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MPs say EADS air tanker contract poor value
By Adrian Croft
LONDON | Wed Sep 15, 2010 7:10pm EDT
LONDON (Reuters) - MPs criticised the Ministry of Defence on Thursday for signing a 10.5 billion pound military air tanker contract with an EADS-led consortium, saying it was poor value for money.
Parliament's Public Accounts Committee concluded in a report there were "significant shortcomings" in the way the ministry had contracted to lease 14 modified Airbus A330 aircraft from the AirTanker consortium in 2008.
The planes, due to enter service between 2011 and 2016, do not currently have the protective equipment needed to fly into war zones such as Afghanistan, where Britain has 9,500 troops.
Committee Chairman Margaret Hodge, a Labour politician, said PFI was "inappropriate" for such a large defence project.
The tanker programme has already drawn sharp criticism.
The National Audit Office, a public spending watchdog, said in March that the Ministry of Defence had chosen the PFI route without a sound evaluation of alternatives. Business Secretary Vince Cable has also voiced concerns.
AirTanker will own the aircraft, which will also be used to transport troops, and provide them to the MoD when needed. The 27-year contract includes maintenance and training.
Defence Support Minister Peter Luff said the government was committed to ensuring future contracts were better managed.
Legislators warned the government on Wednesday deep defence cuts could endanger Britain's ability to conduct current military operations
"We do not believe the procurement was value for money," the panel, comprising 14 legislators from all main parties, said.
The scathing report into a decision taken by the former Labour government comes at a sensitive time.
The four-month-old coalition government formed after the May election is searching for ways to save billions of pounds to curb a record peacetime budget deficit. It is reviewing its defence needs and the military faces cuts when the coalition announces detailed public spending plans on October 20.
The review may question whether the tanker deal was "sensible or affordable," the committee said.
The Times newspaper reported last month that ministers might scrap the tanker project or sell one third of the aircraft to France.
However, the Royal Air Force (RAF) urgently needs replacements for its ageing Lockheed TriStars and VC10s.
In the United States, EADS and Boeing are locked in a politically charged competition for a contract, worth up to $50 billion (32 billion pounds), to build 179 tankers for the U.S. Air Force.
AirTanker defended the British deal, saying it offered value for money. "Our new service will provide a greatly enhanced refuelling and transport capability for the RAF ... whilst reducing overall running costs," it said in a statement.
The consortium also includes Britain's Cobham, Rolls-Royce and VT Group, recently bought by Babcock, as well as France's Thales.
WAR ZONES
The Ministry of Defence (MoD) has not yet decided whether to have protective equipment installed, at extra cost, the committee said. It said it was "simply astonishing" that the MoD did not decide until 2006, late in the procurement process, that the tankers should be able to fly into war zones.
The deal was done under the private finance initiative (PFI) scheme, used to fund public projects with private capital.
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