Monday, 19 August 2013

Just call me (Dagenham) Dave

Something a little more off the cuff today. We're going to be talking second hand dealing, obviously on the military scale. Could the answer to Britain's multiple defence procurement woes come from dipping a foot into the used equipment market? Let's have a look.

My interest in this kind of thing was primarily sparked by a discussion I had a while back with a bobby about police cars. He was quite impressed with his new set of wheels (a Volvo something or other), but a little less impressed with the news that had wound its way down the grapevine about the cost. Granted, depending on their anticipated role, police cars tend to be kitted out with the sort of additional features that you can't buy from your local dealer. But the price was nearly double what the car would have cost had it been bought off a forecourt. The word was that the cost increases had been caused by the nature of the centralised procurement system in place. He almost looked embarrassed to be driving it.

The discussion turned to buying second hand cars, and a quick flick through the latest copy of AutoTrader (which I was assured was not a standard feature in the glove box of police cars) threw up some interesting options for procurement that - even taking into account kit upgrades, spray job and the wear and tear - would have significantly reduced the cost of acquiring new vehicles.

Since then I've always had that thought stuck in my mind when I see a police car. And it's stuck with me as well any time I think about military procurement. 

This thought popped back to the fore recently when it was announced that Spain (amongst others) was looking to sell on some of its A400M transport aircraft that are currently on order. The potential to buy additional airframes on the cheap from both Spain and others could provide a nice uplift to the UK transport fleet at a reasonable cost. And from there it took me off to thinking about other potential second hand deals that existed.

Take the RAF's Future Strategic Tanker Mess (FSTM) for example. The cost of the project, when evened out over the 14 airframes (of which 5 will not even be in regular service) works out at something like £750 million per plane. Air India on the other hand is looking to offload 8 of its Boeing 777-200LRs, with the asking price pegged around £65 million a pop. That's £520 million for the lot (assuming you can't negotiate them down), or less than one planes cost for FSTM (yes, I am going to refuse to use the proper acronym of FST... oh, nearly).

Is this a fair comparison? Sort of and sort of not. For a start we're talking about two different aircraft, with different performance characteristics such as range and fuel capacity. The Airbus A330s of the FSTM have been cleared for refuelling operations, which is something you'd have to pay for on top of the £520m for the Boeings. Those aircraft would also need internal work done. One of the reasons that Air India has struggled with them is because of a lack of uptake in the first class section. If they can't sell them, Air India plans to convert them to remove the first class section, with all the work costing around £3 million per plane, which is another expense that the RAF would have to absorb if it were them that ended up buying them. The FSTM also includes provisions for some support and ongoing maintenance, though its unclear what amount of fuel (if any) is covered by the deal.

Now I accept that those things are not insignificant hurdles to overcome that would add on plenty of cost to a potential (we should probably say 'hypothetical') purchase. But when you look at the numbers, just getting the eight airframes for the averaged out price of less than one FSTM A330 certainly raises a few eyebrows of interest. 

Could our tanker fleet provision look very different right now if, right from the start, the MoD had gone about plucking second hand civilian airliners off the market for conversion? Considering when the contract was first drawn up, a bit of second hand market dabbling would probably have got us our full fleet in service by now, certainly in time to ease some of the pressures on the air bridge to Afghanistan.

Sticking with aircraft, the USAF is looking to off load some of its C-27 Spartans, a handy and robust little transport aircraft especially for in theatre work and short haul passenger/small cargo transfer into and out of theatres (the UK has just recently acquired a few extra BAE 146 aircraft to fill just this kind of role). With the most likely destination of the Spartans being the aircraft grave yard, there likely exists a window to swoop in and purchase them on the cheap (they use the same engine as the C-130J, so a bit of commonality already exists).

But it doesn't just have to be aircraft. I've lamented before that while the army was sending people out to face IEDs in land rovers, there were (many) proven* mine resistant designs sitting about in South Africa, a nation that knows a thing or two about protecting military vehicles from mine blasts. The potential for ordering in-production designs aside, some immediate action could have been taken if the South African military could have been persuaded to part with a few second hand vehicles in exchange for a fistful of dollars. 

*Note to Bloggers spell check; "Proven" is a real word, from a real dictionary. So f**k off with your yellow highlighter.

In the naval sphere one wonders (for one is in posh mode tonight with his glass of neat Amaretto) what opportunities exist for acquiring vessels, primarily for use by the Royal Fleet Auxiliary (RFA), off the second hand market. Again, as with the other suggestions above, you're going to be looking at a piece of kit that needs a bit of work and a few quid to knock it into shape for service, but compared to buying brand new, both cost and time could potentially be saved. 

The major issue though, aside for the individual details of any potential second hand buy, is budgeting. Military budgets, like all budgets, are planned in advance. You need to know how much you're going to spend on capital costs, spares, manpower, training etc. Formal contracts to purchase new equipment provide a degree of stability in planning. 

Twisting the treasury's arm to let you have an advance on planned funds, even if it promises savings in capital expenditure, it's going to be a tough sell. Not that the treasury has been adverse to saving money over the years. But if it means disrupting perfectly laid plans then that does seem to become an issue (I wonder sometimes whether successive Chancellors actually run the country).

It would certainly require a more flexible approach. One where the chance to seize opportunities as they present themselves could lead to significant savings, or where the capability of the armed forces could be enhanced unexpectedly for a modest price.

So that's that one out of the window then...


  1. I like this approach, especially in that the focus of such second hand equipment should be towards logistics.

    Ideally, or rather hopefully, the beloved and much derided MOD bean counters are planning budgets in advance for things like what you said about the Air India 777s, and so on and so forth, just to get a head start when it comes to the actual procurement process. Though that might be me misunderstand what they actually do.

    Easier to sell to the public, press, and opposition, by mainly procuring second hand logistics-related equipment rather than frontline equipment. No one batted an eyelid at the RN getting HMS Protector off the Norwegians!

    1. That's a good point Stephen, forgot about Protector. I agree non-fighty stuff would be easier, especially as things like 777s have a global logistics and support base in place that can be tapped, pilot training as well.

    2. The only reason no-one batted an eyelid on Protector was that firstly it is only supposed to be a stop-gap (she's quite an old ship) and secondly, building a new fully Ice Class ship with all the RN requirements would have been propely expensive and taken quite some time - longer than we wanted to leave the IPS capability gapped.

      The last ship of any kind approaching that type built in the UK was James Clark Ross in 1992. Even the Norwegian yards don't turn out many of these. They're proper special ships...

  2. Hi Chris

    'Could our tanker fleet provision look very different right now if, right from the start, the MoD had gone about plucking second hand civilian airliners off the market for conversion?'

    Such options were looked at but all overruled by number 11. It was PFI or nothing that was made crystal clear to the MoD.
    Other options such as removal of the VC10 fleet and going all Tristar. These would have been purchased from the US as they cheap in the 90s but still a good source of spares knocking about. Not long term, but wasn't meant to be. It was to be a cheap way to give the RAF breathing room to make a long term choice.
    I'm pretty sure a joint buy with the GAF of Airbus was considered with a joint training and maintenance contract with Lufthansa.
    Second hand BA jets were looked at, again knocked on the head by GB.

    1. Afternoon,

      Unfortunately that story spreads throughout most of the government. PFI to keep the borrowing off the books. When combined with formal borrowing, the figures are quite eye opening.

  3. Also some connection with GB's relationship with everybody's favourite (b?)anker...Fred (the shred) Goodwin...another classic piece of good judgement from New Labour...