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By Julian Nettlefold, Editor, BATTLESPACE

22 Jun 07. The announcement by Thales prior to the Paris Air Show that it had finalised the design for its Watchkeeper offering has triggered a debate during the show whether this contract worth some £800 million represents value for money for the U.K. Taxpayer. The Watchkeeper Programme has filled many column inches in BATTLESPACE and the win by Thales at Farnborough in 2004, in spite of the fact that the headline in BATTLESPACE stated ‘Thales to win Watchkeeper’ was met with a tirade of public abuse against the Editor, particularly by Thales’s Peter Hitchcock in their chalet and Alex Cresswell later in the show. “You wrote about Northrop Grumman!” was their jibe (amongst others). The fact remains that a number of observers saw Watchkeeper as Northrop’s Programme to lose, which they did, and for Thales to win it. The difference between the two companies is stark and recognisable, Northrop Grumman is the world’s leading UAV company with products from Global Hawk thru Fire Scout to Hunter, which in itself has formed the backbone of the U.S. Army’s UAV force. Thales had no UAV experience at the time and Thales’s win of the contract spurred the U.K. into a wider wish to develop an indigenous UAV industry with Thales and Elbit. This was a brave move given Thales’s lack of UAV knowledge which had to rely on Elbit’s technology. Subsequently the joint UK company, U-Tacs, based in Leicester, is 51% owned by Israel, thus Elbit has control. U-Tacs estimates that the company will create over 2100 jobs in the UK on this project although this is still an estimate.

Indeed this contract, run by Thales, mirrors other contracts such as FIST also run by Thales and BOWMAN run by General Dynamics. The manner by which these contracts are structured allows the Prime Contractor some leeway as to the equipment which is chosen under sub-contract run by internal scruitineers to give ‘best value’ for the Taxpayer and the MoD customer. Senator John McCain has been running a campaign to change the manner by which such contracts are placed as the Prime or LSI appears to wield too much power, often placing sub-contracts internally to other member companies. Thus, in effect, the U.K. taxpayer is subsidising the R&D of these companies enabling them to develop new systems which they can then sell overseas.

This system is supposed to be protected by the Royalties which the Government receives from any exports and the IP resident in the U.K. under the DIS. The process for Governments to grant loans or other instruments for such big ticket items as the Rolls-Royce Trent and AgustaWestland EH101 and the ITT Bowman ADR+ radio has been used for many years to great advantage to the U.K. taxpayer. These grants are paid back by royalties achieved by sales of the item, particularly the Trent which has reaped billions in sales and transformed Rolls into a U.K. world leader. All of the items mentioned above have paid the loan back in full and made a profit for the Government and thus the taxpayer and have also created U.K. jobs. ITT told BATTLESPACE at IDEX that the U.K. investment in its BOWMAN radio had been paid back in full before any more export orders are achieved.

But, where the process falls down is when systems, not products, are subsidised. Lt. Col. Andy Pedder told his audience at IDEX that BOWMAN could not be exported as a system, as it was unique to the British Army. Thus has GD gained from the huge investment made by the U.K. in BOWMAN without the possibility of the MoD clawing back some of the investment? We will return to BOWMAN and GD UK for comment in our forthcoming feature for DSEI where we can cover these points in detail. FIST is another case in point where Thales had lost its indigenous French Army contract to Safran and thus could leverage any funded U.K. technology into other offerings. FIST is a good case in point as infantry systems have been undergo

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