BAE Systems' receipt of a major RAF deal without a competition has its critics, but the UK government action merely mirrors that of other nations
After a lengthy period of consideration, some may say prevarication, the UK government has promised BAE Systems an £800 million ($1.3 billion) deal for 20 Hawk 128 advanced trainers.
These trainers will replace the 1970s generation Hawk T1 in Royal Air Force service from 2008. The government has also taken an option for another 24 aircraft. The two generations of aircraft share little in common except for the Hawk name. The new jet has a glass cockpit, improved aerodynamics and other enhancements designed to make it a more representative trainer for the Eurofighter Typhoon as well as the other "digital generation" combat aircraft in UK service.
As with all military contracts, there will be those who are satisfied and those who are disappointed with the decision. The latter category will include the Italian industry, which held out high hopes for the Aermacchi M346. But the UK government has been intent, understandably, on supporting jobs at BAE's factory at Brough in the UK rather than those in Italy.
Although the Ministry of Defence is keen to stress that the Hawk 128 is the best aircraft for the job, this deal is widely seen as a significant shift in policy - ensuring that UK industry is supported by Whitehall spending. This will be condemned in many quarters, but it is nothing that the majority of governments do not do already. The policy is also one repeatedly called for by UK companies and industry bodies in recent years.
The government has also displayed admirable pragmatism in other ways in deciding on the Hawk 128. Originally the Ministry of Defence was set on contracting for aircraft flying hours. BAE would have had to secure loans to cover the manufacture and operation of 31 aircraft, but it became obvious the cost of the loans would make such a private finance initiative (PFI) untenable. So it was dropped, despite PFI being a central pillar of UK acquisition across all departments.
As defensible as this new policy is, the government must be careful to ensure there is competition for the vast bulk of contracts.
After all, BAE is not the only UK aerospace and defence company. There are other companies capable of managing large development and manufacturing programmes. Many already believe BAE, and its various subsidiaries and joint ventures, already has an unfair advantage in dealings with the MoD.
Critics of the decision to award BAE a Hawk deal without a formal competition - although data was sought from other trainer manufacturers for comparison purposes - will point to the company's misdemeanours in recent years. BAE and the MoD ended a lengthy spat in February following a long period of BAE being harshly critical of government procurement strategy, while Whitehall was increasingly irritated at being bad-mouthed, and perhaps even bullied, by a company that has failed to deliver on a number of programmes - most notably the Nimrod MRA4 and the Astute submarine. The latter two cost BAE significantly, but the Treasury also had to put its hand in its pocket to find extra cash - to the tune of £700 million. Other critics will point to BAE's drive to establish itself in the USA as an American company qualifying for lucrative Department of Defense contracts, turning its back on its traditional home market.
Competition will still be the usual means of selecting defence contractors, but the impact of the competition on UK industry should receive greater attention. And despite the intent to protect UK jobs, it should be remembered that competition is a good thing. In the early stages of competition it fuels innovation. Later it helps control costs and drives bidders towards meeting desired in-service dates. But competition can also have negative effects, such as the taking of undue risks and agreeing to schedules that ultimately lead to delays and cost overruns.
If industrial issues are to be more centre stage during procurement, then it is likely that national champions will emerge. But this has to be done with care. Remember many national champions will not have BAE in the company name. Some, although resident within the British Isles, will be owned by non-UK headquartered companies. Some will have turnovers measured by the billion, others will have annual sales of only a few millions - there are many organisations in the UK that can be considered in the same way in their fields as BAE has been for the Hawk deal.
This deal is a shift in UK procurement, but if the government is to continue following this strategy, it has to remember that the industry comprises more than one company.
Source: Flight International
