HC 898 Published on 30 March 2011
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House of Commons
Defence Committee
Defence Equipment 2010: Further Government Response to the Committee's Sixth Report of Session 2009–10
Fifth Special Report of Session 2010–11
Ordered by the House of Commons to be printed 22 March 2011
The Defence Committee
The Defence Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Ministry of Defence and its associated public bodies.
Current membership
Rt Hon James Arbuthnot MP (Conservative, North East Hampshire) (Chair) Mr Julian Brazier MP (Conservative, Canterbury) Thomas Docherty MP (Labour, Dunfermline and West Fife) Rt Hon Jeffrey M. Donaldson MP (Democratic Unionist, Lagan Valley) John Glen MP (Conservative, Salisbury) Mr Mike Hancock MP (Liberal Democrat, Portsmouth South) Mr Dai Havard MP (Labour, Merthyr Tydfil and Rhymney) Mrs Madeleine Moon MP (Labour, Bridgend) Penny Mordaunt MP (Conservative, Portsmouth North) Sandra Osborne MP (Labour, Ayr, Carrick and Cumnock) Bob Stewart MP (Conservative, Beckenham) Ms Gisela Stuart MP (Labour, Birmingham, Edgbaston) The following were also Members of the Committee during the Parliament. Mr David Hamilton MP (Labour, Midlothian) Mr Adam Holloway MP (Conservative, Gravesham) Alison Seabeck MP (Labour, Moor View) John Woodcock MP (Lab/Co-op, Barrow and Furness)
Powers
The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk.
Publications
The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at: www.parliament.uk/defcom.
Committee staff
The current staff of the Committee are Alda Barry (Clerk), Georgina Holmes-Skelton (Second Clerk), Karen Jackson (Audit Adviser), Ian Thomson (Inquiry Manager), Christine Randall (Senior Committee Assistant), Christine McGrane (Committee Assistant) and Miguel Boo Fraga (Committee Support Assistant).
Contacts
All correspondence should be addressed to the Clerk of the Defence Committee, House of Commons, London SW1A 0AA. The telephone number for general enquiries is 020 7219 5745; the Committee’s email address is [email protected]. Media inquiries should be addressed to Alex Paterson on 020 7219 1589.
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Fifth Special Report
The Defence Committee published its Sixth Report of Session 2009–10 on Defence Equipment 2010 on 4 March 2010, as House of Commons Paper HC 99. The Government’s response to this Report was published as the Committee’s Fourth Special Report of Session 2009–10 on 6 April 2010 as House of Commons Paper HC 516. The Committee has received a further Government response to one of the Report’s recommendations. This is appended.
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Further Government response
Letter from Peter Luff MP to the Committee about problems concerning the procurement of A400M
At CDM’s appearance before the House of Commons Defence Committee, during which problems regarding the procurement of A400M were discussed,1 the committee requested that a study be commissioned, to establish the lessons learned from the A400M which could be applied to future collaborative projects.
Professor Trevor Taylor,2 a lecturer at the Cranfield University, Defence Academy Shrivenham, was selected to undertake the review and to produce the report. The MOD originally agreed to provide the completed report by the end of September 2010 but a short extension was agreed to ensure that it did not interfere with the intensive contract negotiations which continued until November 2010. The final report was received on 20 December 2010.
Please find enclosed the final copy of the report for distribution to your committee. The report will make a contribution to the body of evidence on collaborative projects lessons learned necessary to take forward a key work stream of acquisition reform. The conclusion that we should aim to run collaborative projects better and not seek to avoid them provides an interesting perspective with which to take the report forward into acquisition reform. This report is being handed to the Business Change Team that is responsible for taking forward acquisition reform within the DE&S.
Peter Luff MP Minister for Defence Equipment, Support and Technology Ministry of Defence February 2011
1 HCDC Defence Equipment 2010, Sixth Report of the Session 2009-10, 4 March 2010
2 Emeritus Professor (Defence Acquisition, Comparative International Acquisition, and the Organisation of Defence Acquisition) Cranfield University, also RUSI
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Lessons (to date) from the A400M experience
Acknowledgements
A considerable number of uniformed officers and civil servants gave freely of their time, knowledge and experience to support this short investigation. The author is grateful to all of them. He hopes to have captured all the implications of their thought and to have done justice to their ideas. In order to encourage people to speak freely, their identities are not revealed. Thanks are also due to Cranfield’s Lt Col (retd) Philip Poole who managed this project on behalf of the university, provided timely support and more than the occasional useful comment on the drafts. The shortcomings of the report are the responsibility of the author, but its qualities owe most to those who provided inputs to the study.
Executive Summary
Background
This report was written in response to a request from the House of Commons Defence Committee that the Ministry of Defence should undertake an exercise on the lessons to be learned from experience with the A400M project.
‘The MoD should provide us by the end of September 2010 a written evaluation of the lessons learned from the A400M experience which will establish the most effective basis for future collaborative projects’.3
The report was drafted by Professor Trevor Taylor of Cranfield University at the Defence Academy, Shrivenham, with his draft then being reviewed by senior staff at the Defence Equipment and Support (DE&S) organisation at Abbey Wood, including the current A400M Team Leader, Director Air Support and the Chief of Defence Materiel.
The generation of lessons from experience is an inherently subjective activity involving judgement: different individuals and organisations can derive very different lessons from the same experience. Particular care needs to be taken in deriving lessons from ‘projects’ which by definition have significant elements that make them unique. Here, the lead author sought to articulate lessons that could be derived from the views of UK participants in the A400M project and endorsed by senior MoD staff. The particular context of the A400M included its symbolic nature in terms of European cooperation, its limited political support within the UK defence sector, its large number of partners, its potential to sell in wider markets, its importance for the civil aerospace sector in the UK, and Airbus’ success record with commercial aircraft.
The A400M was a very different prospect at the end of 2010 from what it had been 15 months earlier. After a first flight in December 2009, good progress was achieved including more than 800 hours of flight testing. The DE&S Sentinel project health tool showed the A400M in good shape with more than 75% of the indicators involved showing ‘green’.
3 House of Commons Defence Committee, Defence Equipment 2010, Sixth Report of the Session 2009–10, London, the
Stationery Office, 4 March 2010, p.23, http://www.publications.parliament.uk/pa/cm200910/cmselect/cmdfence/99/99.pdf, accessed 25 October 2010.
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Lessons
L.1 Appreciate the range of motives behind participation in a collaborative project and, if necessary, manage that range as a risk.
L.2 & 3 Select, prepare, maintain in post staff with the right attributes and skills.
L.4 Ideally collaborative projects should target a significant ‘gaps in the market’
L.5 and 6 Governments should fully resource the early stages of a collaborative project so that its risks can be fully assessed, and customers and suppliers should build and maintain an agreed risk register.
L.7 The procurement approach should reflect risk appetites, with a fixed price development and production contract being recognised as risky for both customers and suppliers.
L.8 Payment arrangements should be against demonstrated progress, and a significant final payment should be dependent on project success. However Earned Value Management systems (EVM) cannot be expected to operate without some flexibility.
L.9 European governments often engaged in collaborative projects might usefully explore the idea of a shared acquisition cycle and requirements engineering process for such projects
L.10 Governments may need to educate a commercial contractor new to defence as to the full implications of a military requirement and a fixed price development contract.
L.11 The scenarios against which a proposed system is judged are central to the evaluation of that system and so must be selected rigorously.
L.12 Incorporating a number of national requirements into a single system brings risk but can also generate the flexible and adaptable systems needed for the 21st century.
L.13 In assessing the risks in programmes, account should be taken of the experiences of other government and companies developing similar systems.
L14 A fixed price development and development contract does not negate the need for a continuous frank dialogue between supplier(s) and contractor(s), and consideration should be given to the generation of a code of conduct between customer and supplier(s) to direct their behaviour towards each other.
L.15 A fixed price development and production contract does not negate the need for the MoD to make contingency provisions, especially for large projects including significant technological and managerial risk. This constitutes a further argument for the establishment of a central MoD contingency fund as proposed by Tom McKane in his Enabling Acquisition Change report of 2006.4
L.16 Decision-making on collaborative projects is easiest with two partners. For projects where two states could not provide a viable market, the MoD should seek to establish an 4 Enabling Acquisition Change: an examination of the Ministry of Defence’s ability to undertake Through Life
Capability management, A Report by the Enabling Acquisition Change Team leader, London, MoD, June 2006, paras 1.9 and 6.30
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early close relationship with another major contributor in order to be able to play a leadership and control role.
L.17, 18 and 19 Contracts should be placed with a well-resourced prime contractor, not a single-project, special purpose company, and account needs to be taken of all the commitments and resources of the supplier. Governments should work to communicate with the particular staff who will deliver a project.
L.20 The MoD and OCCAR management structures coped well with the crisis that began in 2009 with the Airbus request for additional resources, but thought could be given to the development of crisis management provision for major international projects.
L.21 Greater transparency between Airbus and OCCAR after contract signature would not have prevented the technical problems associate with the A400M, but would have meant that such problems could have been dealt with in a non-crisis context.
L.22 Rigorous commercial and military logic, alongside expertise in areas such as logistics, programme management and technology, matched with political acumen, may be needed to rescue a struggling project, and crisis management needs to be able to draw on such skill sets.
L.23 When a major defence project encounters technical and managerial challenges, having a collaborative basis should not be entirely bad news, since it has access to a broad range of expertise and several parties are available to share any extra cost burden.
L.24 The A400M demonstrates that Europeans can move away from strict application of the juste retour principle. The sub-contracting process for the A400M was clearly preferable to that for Tornado or Typhoon, demonstrating that Europeans can learn to improve collaborative performance.
L.25 It is difficult to find the right amount of empowerment for the international governmental team managing collaborative projects.
L.26 The UK can gain influence from being a second-ranked but significant partner when it enjoys a reputation for impartiality and expertise. The UK 2* and 3* representatives have been chosen to chair both the Programme Committee and Programme Board.
L.27 ‘Be careful what you wish for’ is a useful adage: both customers and suppliers got what they wanted in the original contract, and both suffered as a consequence.
Conclusion
In conclusion, there is a clear message for the UK that collaborative projects will be necessary if any aspiration for ‘operational autonomy’ is to be maintained. The A400M project emerges as a risky but eventually positive experience, and the most important lesson may be to work to run collaborative projects better and not to expect to be able to avoid them.
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The lessons of the A400M experience
1. Introduction
This report was written in response to a request from the House of Commons Defence Committee that the Ministry of Defence should undertake an exercise on the lessons to be learned from experience with the A400M project.
‘The MoD should provide us by the end of September 2010 a written evaluation of the lessons learned from the A400M experience which will establish the most effective basis for future collaborative projects’.5
The report was drafted by Professor Trevor Taylor of Cranfield University at the Defence Academy, Shrivenham, with his draft then being reviewed by senior staff at the Defence Equipment and Support (DE&S) organisation at Abbey Wood, including the current A400M Team Leader, Director Air Support and the Chief of Defence Materiel.
2. Method and approach
The generation of lessons from experience is an inherently subjective activity involving judgement: different individuals and organisations can derive very different lessons from the same experience. Risk appetites, personal roles and experiences, and individual and organisation culture can shape the lessons that may be identified. The UK and France were partners in the ill-fated action against Egypt in 1956 but learned very different lessons from that activity.
Particular care needs to be taken in deriving lessons from ‘projects’ which by definition have significant elements that make them unique. Projects also have internal features and a particular context. Both are important. A lesson valid in one context may not be valid for even a similar project which is taking place in a very different context.
These considerations make it important to articulate the process by which the lessons articulated below were generated. The lead author sought to articulate lessons that could be derived from the views of UK participants in the A400M project and endorsed by senior MoD staff. Thus, around a dozen past and present officials were interviewed. They were assured that their individual views and information provided would not be attributed to them, and then questioning took a broadly structured form. Interviewees were asked what they saw as key elements of the wider context of the A400M project, what problems they had encountered in their roles, and then how they had dealt with those problems. Finally they were asked to reflect on the lessons that might be identified. The intention of the principal researcher was that lessons should be based on logic and empirical evidence, bearing in mind that those who later invited to absorb/learn a lesson are unlikely to respect guidance on weak foundations.
5 House of Commons Defence Committee, Defence Equipment 2010, Sixth Report of the Session 2009-10, London, the
Stationery Office, 4 March 2010, p.23, http://www.publications.parliament.uk/pa/cm200910/cmselect/cmdfence/99/99.pdf, accessed 25 October 2010.
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The author was also able to use some internal studies commissioned or undertaken by the DES over the past three years and the written views of some former participants in the project. These studies are not explicitly cited in the report because of their sensitivity.
3. Provisos
Two timing issues affected the generation of this report. First the process of setting A400M contract amendments had not been completed. The unfinished nature of some discussions made it inappropriate to interview either the representatives of other A400M partner states or of Airbus and other industrial partners. Second, like any defence system, the eventual value of the A400M will become known only after it has come into service and been in use for some time. The project management focus on procurement time, cost and initial performance often loses prominence once a piece of equipment comes into service. To illustrate, the C17 is today a widely-admired aircraft, not least within the Royal Air Force, but its development in the 1980s and 1990s was fraught with technical problems, cost increases and delays, as reports from the Government Accountability Office and Congressional Research Service made clear.6 Only future events will demonstrate or undermine the value of the procuring an aircraft with the characteristics of the A400M, but the range of missions to which it can contribute is a positive indicator.
This report offers 27 lessons, many of which are applicable to defence projects as a whole and not just collaborative cases. However, some are also lessons which the MoD could reasonably claim to have identified before the A400M came to prominence.
4. Context
Political: a symbol of commitment to European cooperation In defence acquisition matters, the UK frequently is drawn to either relying on the US for a solution (as in the case of the C17), going alone (as with the successful Hawk project) or collaborating in both development and production with other European or friendly countries. UK involvement in the A400M was and is in part a symbol of the UK’s commitment to support for cooperative European ventures and a vote of confidence in the value that cooperation on the European level can bring.
Political: the project had limited domestic political support within defence In particular some senior staff in the RAF are perceived never to have supported the project and, even into 2010, would have preferred that resources be directed instead into additional C17s. Some in the RAF leadership were reluctant to live with the risks of a major development project when the C17 was available from a mature production line.
Also, during the development of the A400M, BAE Systems sold its civil aviation business, and with it responsibility for the A400M’s high-technology composite wing development and production, to Airbus/EADS. Thereafter the UK’s largest defence company ceased to be prominently involved with the programme.
6 The Wikipedia report on the Boeing C17 Globemaster is authoritatively referenced: see
http://en.wikipedia.org/wiki/Boeing_C-17_Globemaster_III, accessed 25 October 2010
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Political: Collaborative structure The project has an unusually large number of partners (six)7, even for a collaborative project. This raises the issue of the extent to which decision-making should be based on unanimity, consensus or some form of majority vote. Approvals and funding for the project on an annual basis must come through six different acquisition systems.
Economic: The existence of a wider market for the aircraft Since the project’s inception and the Future Large Aircraft in the 1990s, the wider market for the A400M has been in the minds of both Airbus and, to a lesser extent, the participating governments. At one stage it was thought by Airbus that a there could well be a civil market for a large, rugged transport aircraft able to operate from poor airfields. In recent years this expectation has faded, not least as military demands made the A400M more sophisticated and so costly. However, there is growing awareness that the United States has not generated a replacement for the C130 and therefore there is a large potential global military market as C130s of various versions are retired. This global market could well include the US itself. Many collaborative projects have enjoyed significant success in wider markets but the potential of the A400M appears particularly notable.8
Technological/Economic: Implications for civil industry The UK civil aerospace sector has benefited greatly from the rise of Airbus products, particularly because the UK has been the base for the design and manufacture of the wings of Airbus aircraft. Had the UK not taken part in the A400M, another country could have obtained the task of developing and producing the novel composite wings involved. That country would then have been well-placed to take forward the application of composite wing technology on to future commercial aircraft.
Economic/Technological Airbus was and is an industrial organisation that had demonstrated an ability to succeed in difficult circumstances, developing a family of aircraft which had successfully taken on US competitors and which had come to gain approximately an equal share of the large civil aircraft market alongside Boeing. It was an organisation in which governments could feel confident and which had grounds for confidence in its own ability.
5. Current state of the A400M programme
The fixed-price development and production contract for 180 aircraft was signed in May 2003, and by 2007 Airbus was publicly recognising problems with keeping the project on schedule. The problems became more pronounced in 2008 and, at the beginning of 2009, Airbus went public in announcing that it would require amendments to the original contract. More than a year of complicated and hard negotiations followed with the partner governments, before there was an agreement in principle that the partners would provide €2 billion in extra funding and €1.5 billion in loans in spring 2010. Thus the A400M fell three years behind schedule and Airbus had to make loss provisions of €4 billion in connection with the project. 7 Luxembourg is the seventh country involved but it is procuring its one aircraft through Belgium.
8 While Malaysia is the only firm customer for the aircraft, Airbus was reported in July 2010 to have talks with 36 countries interested in the aircraft, Amy Wilson, ‘Airbus holds talks with 36 countries …’ Daily Telegraph, 4 July 2010.
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However the first A400M aircraft flew in December 2009. Flight tests thereafter went well and the manoeuvrability of the aircraft, even with a significant load of test equipment on board, was demonstrated at the Berlin and Farnborough Air Shows in 2010. By the end of November 2010 more than 800 hours of test flight had been completed and construction of a fourth test aircraft was near complete. An amended contract, to replace that originally signed, had been initialled and was in national capitals for confirmation, the partner nations having earlier agreed in principle on the way forward once the aircraft had flown successfully.
The revised schedule is for first delivery of a production aircraft to France in 2012, with the UK receiving the first of its planned 22 aircraft in September 2014. Under the revised deal, the UK will not being paying a higher sum than was previously envisaged, with the government having decided to reduce its purchase from 25 aircraft to 22.
The team does not expect serious problems in remaining flight tests, although clearly some risk remains. There will also be some production risk once the aircraft moves into the full-scale manufacture stage. But throughout 2010 the picture was encouraging and the UK Government is hopeful of a smooth period to entry into service.
The recently introduced DE&S ‘Sentinel’ project health tool shows the A400M in good shape with more than 75% of the indicators involved showing ‘green’.
6. Lessons
1. The various partners in a collaborative project see different mixes of defence, economic and political benefits in participation, and the UK needs to understand although not applaud the different drivers involved. Participants with somewhat varying motives are likely to react differently to changes within the project and in its wider context. The motives of the different players should be explored and, if appropriate, treated as a risk.
2. It is important to appoint the right sort of people to collaborative projects, to prepare them thoroughly, to leave them in post for at least three years, and to recognize their value. Staff appointed to collaborative projects should be psychologically comfortable with the politics of a project with a wide number of stakeholders and drivers. They should be properly prepared in terms of training and education and left in post for at least three years to gain familiarity with the complications of their post, so giving them the chance to exploit their understanding. Personnel who operate successfully on international projects should be recognized as having the capacity to work in a demanding context. Consideration should be given to allowing people to be promoted in post, especially if it can be shown that a collaborative project has moved to a new more demanding phase. Retention allowances are a valuable tool to encourage people to stay in post longer and the A400M project has been helped by OCCAR postings normally lasting for four years.
3. Foreign language skills among UK personnel are an important aspect of being able to build close relationships with foreign stakeholders, although the official A400M project language is English, not least because of the number of partner countries.
4. Collaborative projects ideally address clear shared needs/common requirements for which no off-the-shelf solution or near solution is available, although this means the
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adoption of some managerial and technological risk. Ideally collaborative projects should target significant ‘gaps in the market’.
5. As with any major defence development project, the early stages of a potential collaborative project should be fully staffed and resourced, so that the project can be appropriately defined and de-risked. Both governments and industry appear to have committed to A400M delivery dates, costs and performance before proper appreciation of many important risks. The degree of protection for governments provided by a fixed price development and production contract for a very large project should be recognised as limited.
6. An agreed (government and contractor) and thorough risk register should be completed as a key element before firm commitment to the project is made. Clearly such a register would need constant review and updating.
7. A procurement approach should reflect the risk appetite of both the government and the company/companies. The single phase development and production contract approach used in the A400M required governments to tolerate a significant risk that the company would fall short in some respect. Governments with a lower risk appetite should opt for a staged approach to a project in terms of detailed commitment to performance, time, cost and numbers to be bought.
8. Payment arrangements agreed in very large contracts should be based on the contractor’s demonstration of specified progress, preferably in the framework of an Earned Value Management (EVM) structure. Deferring a significant element for a final payment, while sensible, may not of itself assure that the contractor will maintain commitment to a specified time, cost and progress schedule? However, in ambitious projects involving significant technical challenge, governments should recognise that they may have to demonstrate flexibility in the application of written agreements. An EVM scheme should not be thought of as a ‘fire and forget’ instrument.
9. Different national systems for requirements setting, approvals and funding hinder the smooth progress of collaborative projects. European countries most commonly involved in international development projects should consider the development of a common acquisition system, including a common approach to requirements engineering and to staged approvals for such projects.
10. A prime contractor accustomed to operating in the civil commercial sector may struggle to understand fully the military requirement and the centrality of fixed price development, and governments should undertake a major educational effort to ensure this does not occur. The change of mindset required in a company may well involve change in organisational culture, and the effort to bring about such a transformation should not be understated. The Ministry of Defence needs to recognise the risks of dealing with a contractor which operates primarily in the civil sector and should communicate clearly with the development team as to what it has diagnosed as key technological challenges and the importance of cost control in the development phase alone. Communication should be verbal and informal as well as written, and be directly aimed directly at the numerous staff doing development work.
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11. The scenarios against which a proposed system is judged are central to the evaluation of that system and so must be selected and assessed rigorously. The range of tasks against which a proposed system is judged should be assessed by an independent authority without close ties to any particular branch of the armed forces. In major defence development projects, the scenarios that appear most relevant can change over time. The UK evaluation of the relative value of the A400M compared with other aircraft changed between the original decision to take part in the project and the project review in 2009-10, not least because of experience in Afghanistan.
12. Seeking to incorporate varying national requirements into a single programme brings risk but can generate a system with the flexibility and adaptability needed in the 21st century. Had the UK procured an aircraft that simply met its own perceived requirement at the end of the 1990s, such an aircraft would not have been as useful as the A400m is expected to be.
13. In estimating costs and risks, consideration should be given to the experience of other companies and governments in developing comparable systems, and there should be no assumption that the UK can avoid the problems that comparable programmes experienced. The A400M development might have been expected to run into significant technological challenges, given experiences in the US with the C17 and the C.130J. Credible means to manage the risks of problems met by others should be articulated.
14. A fixed price development and production contract does not negate the need for a full dialogue between customer(s) and supplier as the project advances. OCCAR and Airbus, in addition to the revised contract, should consider a code of conduct to direct their behaviour with regard to transparency, honesty and trust. More generally there is value, especially when dealing with a new supplier, in generating an early MoU/MoUs between customer(s) and the prime contractor (and major sub-contractors) articulating how all sides will behave as the project advances.
15. A fixed price development and production contract does not negate the need for the MoD to make contingency provisions, especially for large projects including significant technological and managerial risk. This constitutes a further argument for the establishment of a central MoD contingency fund as proposed by Tom McKane in his Enabling Acquisition Change report of 20069. Such a fund could play a valuable role, especially when there is a shared approach to risk management.
16. There is widespread awareness that decision-making on collaborative projects is normally easier with a small number of partners, with two being the most attractive number. For some projects, such as the A400M, a larger number of partners are needed to create a viable project. Because decision-making in very large multi-partner collaborative projects can be protracted, the UK should seek to establish a leadership role, normally with one other partner, early in a collaborative project’s life. Two states could then establish the key elements of the project, which others who joined the project later could not change. The UK and its partner would need a shared conception of what ‘leadership’ entailed,
9 Enabling Acquisition Change: an examination of the Ministry of Defence’s ability to undertake Through Life
Capability management, A Report by the Enabling Acquisition Change Team leader, London, MoD, June 2006, paras 1.9 and 6.30
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including recognition that it could not be a matter of presenting others with a ‘take it or leave it’ set of propositions.
17. Contracting with a single-project company, such as Airbus Military Societad Limitada (AMSL), which was set up to deliver one contract, even with parent company guarantees, was not an encouraging experience. The MoD should wherever possible contract with a well-resourced prime contractor, even for collaborative projects.
18. In evaluating development and production offers, the MoD should take account of all the development commitments of the prime contractor and the leading companies involved, and assess them as a risk.
19. Even companies which have developed large and challenging development and production projects do not necessarily have high project management skills throughout the organization. Government contracts personnel should work hard to identify and communicate with those who will actually deliver a project.
20. The A400M customers’ management structures (Abbey Wood project team, OCCAR team, Programme Committee and Programme Board) could cope with the stresses of what for a defence project was a sudden onset crisis brought about by Airbus demand for a re-negotiation of the contract in 2009. The sources of this ability to cope should be explicitly recognized. The effectiveness of the Programme Committee and Board was founded upon the members of these bodies being :
a) known to each other for some time, which supported their ability to interact frankly, honestly and with trust;
b) intellectually and psychologically comfortable in addressing an international project with major defence, industrial, financial and foreign relations implications; and
c) aware of the limits of their delegated powers, ready to make choices within those limits and content to pass up even to the ministerial level matters that lay beyond their delegation.
In addition other positive factors were:
d) the internal communication system and relations within the relevant UK groups that meant that the UK team could maintain coherence when matters at some points were being dealt with (on a part-time basis) by the minister for Defence Equipment and Support, CDM, a 3* RAF officer, and a 2* civil servant, as well as the full-time A400M team leader;
e) The generation within the UK of a clear sense of the financial-military value of the A400M in comparison with other aircraft, and of the minimum extra funding that Airbus would need in order to maintain its commitment to the project. The UK was able to adopt a shared appreciation of what an acceptable outcome would comprise.
f) the happenstance of a UK minister who, because of his exceptional language skills, would quickly communicate freely with other partner representative.
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Dealing with the crisis, however, owed nothing to any prior thought or planning about crisis management as a specific area. Whereas planning for crisis management is widely advocated at the organisational level, at the project level it is assumed that ‘issue management’ in which particularly difficult questions are pushed upwards through the sponsor and even the board, can cope with any occurrence.
21. Continuous transparency between supplier and customer reduces the probability of a sudden onset crisis in a major defence project, and the signing of a fixed price development contract does not mean that a customer should not work to maintain full awareness of progress (see Lesson 14).
22. Rigorous commercial and military logic, alongside expertise in areas such as logistics, programme management and technology, matched with political acumen, may be needed to rescue a struggling project, and crisis management needs to be able to draw on such skill sets.
23. When a major defence project encounters technical and managerial challenges, having a collaborative basis should not be entirely bad news, since it has access to a broad range of expertise and several parties are available to share any extra cost burden.
24. The A400M demonstrates that Europeans can move away from strict application of the juste retour principle although governments still require a sense that their economies will enjoy an appropriate return from participating in a collaborative project. This should not be regarded as an overwhelming disadvantage of collaborative projects. Workshare arrangements should be viewed a risk and managed accordingly. They do not constitute a risk that can be completely avoided. The sub-contracting process for the A400M was clearly preferable to that for Tornado or Typhoon, demonstrating that Europeans can learn to improve collaborative performance.
25. It is difficult to find the right amount of empowerment for the international governmental team managing collaborative projects. A balance among the following factors must be found.
a) A significant national team is needed to clearly define and found the project. Project expertise can bring influence disproportionate to the size of a country’s planned off take.
b) The more a collaborative project contains individual national requirements above the common base requirement, a larger national team is likely to be needed.
c) The better founded and defined the project, the smaller the home team that should be needed during contract implementation. However, when things go wrong, a body such as OCCAR is unlikely to be given much power to resolve issues.
d) Slow decision-making is inevitable if the international project management team has only very limited discretion. The OCCAR model appears as the best international project management developed so far.
e) Throughout a project’s life, home team staff are needed to ensure consideration of Defence Lines of Development (DLoDs). As a project matures, more home staff should
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be needed to deal with detailed and integrated delivery of all (DLoDs). If a project is novel and not simply a replacement for a similar system, DLoD issue will loom larger.
The MoD understands the advantages and risks of empowered international contract authority. Those charged with managing those projects on behalf of governments should be experienced and sufficiently senior that they can command maximum confidence in national capitals.
26. The UK can gain influence from being a second-ranked but significant partner when it enjoys a reputation for impartiality and expertise. This is because the first rank partners may have significant doubts about each others’ motives and drivers. The UK 2* and 3* representatives have been chosen to chair both the Programme Committee and Programme Board.
27. ‘Be careful what you wish for’ is a useful adage. The governments were anxious to pass financial, technical and perhaps reputational risk to a prime contractor while the prime contractor was anxious to avoid excessive customer intervention in the development process. In the event, the customers experienced significant operational and financial problems, and arguably suffered reputational damage, while the contractor ended up in a supplicant position vis-à-vis the customers seeking contract modifications. The contractor also incurred significant extra costs. Large defence projects are truly complex, and can evolve in ways that cannot easily be anticipated.
7. Conclusion
This report identifies a significant number of lessons from the A400M experience, derived centrally from the views and experiences of the staff involved.
It is clearly a separate task to make MoD and other governmental staff who may become involved in defence acquisition to be positively aware of these lessons and persuaded of their relevance. This clearly needs to be done alongside thinking that has emerged from experience with other international projects.
The Committee invited the MoD to search for ‘the most effective basis for future collaborative projects’ but the A400M is a reminder first that every collaborative project has its own characteristics. This project accommodates a range of national defence, industrial and commercial, and foreign policy interests which evolve constantly rather than remaining constant. It could thus reasonably be described as a complex task in which significant risk is unavoidable, but where the potential rewards are great.
Most, but not all, officials contributing to this study recognised that the alternative to a collaborative project is not usually a national project but to procure a foreign piece of kit, often from the United States. In the case of the A400M, there is of course no equivalent US piece of equipment, and collaborative projects with this attribute should have particular resilience providing they meet a real need in Europe.
The UK staff at all levels who contributed to this project see the A400M as good value, not least because UK expertise and operational experience has led to a design solution with a very close fit to UK-specific requirements, yet the UK has incurred only about 14% of the
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programme costs. The £850 million development cost to the UK of a tailored solution is viewed as worthwhile.
The officials who helped to shape this study also saw that, if the UK is to sustain a defence industrial capability, have any aspiration for ‘operational sovereignty’ and avoid dependence on a major outside supplier, collaborative projects will be needed. They need to have their difficulties understood and to be managed as well as possible in the political context of their time. Thus the most important A400M lesson may be to work to run collaborative projects better and not expect to be able to avoid them.
Professor Trevor Taylor Cranfield University Defence Academy of the United Kingdom, Shrivenham 20 December 2010
