The Defence Crisis; BAE Are Still Hopeless

It appears that the defence procurement stories we've been tracking are coming to a head. Recently, it emerged that the Astute SSN, Nimrod MRA4, and T-45 destroyer projects are going significantly overbudget again; the first two of these are, of course, the ones that were already £800 million over budget and several years later. The common factor in them is of course that BAE is the prime contractor in all three. BAE has been the owner of the Vickers submarine yard in Barrow and the Govan and Scotstoun shipyards on the Clyde since 1999; Nimrod is a legacy of Hawker Siddeley and for that matter of De Havilland, and the job is being done at BAE Woodford.

Chuck in the fact that we're still not cutting steel on the carriers - which, at an estimate £3.9bn, start to look positively cheap - and that the Army's FRES vehicle project has still not produced any actual vehicles, and is now costed at £14bn (!!!), and it's clear that the UK's defence policy is in ruins. There are a number of reasons for this; the first is a history of disastrous management back to the 1980s. The second is the decision to let BAE buy the GEC-Marconi defence businesses in 1999. The third is Iraq, of course; I-bloody-raq.

Recap; spending as a percentage of GDP was pushed up towards a target of 5 per cent in the 1980s, which should have seen the armed forces superbly equipped for some time to come. How this didn't happen would require a small book, but there were a string of horrible procurement fiascos. There were the whole succession of cost-sucking redesigns to what became Eurofighter, a wedge of electronic systems which all went wildly over budget, the failed Nimrod AEW3 airborne early-warning aircraft, the decision to buy the SA80 rifle in order to privatise Royal Ordnance; but there was surprisingly little output from all that money. Projects became eternal; MRA4 has its genesis in the "Nimrod 2000", whose title should tell you how long ago it began.

Then, on the boom came the crash; in the expenditure-constrained 90s, the MOD was asked to a) deliver a peace dividend and b) complete its equipment projects, two things that could obviously not both happen. Also, more and more gear was coming up for renewal; the VC10 tankers, the Sea Harrier, the CVS carriers, the T42 destroyer, the Swiftsure and Trafalgar class submarines, the Clansman radio system. By the mid-90s, the UK was facing a mammoth block-obsolescence problem, worsened by the lack of progress on several key European projects like the Future Large Aircraft (now the Airbus A400M, and still not here).

The solution was meant to be the Strategic Defence Review launched by the first Blair government; this was the first since the Cold War to actually review strategy rather than the budget alone. It concluded that the least likely form of war was the one the military was still designed for, a NATO Central Front battle against the Red Army; peacekeeping, intervention, or whatever might be required anywhere in the world. Their answer involved pushing on with the big kit projects, and specifically more amphibious and support shipping, two large aircraft carriers, and attack helicopters to support light troops. They also wanted to look into the possibilities of finding a more deployable armoured vehicle; this became FRES.

We'll come back to SDR; what happened next was that GEC-Marconi, under the brilliant guidance of John Mayo and George Simpson, decided to get rid of all its non-telecoms businesses and its pile of cash. The government was conflicted; on the one hand, it was Blair, and they didn't want to interfere. On the other hand, there was an attachment to the idea of a national champion; what was really wanted was scepticism at the prospect of a monopoly supplier of almost all the Forces' equipment. Increasingly, I think permitting the merger was one of the worst decisions of the Blair years; it facilitated Mayo and Simpson running Marconi into the ground, it left the government negotiating with a monopolist arms maker, and it let BAE's management culture infect another chunk of industry. BAE's deep history goes back to the government-pushed mergers in the aviation industry in the 1960s; the idea was that the companies needed to build scale to finance R&D, but what tended to happen with each one was that the top management demanded they keep their empires, and what got dropped were half the development projects. It didn't help that investment in civilian work mostly went into Concorde at BAC; rather than developing new products, the business became one of angling for huge government contracts that took 20 years to work through. One of the component parts, English Electric, had had the engineering motto "when in doubt build a demonstrator"; there would be no more of that at BAE. The decision not to participate in Airbus until 1977 was another contributory factor, as was the Tony Benn-driven merger between BAC and Hawker Siddeley. And the years of easy, Al-Yamamah funded 80s success...well.

Having bought out the GEC-Marconi defence businesses, BAE began preparing to seek its fortune in the US; the big strategic aim was to get Boeing to buy them, generating big bucks for the board. So, all the interesting bits of the company were shut down or hived off; just as a huge boom in regional jets began, development of the RJX was killed off and the line at Woodford shutdown. Canadair and Embraer of Brazil seized the day. Just as a boom in business jets began, the business jet operation was sold to Raytheon, where it is doing very nicely. Even the name was changed from British Aerospace to BAE Systems in order to remove the word British and the impression that aeroplanes were one of its products; at least they didn't choose another of the options that floated around Farnborough at the time, "Millenium Aerospace".

Meanwhile, SDR went on its way. The Army was reorganised, losing some heavy armour and forming another light brigade; the 24 Airmobile and 5 Airborne Brigades were rolled into 16th Air Assault, all helicopters placed in an integrated command, as were the Navy and RAF Harriers. This was the easy stuff; everywhere the policy met BAE, though, there was trouble. (To be fair, the BOWMAN radio project, which wasn't one of theirs, was pretty crap too.) The T-45 destroyers, Eurofighters, submarines, and Nimrods took longer and longer and sucked up ever more money; FRES went nowhere.

And then we found ourselves in a war, which saw all kinds of chickens darken the skies coming home to roost. It was time to decide whether the Government wanted its wars, its equipment, or its budget; they decided not to decide, and from this point on the kit projects were competing for the same pie as the war. Further, BAE now realised that the Americans weren't capital exporters any more, and began buying everything they could in the States, which meant they began showing up in all kinds of other stuff; radios and vehicles, not just aircraft and ships. The impact on FRES was serious. This was skinned over by "capability gapping"; letting things go and putting off the replacements. But now, we're seeing the replacements on the other side of the gap sliding right, and there is little we can do about some of them; the RAF and Fleet Air Arm's future is predicated on the F-35, which is being squeezed for funding in the US and is also the target of a Boeing kibosh attempt. This means that the air defence capability gap opened by the decision to retire the Sea Harrier FA2 may be open-ended; like the bankers' distinction between a bridging loan and a "pier loan".

It's time for big decisions; will we get'em? More to the point, will they be good ones? What is especially depressing is that not only does Gordon Brown have heavy responsibility for wildly stupid things like the vehicles that were sold, bought back for SAIF SAREEFA II, sold, bought back for Afghanistan, sold, bought back for Iraq, sold, and bought back for Afghanistan, and the tanker PFI, but the Conservatives have shown absolutely no credibility or even comprehension of the position.

Sunday SDR, Chapter 5: People, Equipment, and Structures

So we've had the grand tour d'horizon; we've had the self criticism; we've had the very rapid skip over the nuclear issue; we've had a careful balance of general-purpose capability and counterinsurgent language. Now for some hardcore bureaucracy. It's Chapter 5 of the SDR Green Paper - People, Equipment, and Structures.

This kicks off with the MOD's personnel problems. As in essentially any organisation of the last 15 years or so, there's an invocation of having to learn new skills many times in your career, etc, etc. There's going to be a "whole force concept" review of how the MOD manages its people. There are warm words about looking after our veterans being a moral value. And then there's this:

The provision of accommodation, for example, is a potential disincentive to home ownership and may not represent the best investment we can make in helping families and personnel deal with the demands of Service life.

I would have thought the disincentive to home ownership would be the wages, and the, well, demands of Service life. (How many mortgage lenders are cool with the idea that the signatory may get shot at any moment?) Seriously. What the fuck? Apparently they're looking at "alternative models for accommodation", which might be good if it involved killing off the Annington Homes money pit, but it doesn't sound like it.

On equipment, the general theme of a renewed interest in industrial policy is there, although the section is very general indeed, in fact vague. Tellingly, the issue of operational sovereignty - which has flared up all over again with regard to the F-35 - is raised:

We will have to revalidate our overall approach to:
* Operational Sovereignty. Our Armed Forces rely on assured overseas sources for some important equipment and support but there are cases where specific industrial capability must be located in the UK for operational reasons

There's also a nod to arms exporters, presumably to pass the document through the bits of the MOD involved with DESO and friends.

On organisational issues, the chapter contains a bit more meat; it appears a major re-apprisal of the MOD's structure and business processes is coming, although the drafters warn that the costs of constant reorganisation have been a very serious problem.

Change must be considered carefully in the light of the risks associated with reorganisation highlighted in the Haddon- Cave Report. The future Review will offer an opportunity to re-examine the model and to determine whether and how we might be able to improve on it.

Haddon-Cave is the report on the Nimrod XV230 crash in 2006, which demonstrated that the Nimrod fleet was essentially unairworthy in its entirety and that the engineering and management systems intended to guarantee the safety and effectiveness of the MOD's aircraft. A major issue it identified was the impact of constant organisational change - something of a theme throughout the public sector in the Blair era.

The chapter finishes with a ritual call for greater efficiency. There's also this worrying statement, in the light of the bizarre property-booster bit:

the scope for further rationalisation of the defence estate;

Not again...

In short, if Chapter 3 was impressive, Chapter 5 is poor - with the exception of the reference to Haddon-Cave, it's mostly either made up of truisms or else simply too vague to mean anything at all. And what on earth is this stuff about property? Notably, the comments home in on it at once; it's also noticeable that by Chapter 5, the trolls have landed.

Nimrod Update

Just a quick update on this one. The Nimrod MR-2 lost with its entire crew over Afghanistan was XV230, the first one to be delivered to the RAF in October, 1969. She was also the first to get the colour display version of the Thomson Searchwater 2000 radar, which is a detail. What is less of a detail is that she was modified in June-July this year under something called Project Broadsword.

This involved the installation, under an Urgent Operational Requirement (UOR), of a new and highly capable surveillance camera system permitting live images to be transmitted from the aircraft to ground commanders. It is surely no coincidence that this work was undertaken shortly after the deployment to Afghanistan.

In other news, although the government has been keen to say it was "at 30,000 feet" when whatever happened, happened, it's worth pointing out that the ground is pretty high there. There are places in Afghanistan where, if it was at 30,000 feet of altitude above sea level, it would have been more like 15,000 feet of height above ground level. And that is the relevant measurement if you have a surface-to-air missile problem.

In this case, as you can see in this image from Google Earth (229KB .jpg), the crash site 25 miles WNW of Kandahar is at about 3600 feet above sea level. Rumours speak of a fire on the aircraft after it completed air-to-air refuelling at high altitude somewhere further west. In this case, the aircraft would have been descending to a diversion into Kandahar.