Over the past 10 years, the armed forces have largely stood back from the race by companies, government and local authorities to outsource non-core and, in some cases, core activities. This reluctance was rooted in security worries and the institutional cultures of the army, navy and airforce.
However, following cuts in defence budgets, the services are becoming more willing to work with the private sector if it means working more efficiently or spending less money.
One sign of this change is a new Royal Air Force repair service contract provided by Somerset-based aerospace supplier Claverham. As Britain’s armed forces try to cut costs and delays by using ‘smart procurement’, the deal is being heralded as the first example of ‘smart supply’, with the supplier and the MoD each concentrating on doing what it knows best.
Under the £60m deal, Claverham will maintain and repair actuators, the vital hydraulic devices that move the rudder and tailerons on each of the RAF’s fleet of over 300 Tornados. Each actuator is a complex device with over 2,000 parts.
The 10-year contract comes with a difference: the amount of cash Claverham receives increases the more the Tornados fly. Traditionally, contracts have involved payments per repair so contractors could benefit from aircraft unreliability.
Up to 1997, Fairey Hydraulics, Claverham’s predecessor, supplied parts for RAF actuators. The repairs were carried out by RAF technicians at St Athan in South Wales. The RAF did not know how many parts to stock, or how long they would take to arrive, so was unable to plan ahead. As a result, Tornados could be stuck on the ground for days.
In a two-year trial, under which Fairey Hydraulics which became Claverham after a management buyout carried out the repairs. The groundings fell from around 180 to 18 per year, and none lasted more than 24 hours. This, plus cost savings which the RAF puts at about 20%, led to the 10-year contract.
The deal also means that the risk of unexpected cost increases is transferred to Claverham. But the supplier does not believe it is taking on too much. ‘There are some areas in which the manufacturer is better qualified to understand risk,’ says Ian Martin, director of business development at Claverham’s Support Chain Management division. ‘We know the consumption rates and lead times of each part, whereas RAF employees did not understand how many were needed,’ he adds.
One new risk for the RAF is that it cannot be sure that every repair and check has been carried out it may be paying for work not done. This, however, is outweighed by the fact that the supplier knows its part better. An MoD spokesman says: ‘In the past we’ve been too prescriptive in what we’ve done. Our main strength is in operating planes.’
RAF-trained technicians are still used, however. Half the repairs take place at a ‘partnered repair facility’ at the RAF’s St Athan base. Claverham subcontracts work worth around a third of the contract’s value to MoD staff there. The remaining work is carried out at the company’s main site at Claverham in Somerset.
On average, a Tornado flies for 450 hours over two years before an actuator fault is reported. The actuators do not need to be removed before something goes wrong because each has a double back-up two independent hydraulic systems and a manual link from a joystick.
If an actuator fails, it is removed and replaced from stock, and the repair process begins. Some need only simple repairs, while others require a full ‘strip and survey’, to identify the parts that need to be replaced or reworked. Each part is tested before final re-assembly and the completed actuator receives a computer-aided final inspection.
The potential market for Claverham’s service goes beyond the RAF’s Tornados. Fairey actuators are used in the Harrier jump jet, Jaguar strike aircraft and Lynx helicopter fleets. The company says it has a ‘more than 50%’ chance of getting repair contracts for all of them this year.
Claverham also aims to sell the expertise it has gained with the RAF in managing other companies’ supply chains. However, Martin says: ‘We won’t repair anybody else’s parts. Those other companies depend on repairs to make money.’
There are also overseas markets for supplier support. Claverham is involved in OTIV, a joint venture in Frankfurt which provides a similar service for its actuators in the German air force’s Tornados. Italy also has a fleet of Tornados, and the company has a subsidiary dealing with civil aircraft in the US.
But there are limits to how far the smart supplier concept will go. The part has to be complex enough to mean the supplier understands it best, while security considerations could also mean some suppliers are excluded. As an MoD spokesman says: ‘We have to be careful we don’t sell the crown jewels.’