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15 Dec 10. One facet not taken into account in the excellent Times coverage of defence project overruns is the ‘Dwain Effect’ named after a prominent U.S. engineer. He worked out a formula by which the effectiveness and reliability of systems increased over its lifetime when divided by the numbers purchased. This system still works in the USA where procurement of systems is still in the thousands. However, given the decline in numbers of the British Army and lack of a coherent European strategy, apart from Eurofighter Typhoon and A400M, the numbers and specifications of equipments procured in the U.K. and Europe are in the tens or hundreds. Thus, if a system, such as Astute, suffers a design defect, the costs of putting that system right is spread over only six systems, thus the final costs rises, significantly. This was taken into account under the old Cost Plus regime where the building of different variants, in tanks in particular, led to a gradual improvement in reliability and performance over a period. In the current Fixed Price regime, all the extra costs are now carried upfront which causes the huge budget deficits we are seeing today.

21 Dec 10. BAE was fined £500,000 on Tuesday after pleading guilty to making accounting errors relating to a radar contract in Tanzania, ending a six-year investigation into its activities. The smaller than expected fine coupled with the judge’s stinging comments that a landmark settlement between the Serious Fraud Office and BAE was “loosely and perhaps hastily drafted” throws into question the future of US-style “plea bargain” agreements between prosecutors and companies. The prosecution was a high-profile test of whether the courts would accept plea bargains, commonly used in the US, in which businesses admit limited wrongdoing in exchange for more lenient treatment. The size of the fine compared with the $400m fine imposed by the US will be seized on critics as a signal by the judge of the weakness of the settlement agreement. The Serious Fraud Office told Southwark Crown Court that BAE accepted it had not accounted accurately for $12.4m of payments made between 1999 and 2005 to Shailesh Vithlani, a Tanzania-based businessman, for his work as an agent in helping to secure the politically contentious 1999 radar deal. Sentencing BAE on Tuesday, Mr Justice Bean said he was “surprised” to find the Serious Fraud Office as prosecutor “granting a blanket indemnity for all offences committed in the past”. He noted that a similar settlement which BAE struck with the Department of Justice did not do this. He also said that on the basis of documents shown to him that it was “naiive in the extreme” to think that Mr Vithlani was “simply a well-paid lobbyist”.He said he accepted there was no evidence that BAE was party to an agreement to corrupt. But the fact that money was paid via an offshore company controlled by BAE to another Panama-based company controlled by Mr Vithlani, he said “placed them [BAE] at two or three removes from any shady activity by Mr Vithlani”. Mr Justice Bean also told the court: “The airport at Dar es Salaam could no doubt hav

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