§ The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Bach)My right honourable friend the Secretary of State for Defence (Mr Geoffrey Hoon) has made the following Written Ministerial Statement.
We are pleased to report to House the latest developments in our plans to provide the Royal Air Force with a modern replacement air refuelling capability. The future strategic tanker aircraft (FSTA) programme is planned to replace the RAF's ageing fleet VC10 and TriStar aircraft around the end of the decade. We have been considering for some time whether the FSTA capability can be provided through a service-based contract with industry under the private finance initiative (PFI). We can now report 5WS that, following a detailed assessment process, a bid from Air Tanker Ltd has been judged to offer the best prospective value for money PFI solution to the FSTA requirement. This decision marks a key milestone on this vital project.
Under a PFI contract, industry would own and maintain the aircraft and provide training services, infrastructure and some personnel, while the RAF would undertake military operations. A PFI contract has the potential to offer considerable scope for innovation, not least because the contractor will be able to use aircraft not required by the RAF in peacetime to generate revenue, through commercial usage. Industry is also best placed to manage the through-life risks of owning a fleet of modern jet airline aircraft Two PFI consortiums submitted bids last year. Air Tanker Ltd, which comprises Rolls Royce, EADS, Cobham and Thales, proposed a service using Airbus A330 aircraft, while the Tanker Transport Services Company (TTSC), which comprises BAE Systems, Boeing, Serco and Spectrum Capital, proposed a service using Boeing 767 aircraft. The competition was keenly fought. However, our judgment is that Air Tanker's proposal offers the best prospective solution for the Armed Forces, the taxpayer and UK industry.
We will now take forward single bidder negotiations with Air Tanker Ltd, aimed at concluding a PFI contract as soon as possible. We should stress, however, that this remains a complex and challenging PFI programme. A number of detailed issues remain to be resolved and we look to AirTanker to work with us over the coming months to resolve the outstanding issues. A final decision on whether or not to proceed with a PFI contract will not be taken until these negotiations have been satisfactorily concluded. We will of course ensure that the House is kept fully in touch with significant developments.