Like any joke, it’s the way you tell it that makes a good one great.
The same goes for the Major Projects Report 2009, issued by the MOD on 15th December, with special regard to the AW159 Lynx Wildcat. The Future Lynx Wildcat is one of our favourite subjects, in a large pool of MoD debacles the Wildcat is in the Premiere League vying for the top slot with Nimrod MRA4, Astute and a few others.
The Report states that:
a decision was taken to reduce the number of helicopters being procured to 34 from 45 for the land variant, and to 28 from 35 for the maritime variant, an overall decrease of 23 per cent. The Department expects the reduction in the number of helicopters to deliver an overall saving of £194 million (10 per cent) in equipment costs over the next ten years, plus an additional reduction in the cost of capital. Further savings are expected to accrue from the associated decrease in the number of crews required to 72 from 110 and in support costs over the life of the fleet.’
However, a little digging reveals things are not quite what they seem, so a look back is informative…
Future Lynx gets an official mention in March 2002, when Dr Lewis Moonie MP (Parliamentary Under Secretary, MoD) in a written answer stated that the Future Lynx proposal was being considered for the Surface Combatant Maritime Rotorcraft project.
A few months later Adam Ingram MP (Minister of State (Armed Forces) replied to another written parliamentary question with a statement in which the Battlefield Light Utility Helicopter requirement might also be met with Future Lynx.
BLUH eventually became the Battlefield Reconnaissance requirement, cut forward to 2006 and the MoD decided not to issue a competitive tender but instead to form a strategic partnering arrangement with AgustaWestland and proceed with Future Lynx. The term ‘value for money’ started to appear in relation to this very cosy partnering arrangement and the benefits of reusing parts of the existing fleet would further enhance value for money (more on this later)
In 2006 the Lynx Wildcat, or Future Lynx as it was then known, was ordered by the MOD. This allowed for a firm order of 70 aircraft at an estimated cost of £1billion (there was an option for an additional 10 aircraft but this was never exercised).
This was re-confirmed by Bob Ainsworth to Parliament on 30 April 2008. This gave a unit cost, not including development, training, spares and the like of around £10 – 12million.
In a December 2007 article in Flight Global, David Hillcoat, AgustaWestland’s head of the Future Lynx programme stated, “Any savings that we make are shared between the MoD and AgustaWestland. But any overspend above the maximum is at the company’s liability.”
A target and maximum price having been agreed between the MoD and AgustaWestland
In response to a question posed by Douglas Carswell MP at the end of December 2007, Bob Ainsworth MP stated that Future Lynx was selected because it provided the best mix of capability, cost and risk.
On 11 December 2008, the Future Lynx numbers were reduced to 62 (34 Army, 28 Royal Navy) with no change to the budget.
In January 2009 Quentin Davies declined to provide a breakdown of savings due to the reduction in numbers because of commercial sensitivity.
In a written response to Liam Fox MP, Quentin Davies confirmed that the forecast cost of Future Lynx was £1.968billion, a staggering doubling in cost despite 8 less aircraft being obtained.
By 20 July 2009, Quentin Davies confirmed to Parliament, in what seems like a contradictory figure to the previous one, that the total cost of the 62 Future Lynx was £1.7billion.
The much vaunted strategy of reusing components from the existing fleet now seems in tatters, less than 5% of components will be reused.
The Major Projects Report 2009 now states that the expected cost to completion for the Lynx Wildcat is now £1.669 billion against an approved cost of £1.966 billion, a saving of £297 million. The £1.7 billion figure quoted by Quentin Davies seems to be the lowest forecast/approved figure.
Rejoice rejoice, the MoD has managed to come in under budget, Christmas must be here.
Hold on there, this is the MoD, surely this is some mistake.
About a third of this reduction has come from risk differentials, cost of capital and other accounting/project related costs. The cost savings accrued by reducing the airframe numbers t0 62 is £194 million, roughly a 10% cost savings
For both the Army and Naval version of Future Lynx it seems that some Key Performance Measures are at risk of not being met, despite the massive investment. The report does state that this reduction will only affect a small number of mission profiles and if money can be found at a later date then it could be reintroduced.
On the 16th of December the Yeovil Express reports that the local MP (David Laws) and the Secretary of State for Defence (Bob Ainsworth) have exchanged letters (obviously the local MP isn’t too happy about the MoD buying 20 odd Chinooks from Boeing rather than more Merlins from Agusta Westland) and in these letters Bob Ainsworth wrote of “the possibility that we might increase our order for Wildcat Future Lynx”
Nearly double the cost of the original budget yet still a few things that don’t meet requirements that will require even more money in the future to fix. We have cut the order but are now considering increasing it.
62 is a ridiculously small number, especially as it is now obvious that the ratio of ‘available for service’ to ‘not available for service’ because of maintenance, training and other issues is relatively high, meaning that the Army will likely be able to field around 10 on a continuous basis and the RN even less.
It might not be so bad if the aircraft was worth the £27 million each (total cost divided by total airframe numbers, yes, we know that is not the complete picture) but it is not.
When discussing unit costs one must always exercise caution because the total cost divided by the total numbers is not a unit cost because the total cost will include everything from manuals to simulators to spare parts to training.
The NH90, using a similar ‘extras included’ price seems to be on average approximately £22 million each.
So, did you hear the one about value for money?
It’s the way you tell em.