Q1. What did the DIS Fixed Wing chapter say?
That BAE Systems face a long term challenge of sustaining critical defence industrial capabilities against the backdrop of an overall long term decline in new programme work once F-35 Lightning II and Typhoon have been introduced into service.
The necessary transformation of our air sector business to reflect the shift from new programmes to through-life support (including upgrades) is likely to have a consequent impact on our long term industrial footprint (sites, jobs and facilities).
That is why BAE Systems and the MOD are working together to better manage this transition and explore the viability of a Long term Partnering agreement (LTPA). The objective will be to sustain a healthy fixed wing sector and thereby the industrial capabilities, skills and technologies that will be so important to our ability to support and upgrade our aircraft fleets, through-life, over the next 30 years.
Q2. How can this work benefit both Industry & MoD?
For industry - the objective is a sustainable business with the opportunity to earn profit. It should enable BAE Systems and its Supply Chain to plan business changes with greater degree of certainty consequent upon the open sharing of data and an open dialogue of future MOD requirements. This in turn should better facilitate business transformation and essential industrial restructuring over the next 15/20 years and help secure an efficient, effective and viable operation.
For MOD - will benefit from contributing to and influencing decisions regarding the retention or decline of manufacturing and engineering capabilities and technologies and thereby ensuring industry is the size and shape necessary to meet MOD requirements. This visibility will allow greater influence and flexibility in terms of future cost commitments and incentivisation options.
Q3. What has been achieved?
Prior to DIS BAE Systems and MoD had already been working together to better understand the implications of sustaining key industrial capabilities needed to support the Front Line. In 2006 we continued this work and explored how an LTPA could meet this challenge and make sense to both sides. In October 2006, BAE Systems and the MOD signed Heads of Terms, providing a framework for negotiations and setting the aims and objectives of a possible future LTPA. In March 2007, this was followed by the signing of an LTPA Foundation Contract: an initial contract intended to help establish the key elements of an LTPA.
Q4. What happens next?
A phased approach to an LTPA so that risks can be progressively tackled and success assured. We are currently negotiating the agreement for the next phase of the programme (a demonstration phase) to run during 2008 and 2009, and then depending on progress and subject to negotiation, followed by a full LTPA in late 2009.
Q5. Why is the LTPA taking so long?
Given the scale of the transformation required in the air sector, the complexity of business, and the need to ensure that an LTPA makes good commercial sense contract that needs to make sound commercial sense to BAE Systems and to the MOD, we recognise that this would take time.
Q6. Is the LTPA being delayed pending the outcome emerging from the current MOD 2008 planning route?
No. However, it is recognised by both parties that in due course the LTPA (and negotiations during the demonstration phase) will need to reflect the outcome and decisions emerging from the MOD's current planning round (PR08) as they relate to key programmes in the fixed wing sector. As for the updated DIS (DIS version 2) it is important that is should offer the clarity on our future strategy that Industry is seeking, and reflects a realistic view of the MOD's assumptions and plans. As the MOD are currently in the process of undertaking their usual planning round, they have decide that it would be more appropriate for DIS version 2 to be aligned to that process.
Q7. Given the well-publicised 'spats' between the MOD and BAE Systems, suggesting an adversarial relationship, how is it going to be possible to forge an Air Sector LTPA based on trust and visibility?
The DIS has helped both sides turn a page in the relationship and the development of a more constructive and mature relationship in which issues are worked through by the teams involved rather than being highlighted in the media. The signing of the Tornado ATTAC contracts which will involve the MOD and BAE Systems working together to maximise aircraft availability, is a good illustration of this improved relationship delivering tangible results. One of the key aims of the Foundation Contract is to build these positive relationships and create the confidence and commitment needed to deliver a successful LTPA.
Q8. How can BAE Systems sustain design skills if there are no new manned aircraft programmes?
BAE Systems overall strategy will be to target our investment - e.g. in unmanned air systems technologies, to help sustain our engineering and design capabilities. This should provide assurance of BAE Systems ability to provide effective through-life support for current and future fixed wing aircraft and inform decision making on the future mix of manned and unmanned aircraft.
Q9. Does the LTPA not reinforce BAE Systems' monopoly?
The negotiation of an LTPA recognises the reality that BAE Systems is the UK's only indigenous supplier of fast jets. However, the right LTPA can represent a good deal and value for money for the MOD and Industry alike.
Q10. How will MOD ensure security of supply, and how does this relate to the achievement of "Appropriate Sovereignty"?
There is an enduring need to support and upgrade the RAF's existing and planned fleets of manned aircraft, which are likely to have a service life of at least 30 years. In order to preserve the ability of the UK to conduct operations without undue dependence on other nations it will be necessary to preserve a number of industrial capabilities on-shore.
Q12. The DIS Fixed Wing Chapter talks about BAE Systems in many places. What about the rest of the aerospace sector?
As the UK's only supplier of fast jets it makes sense for the MOD to work primarily with BAE Systems on issues of sustainment in the air sector. However, the MOD also recognises that many of the underpinning skills and technologies needed to sustain its aircraft fleets reside within a wide range of defence companies. That is why BAE Systems and the MOD have already begun looking in greater depth at the relationship between the supply chain and the sustainment of key skills and capabilities in the air sector, and how any partnering and transformation agreement with BAE Systems might take account of and/or affect this relationship. This will include looking at BAE Systems supply chain and the range and number of subcontractors we use.
Q13. Impact of LTPAs on subcontractor competition?
BAE Systems are at an early stage of exploring these issues. It follows that there is a possibility BAE Systems may find key capabilities at subcontract level that are only available from a single supplier. Competition will remain a significant procurement tool but it will be used selectively with other procurement models so that the capability BAE Systems require, the nature of the market in the relevant sector and the need to sustain capabilities and technologies that are critical to the UK are all considered properly before a procurement strategy is confirmed.
Q14. Impact of LTPAs on the future route to market for sub-primes and SMEs?
BAE Systems recognise the need to develop a greater understanding of the defence supply chain, its key players, where vulnerabilities may exist and the impact decisions could have on SMEs. BAE Systems are working with industry, the SBAC, Regional Development Authorities and others to improve our knowledge of defence supply chains. The position will become clearer as discussions mature.
Q15. What happens now from a Supplier perspective?
At this stage BAE Systems are communicating with suppliers to raise awareness of the LTPA. Clearly, the effects on each supplier will be different. The intention is to work through the process from communication, through to engagement and finally alignment - this will be conducted for each supplier where appropriate. If suppliers have any specific issues, feedback, concerns or innovation initiatives they would like to voice then please contact the BAE Systems Military Air Solutions LTPA Procurement team.
Q16. How does the LTPA activity link with the SC21 initiative?
SC21 is a significant element of the Aerospace Industry transformation and will provide key improvements in areas such as performance, cost reduction and relationships; however, it will not cover the specifics around sovereignty or security of supply for each platform. LTPA and SC21 do not duplicate work they should be seen as a complimentary set of activities which ensure BAE Systems have the right supply chain which is fit for the future.
Q17. What do BAE Systems want from suppliers with respect to LTPA?
BAE Systems are not setting arbitrary targets although BAE Systems do need to be able to quantify any LTPA related transformation and will progressively commit to transformation financial targets as our plans mature. Ultimately BAE Systems are seeking to establish a healthy and competitive supply chain capable of delivering through life solutions to the front line. This means addressing the capability, capacity, sovereignty and value for money challenges raised by the DIS.
Q18. Long term decline? BAE Systems keep winning lucrative export orders such as Typhoon for Saudi Government?
The LTPA will take account of the industrial capabilities sustained by BAE Systems export business. Winning export orders does not fundamentally change the underlying assumption of a long term decline in new programme work, and therefore the challenge of sustaining critical defence industrial capabilities required to support the RAF fleet through-life remains.
Questions or Comments for the LTPA Supply Chain Team
If you would like to contact the LTPA Supply chain Team with any queries or questions please email providing your name and company name:
Contact: ltpa.supplychain@baesystems.com
You may also wish to fill in the LTPA Supply Chain Questionnaire that will help BAE Systems to understand your organisation's capabilities, help improve business relationships and identity areas of transformation or innovation.
Participate: LTPA Supply Chain Questionnaire
