Archive for the ‘BAE’ Category

Did the UK and France get around the Missile Technology Control Regime in order to sell Saudi Arabia the Stormshadow air-launched cruise missile just by draining off some of the fuel to get the range under a key number? This should probably get more publicity than it has.

We’ve not done one of these for a while, and I meant to get around to a Loleatta Holloway tribute link at some point. Here goes – an absolute killer of a remix that dropped out of the YouTube playlist by chance.

Meanwhile, depress yourself!

The auction of machine tools and fittings, including a 10m antique boardroom table and 20 matching chairs is now being advertised; it takes place at the end of the month.

Ah, where did I leave that post? This stands up pretty well too.

I’ve been rating my way through the SXSW torrent, which is far less fun than it sounds. Sturgeon’s law applies – in fact it’s worse than 90% of everything being shit, it’s more like 90% of everything is inoffensive and a significant chunk of the other 10% is offensive. But then it got worse, thanks to this tweet. The best is the enemy of the good, but they are natural allies against the mediocre.

This LA Times story about the Boeing 787 Dreamliner (so called because it’s still a dream – let’s get the last drop from that joke before it goes into service) and the role of outsourcing is fascinating. It is partly built on a paper by a senior Boeing engineer which makes among other things, this point:

Among the least profitable jobs in aircraft manufacturing, he pointed out, is final assembly — the job Boeing proposed to retain. But its subcontractors would benefit from free technical assistance from Boeing if they ran into problems, and would hang on to the highly profitable business of producing spare parts over the decades-long life of the aircraft. Their work would be almost risk-free, Hart-Smith observed, because if they ran into really insuperable problems they would simply be bought out by Boeing.

Even in its own financial terms, the whole thing didn’t make sense, because the job of welding together the subassemblies and hooking up the wires doesn’t account for much of the profit involved. Further, the supposedly high-margin intellectual-property element of the business – the research, development, and design of the plane – is only a profit centre after it’s been built. Until they’re done, it requires enormous amounts of investment to get right. The outsourcers were expecting the lowest-margin element of the company, assembly, to carry the costs of developing new products. Whether they were funded with equity or with debt, this implies that the systems integrator model, for aircraft at least, fundamentally restricts innovation.

This is one of the points I’d like to bring out here. Hart-Smith’s paper – you can read it here – is much stronger on this than the LA Times was willing to be. It’s a fascinating document in other ways, too. For a start, the depth of outsourcing Boeing tried to achieve with the 787 is incompatible with many of the best practices used in other industries. Because the technical interfaces invariably become organisational and economic ones, it’s hard to guarantee that modules from company X will fit with the ones from Y, and if they don’t, the adjustment mechanism is a lawsuit at the financial level, but at the technical level, it’s rework. The dodgy superblock has to be re-worked to get it right, and this tends to land up with the manufacturer. Not only does this defeat the point of outsourcing in the first place, it obviates the huge importance of avoiding expensive rework.

Further, when anything goes wrong, the cost migrates remorselessly to the centre. The whole idea of systems integration and outsourcing is that the original manufacturer is just a collection of contracts, the only location where all the contracts overlap. Theoretically, as near to everything as possible has been defined contractually and outsourced, except for a final slice of the job that belongs to the original manufacturer. This represents, by definition, all the stuff that couldn’t be identified clearly enough to write a contract for it, or that was thought too risky/too profitable (depends on which end you look at it) for anyone to take the contract on. If this was finance, rather than industry, it would be the equity tranche. One of the main reasons why you can’t contract for something, of course, is that you don’t know it’s going to happen. So the integrator essentially ends up holding all the uncertainty, in so far as they can’t push it off onto the customer or the taxpayer.

This also reminded me a little of Red Plenty – one of the problems is precisely that it’s impossible to ensure that all the participants’ constraints are mutually compatible. There are serious Pareto issues. There may be something like an economic law that implies that, given that there are some irreducible uncertainties in each contractual relationship, which can be likened to unallocated costs, they flow downhill towards the party with the least clearly defined role. You could call it Harrowell’s U-Bend. (Of course, in the macroeconomy, the party with the least well defined role is government – who you gonna call?)

Anyway, Hart-Smith’s piece deserves a place in the canon of what could be termed Sarcastic Economics.

I suspect that the problems he identifies have wider consequences in the economy. Given that it’s always easier to produce more or less of a given good than it is to produce something different, the degree to which it’s possible to reallocate capital has a big impact on how quickly it’s possible to recover from a negative shock, and how bad the transition process is. I would go so far as to argue that it’s most difficult to react to an economic shock by changing products, it’s next most difficult to react by producing more (you could be at a local maximum and need to invest more capital, for example), and it’s easiest to react by producing less, and that therefore there’s a structural bias towards deflationary adjustment.

Hart-Smith’s critique holds that the whole project of retaining product development, R&D, and commercial functions like sales in the company core, and contracting everything else out actually weakens precisely those functions. Rather than being able to develop new products quickly by calling on outside resources, the outside resources suck up the available capital needed to develop new products. And the U-bend effect drags the costs of inevitable friction towards them. Does this actually reduce the economy’s ability to reallocate capital at the macrolevel? Does it strengthen the deflationary forces in capitalism?

Interestingly, there’s also a presentation from Airbus knocking about which gives their views on the Dreamliner fiasco. Tellingly, they seem to think that it was Boeing’s wish to deskill its workforce as far as possible that underlies a lot of it. Which is ironic, coming from an enormous aerospace company. There’s also a fascinating diagram showing that no major assembly in the 787 touches one made by the same company or even the same Boeing division – exactly what current theories of the firm would predict, but then, if it worked we wouldn’t be reading this.

Assembly work was found to be completed incorrectly only after assemblies reached the FAL. Root causes are: Oversight not adequate for the high level of outsourcing in assembly and integration, Qualification of low-wage, trained-on-the-job workers that had no previous aerospace experience

I wonder what the accident rate was like. A question to the reader: 1) How would you apply this framework to the cost overruns on UK defence projects? 2) Does any of this remind you of rail privatisation?

It took a while, but somebody finally acted on those 38-year old gaskets. The BBC is reporting that the RAF’s Nimrod MR2 fleet has been grounded for the replacement of the engine bay hot air ducts, the famous pipe involved in the loss of XV230 over Afghanistan in September, 2006. According to my own sources, the original plan was to have them all examined and either replace, overhaul, or ignore depending on the results, but BAE as the Design Authority wasn’t keen on this (who would be?) and therefore the ducts were all declared time-expired.

The upshot is that in order to maintain the RAF’s maritime commitments in the North Atlantic (which seems to be what “critical homeland security tasks” are in Bob Ainsworth’s statement), they have to find enough airframes to maintain the sub-spotting and SAR quick reaction alerts while the fleet goes through the engineering wing at RAF Waddington. This means that the Nimrod detachment in the Middle East is being withdrawn.

Its tasks included supporting the various naval operations in the area (pirate spotting, looking for a dhow with Osama Bin Laden on the bridge, and looking after oil platforms off Iraq) but also providing special reconnaissance capabilities for the Army in Afghanistan, both with the Searchwater 2000 radar and also providing a live video feed. Readers with a long memory will recall that XV230 was the first Nimrod to get the video capability under an Urgent Operational Requirement for Helmand in early 2006.

Apparently “other UK or coalition aircraft” will fill the gap. The whole affair originates from one of the great cockups of British defence procurement – the much-delayed, if formidable, MRA4 Nimrod, which has been in the works since the 1980s under various titles. (One of which was “Nimrod 2000″…) The decision to convert existing airframes rather than build new, in order to save money, turned out to be a very bad one, especially as the original airframes were essentially built by hand, with the result that the new CAD-CAM’d wings didn’t fit any of the fuselages and the job ran several hundreds of millions over budget and many years behind schedule. The first flight has now been achieved, but part of the problem is that the planned fleet has shrunk dramatically, and the existing MR2s have been flogged to death waiting for the new airframes.

This is wrong;

Gitmo will be closed. Binyam Mohammed will be returned to Britain, or put on trial in the USA. Either way the details of his treatment, and that of all the other inmates, will become public. What are Foggy Bottom and the CIA playing at? Get it over with

Consider this BBC story. The interesting thing here is that Miliband’s position requires him to argue two mutually impossible things at once; first, he can’t possibly let evidence of Mohammed’s torture appear in court, for fear of terrible retaliation from the United States, second, that the United States has not threatened such a thing.

The two are mutually dependent, because if the first one was allowed to stand on its own, who would imagine that good relations with the United States were anything worth having? Therefore, it’s necessary for the protection of the self-regard of the political classes that the US threat be both unambiguous and invisible. It is like the chapter in The Art of Coarse Rugby about fields with bulls in them; eventually they conclude that the ideal scenario is a field next to the rugby ground with a large sign in it, reading BEWARE OF THE BULL, but no bull.

That way, if you need to play for time, you can hoof the ball into the field and count on your opponents’ fear of the bull to waste time – but should you find yourself a couple of points down as time runs out, you can always declare that the bull was taken away years ago and just get on with it. Similarly, no evidence was ever provided of Saudi threats back when this legal dodge – the BAE gambit as I call it – was invented.

Providing evidence of the threats would spoil it. If the government had to admit it was being bullied into covering up for appalling torture or spectacular financial corruption, this would alter certain political facts. But that is not all. The beauty of the BAE gambit is that it’s so flexible; because the evidence of the risk is itself secret, it can be invoked whenever required. I said this at the time, and now they’re doing it. If they had to demonstrate the threat, this would spoil its effectiveness.

I see no reason to think that the Government is lying now about the Americans’ position. In fact, it’s very likely that the Obama administration has not contacted them; for example, here’s the new CIA director explicitly stating that he considers torture and refoulement to states that practice it illegal. Here are his own words:

On January 22, 2009, the President issued an executive order directing all U.S. agencies to use Common Article 3 of the Geneva Conventions as the baseline for the treatment and interrogation of persons detained in any armed conflict. The executive order also states that agencies must notify the International Committee of the Red Cross of such detainees and provide the Red Cross with access to them. The intelligence community must follow the executive order.

With respect to renditions, the intelligence community must comply with U.S. obligations under the Convention Against Torture and Other Cruel, Inhuman and Degrading Treatment or Punishment, including Article 3 prohibiting the rendition of a person to a country where it is more likely than not he will be subjected to torture.

Here’s the relevant paragraph in the executive order:

Nothing in this order shall be construed to affect the obligations of officers, employees, and other agents of the United States Government to comply with all pertinent laws and treaties of the United States governing detention and interrogation, including but not limited to: the Fifth and Eighth Amendments to the United States Constitution; the Federal torture statute, 18 U.S.C. 2340 2340A; the War Crimes Act, 18 U.S.C. 2441; the Federal assault statute, 18 U.S.C. 113; the Federal maiming statute, 18 U.S.C. 114; the Federal “stalking” statute, 18 U.S.C. 2261A; articles 93, 124, 128, and 134 of the Uniform Code of Military Justice, 10 U.S.C. 893, 924, 928, and 934; section 1003 of the Detainee Treatment Act of 2005, 42 U.S.C. 2000dd; section 6(c) of the Military Commissions Act of 2006, Public Law 109 366; the Geneva Conventions; and the Convention Against Torture. Nothing in this order shall be construed to diminish any rights that any individual may have under these or other laws and treaties.”

No torture; no handover to states that torture. So it would be surprising if they were to do so. And, indeed, Miliband explicitly says that no approach to the new administration has been made.

However, the Government has chosen to regard not being explicitly told to stop as equivalent to a reiteration of the threats (whose existence it denies, lest we forget) issued by the Bush administration in 2007. It has done this because it suits the Government’s interests. For once, William Hague is right – they should simply ask the Americans to state whether or not the non-threat is still not-in force.

Of course they will not, because it suits them to be able to kick the ball over the BEWARE OF THE BULL sign whenever they think fit. As Scott Horton points out, there are a lot of people about who desperately want a new US administration to be guilty, because it detracts from their own guilt.

I think I’ve said before that I find public sector accounts incredibly weird. Here’s a great example; it’s a very good FT story on the bank nationalisation plan and how it affects the national finances. Bizarrely, the £25-50bn of government bond issuance required to raise the money probably won’t count towards the public sector net cash requirement (what used to be the PSBR in John Major’s days of sound finance…not!); it’s a “financial transaction” and these are excluded.

Well, that makes a weird sort of sense; the liability on one side is matched by an asset (the stake in the banks) on the other, the net change in the government’s cash position is zero (at first, but even later, any dividend paid on the preferred stock would at least balance the interest payments). The next bit, however, gets really strange; although it’s not counted as new public borrowing, it is counted in the figure for the national debt. It’s debt, right? Yes, but if the government was anything else but the government, the increased debt would be matched on its balance sheet by the stash of bank shares. It being the government, however, it’s not.

Now, it gets really counterintuitive when it comes to the really big money – the £250bn guarantee for wholesale bank lending. Apparently, if the Government (as suggested) charges the banks a significant fee for the guarantee, this will force it to take the full wad on its books as a liability of the public sector. (Even though most of any transactions among the eight participating banks will add up to zero; if Lloyds lends Barclays £1bn and Barclays lends HBOS £1bn, and Barclays then goes bust, the state guarantee would only come into it if Lloyds and HBOS couldn’t agree to settle the transaction between themselves.) If the Government offers the guarantee free of charge, however, the rules on public sector contingent liabilities mean they can keep it off the books. Yes, you heard that correctly; it’s in some sense financially better for the state not to receive quite a lot of money.

Anyway, in these weird times, let me propose a weird solution. The Government has promised to put manners on the banks in return for the £50bn, pressing for executive pay restraint and measures to help small businesses. Some people are concerned that they won’t be able to make this stick because preference shares don’t come with a vote. I disagree; whatever the formal terms, anyone who fronts up as much as half of RBS’s capital base is going to have several billion votes, and indeed it looks like the CEO is going to be sacked as a condition of the deal. It’s a question of political will.

EDINBURGH, October 12th: Crowds cheered as the giant statue of Sir Fred Goodwin was torn from its perch by a Royal Engineers’ armoured tractor. As the news spread this morning, a mob gathered around the base of the monument, unavailingly beating it with sledgehammers and dragging at it with ropes. Eventually, Sergeant Mick Kelly’s Chieftain AVRE arrived. After a few minutes, its engine roaring, the huge vehicle succeeded where they had failed and the dictator’s figure crashed into the dust. In a sinister orgasm of rage and contempt, the mob beat it with their shoes, spitting and jeering as the ruin was towed through the streets….

Like I said, it’s a matter of political will.

However, it will be much easier to hold the Government’s feet to the fire about this if they do have formal rights to intervene, as well as safer, as unwinding the stakes in a hurry in order to punish a recalcitrant bank wouldn’t be easy. One option is to buy ordinary shares as well as the new preference ones, and have the Treasury Shareholder Executive manage them; the numbers involved would put the Government in a position to insist on a seat on the board and extensive influence over management. However, this would be riskier, as ordinary shares don’t have the charge over cashflow the preferred kind do, and it would also spook the market even more, as issuing the new shares would dilute the existing shareholders.

It would also be affected by weird public accounting, as this would make the banks into public-sector entities and therefore bring them on the Treasury’s books; in which case, only their liquid assets would be counted against their debts and the national debt would therefore reach unheard-of proportions.

But there’s another option. For many years after privatisation, the Government held so-called “golden shares” in a range of ex-nationalised industries considered to be strategically important. For example, that in Rolls-Royce gave the Government a veto over changes of ownership and the right to reserve the top management positions to British citizens. Some of them were abandoned in the early 2000s at the request of the European Commission; notably those in BAA plc. Now, these shares were legally structured as “special preference shares”, and the Office for National Statistics didn’t consider them to be sufficient state control to put BAE, RR, National Grid plc, BAA and the rest on the books – but they certainly granted the Government special rights over these companies. In fact, they still do at BAE Systems and Rolls.

Update: Oh well, here comes the shock and awe. Sod golden shares, preference shares, whatever – it looks like we’re in for the whole hog, 75% of RBS’s market cap, voting stock, Government directors, sack the board, don’t open the London Stock Exchange…fuck, did they just say that? Looks like the opening of the books must have been quite a dramatic event.

Gratuitous Dogfight Blogging

I don’t know why Danger Room is so surprised about this; apparently one of the Hungarian Air Force’s new Saab Gripens managed to claim a shootdown of a Eurofighter Typhoon during an exercise (is that the first encounter between 4th generation fighters?).

The first point is that the Gripen isn’t second-rate at all, as DR implies; it’s a genuine fourth-generation fighter. The manufacturers (Saab and BAE) respectively built the Saab Viggen, an F15E/Tornado GR1A/Sukhoi 24-class strike aircraft in the 80s, and the Tornado itself; BAE, of course, is also a major workshare partner in the Eurofighter.

The second point is that there is a history of lightweight fighters doing better than expected; back in the 60s, the Singaporean air force’s BAC Strikemasters – Jet Provost initial trainers with guns – occasionally shocked the RAF Lightnings and RAAF Mirages. At the same time, the North Vietnamese MiG-17s and -19s did very well against US F-4s. More recently, the Sea Harrier FA2 had a similar reputation. This is actually why the Americans decided to develop the F-16.

It all goes back to John Boyd, and his ideas of the OODA loop and the importance of shifting energy states; if you’re small, you’ll be seen later, and you can turn tighter without losing as much energy. Of course, smallness has costs; the Gripen is comparable to the Typhoon in many ways, except range.

The Obscurer is usually Blairite Pravda, but now and then it does something worth reading. Have a read of this story. One Anthony Bailey, a rich PR man, is apparently running a Labour Party entity called the “Faith Task Force” charged with raising donations from the rich and religious.

What is fascinating is exactly what Jamie Dowson’s story doesn’t point out. For a start, Mr. Bailey claims to have raised £7 million for the City Academies program. Yes, the same one at the heart of the police investigation into cash-for-honours. And honour – or rather, influence – is what he got for the cash. He is, it turns out, an “advisor” to the Department for Education and Skills and a member of its “Gifted and Talented Task Force”.

Wonderfully, even Lord Levy was suspicious of where his money came from, rejecting a £500,000 donation to the Labour Party from Bailey’s own pocket on suspicion that it came from abroad, in breach of the Political Parties, Elections and Referendums Act 1999. That law, let us point out, does not restrict donations to a nonparty pet project like the academies.

Bailey appears to be the Vatican’s chouchou flack, running a supposedly ancient order of chivalry for them. But let that pass. What worries me more than that is his client list – including the House of Saud and the Syrian Government. Lovely. And what about this?

As chairman of ‘Painting and Patronage’, a regular cultural exchange of artists between Saudi Arabia and Europe, Bailey has presented paintings by Prince Charles at exhibitions sponsored by British Aerospace.

Paintings by Prince Charles? In Saudi Arabia? Sponsored by BAE? And this chap gets to “advise” government on the prime minister’s pet policy? Actually, let’s not let the order pass. His order of chivalry “bestowed honours” on Margaret Thatcher and donated charitable funds to “pro-life causes”. I wonder how much of the charity came from either the Saudis or BAE? And did any of that money wander into one of the Blair academies?

It all has a smell of John Latsis’s £2m bung to the Tories, which was also backed up by lavish funding of Prinny’s various hobbies. It goes without saying that the link with the cash-for-honours case is tastefully elided.

Update: Via Labour Humanist, Bailey’s official biography according to his website. And what do we find? Not only is he on the board of a thing called the United Learning Trust that has been given not less than 12 schools to run, but he’s an Ambassador-at-Large for the Gambia. Yup, that’ll be the same Gambia whose president claims to be able to cure AIDS by magic, and whose private Ilyushin-62 C5-GNM is on a UN Security Council blacklist.

Did I say I loved the Financial Times?

When everyone else was frontpaging with Princess Diana, the paper had the following stories on the front: the BAE investigation kibosh (this was the lead), Blair grilled by the rozzers (number two, opposite the lead and separated by a photo of the man), then the OPEC meeting and Vodafone’s €67 million fine in the Greek snooping case.

Spyblog, via Iain Dale, carries a table of journalists using illegal “data brokers” to get at private information. It’s fascinating that the more illegal snooping was done, the less actual news. Here’s the data. The left column shows the total transactions, the right the number of individual hacks involved.

Daily Mail 952 58
Sunday People 802 50
Daily Mirror 681 45
Mail on Sunday 266 33
NOTW 182 19
Sunday Mirror 143 25
Best Magazine 134 20
Evening Standard 130 1
The Observer 103 4
Daily Sport 62 4
Sunday Times 52 7
The People 37 19
Daily Express 36 7
Mail Weekend mag 30 4
Sunday Express 29 8
The Sun 24 4
Closer Magazine 22 5
Sunday Sport 15 1
Mail Sunday mag 9 2
Sunday Business 8 1
Daily Record 7 2
Express, Sat 7 1
Sunday MirrorMag 6 1
Real Magazine 4 1
Woman’s Own 4 2
Daily Mirror Mag 3 2
Mail in Ireland 3 1
Daily Star 2 4
Marie Claire 2 1
Personal Mag 1 1
Sunday World 1 1

Do you see a pattern? Quality is inversely proportionate to bastardness. This even holds for the Guardian Media Group papers – The Grauniad isn’t in there with even one request, but its super-Blairite stablemate the Obscurer put in a performance worthy of the Daily Beast. It’s also noticeable that the Murdoch press was almost restrained compared with Rothermere and Northern & Shell titles.

So what is in the Memorandum of Understanding old Virus Drayson signed with the Pentagon and Lockheed-Martin? As far as I know, he says it guarantees that no USAF personnel would be necessary in the chain of command. This says very little in and of itself. No US personnel are necessary in the chain of command for Trident, nor for any US-made aircraft in foreign service I’ve heard of, though I am open to contradiction in the space provided. It would have been astonishing had the opposite even been suggested.

Of course, it wasn’t the chain of command we were arguing about. It was more the intellectual property rights, and specifically the ability to fiddle with the software ourselves (without necessarily telling LM, or the Pentagon), what we were doing. Secondarily, it was more the commercial terms under which UK IPR embedded in the Unified Control System (specifically the VAACS stuff, without which the F-35s wwe are ordering cannot fly) was supplied that we were worried about.

I have heard and seen nothing bearing on this.