also need to pay Airtanker £8000 + £300 per hour that the chartered aircraft is being used.
This would be on top of the costs of the sub-chartered aircraft.

3. Nobody saw a need for either a cabin freight door or for the ability to receive fuel.

4. Only 5 out of the 7 aircraft that will have the ability to refuel larger aircraft will have the kit installed.

What a crock this whole arrangement seems to be. At what point will someone down the line say enough and there be a requirement to purchase the aircraft.

[NURSE]

3. Nobody saw a need for either a cabin freight door or for the ability to receive fuel.



I would sugest that was whoever drew up the spefication originally and that was probably an MoD civil servant taking Advice from the RAF advisers. So Who from the RAF advised them?

[NURSE]

wonder how much it would cost to nationalise Airtanker?

[tucumseh]

I think it needs said that it is many years since MoD project managers were permitted to draw up a conventional procurement specification. The skill has largely disappeared.

What commonly happens now is that DEC outline a requirement, which invariably misses out the detail because "staff officers" are taught that detail should be avoided. Even if they know/understand it, they are not allowed to "solutionise". As most IPTs now lack the necessary experience to transform a typical requirement into something sensible (or in this case, something that remotely meets the regulations), this user requirement is offered to industry in the Invitation to Tender, which basically says "Meet this requirement". Requirements can be met in many ways, so very often it takes years to sort out the raft of resulting "clarification qeustions". Industry is as frustrated by this system as we are.

When this no spec policy first emerged, many companies would answer saying "The requirement is bolleaux, here's what we know you need / think you mean". They were severely bollocked by MoD Commercial (ironically, the report is issued by a former MoD Commercial Director) and warned as to their future behaviour. In time, companies would then "answer the exam question" but submit an annex outlining the actual requirement & cost. Again, bollocked. Then they'd supply, separately, an unsolicited proposal. At this point they would often be blacklisted and word would come down not to contract them. Commercial would contact senior staff at the company and complain about the behaviour of juniors.

I know this happened very recently when a company, in response to a substantial Invitation to Tender for an R&D contract (for an aircraft which goes out of service this week!), replied saying "It's already in service, the performance is far better than that required in your ITT and you (MoD) own the Intellectual Property Rights. Here's the price for a follow-on buy but you'd be better buying direct from your existing supplier." The MD got an earful from Commercial and did not get the contract. The company withdrew from the MoD market as the cost of bidding for such contracts was huge compared to the return.


Often, the contract goes to the lowest bidder, who has shown no understanding whatsoever of the requirement; only that he vaguely appreciates that MoD has got the ITT wrong, so any price hike and delay is MoD's liability. This applies equally to the smallest replenishment contract to largest programmes. In this case, I imagine the supplier knows exactly what we need and has a contingency plan (and bill!) up his sleeve.

[Saintsman]

Liam Fox, shadow defence secretary, said: "Because the contract was shrouded in secrecy, it is only now that we learn that the planes will not even be fitted with defensive aids to enable them to fly into war zones."

Is he saying that the DAS system that is being fitted (and always was being fitted) is not good enough or like most people, doesn't know what he is talking about?

There are enough photos of the Australian MRTT that give an idea of what is fitted and the FSTA is no different.

[tucumseh]

Good question Saintsman. One Secretary of State tried to pass off a rather dated IRJ on C130 as a fully integrated, comprehensive Defensive Aids Suite. The Coroner wasn't impressed. I'm afraid Liam Fox will be no better.

[endplay]

In the upcoming election shouldn't we all vote for the NAO? They always seem to know the answers.