Could C17 be a Model for MPA Purchase?

News is starting to leak out that the MOD is keen to get its hands on a 9th C17 before Boeing’s production run ends in 2015. This is not the first time that the MOD has managed to cobble together the funds to purchase a new C17 out of the blue.

http://www.defensenews.com/article/20131124/DEFREG01/311240001/UK-Shows-Interest-Buying-Another-C-17

With the scrapping of Nimrod the C17 is one of the most expensive single aircraft in the RAF’s inventory and with a total cost of the entire fleet likely to be near £2 billion one of the RAF’s largest total programs in the past decade.

Even more surprisingly, if the RAF manages to get a 9th the programme will have delivered 90% of the number of aircraft initially outlined (something I can’t think has happened with any other military programme since the end of the cold war).

Key to this success is the way the aircraft have been purchased. Originally four were leased before being bought. Others were added as the requirements for the Afghan air bridge stepped up and the last was ordered simply because it was needed and the MOD had some spare cash that it needed to spend in a hurry.

This seems to have prevented two things. Firstly the usual billion pound assessment with a four letter abbreviation beginning with Future and it also seems to have prevented the usual impulse of the MOD to buy of the shelf, and then spend billions adding in Gucci extras. Also not having a large initial order has prevented the aircraft purchases being caught up in the MOD’s £38 billion black hole death spiral, with the usual penalties being paid to manufacturers for ever smaller numbers of aircraft being ordered.

Model for MPA?

P8A Poseidon
P-8A Poseidon

It seems highly likely that SDSR 2015 will outline the need for an MPA solution. Even though spreadsheet Phil likely has the funds to start looking at this today the political ramifications of yet another SDSR 2010 u turn are probably too much to bear. The other issue I think is that the MOD has its heart set on the P8 which is not yet in full production and they probably won’t be able to get their hands on any until after 2015 anyway. (It should be noted that the vast majority of the aircrews on seed corn seem to be training up for the P8 as well).

I don’t want to debate the merits of the P8 vs. the SC 130 and other platforms that are out there. What I would like to suggest is, assuming the MOD does want P8; would the C17 purchase model be the best way to introduce it?

Even the current cash strapped MOD could probably find enough coppers down the back of that couch in Whitehall to lease four P8’s. While four would not be ideal it would be way better than the current number and would allow us to prevent the loss of skills in MPA/ASW that are estimated to be irreversible by 2019. It would also mean that the time spent working up on the USN’s P8’s by the seed corn initiative would not be wasted.

One of the beauties of Phil’s spreadsheet approach is that with a bit of luck it should continue to produce underspends in the equipment budget. This should allow the MOD to gradually increase the fleet size when funds become available and it will remove MPA from competition with other large defence projects such as Successor and F35.

It will also allow the decision on manned vs. unmanned MPA to be pushed off into the future when it can be better aligned with other programs such as the RAF’s SAVENGER.  So if the unmanned option does not work well we may end up with a fleet of 12 P8’s. If it does work we may end up with 5 or 6 and some form of UAV.

I am sure Boeing would jump at the chance to land a large international customer and I am sure the USN with the problems it’s facing from sequestration could be persuaded to part with a handful of early production slots.

There would be some issues especially modifying Stingray for glide kit launch from the P8 however this could be dealt with separately and it would not be the end of the world if the P8 entered UK service with no air launched torpedo capability for the first few years.

Air to Air Refuelling capability could be an issue but again it could be put off to the future with the first four leased aircraft being kept with the USAF boom receptacle then converted later at some date if needed. Having the ability to use the drogue AAR system will likely be useful for Boeing in the export market in the future especially if it wants to sell to Europe so we may be able to put in a joint funded development in the future if we take up more planes. (I’m guessing Boeing already has plans for this anyway)

The initial lease may even help our spineless politicians avoid the appearance of a u turn. They can simply use the lease as a cheap ‘interim solution’ until a proper decision can be made in the future before just deciding to go with what we have in the P8. Under these terms the capability could be generated even faster with no need to wait for the SDSR 2015 decision.

Training and maintenance should not be much of an issue either. We can use a similar system to that used on Air seeker/Rivet Joint simply tapping on to US Navy systems.

Also as with C17 purchases currency fluctuations can be a positive as opposed to a negative as with fixed production contracts like the F35. The MOD can purchase the aircraft at times when sterling is higher against the USD and not buy when it’s lower.

Using the C17 purchase model seems like a very sensible way to acquire any large niche capability from the USA. It would seem especially optimal to use such a set up to purchase P8 if the MOD decided it was the right aircraft for the job.

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Bob
Bob
November 25, 2013 12:00 pm

C-17 is a happy accident, the accident being the bungled RAF C-130K replacement programme. With the remarkable lack of foresight (or hindsight given Gulf War 1 and the Falklands) the RAF decided to replace what was virtually it’s entire transport fleet with a tactical air-lifter as if the Cold War had never ended when it should have been looking for a renewed strategic transport capability (which it had lost in 1974/5). Fortunately, politics kicked in and the MoD was ordered to participate in the European Future Large Transport Aircraft programme- which was delayed from the start which, combined with the Afghan mission, forced the C-17 leasing. Then, shock horror, the C-17 turned out to be very good at what it was designed to do- so they tried to acquire as many of them as possible.

This is not a happy story, it is a sad story with a mildly happy ending.

Finally, the last thing the MoD should be doing is trying to plan large procurements based on forecast currency movements- as such forecasts are almost impossible to do accurately and would cause chaos within the budget.

Bob
Bob
November 25, 2013 12:07 pm

Also, if the MoD is going to acquire an MPA capability it should be a proper fully funded procurement programme built in to the budget. It should not be some silly penny sweet because you found some change down the sofa affair- such things only end in tears,

Not a Boffin
Not a Boffin
November 25, 2013 12:15 pm

The most important thing about the C17 procurement was the way it was handled in terms of the Customer 1&2 vs DE&S relationship. All involved were told very firmly that the aircraft had to be equipped, operated and supported exactly like the USAF variant. Any deviation from this would require a supporting safety case (inc MAR) and would have to be paid for from the project budget. Funnily enough, few if any variations were requested and as a result the project came in (I believe) broadly on time and budget.

Applying that model to a P8 purchase would be more difficult, because there are an awful lot more UK-specific widgets, systems and operating procedures that are already in use and would have to interact with the aircraft (Merlin, UK submarines and surface ships etc). There is also a legacy from the kipper fleet where the attitiude that “if you want to do it properly you’ll need to fit this” will survive for a while yet – something which was largely absent for strategic airlifters.

Still, might be worth a go, with the same C17 “you want it, you justify it and pay for it” approach to the requirement vs the baseline P8 performance.

Bob is also correct in that buying cabs without a clear requirement or force structure in mind would be a bad idea….

x
x
November 25, 2013 12:20 pm

Let us see how much of this below is still ours post September 2014 before we buy an aircraft that each cost as much as 5 OPV and 5 helicopters……..

http://www.seaaroundus.org/eez/826.aspx

C17 is super duper. But as I explained elsewhere we are constantly told there are always runways in theatre and a question how often we have to move a vehicle by air. A C17 is like buying a Bay and a company of MICV.

Harbinger
Harbinger
November 25, 2013 12:35 pm

I understand the initial C17 lease terms were extremely expensive and not that great of a deal.

Bob
Bob
November 25, 2013 12:36 pm

martin,

You have a fundamental understanding about how defence procurement works. The MoD will use various mechanisms to lock in particular prices for imported equipment. This includes either contracting in sterling and making the contractor take the risk or using financial instruments to hedge against potential currency movements. It does not do anything as simple as sticking its finger in the air before deciding to wait to buy something just in case the pound strengthens.

Oh, and piecemeal buying something as complex as an MPA is absurd. The end result will be no MPA and a horrendously expensive and disjointed investment programme. The MoD needs forward planning, not idiotic random purchases.

Bob
Bob
November 25, 2013 12:38 pm

martin,

Nonsense. Nimrod failed because it was a stupid programme (should have used 100% new build airframes) not because it was a planned programme. MoD needs stability, piecemeal purchases provide the opposite.

paul r
paul r
November 25, 2013 1:08 pm

@bob “Nonsense. Nimrod failed because it was a stupid programme (should have used 100% new build airframes) not because it was a planned programme. MoD needs stability, piecemeal purchases provide the opposite.”

100% new build? Remind me after rivet joint brands new? I don’t think so!

But i won’t get into a slagging match about Nimrod :)

dave haine
dave haine
November 25, 2013 1:12 pm

Whilst the idea of ‘leasing’ an MPA, in the same manner as the self-adjusting f**k-up that was the RAF’s airlifter programme, is attractive, The MPA has an awful lot of mission specific gadgetry, whereas most military airlifters, have very little, apart from from an defensive aids suite. Even to the extent that systems-wise they’re barely distinguishable from commercial aeroplanes.

Like Bob, I can see problems, with an ad-hoc buy, rather than a properly-planned programme, not least of which is training of both aircrew and technical staff, and keeping such staff current.

The other factor that comes to mind is the fact that no lessor is going to accept a nation-specific model, mainly because of the risk of getting something back that no-one else wants. Unless, of course, the lease contains a financial element recognising that.

Maybe an initial buy, and then lease in additional capacity, or hire purchase.

wf
wf
November 25, 2013 1:20 pm

Why don’t we push back A400 and buy a decent number of additional C17? Boeing will be grateful for the business and A400 won’t be fully ready for a while.

Not a Boffin
Not a Boffin
November 25, 2013 1:30 pm

We need to be careful not to confuse the method of acquisition (the lease and subsequent one-off buys) with the actual artefact (the aircraft and training and support package). What the C17 did demonstrate was how to properly control acquisition of a MOTS solution – don’t d1ck with the baseline system configuration by adding your own requirements or operating philosophy, unless you are fully prepared to pay for it.

The C17 could have quite happily been bought as a standard procurement (as opposed to the initial lease) with the same requirements control logic applied, although I suspect it would have been a bit more difficult to prevent the “oh we really need to look at adding this, that or the other” without the discipline imposed by having to use aircraft that are (at least originally) actually owned by someone else.

M&S
M&S
November 25, 2013 1:42 pm

Errrm, I believe this came up with the CN295 posting but what do you want the thing to do?

How many places do you need it to do it?

Are there any variances between same?

How much role incursion have other services/platforms taken out of the mission?

What is the strategic view of Britain relative to Pacific Pivot vs. a maintained presence, closer to home, in the Med and PG?

It seems to me that selling jointness as an operation modality where you promise a service in trade for a lease or purchase discount might be considered, particularly if it fills out a production lot but how valuable SAR in the Approaches is as a principle justification for a very expensive ASST/ASUW/ASW platform in a peacetime condition remains to be seen.

Leasing depends on fleet size and general convergence of capability with utilization rates. If you don’t have a strategic picture of what you want to do and how often/how far afield, talking about numbers of airframes as an an arbitrary economic condition of purchase is just shy of absurd.

Having a capability in case you need it is something that is sinking the U.S. under a sea of red ink.

Alex
Alex
November 25, 2013 1:52 pm

ASW is meant to be a national speciality and an area of premium capability, though. There’s a big difference between that and an llyushin 76 with manners. It’s precisely the sort of thing where we might want to experiment, improve, and specialise. That said, the C-17 buy worked and I can see an argument that leasing a couple of airframes is “Seedcorn phase II” and a canny way of getting some basic coverage of the Eastlant in place.

Also, there are substantial questions about whether the P-8 concept works, and if it does, whether the glidey torpedo thingies and drones and whatnot work, are affordable, and exist as a thing you can buy. If you don’t know if something works, experimenting is a sensible answer.

But I’m suspicious of more capability being moved into what are essentially UK-manned and badged squadrons of the USAF like the Rivet and UAV ones. Reverse Eagle Squadrons, if you like.

wf
wf
November 25, 2013 2:04 pm

: come on. We build the wings for A400 whomever buys them, and we paid for that workshare in billions of dev monies. Airbus can hardly hold us to a contract when they have spectacularly failed to hold up their end (admittedly assisted by the governments insisting on Euro engines). Run on C130J for a bit longer, and we can get the cheaper later batches of A400 in 2020 instead.

Bob
Bob
November 25, 2013 2:05 pm

As amusing as it is watching martin flail around trying to defend a ridiculous and ill-informed idea there are some very basic facts he is ignoring.

The fact this does not work is being proven right now. The US is closing the C-17 line, if the UK wants any more it has to buy soon- this is not a matter of choice or having budget available- this is the last chance to buy.

And the same would happen with P-8. It is all too often forgotten that the P-8 line will close in the 2019-21 time frame. You have to buy all the P-8s you want before then. That is just eight years away. If the UK wants P-8s it needs to start thinking very seriously about it and then undertake a proper procurement. Not a fantasy land piecemeal procurement that takes no consideration of force level requirements, investment patterns or budget balancing.

Bob
Bob
November 25, 2013 2:07 pm

paul r,

Silly comment. Rivet Joint is effectively off the shelf; About as far away from a high-risk aircraft rebuild programme as it is to get.

dave haine
dave haine
November 25, 2013 2:25 pm

@ martin

Urm, yes. That is what I was trying to say in a half-arsed way. Apologies, I shall try and shout louder, next time.

However, I will say something, we would have the money if we hadn’t bought the navy 3 OPV’s as a surprise christmas present, or arsed about in various other ways.

A little aside here, I had dealings recently with a USN Captain (retd), nice chap and in the usual way of things, a good drinking arm…one of his previous postings was in future aircraft studies. With a particular brief for MPA’s…. He remembers being sent to the UK, to assess the MR4A, from the USN point of view. He maintains that the US military and Navy like their allies to have different kit, because it adds different dimensions and capabilities to combined operations (he reminded me of the Sea Dart and USS Missouri in the gulf war), but US industry ‘act like spoilt children’ at any suggestion that doesn’t involve them making money. He said the USN were really disappointed when MR4A was cancelled, but Boeing acted like ‘a jock about to get laid for the first time’.

mike
mike
November 25, 2013 2:37 pm

I posted that link yesterday… darn comments monster!

I agree with Bob here, the C17 buy was rather something pressed/forced by need… (and failures within and outside of our control) perhaps we would do similar with MPA if very suddenly we needed the capability. That is why it moved so quickly by procurement standards. I liked how we were forced to take the product, rather than attempting another sorry route of Brit-izing it. Our hand has been forced by Boeing to consider this expenditure. Could this suddenly threaten the Shadow R1?

Otherwise such a procurement model is not going to go well, I mean… buying such a complex aircraft piecemeal rather than a fully funded project… what can possibly go wrong!? lol its like the idea of us suddenly buying that Dutch logistics vessel (which is now not for sale…) despite no need for it.

Bob
Bob
November 25, 2013 2:58 pm

martin,

Re MRA4; you are completely wrong. Nimrod 2000 as selected was MRA4- new wings and mission system on the legacy fuselage. It was never low-risk or off-the-shelf. Rivet Joint is as there is no development risk to the UK.

Re P-8; The USN has programmed 117 P-8A aircraft. After FY18, under current plans, there will only be 8 left to complete in FY19. The USN has stated that sequestration would delay the final deliveries to 2021. This is all easily available open source information. JSTARS replacement is irrelevant, it will have a completely different set of missions systems and will have little except an airframe (if that) in common with P-8. Boeing will not build more P-8s unless it can make a profit on them- which either means an outright purchase or an Airtanker style PFI.

Ace Rimmer
November 25, 2013 3:23 pm

Given the Governments propensity towards private ownership, could we have a situation similar to the tanker contract, whereby we ‘purchase’ a number of C-17’s and operate them privately hauling cargo and get them back in times of conflict?

Very simplistic idea I know, but the I’m surprised there are no civvy C-17’s knocking about, why is it just a military aircraft? Apart from the asking price it would make a decent enough competitor to the AN-124.

Bob
Bob
November 25, 2013 4:18 pm

martin,

You are still typing nonsense. The Australian deliveries will be in 2017-18 so will not extend the line and the Indian version is actually very custom with current orders due to be delivered by the end of 2015.

Nicky
Nicky
November 25, 2013 5:15 pm

This is why the Brits should have gotten in on the P-8 program and they would have a MPA aircraft as well.

Observer
Observer
November 25, 2013 5:23 pm

Nicky, American technical projects are very difficult to work with, due to their ITAR rules. You may be a “partner” in a program, but that does not mean that the Americans will be sharing with you. It’s a pretty irritating thing. It sometimes smacks of a “I take, you get nothing back” exchange. See the recent problems with the F-35 source code and UK access.

Engineer Tom
Engineer Tom
November 25, 2013 5:30 pm

ITAR is a restriction the UK needs to avoid at all costs unless they are buying off the shelf tech, with a support contract included.

I do hope they make T26 ITAR-free (just to make export sales easier for one) but I highly doubt this.

Bob
Bob
November 25, 2013 5:38 pm

Observer,

You have that the wrong way round. The UK is getting the source code, and a very large programme work-share, in return for a comparatively very small investment and very small procurement, not to mention the money wasted on the F-136 just to keep the British happy prior to it finally being cancelled. In fact the US should be furious about how they have been screwed by the UK through the F-35 programme.

Nicky,

What the UK should have done is new build MRA4 airframes rather than trying to reuse the fuselage as BAE actually offered in the early stages of the P-8 programme.

Bob
Bob
November 25, 2013 5:42 pm

Engineer Tom,

The UK already avoids ITAR for the most part as it (along with Australia) has a series of exemptions through the Defense Trade Cooperation Treaty.

http://www.pmddtc.state.gov/treaties/

Think Defence
Admin
November 25, 2013 5:48 pm

On the short term opportunistic purchases not sure it is automatically a bad idea, would be interesting to look back at such in past history and see if they are still with us

Don’t forget as well, in the land of balanced budget milk and honey we now find ourselves in the MoD is supposed to maintain a set of contingency ‘nice to haves’ should the cash become available because of underspends, risk contingency being released from projects or unexpected currency deviation in its favour.

The development woes of the C17 by the way, make the A400 look like an exercise in walking into Tesco and buying a can of coke.

On the whole, I would prefer to spend the money on more A400 than an additional C17, or even other capabilities outside of air transport. You can see the logic though, given the ‘closing down soon, no, honest this time’ C17 production line

Ace, can’t really see much of an opportunity for civvy C17’s, just too expensive and niche compared to the the Russians

Mark
Mark
November 25, 2013 5:51 pm

Is there a requirement? Is that requirement the same as a pacific focused american? If the production lines long enough drip drip of orders is fine provided you have a force goal and the people to operate them. Crews for operating c17 came from discarding vc-10 and c130k is large numbers.

We can’t have it all if maritime patrol is a vital requirement what goes from the 2015-2025 budget to pay for it. Remembering not everything cut in the 2010 budget has yet gone. C130j start retiring 2016, tornado has already started, sentinel still due to go, tranche 1 typhoons due to go. To stop any of that will cost money there not free options.

F35 budgets still, type 26 budget, carrier budget, ssbn budget, merlin budget, puma, wildcat, fres sv, another 20k soldiers pick one to bin not delay bin and then talk about what type of mpa we need.

A400m is about 9 months from deliver to the raf and by sdsr 2015 a significant number will with be delivered or in final assembly the chances of deferring is remote and expensive at this stage. http://media.defenceindustrydaily.com/images/PUB_A400M_Delivery_Schedule_2012_lg.jpg

as
as
November 25, 2013 5:52 pm

Can a C17 fly on two engines for long term loitering?
I assume it could be converted to look like that concept Sea Hercules that Lockheed were pushing not so long ago.

http://www.lockheedmartin.co.uk/content/dam/lockheed/data/aero/documents/global-sustainment/product-support/2012HOC-Presentations/Wednesday/Wed%201530%20Sea%20Herc-LM-Mike%20Bell.pdf

Engineer Tom
Engineer Tom
November 25, 2013 6:07 pm

@ Bob

It took a long time to get that source code, even after it had been agreed to, but the point is more about the delays involved than the eventual green lighting of a transfer.

I also haven’t heard any huge criticism of the UK’s involvement in JSF, the UK changing its mind over which type it wanted, twice, didn’t affect the program except in terms of some guy doing the planning for future work, also the reduction in numbers the UK wants isn’t confirmed and also would be alongside most other nations involved doing the same. The UK is still the biggest contributor to the program other than the US.

I don’t know about the F136 engine, but from what I can see not having intimate knowledge of the politics involved, it wasn’t especially a UK engine (Rolls Royce were partners in both engine programs) and it was a US decision to fund it and then cancel it. Also in my eyes it is smart to have a backup design in case the first is a failure.

If you can give a link to something that disproves this please share, as I said I haven’t seen any criticism, but I am not saying there hasn’t been any.

Engineer Tom
Engineer Tom
November 25, 2013 6:13 pm

@ Bob

I work in the UK defence industry and trust me ITAR exists, I have personally seen it causes 6 month delays and costs 10k+ in extra costs to replace parts that are available COTS, but as they run software that is ITAR they had to be procured through the OEM in US and then get a load of ITAR paperwork to be shipped over here.

Also the US has to approve every sale of a piece of kit, that contains ITAR tech, to a third country.

Bob
Bob
November 25, 2013 6:17 pm

TD,

Opportunistically topping up an in service capability is one thing, trying to piecemeal a complex capability without any thought as to actual force structure or capability requirements is absurd.

The difference with C-17 and A400M is that those C-17 development costs were 100% paid for by the US taxpayer and have cost the UK nothing unlike the A400M costs.

No need for a civilian C-17, virtually all air-freight is transported in converted commercial airliners which are much more cost efficient than new build airliners. The Russians are a special case as the aircraft were basically free having been paid for by the Soviet Union- so no capital costs to pay.

Ted
Ted
November 25, 2013 6:18 pm

@TD I agree

C17 is great to have however we had to reduce the order of a400m. We should approach airbus and see how much they want to revert to our old order giving us a multirole transport. Don’t forget C17 in RAF service is effectively for the afghan airbridge.

I’m not saying its useless or worthless and if it were C17 or nothing I would definitely get more. My 1st priority with excess money would be to use it as a bargaining chip to alter the FSTA contract to make it useful to the RAF.

In fact I like the idea of the whole post. The benefit of our C17 buys has been that we have slowly built up an operational structure. I think you are right if we have to buy other peoples aircraft this is the way to do it. But if we have a budget for a full on procurement then we get the aircraft we want as the leaders in ASubW. Maybe if we had carried on with MRA4 then we wouldn’t have to buy anything. Just saying!

Bob
Bob
November 25, 2013 6:23 pm

Engineer Tom,

I don’t care where you work, the UK has a series of ITAR exemptions.

Re F-35- the UK is a net contributor of nothing. BAE is building 15% of each F-35 in the UK- the UK is not buying 15% of the total F-35 production run. If you have a problem with US export controls then Britain should develop its own stuff……oh wait.

John Hartley
John Hartley
November 25, 2013 7:06 pm

Was there not a National Audit Office report that said leasing those first 4 C-17s then buying them later, cost around £450 million more than if we had bought them outright in the first place?
If P-8 is an off the shelf item, then buy a few at a time as you can afford them, but for pities sake avoid an expensive lease.
As for new build. Typhoon was expensive because of political delays in the various capitols, T45 was expensive because the R&D was over 6 rather than the planned 12. Astute had problems due to skill shortages due to gaps in orders (political). Political blundering/stupidity was the primary factor in all of them.

Engineer Tom
Engineer Tom
November 25, 2013 7:25 pm

Those exemptions don’t help us when we are building equipment for export, such as T26 I previously mentioned. Also they are still a huge issue when we buy kit, most ITAR restrictions still apply.

Regards UK and the F35 you said the UK had screwed the US over it, just the fact that a certain amount of the work is being done in the UK doesn’t prove that, the UK also paid in 10% of the projected development costs to get it’s level 1 status, and also provides some niche products.

Also regards developing our own stuff, that is what I am saying we should be doing or at least if we are buying off the shelf pieces of equipment to fit into our products, such as T26, we should buy non ITAR equipment.

Fedaykin
November 25, 2013 7:34 pm

I’m sure Engineer Tom doesn’t care where you work as well Bob, have you ever shared your credentials?

Anyhow for the rest of us anybody wish to read between the lines of this?:
http://www.youtube.com/watch?v=CioOYZNIZac

Going on the origonal article, lease would be a bad idea but a model similar to the full C17 procurement appeals. I salute your observation that British defence programs suffer from four letter acronyms starting with “Future”! “Modern” would be far more desirable then blue sky thinking.

For it to work similar to the C17 they would have to be virtually USN spec albeit I wouldn’t mind the MAD like Indian P8I Neptunes. So forget integrating a probe or Stingray on the aircraft, I presume RAF Stingray stocks went to the FAA anyway. Adopt the American weapons fit initially including the Torpedo and maybe raise the idea of Spear Capability 3 integration down the line. The UK RC135 have a few UK specific black boxes and antennas so I don’t see why that couldn’t be swung for P8 but I wouldn’t push the issue too far.

As for deliveries well even if we take Bob’s schedule as gospel that still works within the realms of possibility. If we make it clear in 2015 SSDR that we want the capability and we let the US/Boeing know that the P8 is in the running we can have realistic talk about production slots within the next five years. As I think more countries then just India and Australia will go for the P8 I am not losing much sleep over production slots.

On the other hand I would like a serious talk about what we want out of the capability, maybe something like C295 would be more then adequate with Blue Water ASW being the preserve of the Frigates and Merlin HM2.

james parry
james parry
November 25, 2013 10:40 pm

Would someone kindly explain, to me, why it is that when it comes to discussing MPA options, the benefits of commonality with current platforms, training, logistics et al, is forgotten, yet is almost always used as an early argument when discussing other procurements …as far as I know the P8 is based on a plane UK armed forces does not presently operate …

I don’t fly but, if I did, I would prefer 4 engines to 2, when loitering over the great expanses of sea… I would also find it very preferable if I had the Sea Herc, with all the expertise gained over the years of service of a very similar platform, I would also find it would bring great flexibility to occasionally make use of one or two of them for SF trips, and just having some around to use for tactical lifts (a la Phillipines)

Also, the US has over 200 C17s…. do they really need that many? Could we not just purchase 3 nearly new ones?

Mercator
Mercator
November 26, 2013 1:52 am

You guys leased those C-17s because you thought you were one day going to hand them back. It was always cheaper in the long run to buy if you thought you were going to keep them. You want to keep these P-8s, right? So why the hell pay a financial penalty to lease?

What are you buying these aircraft for? It’s not for the Cold War threat of submarines stalking home waters. If it was, you would be buying 20+ aircraft like the good old days. Clearly it is a very limited ambition to maintain a capability just in case you need to build up to build up to those Cold War levels again and perhaps, in the meantime, make some modest contribution to some lesser contingency or a future coalition endeavour.

Given that, interoperability with your allies should be pretty high on your list of attributes for a future MPA. At best, you guys are buying enough for one or two orbits. You won’t be working alone against a serious threat. MPA rarely do. Why would you want to be too different? Being able to turn up to a conflict and use the stack of spare parts, weapons and sonobuoys your allies have stockpiled is a good thing.

Mercator
Mercator
November 26, 2013 5:55 am

Of course there will be financial penalties from a lease. Nothing is for free. Someone has to shoulder the burden of risk when the lease runs out and they are left with a slightly used MPA. It will cost you more to lease.

Opinion3
Opinion3
November 26, 2013 6:57 am

The UK Government should avoid leasing full stop, the idea that the commercial sector can finance assets for the Government cheaper than the Government herself is daft. I am not suggesting any commentors are daft just that acceptance of this is daft. Something is very wrong with the procurement or analysis to reach that conclusion.

Strategic transport, indeed tactical transport is hobbled by the PFI contract.

Can’t refuel C17, No cargo door or strengthened floor on Voyager, insufficient consideration given to DAS/contested airspace and late delivery. I’d like to see 10 C17s and would be pleased to see another added to the fleet but feel the assets are often used when perhaps the Voyager would/should have been used. MEDEVAC is one such example.

Contracts mean less flexibility (especially lease ones). In this case Martin has extolled the virtue of removing the procurement flexibility (MOTS) and I agree it has worked well. There is much to be learnt from the experience. Personally I would consider a rigid US spec buy for the P8 (hopefully with the AGS fit) and the Apaches. Proper consideration needs to be made to the pros and cons. I have worked in IT implementations and changing the processes of the company to suit the new systems is usually cheaper and better than changing the program.

The C17 was a bit unique, we have almost certainly benefited from a purchase late in the production cycle. The development costs will have been recovered and the contribution to the bottom line will not have the same pressure. Boeing has been keen to sell, I am sure this is always the case, but with the looming of shutdown costs every sale delays the CEO and CFO having to report a whole lot of expensive one off costs. (Maybe they can collect their bonuses first ;-) )

I suspect a staggered contract order in the way proposed would cost more money than a certain defined order. Manufacturers, the MOD and the taxpayer will gain the most from a well defined plan/order. This of course is often hard, but we can start with realistic expectations and the MOD following through with the numbers originally planned.

Take the T45, in practice it had its problems but the extra costs were largely development costs borne by fewer vessels. We also need to be realistic with development costs, the benefits of development and the risks too.

It is here that frequently we lament the failures of the effectiveness of our development pound. But the reasons behind the failure are often many and disparate. My headline reasoning list is

MR4A – promised project delivery plan unrealistic (timescales and budget insufficient, should have been new build plane, mission systems largely not the issue).
Astute – poor project management and wholesale loss of expertise caused by stop start Government procurement added hugely to the costs and challenges of the project.
FRES – To me it looks like they have failed to carryout a proper cost-benefit analysis of MOTS vs bespoke.

We need to think what can we standardise. The C17, Voyager, Atlas – yes (although only two of those are). We also need to understand better the benefits of our unique assets and skills. I thought it particularly interesting Dave Haines’ comment about not having the same kit as the US. Spot ON. Commonsense in my view, I disagree with those who extol commonality and single fleet fighters for the RAF because it means development and overcoming weaknesses in the remaining single fleet becomes very difficult. Development costs money and needs a customer at the end, the risk is – in the name of MOTS – we lose that skillset and funding to the deteriment of all.

Engineer Tom
Engineer Tom
November 26, 2013 10:06 am

Just putting it out there could the Kawasaki P-1 be an option for the UK, it will clearly be interoperable with the US, but is looking slightly cheaper, I believe.

TED
TED
November 26, 2013 11:25 am

I’m quite surpised we don’t have a single aircarft for AWACS, MR and ISTAR (ISR). Say a Sentinel airframe with bolt on fits for its different roles. Woul;d that not increase commonality?

Martin
Martin
November 26, 2013 11:58 am

@ Ted

we did have it was called the nimrod but the AEW version was a f**k up? we are likely to have a common fleet once again with the P8 737 fulfilling all tasks but its likely a long way off.

Ted
Ted
November 26, 2013 1:00 pm

I know about nimrod, sad isnt it. I wonder how much it would cost to stick the various bits of kit in a sentinel and make it modular so you can switch stuff between aircraft. However this is all a bit dreamy as we have sentry and are just getting airseeker. All I’m saying is why in this age of modularity and multirole are we buying seperate aircraft for roles that are diverse but essentialy served by the same crew/airframe?

MRA4 Maritime Recconnaisence Attack. Deserves a minute silence, yes it was a procurement disaster but to cancel it just before becoming operation is nearly a criminal offence. It will be interesting to see how much our replacement will cost as well as the other costs incurred by not having an MPA compare to MRA4.

I don’t like the idea of relying on the yanks to produce these aircraft for us and I would be suprisised if someone wasn’t looking very seriously at having a base airframe with radar pods and weapons pylons. Is the P8 our only option what about europe which we are so keen to be a part of?

Not a Boffin
Not a Boffin
November 26, 2013 1:37 pm

What would have been criminal would have been to let MRA4 become operational without it being airworthy, which was allegedly the reason behind the cancellation. Rumours of it being close to operational were apparently somewhat exaggerated.

Not sure that the requirements for sentry/sentinel are similar to those required for an MPA. The former two tend to carry sensors and comms gear only and operate at height in fairly stationary orbits. An MPA may well need to get down under clag for an EO sensor to work, to drop buoys or to drop weapons. They also tend to cover patrol areas with a reasonable transit distance from base to station.

Bob
Bob
November 26, 2013 2:47 pm

Fedupkin,

Terrible shame to see you back- you really lower the intellect level on this form. Your post is complete rubbish. If the UK wants P-8s it should be very worried about production slots. It is not my schedule, it is the US government stated schedule. If you don’t like it take it up with DoD.

Finally, Engineer Tom didn’t “share his credentials” unless I missed the post containing his CV?

Jeremy M H
November 26, 2013 2:52 pm

@Eng. Tom

As far as I can tell the P-1 is still grounded from a variety of issues (engines, airframe cracking). The news is sparse but I have looked and looked and can’t find anything that indicates it has gotten back into the air. Depending on how things go (I know one of the issues is a combustion problem in the engines) I would not be all that shocked to see Japan about face on its commitment to the P-1 if things drag on that much longer. For me dispatch reliability is probably the single most important thing about an MPA.

And I don’t think it is cheaper. Based on the 2013 order for Japan the unit cost (without R&D) is about 10% higher than a P-8. I think the P-8 has higher development cost associated with it but it does not have cracking on engine combustion issues it still has to solve either. I would also anticipate its through life cost to be significantly lower considering that it is not a custom airframe like the P-1.

I don’t think Boeing is at all desperate to move P-8’s. They have a solid order book, will likely add Australia to the confirmed order list in the near future and are probably well positioned to use the P-8 airframe as the basis for other specialist aircraft moving forward. No one is going to lease these things to you without you basically paying the full cost of the aircraft and then some over the life of the lease.

Engineer Tom
Engineer Tom
November 26, 2013 3:59 pm

Is there any reason why the P8 production line HAS to close in 2019 if someone else wants some extra planes added on the end I am sure they will be more than happy to build them.

Jeremy M H
November 26, 2013 4:33 pm

@ET

No, it could stay open at reduced volumes certainly. I think the point was if you want to get a decent price for the airplane you better buy when it is in FRP for the USN. If production goes from that rate to a handful of frames a year then cost will rise quite a bit.

I agree they would lease if they were going to make a profit on it. But you don’t seem to understand how a lease works. If I am financing it I agree to lease it because I feel I can resell it for a profit if I have to at the end of the lease term. Given the uncertainty of the international market I would imagine very few finance companies would be willing to take on this risk without having lease terms that basically make them whole even if they can’t resell the item. Add interest, the time value of money and administrative expense and the UK would end up paying more than it would to just buy. As a commercial venture that is unlikely to happen on terms that the UK would find acceptable in my view.

A far more likely scenario would be to lease some from the USN with an expiration date timed to matchup with the close of production. Either the USN gets them back and that point and makes the fleet whole here or the UK buys them and the US buys new builds at the end of production.

Jeremy M H
November 26, 2013 5:04 pm

Yes, assuming you have two willing parties.

If the MOD wants a 10-year lease who is the end buyer if the MOD does not take up the purchase options? What is the resale value of a 10-year old P-8? You have to know those to structure a lease. Since both those questions are unknown no one is going to finance a deal where they are left with say half the cost of the P-8 (which theoretically should have a useful like of 30 or so years) hanging out there if the MOD turns them back.

I am sure someone would finance it on 10-year terms where 100% of the cost plus interest of the P-8 is paid out in those 10-years and then if they can resell those aircraft they get a big bonus. They might do it for 90% of the cost plus the interest even. But leasing these aircraft is going to be very expensive.

Bob
Bob
November 26, 2013 5:05 pm

martin,

And that is what you don’t understand. The lease has to be attractive to all parties. Boeing is not going to provide the upfront capital- it will have to come private sources, those private sources are going to need a good enough return to justify putting up the capital which means near commercial rates and it means the MoD being locked in for the life of the contract. The insurance for what is a combat platform will also be a nightmare; no commercial investor is going to put up capital without the assets involved being very heavily insured which will further add to the costs.

The cheapest way for the MoD to get anything is to ask the Treasury for more money then for the Treasury to sell bonds at the UK’s currently very low interest rates and then hand it back to the MoD. A commercial lease a terrible and expensive idea.

John Hartley
John Hartley
November 26, 2013 6:57 pm

Just to repeat, leasing those first 4 C-17s then buying them, added over £450 million to the bill, in comparison to buying them from the start. Leasing is a no-no for military kit (limited resale prospects), so very expensive.
If you must go commercial, do as airlines do ie. buy the few you can afford then option the rest. Say the RAF needs 9 P-8. Buy 3, option 6. When you have the money , turn the options into orders. The USN will use the P-8 for a long time. The B737 Max will be in production till the late 2020s. Why not buy in 3 batches of 3? As long as Boeing knows our plan & we stick to it, everyone knows whats happening & can plan accordingly.

Fedaykin
November 27, 2013 10:47 am

30 year lease would be a terrible idea, that is almost exactly what we have with the Voyager. We are paying far more then the value of the aircraft to serve that long a lease. The C17 had a short lease with a conversion to purchase clause. Even then we were paying massively over the odds for the first four whilst leasing and then even more to buy out of the lease.

If we want P8 an outright purchase with a staggered procurement based on small batches appeals the most to me. John Hartley is right, buy 3 option 6 is better or similar combinations.

Brian Black
Brian Black
November 27, 2013 3:03 pm

Hmmm… pen utensil set? I don’t think I need a pen utensil set.

What’s that? They’re going to discontinue the pen utensil set? I need to buy pen utensil sets!

http://www.neatoshop.com/product/Dine-Ink-Pen-Utensil-Set

percontator
percontator
November 28, 2013 12:45 am

@Brian Black

Brilliant!

Jeremy M H
November 28, 2013 2:38 am

A 30-year lease on an asset with a service life of around 30-50 years is basically just paying interest on the cost of the item. You can pretty easily predict what the cost of such a thing would really be within a reasonable margin. If you are doing the lease and you assume that the things will be worth 20% of their original value after 30 years you need to collect the other 80% just to get whole, plus a return on investment for everything you put out there that would be at some premium of a “risk free” investment like a highly rated government bond.

30-year bonds in the UK go off at 3.5% roughly. Since you could buy that investment with no risk and this has some level of risk the MOD would pay more for a lease. Figure at least 2% right there just because these are not government bonds. its a commercial lease.

So the rate to the MOD starts at 5.5% a year. Lets call it a $300 million airplane once you pay for all the fees and R&D portions to buy 12, may be more, may be less, who knows but that is close enough. So a dozen would cost the financing entity $3.6 billion. If the people putting up the money demand a 5.5% return (and remember for no risk or effort they can take an assured payout from a 30-year government bond for just 2% less) then your payments each year for 30-years are $235.8 million per year, or a total of $7.074 billion. Even at 3.5% rate of return for the investor you are paying $5.410 billion.

If I let you only pay 80% of the upfront cost in principle over that time then we have $720 million left at the end of the contract roughly. So even with no juice at the end of the deal you end up paying somewhere north of $6.1 billion for $3.6 billion worth of airplanes if you really want to do a 30 year deal. If you want to defer more of the cost to the residual then your interest rate is likely to go up because the risk to the financing entity rises. If you want to add optionality (such as the ability to turn the planes back in any time before 30-years ends) then your interest rate (or fees associated with such action) rise.

That is why leasing 12 is such a bad idea. The only good reason to lease something (other than tax purposes in many nations) is if you want optionality with the purchase (ie you want to be able to hand them back). But the more optionality you demand the higher your cost are. This would be such a large purchase that even small increases for such things drive huge cost to the annual MOD budget.

Conversely if you just buy 4 per year the last 3 years of production and finance the whole thing at the 20-year government bond rate while still paying right around what I would pay for a 30-year lease I can pay the whole thing off in 20-years. Also keep in mind that since the payments would be roughly equal they would have a neutral impact on the deficit and budget. In fact you probably come out ahead since any lease payments would contribute to a deficit and the government borrows money to make ends meet. In effect you are borrowing money with bonds to pay for more money you borrowed at a higher rate anyway unless you are running a surplus.

There is just no way a lease makes sense for anything you want to continue to own.

dave haine
dave haine
November 28, 2013 11:55 am

@ John Hartley

Its a very rare airline that owns its aeroplanes- Almost all now are leased to make the airline more tax efficient.
If you own an aeroplane, it’s an asset, and you get taxed on the value of it. If you lease it, the cost of servicing the lease is a necessary expense, and you can claim the tax back.

Within the lease agreement, there is usually a depreciation calculation, and early hand-back clauses, which generally require the airline to find a new lessee, or pay a premium and of course other charges to make it financially worthwhile to the lessor.

The ‘buy 3, option 6’ is more a function of hedging your bets, to see if the expected seat sales increase happens, or the expected improvement in running costs, plays out. If the market doesn’t play, you cancel your options. Airlines generally fleet plan 5-10 years ahead, and you need a certain amount of flexibility over that timescale.

Oscar Zulu
Oscar Zulu
November 30, 2013 12:57 am

Australia’s experience with the C17 is similar (although we are generally not into leasing and bought them outright). The order went from an initial 4 then to 5 and finally 6 with Treasury seemingly able to find the incremental cost each time. Prodded along of course by the need created by the Afghan conflict.

The ADF has been guilty in the past of trying to “Australianise” platforms rather than buy MOTS – witness the $1 billion Seasprite helo debacle. But we’ve learned our lesson now and buying US spec MOTS is now de rigour. Seems to work well with both the USAF and USN willing to give up production slots for an ally with a “special relationship”.

First the C17s, then the Super Hornet, currently the Seahawk Romeos and soon the FA18 G Growler buy and then P8. The experience of managing these projects has overall been very positive with on-time on-budget delivery. The C17s were down to something like less than 18 months from original FMS request to delivery on the tarmac at Amberley. The Romeos are currently many months ahead of schedule.

There are other benefits too of a MOTS buy. In the case of the C17 the global sustainment chain is a big plus for a small airforce like the RAAF. There are also real benefits in terms of reducing the costs of training and the time taken to work up a platform to IOC. Currently we have both RAN Romeo pilots and maintainers training with the USN and RAAF crews training on Growlers with the USN.

The RAAF has committed to the P8 but the numbers are still not decided, except that it won’t be a one-for-one replacement of the RAAFs 18 AP3C Orions. They have been relatively recently upgraded and are now arguably the most capable P3 platform flying with a couple also fitted with some useful SIGINT/ELINT gear. So we can probably take some time to firm up the numbers.

The CONOPS seems to be to operate them in conjunction with the Triton HALE UAVs for long range maritime recon in the same way (and potentially actually as part of) the USN’s BAMS program. Originally proposed numbers were 8 P8’s but the RAAF seems now to favour a larger number of manned platforms (up to 12 are mooted) along with a lesser number of Tritons.

Mark
Mark
November 30, 2013 11:01 am

Wouldn’t be under any illusions about the US giving up production slots for allies. The USAF has wanted to stop c17 orders years ago but the nice congressmen from California and the Pacific Northwest have just continued to order them so palming a few off to allies has suited the USAF as they don’t have to given anymore. Same with the navy and f18 they’ve never been totally sold on the f35 program and are desperate to keep the f18 line open to alleviate budget issues and to hedge bets without getting dragged into the f35 political dogfight.

Oscar Zulu
Oscar Zulu
December 1, 2013 1:41 pm

@ Mark

Whatever the motivation of the USN or USAF may be, it doesn’t alter the fact that the ADF is able to bring 3 new fixed wing and rotary platforms online, on budget and on (or ahead) of schedule using the FMS/MOTS approach.

There is no reason to believe that the Growler experience (4th platform) will be any different.

The P8 (5th platform) could be a more complex project but hopefully it won’t be a repeat of the Wedgetail systems integration issues and resultant delays. At least the RAAF isn’t the lead customer on the P8 so the cost of any technological fixes won’t be borne by the ADF. In late 2012, the RAAF signed an MOU with the USN to formalise participation in the P8 program ( A$73.9 million) which offers a least a seat at the table.

So whether it suits the political agenda of some US senators, or the internecine politics of the different arms of the US military or plays into the hands the Boeing-Lockheed rivalry, Australia is more than happy to take advantage of the US desperation if it continues to deliver project outcomes like these.

When you look at the current experience of defence procurement worldwide the typical experience seems to be one of delays, cost overruns and/or cancelled programs. The Nimrods being a case in point.

We currently have 18 of arguably the best (at least since Nimrod was scrapped) maritime surveillance platforms in service. I’ll bet you a pint that that the RAAF will have the P8 to FOC before the RAF settles on a replacement for the Nimrod.

Mark
Mark
December 1, 2013 3:22 pm

Oscar Zulu

The fact you can buy exactly a product off the shelf and buy into the operating and training method for that platform on time and on budget should not really be a surprise civil companies have been doing it for years. But with things like nimrod and even typhoon you will ultimately run into unforeseen technical issues which will cost money and time to fix much like Australia’s experienced with seasprite helicopters and wedgetail.

The difference to an extent is the continent of Europe has significant aerospace industries making extremely effective and capable civil and military products which perhaps drives the uk interest in developing new tech more than perhaps Australia. The fact that we have been poor at leveraging extremely effective civil designs in fixed wing and rotary wing assets has perhaps been more to do with “gold plating” capability requirements and extremely complex and differing certification requirements.

The fact that the uk armed forces are significantly larger than Australia’s may of course mean there is more of a reluctance to change operating practices to suit pure off the shelf foreign military aircraft.

TimPanda
TimPanda
December 2, 2013 4:42 pm

buy the extra c-17 and the P8, or get some a321(or other members of the family) and convert them into military aircraft. Buy airbus would help to keep jobs in the UK

Jeremy M H
December 2, 2013 4:52 pm

@TimPanda

While I am sure that converting an A320 variant for MPA work would be perfectly fine as a solution it is also utterly unaffordable for the UK at this time. The R&D cost would be substantial and there is not nearly the production run to spread it over you would need. As far as I can tell there is basically no other likely market for such an aircraft outside of the UK.

Alex
Alex
December 2, 2013 5:49 pm
dave haine
dave haine
December 2, 2013 8:46 pm

Airbus had a MPA development of the A319 underway. As I understand it the design was fully mature and all system architecture finalised. Basically aimed at replacing the Atlantique in Italian and German service, initially, but also offered to India, and Canada (although they wanted an A320 airframe).

As an aside, I would say out of the A320 series, the A319LR has the best range/payload compromise. If you specify the ACJ tanks (which are removable) you get a 7500 mile range. Slightly limited gadget space compared to the P8, but better range and endurance.

Mark
Mark
December 3, 2013 8:49 am

Martin

In the end everything we buy has a option off the shelf if we change operating requirements enough. There does off course need to be realism but not for one minute do I think we should start purely buying equipment from else were and stop developing anything of note as Australia currently does. You would the be advocating stopping type 26 and buying the French fremm exactly as it is from French yards to satisfy our small defence requirement for asw ships?

Bob
Bob
December 3, 2013 11:49 am

martin,

You were talking rubbish when you first put this post up and you are still talking rubbish. Your lease idea is stupid as is made clear by your inability to explain how it would work.

Bob
Bob
December 3, 2013 4:32 pm

martin,

You have still yet to explain where the upfront capital is going to come from or how the inherent risk will be managed.

Engineer Tom
Engineer Tom
December 3, 2013 4:48 pm

@ Bob

Not that I agree that it is a good way forward, he has explained that Boeing (If we are talking lease rather than PFI) would take on the capitol layout and the risk, the MOD is probably seen as a very low risk compared to many airlines, but they would of course need to over thirty years make the entire cost of the aircraft on the lease, and any resale value for them would be a bonus.