What fascinates me is Mr Rowntree's insistence that this deal represents best value for money:
Q188 Mr Holloway: How much more is it going to cost over the long-run, how many millions or billions of pounds?
Mr Rowntree: It is a value for money solution.
Q189 Chairman: I am not sure that is a fully comprehensive answer.
Yet he goes on to say:
Mr Rowntree: We have compared it considering, if you look at conventional procurements, what the historic trends tell us in terms of what cost growth there is in those. So we have taken an informed judgment as to what the through-life cost of this deal will be, considering also the availability of this service, because we are buying a service, not an aircraft, and it is value for money compared to a conventional procurement.
So, he expects cost growth over the whole life of the project, but wants Airtanker to take that at risk, not the MOD. But if I was the boss of Airtanker, I'd just factor that extra cost growth into the whole contract price, and charge that to the MOD from the onset, regardless of whether the growth was likely to happen or not. Chances are that, if the cost growth happens years in the future, I could claim that I couldn't afford it and raise the price anyway. In every way, I'd be onto a winner!
That doesn't sound like good value for money to me. However, spreading the cost over the whole life may make it more affordable. To me, the real question is, although it may be affordable now, will it still be affordable in 20 years time?