Oral evidence: Ajax: recent developments, HC 550

Oral evidence, 20 July 2021.

Witnesses

Carew Wilks and Scott Milne.

Chair

Welcome to this Defence Select Committee hearing on “Ajax: recent developments”. This comes on the back of our previous report entitled “Obsolescent and outgunned: the British Army’s armoured vehicle capability”. It is designed to explore the progress that has been made with the Ajax programme. Our time today is divided into two parts; we have two separate panels. Our first panel will include Carew Wilks, vice president and general manager of General Dynamics Land Systems, and Scott Milne, executive programme director of General Dynamics Land Systems. Part one will involve you two and in about an hour or so we will then turn to the Procurement Minister, Jeremy Quin, who will be joined by David Williams, the permanent secretary, Lieutenant General Ralph Wooddisse, who is Commander Field Army, and Major General Timothy Hodgetts, who is the Surgeon General. We are very grateful for their time as well. To set the scene of our focus today, AJAX is a new armoured recce vehicle, designed to replace Scimitar, which was first used by the British Army in the 1970s. Discussions to replace Scimitar began in 1992. After exploring options over 18 years, the MoD finally approved a business case for a new vehicle in 2010. General Dynamics received the contract to produce 589 vehicles, based on an existing chassis already in use with the Austrian and Spanish Armies. Part of the deal involved investment in a manufacturing site in Merthyr Tydfil in Wales, and the first vehicles were to be delivered in 2017. But today the MoD has already spent over £3 billion and has received over a dozen vehicles of the 589. The cost of each is likely to exceed £7 million, and there have been much-publicised reports of issues with the turret and firing mechanism, noise and vibration concerns, and speed performance, leading to the suspension of approval tests. This is a complex vehicle compared with its predecessor but, consequently, its weight has ballooned from 8 tonnes to 43 tonnes, meaning that it is too heavy for the A400 transport aircraft, and only with partial dismantling can it fit into the C-17. To compound matters, as a result of the MoD’s Command Paper, the Warrior armoured fighting vehicle is to be withdrawn and replaced by Boxer, the wheel combat vehicle, which has no turret, meaning that Boxer can deliver dismounted troops to the frontline but cannot adequately protect them, as Warrior could do. This is pertinent today to AJAX, which does have a turret but cannot carry infantry. All in all, strategically and operationally, it is a very unsatisfactory and confusing picture, which I hope our Committee can unravel today. To begin proceedings, I will turn to Kevan Jones to kick us off.

Mr Jones

On 8 June this year, the Minister for Defence Procurement said that negotiations on the planned contract had to be recast for the contract held between December 2018 and May 2019. What is a recast? What is the difference between that and a renegotiation?

Carew Wilks

Good afternoon. In response to that, the recast agreement was reached between ourselves and the Ministry of Defence in 2019 and was the first change to the contract since it was awarded for the demonstration contract in 2010, the production contract in 2014, and the support contract in 2015. The recast contract took account of issues through the programme in the period between the original contract award and 2019, and it also introduced some new requirements. It also set out a delivery plan involving capability drops—in other words, a sequence of capability drops to be delivered through the programme, with the continuation of the demonstration phase concurrent with the production and delivery of vehicles.

Mr Jones

Who asked for the recast or renegotiation?

Carew Wilks

It was a joint decision to clarify some of the issues that occurred in the early stages of the programme, taking account of some of the technical challenges that had taken place and some of the configuration changes that had taken place on the cannon system.

Mr Jones

So this is the first renegotiation of the contract, is it?

Carew Wilks

The recast was the first renegotiation of the contract since it was awarded in ’14-’15.

Mr Jones

From my parliamentary questions, the MoD has spent between £4.2 billion and £4.7 billion on this vehicle so far and only got 12 vehicles. Could you explain the original contract? It has always been a bit of a mystery to me that all the risk on this contract seems to have been with the MoD. Why was it that the MoD chose to basically pay up front for this, rather than having some type of milestone payments throughout the contract?

Carew Wilks

The contract is for 589 vehicles at the full capability. It also includes extensive training systems and simulation systems to train Army crews, and the full logistic support, as well as the demonstration and design of the platform.

Mr Jones

Mr Wilks, you are talking only about the contract, which I could recite in my sleep.

Carew Wilks

In terms of where we are today on that contract, it is a firm price contract with a value to us of £4.62 billion, excluding VAT.

Mr Jones

That wasn’t my question. Why was the risk all with the MoD? It seems very strange to me that money is paid up front. What risk is GD taking on this contract?

Carew Wilks

I own the delivery risk on the programme to deliver the programme, the vehicle and the capability to meet the requirement that has been set out to us. We have been developing, testing and trialling that throughout the development process. We have delivered milestones throughout the contract.

Mr Jones

I don’t know whether you have been a civil servant in a previous life, but you are answering questions like a civil servant. Why was the contract negotiated so that the taxpayer is basically funding things up front? What was the risk to the GD? It seems to me that the taxpayer has spent an awful lot of money here—I accept that we will come on to the reasons why later. Why was it framed in such a way that you were not taking some of the risk as well?

Carew Wilks

General Dynamics owns the risk of delivering the capability to the full requirement and we are—

Mr Kevan Jones

No, no, no—hang on. I am not talking about the risk; I want to know about hard cash. What are you exposed to in hard-cash terms? It seems to me that the taxpayer is the one funding this up front without any recourse back to GD. Can you clarify who the contract is actually with at GD because it is not with the parent company, is it?

Carew Wilks

The contract is with General Dynamics UK, which is a UK-based company.

Mr Kevan Jones

So the main US company has no exposure on this, then?

Carew Wilks

We are part of the wider General Dynamics Corporation—

Mr Kevan Jones

Yes, we know that.

Carew Wilks

And we have been delivering the programme in accordance with the milestones that are laid out in the contract and payment is along those milestones—

Mr Kevan Jones

Mr Wilks, can I stop you? You can keep repeating that as much as you want. I have been a Minister, so I know how civil servants work, and I have been on this Committee for a couple of years now, but I was previously on it for nearly seven years, so I know when I am being fed gobbledegook. I am trying to get some understanding of what the risk is to GD. The taxpayer is basically carrying the main risk here. Why was the contract negotiated in such a way that the taxpayer is not just frontloading it, but continuing to fund it? In terms of penalties or hard cash, there is no risk to GD, is there?

Carew Wilks

I have the responsibility for delivering the full capability—

Mr Kevan Jones

I have heard that.

Carew Wilks

—within the firm price of the contract.

Mr Kevan Jones

I have heard all that. What is the penalty, not for GD US, because we accept that is a separate company altogether, but for this company? Let us suppose that we get through all the £5.5 billion, what happens then? Does the taxpayer keep paying it?

Carew Wilks

I am completely committed to delivering the full requirements of the programme within the contract values—

Mr Kevan Jones

Can I stop you? Answer the question. The question is very simple. We have established that you are a separate company from GD US. Just be clear. What is the exposure of your company, GD UK, in cash terms? If you do not meet something, is it going to cost you? What you have here—I have never been able to understand why—is basically a contract where the taxpayer is funding this up front, which is a very odd way of negotiating a contract. What is your exposure as a company?

Carew Wilks

I am not sure that I can answer that in any other way than to say that we deliver the milestones in the contract—

Mr Kevan Jones

Oh, forget it. Chair, he is not answering the question.

Chair

May I try Kevan Jones’s important question another way? In other contracts, have you taken a financial risk whereby if you do not deliver according to the contract, you are financially affected? Here, money is stood across from the MoD, and the money keeps going, but there is no exposure from your side. Is that a standard way that you do business on these huge multibillion-pound contracts? That is not the way that business should be done if you are not feeling some of the pain if things do not go well. My opening statement was clear that there is a litany of things that have gone wrong here. On the face of it—we will explore this in more detail—the MoD is having to pay for this. You are effectively trying to repair it, but the financial responsibility is not there.

Carew Wilks

The responsibility for delivering the capability and meeting the requirement is very much with General Dynamics. That risk sits with us and we own that risk in terms of fulfilling the full requirements against the firm price in the contract.

Chair

I will just finish this off and then hand back to Kevan because I know others want to come in. What you are saying is, “We will continue working on this, and we will deliver 589 vehicles, but it may take us a hell of a long time.” There is no punishment if you just say, “Hang on a minute, I was supposed to deliver the first batch in 2017, operational, but I have missed that,” and then there is no penalty for that. You are committed to delivering the 589 vehicles, but it could take another half a decade. Is that where we are, roughly?

Carew Wilks

The schedule we have commits us to delivering the vehicles, in line with the contract, in 2025. We will finish and they will be completed to the full requirement within the price. The risk of meeting that requirement sits squarely with General Dynamics.

Chair

Kevan, we can go back to this. I think we are not going to get more out of this, but you finish your question.

Mr Jones

It must be a great situation to find yourself in, where you have an open cheque book for the taxpayer’s money. We are going to see the Minister later on today, but the person who is throwing money at this is the taxpayer, not GD. In terms of the so-called renegotiation, recast, whatever you want to call it, have there been penalty clauses put in there that mean that General Dynamics has some financial incentive to sort this out or be penalised financially if it does not deliver?

Carew Wilks

Our delivery is required in order to meet the payment structure and the milestones within the contract are very clear in terms of the outputs, the scope, the deliverables and the sequencing of that. We are—and have been—incentivised to deliver that.

Mr Jones

Wait a minute, the entire contract was £5.5 billion. By my reckoning, the taxpayer has spent—well, at least the figure I have is between £4.2 billion and £4.7 billion. So it does not leave a great deal, does it?

Carew Wilks

We have built 116 vehicles so far and delivered to the Army 25 of those vehicles, which is the requirement for IOC. We have delivered training systems that are now in use at Bovington and Upavon and have further training systems being installed at the Army’s training centre in Tidworth. We have the logistic support in place to support IOC. We have built 270 of the hulls, which means nearly 50% of the hulls have already been made, and 60 turrets.

Mr Jones

That does not reassure me as a taxpayer. Let us do an analogy. If I were to buy a new car tomorrow and the person selling it to me said “Well, actually, I have all the logistics for servicing your car for the next 10 years in place and I can say that you are going to get great customer service on that side in future, but, by the way, your car is not ready yet and it will not be ready for another 10 years”, that is not reassuring for the taxpayer or the Army, which needs the vehicle.

Carew Wilks

I would add that the development and design of the vehicle has been carried out over the past 10 years and we have the evidenced position of compliance to the contractual requirements from completing more than 60,000 km of trials. We fired more than 4,000 rounds of the 40 mm cannon, demonstrated its full capability and have completed 70 battlefield missions to demonstrate the full design and development of this very sophisticated platform, which delivers a reconnaissance capability for the British Army that is second to none, fully digitised and will enable the Army to have information superiority.

Mr Jones

Do you actually believe all of this?

Carew Wilks

I not only believe it, but I know it from my own personal experience as a soldier in the past and from my knowledge of the evidence and data from the platform that we have at the moment.

Chair

We can unpick the details of that, because I know we want to explore that. Before Mark comes in, just on the recast, when you had one of these recasts, was the spec changed of what you expected—what the MoD asked for from you—in this vehicle itself? Is that what we saw happening here?

Carew Wilks

There were some changes to the requirements within recast, one of which was to add the new communication system known as BCIP 5.6. There was some clarification of the latest build standard of the cannon system. There was also an agreement to deliver the capability through a series of capability drops incrementally through the life of the programme.

Chair

A capability drop is what? Just a standard that you have to meet?

Carew Wilks

Batches, in another word.

Chair

Okay, we will explore that a bit later.

Mr Francois

On the numbers, in the recent NAO report, “Improving the performance of major equipment contracts”, figure 10, page 61, says that the spend, as of March 2021, so far, was £3.755 billion. A recent PQ confirms that, of that, General Dynamics was paid slightly more than £3.1 billion. Why has the taxpayer given you £3.1 billion up front for a vehicle that doesn’t work? Why on earth did anyone ever sign a contract like that? What sane person signed that contract?

Carew Wilks

We have delivered already to the Army the 25 vehicles that are required to meet IOC—

Mr Francois

But they don’t work!

Carew Wilks

And the training systems. The vehicles do work, and we’ve got evidence to that. We are very concerned by the recent issues around noise and vibration, and we are working very closely with the Army and the MoD to identify the causes of those concerns and rectify those quickly.

Mr Francois

Well, we’ll get into the detail later. But if there were really no problem, as you’re trying to bluff us, you wouldn’t be here, would you? We would not be having this meeting. So please don’t come in here and tell us it is all a figment of our imagination, because the rest of the afternoon might not be profitable for you. All right?

Chair

Can we just confirm the position from Mark’s perspective? We have read in the media that the trials have had to be paused, so if things are going so well, why has there been a pause in the trials?

Carew Wilks

The trials have been paused as a result of concerns raised by soldiers who started operating the platforms as part of the reliability trials last year—in response to noise and vibration. That has paused some of the trials whilst we investigate and identify the causes of those concerns and incidents and identify measures to rectify them.

Chair

So these are 25 vehicles that you have delivered, that are now being used by the British Army and that have got vibration and noise issues. Is that where we are?

Carew Wilks

The reports from soldiers using the vehicles in trials are of injuries received as a result of noise and vibration, and we are working now closely with the Army to identify the causes.

Chair

But this is the 25 vehicles that you have delivered? You have sort of glossed over where they are. You said, “We’ve delivered it. We have done our bit.” Actually, there are problems with those 25 vehicles that you are going to have to go and rectify. Is that correct? Just a yes or no, because we really have a lot to get through.

Carew Wilks

Yes, we are carrying out that investigation and we will rectify all vehicles—

Chair

And can you confirm that not one of these 25 has got a turret. Is that correct?

Carew Wilks

No, that’s not correct. Twelve of those delivered vehicles are equipped with a turret and went through acceptance testing, which included live firing.

Chair

We’ll come to the issue of the live firing in a second. Stuart Anderson, please.

Stuart Anderson

Before I go on to my question, I just want to get something in the simplest terms, to follow on from my colleagues. You mentioned, with regard to the recast, drops zero to 4. We have got those in the contract. You have been paid an amount of money so far. If you deliver drop 4 in 2040, do you still get paid, or is there something in the contract that says that if you don’t deliver it by 2025, you’re not getting paid?

Carew Wilks

There are incentives and other measures in the contract, to ensure that we maintain schedule.

Stuart Anderson

So if you deliver it 10 years late, you’re not getting paid.

Carew Wilks

If we deliver late, we will be subject to some of the contractual incentives and penalties.

Stuart Anderson

You mentioned the initial operating capability. And this might be one for Mr Milne to look over. In your submission to us, you have explained that the 25 vehicles meet the IOC. I think I have just heard something there that might counter that, and I will come on to that in a minute. You have already delivered. They have been accepted—as you said—including 12 AJAX variants, with the turret, that have been successfully fired by the British Army as part of the acceptance process. Is it solely the MoD that has decided to delay the IOC?

Carew Wilks

The decision for IOC very much sits with the MoD and relies on a number of factors to reach the point where they are comfortable with bringing, introducing, the vehicle into service. In terms of the delay to that, it’s primarily until we can resolve the noise and vibration issues that have been experienced on the platform.

Stuart Anderson

So would it be fair to say this? They were accepted. You didn’t know about these issues—well, my colleagues will explore that later. They were accepted—all fine. The Army then tested them—in addition to yourself—and they have identified more issues, so they have had to delay the IOC. Is that a fair one? Mr Milne, I would like to hear from you on this as well.

Scott Milne

Thank you. I can answer the question. The 25 vehicles represent the equipment line in the IOC declaration. As you can understand, the Army will declare IOC once the training system, the support framework, is in place, and the 25 vehicles have been delivered and have gone through the general acceptance process, which happens after production. They have subsequently been delivered to the Field Army. The vibration and noise concerns have been raised from the reliability growth testing, which involves a separate set of vehicles, however also at a production standard similar to those delivered to the Field Army. We are now working very closely with the MoD and the Army to understand the pinpoint, the specific issues, related to noise and vibration and how they relate to the concerns being raised by the end user. I must say that the soldier is very important to us, and the safety of the soldier is a top priority for us, so we are taking this investigation very seriously.

Stuart Anderson

Obviously it is right to do so. Before I move on, I want to get in my head the sequence: they were accepted, they worked, now they do not work. Is that a very simple process outline of where we are today?

Carew Wilks

Some new, unexpected issues were discovered during trials that were taking place in parallel with the vehicles being delivered.

Stuart Anderson

And “issue” could be classed as a fault?

Carew Wilks

Potentially a fault, yes.

Stuart Anderson

Because you take the soldiers’ safety as paramount, you would not use these with soldiers in an operation—

Carew Wilks

That’s right. We have mobilised resources from across General Dynamics and academia to support our investigation, working very closely with the Army and MoD to understand what those conditions are that have led to those reports and injuries.

Mr Francois

You said that in the course of these trials some issues were identified. Can you put a date on that?

Chair

Quickly, please, because I want to turn to the turret.

Carew Wilks

I can answer Mr Francois’s question. Last summer, we entered a next phase of our reliability testing, which involved Army crews taking over the vehicles and operating them fully. This was a transition from when General Dynamics crews had taken the reliability testing up to that point. It was subsequent to that testing that reports were received from the Army that they had concerns over and injuries related to noise and hearing.

Mr Francois

So last summer, a year ago.

Chair

We are way behind time, so Kevan, quickly.

Mr Jones

Mr Wilkes, that is not true, is it? You knew about them in 2017.

Carew Wilks

If we are talking about noise and vibration on the platform, this has been a feature of the design since 2010, when we started work on the programme.

Mr Jones

Yes.

Carew Wilks

I will just ask Scott to explain that.

Chair

To confirm, you had noise and vibration issues back in 2010?

Carew Wilks

An armoured vehicle such as this requires a balanced design to meet all the requirements. With the engine configuration and other characteristics, there is noise and vibration on the platform.

Chair

But this was a chassis that already existed; you weren’t building from scratch here.

Scott Milne

Let me clarify. From the inception of the contract, the control of noise and vibration is a key feature of the design. Obviously, we are aware of noise and vibration because we monitor it and we put design features in from the very start of the design to make sure the noise and vibration generated to the platform does not exceed legislation limits and action values. From the very start of the programme, we took an ASCOD platform, which was the point of departure, and characterised the noise and vibration values that it would generate. Those were within legislative limits as seen in an operational vehicle. Throughout the development phase of the programme, through the seven prototypes and for each production variant, we have tested the noise and vibration levels of the platform. Those levels are comparable to other armoured fighting vehicles within the GD family and in service today.

Mr Jones

Can I just come back, Chair? I am sorry, but multiple people have told me—I will just look at my notes. September 2017, at DSEI, it was common knowledge that you had problems with this. People have contacted me, and they are not making this up. To give you a flavour, they include a warrant officer, an officer who is part of the programme team, an industrial subcontractor and somebody who has actually worked on your programme told me that back in 2017. If they were raising it then with parliamentarians as an issue, why is it that when I put a parliamentary question down to the Minister—and I do not doubt the Minister—he was not made aware of the issue until November 2020. You have just tried to tell us that this real problem of vibration was only an issue in 2020. That is not true, is it?

Carew Wilks

We have carried out extensive trials and testing throughout the life of the programme, since 2010. Some of that testing has identified areas of vibration and noise, which we have addressed through the design.

Mr Jones

I know you are trying to dance around the head of a pin here, but why don’t you just be honest? The impression that has been given, even to Ministers—I do not doubt that the buck stops with the Minister. In response to a parliamentary question, he said the first time that he knew about it was in November 2020. Possibly that is true from his point of view, but it was not from your point of view, because you certainly knew about it way back in 2017. I had people contacting me—I know people have contacted Mr Francois as well—saying exactly the same thing. These are not people who have just walked in off the street or who want to do you down; these are people who have actually been working on the contract. You have known about this, so the idea that there was some type of revelation that you suddenly discovered in 2020 is just not true. It has been known for a while, so why hasn’t this been flagged up to Ministers or the MoD?

Carew Wilks

Scott can answer that one.

Scott Milne

As I have stated, we have been testing the platform throughout its development cycle, so we have data and evidence positioned against the legislative requirements. What has come to light are the user concerns when the users have first got in the platform, and we need to take those very seriously. I do not know the specifics of the issues that have been brought to your attention, and I am happy to investigate those.

Mr Jones

One of them is an officer who was part of the programme team, and he told me about that in 2017.

Chair

Are you able to share that data? It will help us get to the bottom of this. Are you able to share any of this data with the Committee?

Carew Wilks

We will certainly be able to share some of that information.

Chair

Would you please confirm whether the vibration issues are generated from the engine, or is it the ISTAR capability inside the AJAX itself?

Carew Wilks

There are a number of vibration sources on the platform. As we have just been discussing, these have been part of our design process throughout the design of the platform, subject to numerous trials and improvements. Perhaps I will ask Scott to explain where those improvements have been carried out to bring the vibration and noise—

Chair

I just want to bring in Sarah, who has been waiting very patiently.

Sarah Atherton

We have covered a lot of my questions anyway. Mr Wilks, you mentioned at the very beginning, when talking about the reliability trials, the injury to soldiers. What do you mean by injury to soldiers?

Carew Wilks

The reliability trials were approved by the Army last summer, and we received reports later in the year that soldiers had reported medical concerns, which we subsequently understood were injuries to their hearing.

Sarah Atherton

Just their hearing?

Carew Wilks

And also reports of vibration. We are taking these reports extremely seriously. As I said, we have mobilised experts from across General Dynamics, and we are working extremely closely with the Army and the Ministry of Defence to identify the causes of those injuries, the factors that might have led to them, and what mitigations we can put in place. We have made some good progress on that over the last few weeks to identify potential mitigations, particularly on the vibration, but we are also investigating the noise. It would be helpful to explain how excess noise could occur, and I will ask Scott to explain that in a bit more detail for you.

Scott Milne

I will first answer the question around the design principles and design features that mitigate the effects of noise and vibration. I will not reiterate that we have taken noise and vibration very seriously. In the design, there are a number of features. To answer the question about the root cause of noise and vibration, let’s be clear: it is a tracked armoured fighting vehicle with an 800 horsepower V8 engine. That is a highly powerful engine, to meet the enhanced mobility requirements of the Ajax platform. That will generate noise. The key is how we integrate that engine into the platform, and the transmission path of that noise to the end user, and that is what we take very seriously in the design. We should not conflate ambient noise issues with noise signature, which is another key feature of the AJAX design, to make sure that the AJAX cannot be detected from a survivability perspective. There are a number of noise treatments in the design delivered today, to ensure a highly performing and compliant acoustic signature for AJAX. If I can explain the noise situation, as I have stated, the source of noise is primarily the engine when the vehicle is static, but when you start to move, the running gear will contribute to that overall noise envelope. Like any other armoured fighting vehicle tracked in service, the noise level generated on a platform goes over the upper action value for noise, and therefore it is mandatory to wear hearing protection in the platform to prevent the noise levels from getting to the human ear. Another part of the system is to be able to communicate in the platform. So we have a requirement to provide hearing protection and a requirement for a communication system to allow the crew to speak to each other. That means we need to stop the ambient noise but allow the communication system noise. To be really clear on the noise concerns that we are dealing with right now, it is to do with the level of volume of the communication system noise that has presented to the human ear. It is not the platform noise that we are dealing with. We are working very closely with all stakeholders to understand the full integration of the communication system into the Ajax platform. We know that the communication system works on other platforms such as Warrior, which has a similar ambient noise profile, however at a different frequency. We know that that communications system works.

Sarah Atherton

Were you anticipating these problems and challenges?

Scott Milne

I would say that we were not. It is very late in the programme for us to find this. It is a surprise to us, and I will explain why that is. Throughout the development of the programme, we have always looked at the attenuation that was offered by the headset, and that, fully integrated to the platform, will deliver a safe level of noise at the human ear. GD trials have used an alternative headset system, because the headset is fitted to the vehicle after the point of delivery. There are two changes. The first time the user is using the platform with the in-service headset is during the reliability trials, and at this point we are understanding the noise concerns. We must take into consideration, however, that the user will use the platform differently. As has been stated, we have undertaken 60,000 km of trials over the past 10 years on the programme, and we have not experienced similar issues. So we know that a communications system can be integrated and can work. We have the experience across the breadth and depth of General Dynamics, and the resolve and capacity, to deliver that capability.

Sarah Atherton

I have one last question. Millbrook are undertaking independent investigations at the moment. When do you expect them to report, and who is paying for that?

Carew Wilks

We and the MoD have carried out extensive trials with a number of third-party experts, and most recently, the Millbrook organisation is carrying out trials on behalf of the MoD to verify, validate, the vibration data and noise data, and to provide some additional data points. This is helping us in our investigation as to the potential causes of noise on the platform, as Mr Milne has recently set out, and those trials are ongoing, and will be progressive over the coming months. The expectation is that they will report in early September.

Sarah Atherton

And who is paying?

Carew Wilks

We are contributing to it in terms of our support and crews, and it is a contract with the MoD.

Mr Francois

So the MoD is paying?

Carew Wilks

As part of the overall programme, yes, it is the MoD.

Mr Francois

We have given you £3.1 billion, and we are paying for the trials to try to find the problem with your vehicle. Right?

Carew Wilks

As I said, we are contributing—

Mr Francois

No, no, you are putting in crew, but you are not paying for it, are you? Please don’t do this to this Committee. You are not paying for the trials; the MoD are paying for them. Yes or no?

Carew Wilks

That is correct. The MoD is paying for them.

Mr Francois

Thank you.

Mr Jones

Can I say that it is worse than that, because I had a letter from the Minister this morning telling me that the MoD is also going to pick up the liabilities for any potential insurance claims from individuals who are involved in these trials? The taxpayer is paying yet again, aren’t they?

Chair

The concern that we have is that the MoD is forking out far more than we would anticipate. You make the Abrams tank, arguably one of the best tanks in the world. I can’t imagine that the Americans have signed up to a similar protocol of handover that we are hearing about today, when not only are there defined risks that the company, you guys, have to take, but there is also the shared cost if there are problems.

Carew Wilks

We have brought in the expertise from across General Dynamics into the programme to make sure that our design, as has been set out, is consistent—

Chair

Sorry—my question was to do with the Abrams tank. Is there any correlation between the way you procured the Abrams tank and what you are doing here with AJAX, because what I am seeing with AJAX seems to be very unique in its structure? You have handed over 25 vehicles to the MoD, which now have huge problems. You made it clear, or you implied earlier in the start of our conversations, that that was it—you are “job done”, tick in the box. We are trying to understand this: how did the MoD approve 25 vehicles that now have severe problems with them, to the point where you are having to stop the trials? Was that their fault? Should they have been more thorough in checking before saying, “Yes, I’ll take the goods home”?

Carew Wilks

We carried out extensive testing trials and we are at the position where we did not expect these issues to be raised. We are now working very closely, and we take this extremely seriously and we—

Chair

But if you take it seriously and you accept that these tanks—light tanks—are not working to the standard that we expected, why should the MoD then pay to return them back to you and get them to the standard that we expect?

Carew Wilks

We will fix these problems—

Chair

But the taxpayer is paying for them—

Carew Wilks

We will fix these problems within the contract price; I am committing to that.

Chair

Okay. The concern we have is that the more this costs, the more it is getting closer to another Nimrod, whereby the taxpayer pours money into a programme which— You have made some incredible kit at General Dynamics; there is no doubt about it. But given where AJAX is going, and the length of time it is taking to procure something that has problems after problems, with no end in sight as to when we solve them, at what point do we then draw a line and say, “Enough is enough”?

Carew Wilks

We have identified some mitigations to the issues that have been identified on noise and vibration, and we are confident that those can be embedded. We are carrying out trials on those at the moment and those trials move on to the next phase this week, with another third party called Mara, which we are paying for, to identify mitigations and to confirm the improvements, which we will embody on to our production vehicles for delivery to the Army.

Chair

Okay. To keep us on the straight and narrow, can we specifically now move to Mark Francois and his question, please?

Mr Francois

So you start developing this system in 2010. The timeline is the same as the Warrior capability, which has just been cancelled. Warrior is aluminium; your vehicle is steel. In 2017, lots of rumours start to circulate, including at defence exhibitions, that there is something seriously wrong with AJAX. You carry on doing the trials with GD personnel; funnily enough, they report no problems. Last summer, you hand the vehicles over to Army personnel to start doing trials and straight away there are problems, which GD has not admitted to for nine years. You said there were injuries to people’s hearing. Are there any other injuries caused by vibration?

Carew Wilks

Perhaps I can address the trials—

Mr Francois

No, no, no—just answer the question. Are there any other injuries that have been caused by vibration? Yes or no?

Carew Wilks

We have received reports from the Army of injuries reported by Army crews using the platform.

Mr Francois

Caused by vibration?

Carew Wilks

Reported against vibration, yes.

Mr Francois

What sort of injuries?

Carew Wilks

I don’t have the details in front of me; I think Scott may have some understanding.

Scott Milne

We have received a high-level report of the number of incidents and their nature. There—

Chair

We are after their nature; that is what we are trying to get to here.

Scott Milne

Around the hands and the whole body—vibration.

Chair

So, white noise?

Scott Milne

Tingling in the hands has been a common report.

Mr Francois

What is sometimes called in the construction industry vibration white finger? All right. Okay. So we have now got injuries from the noise and injuries from vibration. You have said that most of the vibration comes from the engine and the transmission, Mr Milne. Did I hear you correctly?

Scott Milne

Sorry—and the running gear, when moving.

Mr Francois

And the running gear, when moving? Okay—well, this vehicle is meant to move. Are there are any noise or vibration issues resulting from the turret or the main armament?

Carew Wilks

Those do not introduce vibration in the same way. Clearly, the whole platform, taken together as a system—

Mr Francois

No, no, no. Sorry—excuse me. I asked you a very specific question. In the same way, are there any noise or vibration issues resulting from the turret or the main armament when it is fired? Yes or no?

Carew Wilks

I think I will let Scott answer that.

Scott Milne

The only noise source really from the turret is the main armament. The design of the turret has the CT40 cannon outside of the crew space, so there is a citadel in which the crew is shielded from the main armament. So, the noise impulse to the crew when firing closed down is negligible.

Mr Francois

Has there been any cracking in the hull at any stage?

Carew Wilks

No cracking in the hull. The hull has gone through a series of very extensive survivability tests, and now provides the best possible protection for the crews, learning from all the experience in Iraq and Afghanistan. I think we should be proud of the protection—

Mr Francois

So you are absolutely adamant? People have told us privately that the hull starts to crack if you fire the weapon on the move.

Carew Wilks

I am not aware of any such reports.

Mr Francois

You are not aware of them.

Chair

If you could look at that and get back to us, that would be great.

Scott Milne

We do not have such reports.

Carew Wilks

We do not have any reports that would suggest that. We have been responsible for the reports throughout the programme.

Mr Francois

What we are trying to get to is: what is causing these problems? To some extent, you have helped us—you have helped us more than the MoD has, to be fair. You mentioned BCIP 5.6, which is the latest iteration of Bowman, with which AJAX would be equipped, correct? Presumably AJAX, because it is part of the digitised battlefield—that is the whole raison d’être of the vehicle—will include Morpheus as well, yes?

Carew Wilks

At this moment, it is BCIP 5.6 which would be put on to the platforms, and the future path for that communications system is something for the MoD.

Mr Francois

Yes, but the design is earmarked for Morpheus as part of LE TacCIS. That has always been part of the solution, hasn’t it?

Carew Wilks

The Morpheus programme is separate, and links to the communications system.

Mr Francois

Yes, but the reason I ask the question is that the integrated review talks about integrated armed forces and about highly digitised armed forces. For the integrated review to hang together, all of these different units—of which there will be fewer—have to communicate with each other perfectly. The Army’s programme for that is LE TacCIS. The main sub‑part of LE TacCIS is Morpheus, which is the Bowman replacement, correct? Who is the prime contractor on Morpheus?

Carew Wilks

For the AJAX platform, this is the most advanced digital platform it has onboard. It has digital systems that are open and scalable, and this is the first of such platforms that will provide the integrated battle space capability for the Army of the future. The communications system is BCIP 5.6; that will be upgraded, I am sure, as Morpheus comes online.

Mr Francois

Right. According to the NAO report I mentioned earlier, so far they have spent £1.5 billion on LE TacCIS, and they have virtually nothing whatsoever to show for it. Is it true that the incumbent on Bowman and on Morpheus is General Dynamics, and that they are now in dispute with the Ministry of Defence over Morpheus?

Carew Wilks

I am speaking on behalf of General Dynamics Land Systems, and for the Ajax programme. I am not able to comment on—

Mr Francois

Yes, but what I have said is true, isn’t it? Don’t pretend you don’t know it. It is true, isn’t it?

Carew Wilks

I do not know the situation with Morpheus.

Mr Francois

From the people who brought you the Ajax debacle, we now have the Morpheus debacle, and you are the same parent company at the end of the day, aren’t you? Not only have you given us a tank that doesn’t work, now you’ve got a radio that won’t work. You’re doing really well, aren’t you?

Carew Wilks

BCIP 5.6 is being installed on to AJAX. It will come out at the drop 3 configuration.

Mr Francois

Yes, but AJAX is meant to be in service for 30 years. Bowman comes out of service in a few years’ time, so it is going to need a new radio, isn’t it? Otherwise, there’s no point in buying the bloomin’ thing. That will be Morpheus, and you do Morpheus, and that is not working either, is it? That is my point.

Carew Wilks

I am not able to comment on the Morpheus programme. Scott?

Scott Milne

I can’t, but I can just give you the assurance that the electronic architecture within AJAX will be fully compatible, because it meets the generic vehicle architecture open standards. Morpheus has been designed with that in mind.

Mr Francois

My final point is that you have brought us not just one cock‑up, but two. Thank you very much.

Chair

Okay, we have three others who want to ask questions: Martin Docherty‑Hughes, followed by Derek, please, and then Richard. Martin, over to you.

Martin Docherty-Hughes

Thank you, Chair. Just following on my colleague’s point about vibration white finger, that is not something we should take lightly: as the son of a shipyard worker, I know the impact of that condition. Can I ask you this, gentlemen? You clearly have every confidence in this vehicle, so given your confidence in it, can you tell the Committee who else, other than the MoD, is going to buy it?

Carew Wilks

The capability of AJAX is a specific reconnaissance capability for manned battlefield reconnaissance. As we said, it is at the leading edge of such capability, with a digital architecture and a very extensive and advanced suite of sensors. It will provide the British Army with a core part of its modernisation, and will be transformational—

Martin Docherty-Hughes

Mr Wilks, other than the Ministry of Defence, who is going to buy this vehicle?

Carew Wilks

We have a number of potential export opportunities. Clearly, we are looking very closely at ensuring we get this into service with the British Army fully functionally. My personal focus is to—

Martin Docherty-Hughes

Okay. I am keen to let other Members get in. You mentioned an export strategy. Which countries are you targeting in your export strategy, other than the MoD?

Carew Wilks

We look, clearly, around the world. I know that there is some interest in a similar capability from the Middle East region.

Martin Docherty-Hughes

Finally, Chair, I noticed one of my former colleagues saying on Twitter that this could take nearly as long as the Apollo mission to the Moon and is probably more expensive. Do you think we will get that far?

Carew Wilks

We are very committed to delivering this capability. We have obviously had a very significant impact from covid since last March. I am very proud of the commitments of my team in south Wales in continuing production operations, and also of our supply chain across the UK in continuing to deliver the programme throughout the covid pandemic, while clearly we have applied the various safety measures. We are, as a result, somewhat behind schedule, but I am committed to recovering that schedule and delivering all the vehicles in 2025.

Martin Docherty-Hughes

Sorry, Chair, just one final point. Mr Wilks, can you confirm whether or not you were responsible for the acquisition of all equipment for the land environment in the MoD before you joined General Dynamics?

Carew Wilks

I left the Ministry of Defence and the Army in 2013, and since then I have been working in various roles in the defence industry, including as chief operating officer for a military vehicle company. I joined GD in 2018.

Martin Docherty-Hughes

Thank you.

Derek Twigg

Talking about your colleagues, in your submission you state that the Ajax programme currently supports more than 4,100 direct jobs and a significant number of indirect jobs across the UK. However, when the contract was announced, you said that the programme would safeguard or create 10,600 jobs for UK workers. Could you explain to us why the figures are so different?

Carew Wilks

As you know, General Dynamics has invested very heavily into this programme and into south Wales. We employ around 800 directly in south Wales at Merthyr Tydfil and Oakdale. Our supply chain across the UK extends to around 230 companies around the UK, some of which work at the leading edge of technology. They employ around another 3,300 direct jobs, and if we then look at the indirect benefit and the indirect jobs associated with that whole supply chain, that would add a further 8,000 jobs. That takes the total to above where we were before.

Mr Jones

You just said that GD has invested heavily in south Wales. It sounds to me as though the taxpayer has, rather than GD. How much has General Dynamics actually invested, separately to the money it has already received from the MoD?

Carew Wilks

General Dynamics is very committed to its place in the United Kingdom. It has been in the United Kingdom for many years. We have established a footprint in south Wales with our engineering centre of excellence and our Merthyr Tydfil production facility. We have invested about £40 million in those two facilities.

Mr Jones

£40 million?

Carew Wilks

Yes.

Mr Jones

Is that all?

Carew Wilks

That was to develop the test track manufacturing facility, and the system integration laboratory and engineering facilities.

Mr Jones

So the rest of it has been paid for by the taxpayer, then?

Carew Wilks

The Ajax programme and the production of the vehicles—

Mr Jones

Just say yes if that’s the case. It has. The taxpayer has paid for this. Although you have perhaps created 4,100 direct jobs—I can’t do the maths very quickly to work out how much the taxpayer has subsidised each one of those jobs—it is quite clear that GD as a company has not actually invested a great deal of money in this, if it is only £40 million. I’m sure I could have created 4,100 jobs if I had access to over £4.7 billion of taxpayers’ money.

Carew Wilks

In addition to the jobs and indirect jobs, the skills base across the UK in the armoured fighting vehicle capability—

Mr Jones

I don’t disagree with you, but let us be honest, you could have done that anyway. You are saying only £40 million—that is astounding.

Chair

Okay, the point has been made. Whatever happens to Ajax, will Merthyr Tydfil be used to build anything else that General Dynamics might procure?

Carew Wilks

We are very committed to the long-term position in the UK. We are looking forward to the land industrial strategy as an important part of changing the way in which defence procures in the UK, to avoid the feast-or-famine arrangements of the past. We are very keen to sustain the skills and the knowledge that have been built up through Ajax over the past 10 years. We wish to continue that at Merthyr Tydfil and—

Chair

Okay. That is very clear. A short question from Stuart and then finally to Richard.

Stuart Anderson

What is the per cent net profit on the Ajax contracts to General Dynamics?

Carew Wilks

I am not able to take that immediately. I can come back to the Committee, if necessary.

Stuart Anderson

If you can write to the Committee, that would be good.

Chair

We are coming to a close. I have a couple of final fast questions. If you do not have the answer, I will be grateful if you could write to us. This is a fixed budget of £5.3 billion, is it not? If you exceed that, if problems continue, who pays for any additional expense, if the decision to continue trying to get a result is chosen?

Carew Wilks

As I said, we are very committed to fixing those problems within the context—

Chair

My question was clear-cut: if it is over the budget, who pays the excess?

Carew Wilks

It is not over the budget—

Chair

I hear that. If it does go over—hypothetically speaking, if we end up with more problems than we can solve?

Carew Wilks

We will solve those problems on the equipment within the existing contract—

Chair

If you feel uncomfortable answering, just say so, but do not give me another line. This is the slight frustration we have. There is a possibility, the way the drive path at the moment is, that this will cost more than the original amount, okay, because of problems. We are not even having tests continue at the moment. You have only delivered a handful and the package of delivery was supposed to be back in 2017. It could easily go far more than the original projected cost, so my question is, who pays if we say, “We just need to fix these final things. It’ll be another half a billion”? Who pays for that? If you don’t know the answer, that is fine.

Carew Wilks

I absolutely know the answer. These problems, we will fix them within the contract, and we will deliver within the contract—

Chair

That is your answer, but that is fine.

Carew Wilks

We are confident that we can fix these—

Chair

You have made that very clear this whole afternoon.

John Spellar

What does the contract say? If the costs exceed, which of the parties is liable for those costs?

Carew Wilks

General Dynamics holds the risk of costs associated with meeting the requirement. That is what I have committed to achieving—the requirement of the contract, the full capability for the British Army to protect our soldiers on operations with this great capability at the contract price.

John Spellar

To what extent have variations to the contract by the client potentially created a question mark over that?

Carew Wilks

Clearly, if there are new requirements that the customer would like to add to the contract, that would be the subject of separate negotiations.

Chair

This is your final opportunity here in front of the Committee. Is there anything you would have done differently? The Procurement Minister is about to come in to sit in the same seat, literally, as you. If you could do it all again, what would be the two things that you would want to do differently?

Carew Wilks

Given the situation we have with noise and vibration, which was a surprise to us last year, we would want to incorporate—

Chair

I was thinking strategically, in the procurement cycle, rather than the individual operational challenges that you faced.

Carew Wilks

I think that integration aspect of the total—

Chair

You were designing something and manufacturing it at the same time. Is that not something that you would avoid trying to do in the future?

Carew Wilks

The concurrency of development and production brings the capability into service more quickly than a more sequential route, but introduces risks. Those need to be more carefully managed in the future.

Chair

You have put your finger on the point. When you do those two things at the same time and you end up making mistakes, it costs more and you do not save time at all, as we have seen. This project started in 2010. My final question is a technical one on Brimstone. This is one of our most incredibly capable missile systems, British-made. When was the decision made to introduce it to AJAX?

Carew Wilks

There is no formal decision. We have looked at the possibility of integrating Brimstone on to the Ajax family. We have provided a concept demonstrator, which we have done jointly with MBDA.

Chair

So our most potent weapon system on the back of build that we could use, and we are now just talking about whether to strap it to the top of AJAX.

Carew Wilks

From General Dynamics’s point of view, we are ready to integrate any other systems that may be required on to the platform.

Chair

All right. It has been illuminating—lots of thoughts. We have asked you, I think, for a series of reports in writing. We will be very grateful for that. You will understand the frustrations here. This is a big programme that is taking an awful long time. That is why we want to get to the bottom of some of the details. You have given us an awful lot of thought, which we will now put to the Government, posing similar questions. You are more than welcome to stay in the Committee room. I will draw this to a conclusion, and we will go off the air briefly while we change seats. Thank you very much indeed. Examination of witnesses

Witnesses

Jeremy Quin, David Williams, Lieutenant General Wooddisse and Major General Hodgetts.

Chair

Welcome to part two of the Defence Committee hearing on “Ajax: recent developments”. We are very grateful to the Procurement Minister for joining us in situ; it is fantastic to see you in person. We also have David Williams, who we have not seen before in this Committee, who is the new permanent secretary at the Ministry of Defence. Welcome to you, sir. We also have Lieutenant General Ralph Wooddisse, who is the Commander Field Army in the Ministry of Defence, and Major General Timothy Hodgetts, who is the Surgeon General. Welcome to you all this afternoon. We have done introductions, and I know you watched part one of the session. Before we turn to Ajax, I have two short questions, if I may, to put to you as the Procurement Minister. One is to do with the numbers of people being pinged because of the covid-19 app. Could you please provide an answer today, or perhaps in writing? What percentage of the military workforce is being forced to self-isolate? I understand it is around 5%. If we start getting towards 10%, you would understand that there would be concerns operationally. NHS staff have been exempt from that, and are able to continue their duties. The question is whether we would help you call for that exemption to be extended to those in our armed forces, so that they can continue watching our backs. Is that okay with you, sir?

Jeremy Quin

Yes, Chair.

Chair

The second is a stock-check of our surface fleet destroyer capability. A quick overview of the Type 45s: HMS Defender is part of the carrier strike group now. HMS Diamond is experiencing technical propulsion issues and has gone into maintenance. HMS Daring and HMS Duncan are both in deep maintenance, and HMS Dauntless is part of a power improvement project upgrade, leaving just HMS Dragon, which is going through planned maintenance as well. Given our national and international security obligations, as outlined in the integrated review, is it not operationally unacceptable that the Royal Navy’s destroyer availability is now reduced to a single ship?

Jeremy Quin

An area that the Secretary of State and I have absolutely focused on is improving the availability of our destroyers and frigates. Your facts are right; Mr Francois asked exactly that question. I think the Committee would absolutely agree that the PIP is essential in order to upgrade the capabilities of the Type 45s. Dauntless will be out of that PIP by the end of the year. We will have another Type 45, depending on operational commitments going in. I hope to see Dragon back on operations in the early autumn. As you pointed out correctly, we have two Type 45s embarked with CSG. Diamond has current issues, although I hope they can be rectified shortly. There is a focus on this issue. We have brought back into the Navy, so that they have the direct control of their strategic suppliers. Part of the issue is making certain they have direct contact with their suppliers to gather spares. To have them, hopefully, at the quayside, when ships come in for deep maintenance is something I am very concerned about. I have spent some time on Duncan talking to the ship’s company about the frustrations of long periods in deep maintenance. You are right to raise the issue.

Chair

It is important that we raise this issue because it is an operational concern. HMS Defender is now our only currently operational Type 45. If that ship experiences propulsion problems, which we have seen across the Type 45 family, our carrier group would be forced to lean on a NATO ally to ensure that we have destroyer protection. That really indicates that, bottom line, we need a bigger Navy.

Jeremy Quin

Above all we need to ensure—which is the pith of your question, Chairman—that the ships we have are in good order and capable of doing the tasks that we set for them.

Chair

Six destroyers, when there is always going to be one in deep maintenance or maintenance and there is always going to be one training—I think the point has been made.

Jeremy Quin

It has.

Chair

I understand that the Secretary of State, on his visit to the United States, visited the General Dynamics headquarters and had a meeting with the head of General Dynamics. I don’t know if you can begin today by sharing whether anything about the project over here was discussed and maybe your initial thoughts, having heard the first hour and the discussions we have had with representatives from General Dynamics.

Jeremy Quin

I was not privy to meetings of the Secretary of State and GD, but I can certainly confirm that I have met in person, in my office, the chief executive of General Dynamics. I am very impressed with how she is leaning into these issues. It is recognised by General Dynamics that there is an issue here that needs to be fixed. We will work together. I think there is a much-improved degree of collaboration between my team and General Dynamics UK, and that is being helped and supported by a very active interest from the global chief executive, which I very much welcome.

Mr Jones

Jeremy, on 23 June the Secretary of State was asked a series of questions about this programme. He told us that 14 vehicles are being delivered. We just heard from General Dynamics that 25 vehicles have been delivered and meet initial operational capability, so why is there a difference in these figures?

Jeremy Quin

I fear I might complicate matters further with a third number, so I apologise, Mr Jones. My understanding is that we currently have 26 vehicles delivered—25 needed to be delivered to meet the IOC threshold. My understanding is that we have 26 currently that have been delivered, gone through GAT and been accepted into the Field Army.

Mr Jones

Why is it that we have paid General Dynamics something like £4.2 billion of taxpayers’ money and only received 26 vehicles? The figure is a lot higher than is in the briefing notes.

Jeremy Quin

My number is £3.167 billion under the contract, but we may need to unpack that, Mr Jones, as there are other things as well. Let’s leave that to one side.

Mr Jones

No, no—let’s just accept your figures.

Jeremy Quin

It is still a lot of money. First, I would say—you would all recognise this—that had we only paid for the aircraft carriers when they had arrived and were in service with the Royal Navy, a lot of designers in the supply chain would have gone bust in the meantime. So, part of the funds that we have been paying is all the design work up to capability drop 4. It includes the training modules. It includes a lot of manufacture. There are not just those vehicles that have been delivered to us; there are other vehicles and hulls. There are 115 vehicles that are actually being assembled in total.[1] There was a large investment into Merthyr to get the whole thing up and running in the first place. I don’t think this is a case of spending a lot of money for nothing. There is a lot that has come via it. I would also say that we have a strong and firm price contract, and that has advantages. It may have disadvantages when you are paying money up front. It has advantages when you reach a bend in the road and you need to get things resolved, because the price at £5.5 billion is a firm price and General Dynamics need to honour their contract, which, from what I was hearing, they were saying they absolutely will.

Mr Jones

They did, but it is quite clear that if we get to £5.5 billion and more money needs to be spent, the taxpayer is going to pick it up. I accept that you have picked this hot potato up. You weren’t involved in the original contract. I accept what you say in terms of carriers and others—we can’t just allow industry to develop it and then buy it at the end, but the problem with this contract is that all the risk is with the taxpayer, isn’t it? If you look at what we have just heard from General Dynamics, they have put no risk up front. I accept there might be a need for a job creation scheme in Merthyr Tydfil, but £3.8 billion for 4,000 jobs is a lot of investment. Why was there not some more risk sharing with General Dynamics? You have just renegotiated or recast the contract. They have only put £40 million up so far, according to their evidence. This is a bad deal, isn’t it? You can admit it, because it was not agreed on your watch, was it?

Jeremy Quin

It wasn’t, but it is my job to fix it. But, before I go down that route, the taxpayer has paid a lot of money up front, but under the terms of that firm-price contract, it is up to General Dynamics to deliver the 589 vehicles to us, and we need to ensure that those vehicles work and are fit for purpose. I made it very clear that IOC will not be declared until such time as we have resolved the serious issues. I heard the tail end of the last session, in which the Committee members were asking General Dynamics what their profit margin was going to be; I think Mr Anderson asked the question. I don’t know how they can answer that, with respect to General Dynamics; they may or may not be nodding behind me, or shaking their heads. The reality is that they will not yet know the costs associated with delivering those 589 vehicles. We have committed to spend £5.5 billion with General Dynamics in return for 589 vehicles, and they have committed to ensure that we get those 589 vehicles. That is the nature of a firm-price contract.

Mr Jones

Could you explain the relationship between General Dynamics Land Systems UK and the main parent company? Let us say that the bucket of money that you have got there—the £5.5 billion—is all spent and we do not actually have vehicles that are capable of being taken into service, the only person who will pick up the tab further on is going to be the taxpayer, isn’t it, under this contract?

Jeremy Quin

It is a firm-price contract, so we pay General Dynamics £5.5 billion and they are required to provide us with the vehicles.

John Spellar

What about variations to contract?

Jeremy Quin

That is the contract as per the December 2019 recast.

Mr Jones

So you are saying that if, sometime next year or even later this year, your £5.5 billion pot of money has disappeared, General Dynamics will have to pick up the tab—let’s say it costs another £2 billion—to deliver these vehicles?

Jeremy Quin

That is what the contract says. I am looking to see whether the permanent secretary is nodding his head. He is putting his hand in the air. If he wishes to add anything to that, he is welcome to do so.

David Williams

Yes. Look, it is actually quite a strong contract. First, we have the ability to hold back or retain payments as milestones are missed. There are provisions for liquidated damages—albeit, given the scale of the overall contract, they are quite modest—for delay. As a firm-price contract, which includes a parent company guarantee, in the end it is for GD to deliver 589 vehicles within that price, as the Minister said and indeed as GD have said. That includes bringing all the vehicles up to the full specified capability standard in the contract. If it is a modest overrun, that is one thing. If it is a major overrun, no doubt there would need to be compensation around the commercial incentives and the ability of the company to fulfil that contract. However, both we and the company are focused on making the current contract work, and it is not our expectation that the taxpayer will need to pay more than we have currently set out in the contract to get these vehicles into service.

Mr Jones

If it is such a good contract and you have a clause in there to hold back and retain money, why have you not done that before now?

David Williams

In terms of your question about the profile of spend, first, as the Minister said, it is not unusual in complex defence contracts for up-front development costs to be funded by the MoD rather than by the company. That is standard in many of our major equipment programmes. The £3.2 billion spent to date includes the development and demonstration phase, which will, in big handfuls, have been around three quarters of a billion pounds for development and one-off costs. We have also spent just over £2 billion on manufacture, to pay not only for the vehicles that we have accepted and fielded into the Army for trials and testing, but for sub-systems and components—armour packs, for example—for turrets and hulls that have been built already. The manufacturing phase of the programme is quite well advanced.

Chair

Why are you building things if they don’t work? Why are you paying for manufacture when the design has not been completed? You are spending money—you have just said £2 billion—to go into the build phase, when we have still not ironed out all the niggles and all the problems, which are now coming to fruit.

Jeremy Quin

I will start, and the permanent secretary may wish to contribute. A question was asked earlier about the risk being taken by General Dynamics, and that is a real risk they are taking, because they are manufacturing vehicles that they may need to change and perform engineering fixes to. In any event, there are going to be upgrades to get them to capability drop 4 before we can declare FOC. But the reason for the combination of the demonstration and manufacture phase dates right the way back to 2014. There were delays to the project. Although there was only a smaller combination then, it was in order to try to ensure that the vehicles were brought into service earlier, and it has not happened.

Chair

I don’t want to interrupt Kevan, who wants to continue here, but you made a comparison with the carrier. The carrier is a prototype, but it is also the final result, because you build only one of them. You don’t make one and then say, “Right, we have learned from it.” With this, you should at least procure one that comes off the conveyor belt and works. Once you are satisfied with that, you can then build more, plus the variants as well. I make it very clear that you have inherited all this, and we fully understand that, but the approach here has been to manufacture and design at the same time—we called it “design and make” when I was doing DT. That is not the best approach here, which is why you are running into problems today. You are spending money for these 25. The question is why you did not send them back when they didn’t work and say, “We are going to stop spending.” The question leading to a question here is: have you actually stopped giving any funding to General Dynamics because of the problems that you have incurred?

Jeremy Quin

We haven’t paid any money this calendar year to General Dynamics.

Chair

Because of these problems, or simply because they are not due any funding?

Jeremy Quin

We pay against milestones, and invoices have not been presented because those milestones have not been hit.

Mr Jones

I think they would be a bit cheeky to ask for any money, personally. I will come on to some other questions in a minute, but I am trying to get my head round it. It seems to me that General Dynamics have not really put anything up here. They have had a good deal: £40 million for some work at the actual factory. In terms of the guarantee of the main parent company—this might be a question for the permanent secretary—is that capped at some level, or is it just an open-ended guarantee?

Jeremy Quin

I know there is a permanent guarantee in the contract, because I have seen it. I have not read the fine print of it. It would be normal for such things to be uncapped, but I don’t know whether the permanent secretary is able to add any light on that.

Mr Jones

If you don’t know, you can write to us.

David Williams

If we could write, that would be preferable.

Mr Jones

Let me finish off the last few questions that I have in this opening session. In the House on 8 June, you stated that under the recast, the “forecast initial operating capability” was to be delayed a year until 30 June 2021 “at 50% confidence, with 90% confidence for September 2021.” When do you anticipate that the IOC and subsequent stages of the programme will be achieved?

Jeremy Quin

I would be very surprised if it was September, Mr Jones. I know that will not come as a surprise to you. What I said in the House at the same time is that we have serious issues with noise and vibration. We have to resolve those before we can declare IOC. We have got the trials, which I hope will be able to resume at Millbrook. We need to get through those trials, get the data and then be in a position to work through what engineering fixes if any need to be applied. And then we will be able to know IOC.

Mr Jones

How many vehicles should have been delivered by now under the original contract?

Jeremy Quin

From memory, capability drop zero is 52.[2] There are more that are ready to be delivered, I suspect, to the MoD, but ultimately we need to get to IOC. To get to IOC, as I made clear, we need to have a resolution to the noise and vibration issues.

Mr Jones

Thank you.

Jeremy Quin

Chair, I do not want to break the flow of the right hon. Gentleman, but you very kindly said that I could say a few words, which I would love to do, just to share with the Committee my latest thoughts.

Chair

I am conscious that we have burned through almost half of our time, and we are still on question one.

Jeremy Quin

I am not going to run away, Chair, so if you need me here for longer. This is an incredibly important programme and I am not going to go until you kick me out.

Chair

That is noted, thank you.

Jeremy Quin

If you don’t mind, I think there are issues that might be of help to the Committee. I have described Ajax as a troubled programme—I wish that it wasn’t, but it is—and it requires a lot of work from ourselves and our industry partners to get ourselves back on track. We can’t be 100% certain that that can be achieved but this programme matters to the British Army, to 4,100 employees and to 230 companies across the UK, and we will do our utmost to succeed. There is a serious problem related to noise and vibration. I personally intervened in March to require that IOC would not be declared without my explicit agreement. As I said previously, we require a clear path to be established for the resolution of these issues. This is critical to ensuring that the vehicle is capable of fulfilling the training and exercise role due to be undertaken at IOC. Given the combined demonstration of manufacturing phases, it was always the case that GD accepted the need to bring the vehicles up to a higher standard required of future capability drops. This remains the case, and we have a strong, firm-price contract. We have the support of GD from the highest levels in achieving our objectives. The programme has faced very significant scrutiny, which has revealed a number of concerns; most importantly, while our health and safety review is still ongoing, I am concerned by some of its preliminary findings. Our people and their wellbeing must always come first. We have been in contact with the Health and Safety Executive, which is content with the investigative approach we are taking, and I have directed that the full report will be shared and discussed with the HSE. While the incumbent team has made great efforts and significantly improved joint working with General Dynamics, we believe that it is appropriate that the programme receives the attention of a full-time SRO, with previous experience of difficult programmes, who can focus 100% of their time on working with DE&S for its delivery. We are currently undertaking a search for the right person who will be responsible for the delivery of the programme through to FOC, or indeed, informing Ministers if, which we sincerely hope is not the case, this is for any reason unachievable. This is part of a wider push led by the permanent sec and me to ensure that we have a greater number of full-time SROs across all our complex programmes. That was in any event going to rolled out from the autumn and has the full support of our TLBs. I do not want the new SRO to be distracted by analysing past decisions but nor are we willing to wait until the end of the programme before we gather the facts about what may have been executed better during the course of that programme. We therefore intend to appoint a review to report to Ministers on these important issues. Our current status is that we need the Millbrook trials to identify and to establish causal links. We have already enough data to confirm that there is problem, but the trials have been paused in order to ensure that crews are not put at risk. I hope that they will be able to resume shortly, but only when we are confident about the means to do so safely. Lastly, I can assure the Committee that GD are now totally focused along with us on achieving resolution. I hope and believe that if this vehicle had been procured after DSIS and the changes in the IR, it would have been better designed to succeed. It still can, however, and that is absolutely our objective. I am very happy to answer your questions, Chair, as I have been so far. I am sorry that it slipped my mind that I had those points to add, but I think they may add to your deliberations.

Chair

Minister, we are very grateful for that. It is also the first time that I think you have been very honest and very candid about the fact that we do need potentially to draw a line in the future, after your review has taken effect, to make a judgment as to whether we can continue or not, depending on the outcome of that review. That is something that the Committee would very much welcome. I know that you are going to come back and say, ”Yes, all hands to the wheel,” and you will make it work and so forth.

Jeremy Quin

We are committed to it, and we want it to succeed. I am sure it can succeed.

Chair

Ultimately, it is taxpayers’ money. After your review has done its analysis, if it is appreciated that it is a bit like Sisyphus pushing that rock up the hill, and you are never going to achieve it, ultimately a line needs to be drawn and we do need to move on. I know that that is going to prompt further questions, and I want to get to Stuart, but is it a quick one, Mark?

Mr Francois

It is only another one on ammunition, Minister. On 23 June, Air Marshal Knighton told us, “We have a plan to purchase appropriate levels of stockpile” ammunition, “and the funding is in place for that. I do not have the figure in front of me, but we will make sure that Min DP has it before he comes to the Committee on the 20th.” The reason is that there are lots of accusations that the ammunition is extremely expensive. So how much does the ammunition cost?

Jeremy Quin

Well, it is more expensive than the 30 mm ammunition. I am going to disappoint Mr Francois, because this is an area where for operational reasons we do not talk about the amount of our stockpile, and for commercial reasons we cannot talk about exact prices. I can confirm that it is absolutely right that it is more expensive than the 30 mm.

Mr Francois

Forgive me: that tells us absolutely nothing.

Jeremy Quin

Richard Knighton—

Mr Francois

No, I am sorry, Minister: you are not going to get away with this. Rich Knighton told us you would come to this Committee and tell us how much it cost. I tabled a question; you have claimed commercial confidentiality. This programme is already in terrible trouble. It is £5.5 billion. You just told us the SRO wasn’t even full-time on the programme. I am going to ask you again: how much does a round of the new 40 mm ammunition cost?

Jeremy Quin

I am going to ask if the permanent secretary can share with us any views that he can on that. But do please—I know this Committee is keen to have vehicles that aren’t outgunned. The 40 mm rounds are far more effective, and we can achieve more with one round than we can with a clip of three, which was, I believe, standard for the 30 mm.

Mr Francois

All we need, sir—we don’t need the PR, we just need the figures. How much?

Jeremy Quin

Which may be the one thing I can’t give you.

Mr Francois

Then I am terribly sorry, sir, but bearing in mind the trouble you are already in, that is not a good move on your part.

Jeremy Quin

May I see whether the permanent secretary can—and if the permanent secretary thinks that I can release that, and that it is public information that we can share, it would get me out of the spot here, but I believe commercial sensitivity means that it is quite difficult to do so.

David Williams

My understanding is that it is commercially sensitive, although if the Minister was content we could certainly write to the Committee with that on a privileged basis, and we might just use that time to check that it is as commercially sensitive as we think.

Mr Francois

But why not just tell us now, then? Just tell us: what does it cost?

David Williams

Precisely because it is a pretty commercially sensitive number.

Chair

Okay. We are not going to get any further with this. The Minister knows that the same gun is used on the Jaguar—the French recce vehicle—as well. We may turn to them and ask them how much it costs them as well.

Mr Francois

But Chairman, for the record, we were promised the figures.

Chair

The point has been made, and we are asking the Minister to reconsider, and bearing in mind what he has heard today—

Mr Francois

This is unacceptable.