§ Following is the statement by the Secretary of State for Defence referred to above:
§ "With permission, Mr. Speaker, I wish to make a statement on airborne early warning aircraft for the Royal Air Force. I apologise in advance for its length.
§ "The House will recall that in March 1977 the then government announced their decision to proceed with the Nimrod system to replace the Shackleton in the airborne early warning role. Contracts were placed with what is now British Aerospace plc for the necessary work on the Nimrod airframe, and with GEC Avionics Limited for the development and production of its mission system avionics. At that time it was envisaged that the aircraft would be available to the RAF in a training role in May 1982 and for operational service in April 1984.
§ "British Aerospace have delivered the airframes in accordance with their contract. But as the House knows, serious difficulties have arisen in the development of the avionics system for the aircraft, and these have led to very serious time and cost overruns.
§ "On 26th February last my right honourable friend the then Minister of State for Defence Procurement informed the House that the Government had decided to consider all of the available options, both from this country and from overseas, for meeting the RAF's needs before taking a final decision on the way forward. He also announced that for Nimrod itself we had negotiated 339 with GEC revised contractual arrangements involving a sharing of financial risk with the company and giving them adequate incentives for completion.
§ "The intention was that, by the end of an interim period of six months, GEC would provide us with a firm price proposal against a technical specification aimed at fulfilling the needs of the RAF, and would also demonstrate to us the progress they had achieved on the development of the project. Meanwhile, we would explore alternative solutions. On 25th September my noble friend the Minister of State for Defence Procurement announced that best and final offers were being invited from GEC Avionics for the Nimrod and from the Boeing Aerospace Company for the E-3A aircraft. These offers have now been received and assessed.
§ "GEC's offer for Nimrod has been judged against a cardinal point specification based on the Air Staff requirement endorsed in 1977, with the addition only of an air-to-air refuelling capability. Since 1977 the air threat against the United Kingdom has increased, but we have not (as they say) moved the 1977 goalposts so far as the Nimrod system is concerned.
§ "GEC's offer covers three levels of attainment. In ascending order, and cumulatively, they have offered three aircraft in the second half of 1987 to the standard of the present trials aircraft; six aircraft between mid-1989 and mid-1990 which would approach the final standard subject to certain exclusions, of which the most important is a vital secure data link to and from the aircraft; and 11 to the final standard between October 1991 and September 1993.
§ "The first of these offers is not of any value as the system is not now of a standard that could be used for training. The question I have had to consider is whether, taking account of the work GEC have done since February, and in particular of recent flight trials, together with our knowledge of the results they have achieved during the last nine years, I can have confidence that they could deliver aircraft with the second and third levels of performance in the time-scales they have offered. This is an assessment of the Nimrod programme against the objective standard of the Air Staff requirement and not against the E-3A.
§ "I am sorry to say that the conclusion I have reached after the most careful consideration is that I cannot have that confidence. GEC have certainly made technical progress in some areas since February, and have also accepted contractual terms which would give them the strongest incentive to achieve success. I pay tribute to them for that. Nevertheless, there have been technical disappointments as well as progress. The recent flight trials which have been attempted have not produced a consistent and reliable pattern of results. Such results as have been achieved fall well short of the Air Staff requirement.
§ "The company have therefore made proposals for a new programme of work which would improve the system's performance over the next few years. I have considered the proposals very carefully, but the 340 unanimous view of my scientific and military experts is that the required performance is unlikely to be achieved before the mid-1990s at the earliest, if then.
§ "This is a question of scientific and engineering judgment; the likelihood of success does not lend itself to absolute proof one way or the other. I must judge the prospects on the basis of the scientific and Service advice available to me. That advice is clear and unanimous.
§ "As I have said, Nimrod AEW should have entered RAF service for training in 1982 and for operations in 1984. Airborne early warning is a vital air defence capability and multiplies the value of other forces. The existing Shackletons, which entered service in this role in 1972, are obsolescent and would be of limited value in hostilities.
§ "Very reluctantly, I have decided that the time has now come to cancel the Nimrod AEW programme, notwithstanding the expenditure of £660m so far, just over half of which has been spent on the avionics. All existing contracts are therefore being terminated. Subject to satisfactory completion of contractual negotiations, we shall instead be ordering six E-3A aircraft from Boeing now, with the option of adding a further two within the next six months. The E-3A is already in service with the NATO AEW force as well as with the United States Air Force. The RAF version will meet or come close to the 1977 operational standard we have set and will in several respects significantly exceed it, thus improving the RAF's capability against the military threat. There is plenty of potential for stretching the sytem to match further developments in the threat. I am confident that the E-3A will give excellent service with the RAF.
§ "Allowing for termination costs on the Nimrod contracts, the cost of acquiring the six E-3As with initial support will be £860m at 1986–87 prices, which is £200m more than the remaining cost of acquiring 11 Nimrods. These prices are based on sterling quotations from Boeing. The difference represents value for money, given our total confidence in the E-3A's ability to perform the operational task in an acceptable time-scale. On a through-life cost basis including running costs over 20 years the difference is marginal. These comparisons are confined to future expenditure and take no account of past expenditure on the Nimrod system. The cost of this purchase will be contained within the planned defence expenditure totals published in my right honourable friend's Autumn Statement.
§ "Nevertheless this is a sad decision to have to take, but I have no doubt that it is the right one. There are lessons for all of us in this outcome, and I do not seek to evade my department's share of responsibility. Our experience with Nimrod has reminded us of the importance of establishing agreed contractual terms at the earliest possible stage, with clear specifications and agreed acceptance criteria, which place the contractor under an effective discipline. My fellow defence 341 ministers and I will be ensuring that these and other lessons are fully absorbed and acted on in our future handling of major projects.
§ "While this must inevitably be a sad day for GEC and their workforce, this decision must be seen in its proper context. They will remain one of MoD's biggest equipment suppliers; we spent over £700m with them last year, even excluding expenditure on Nimrod. They and other British firms will continue to design and manufacture airborne radars despite the present decision. The loss to British defence technology will be solely in this highly specialised field of large and advanced AEW systems, and it is not strategically vital for this capability to be retained in British Industry. In any case, Britain will continue to be involved in this technology through the participation of Racal, Plessey and Ferranti in the E-3A order for the RAF.
§ "Furthermore, Boeing's proposals for the E-3A include a contractual commitment on their part to an extremely high level of offset, amounting to £130 to be spent on work for British companies for every £100 which we spend on the E-3A. This commitment has been welcomed by British firms who will be participating in the E-3A project. Boeing are publicly committed to placing high technology work with British companies and have an excellent record for honouring undertakings of this kind. Our assessment is that job losses resulting from the cancellation of Nimrod will be equalled if not exceeded by job gains in firms all over the country resulting from Boeing's offset proposals.
§ "As I have said, Mr. Speaker, the decision I have announced has not been an easy one. I wish very much that it could have been otherwise. However, if the RAF is to have the equipment it urgently needs to defend this country, this is the only decision that can be right. I commend it to the House."