Defence Analysis is the authoritative monthly publication published by Francis Tusa. As a Defence commentator and writer, Francis Tusa has won a solid reputation for his insight and understanding of the complexities that surround Defence issues and military trends. He first came to prominence during his commentaries on ITN television over the Gulf War period. He now appears regularly on Sky television as a Defence commentator.
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UK Typhoon Tranche Two Negotiations
A Devil of a Dilemma!
- BAE Systems, Alvis-Vickers, General Dynamics
- UK Armed Forces Cuts
- UK-Iranian Diplomatic Relations
- UK Future Rapid Effects System
- European Land Systems Industry Rationalisation
- The Fight For The UK Defence Market
- Thales And Land Systems Business
- British Army Future Integrated Soldier Technology Programme
- Lessons Being Learned By The School Of Infantry
- UK Procurement
- Royal Navy CV(F) Programme
- Letter From Prague
- DEFENCE INDUSTRY NEWS
- DEFENCE DIVERSITY
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July 2004
As recently reported in Defence Analysis, the UK's Ministry of Defence and Defence Procurement Agency (DPA) are on the horns of a dilemma, are the early worms caught by the early bird, or are hoist by their own petard. Whichever adage you wish to use, the MoD/DPA have been trying – in vain – to find "wriggle room".
The problem is twofold. MoD wishes to sign two contracts with BAES separately, one for the Eurofighter Tranche Two production programme, including the new, advanced air-to-surface capabilities, the other for the additional costs incurred from stretching out Tranche One production and the delays in getting Tranche Two production underway.
MoD is cajoling BAES into signing these two deals separately, absolutely promising that if BAES will sign the Tranche Two production deal, it will sign the costs deal very soon afterwards. Honest!
Meanwhile, the UK is coming under increasing pressure from the other three programme partners to sign for Tranche Two by July, probably for the Farnborough Air Show. Worryingly, countries such as Germany, which have much later requirements for air-to-ground capabilities, have come to the table with Euros 60-million for 2005 for air-to-ground development work – enough to fund integration of laser/satellite guided weapons and pods – and Euros 115-million of associated cash towards Tranche Two capabilities. Both Italy and Spain have agreed to find smaller sums.
But BAES is refusing to sign one contract without the other. There is a clear belief that if BAES gets the UK "off the hook" over Tranche Two, without definitive and binding agreements on Tranche Two development costs, as well as on cost overruns incurred by the British government over Tranche One, then MoD will try to bilk on the deal. Even with quite clear contractual lines of responsibility, there is a remaining conviction that the UK government is far from reliable.
The situation looks even worse, according to German sources who say that a contract for Tranche Two development/production has to be signed in July. Otherwise, there will be such a gap between Tranche One and Tranche Two production that added costs could amount to Euros 2-billion. And if EADS was to approach the German and Spanish governments, and Finmeccanica to approach the Italian government, then all of these administrations would turn swiftly to the one that had caused the problem – the UK.
And it shouldn't be thought that the UK could contest liquidated damages suits from the other partners: as stated, the contract is about as watertight as a British government lawyer can write it. But then, the contract was drafted by UK government lawyers.
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