from the BBC: http://www.bbc.co.uk/news/uk-18020809
10 May 2012 Last updated at 19:52 GMT
RAF accused over multi-billion pound Voyager contract
By Joe Lynam
BBC Newsnight
The Voyager could have been purchased at a much lower price, according to Newsnight's research
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The RAF may be paying billions of pounds too much for its new, air-to-air refuelling Voyager aircraft, the BBC has discovered.
Contracts seen by Newsnight suggest the 14 planes could have been purchased for £50m each.
Instead the RAF paid £150m for each plane as part of a leasing agreement.
Defence Secretary Philip Hammond defended the contract, but said he would second check the details of the deal.
"I will go back to the MoD and look personally at what is being done around this PFI contract," he told the BBC.
The Voyager contract is the biggest Private Finance Initiative (PFI) signed by the government and one which both Labour and the current coalition have signed off despite warnings from notable military and political figures.
The Voyager planes are designed and made by Air Tanker - a consortium of blue-chip engineering giants such as Airbus, Rolls-Royce, Cobham, Thales and Babcock.
In their simplest form, they are standard Airbus A330-200s which have been fitted with refuelling pods in each wing and tail.
Air Tanker says the purchasing cost of each aircraft is £152m, but Newsnight has discovered that the MoD could have acquired these aircraft for a fraction of the list price.
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Watch Joe Lynam's full report on Newsnight on Thursday 10 May 2012 at 2230 BST on BBC Two, then afterwards on the BBC iPlayer and Newsnight website
"One would have expected an airline buying a single unit to be paying somewhere about 50% less" than list price, said Paul Leighton, of the Aviation Valuation Company.
But "an order of 14 aircraft would have attracted an even more significant discount", he said, suggesting that the price would have been in the region of £40m each at the time the contract had been signed.
Newsnight has seen a signed contract in which a client paid even less than that for very similar planes.
An expert in air-to-air refuelling told the programme that the conversion costs for each plane to a tanker would be in the region of £10m, but Air Tanker says it costs it more than that.
Even if it cost £10m, that would make £50m in all for each Voyager - or a third of what the MoD is paying.
Instead, the MoD has agreed to lease 14 Voyager refuellers at a cost of £750m each over 27 years up to 2035 - a total cost of £10bn.
When brought before MPs on the Public Accounts Committee (PAC) in October 2010, Ministry of Defence official Tim Rowntree confirmed that the MoD leases were based on a capital cost for each Voyager plane of £150m and said he did not think that was controversial.
PAC chairwoman Margaret Hodge said: "What I now need to do is get the National Audit Office to do a further investigation of this contract."
Former head of the army, Lord Dannatt, raised the issue of the Voyager cost with the incoming government two years ago when he was briefly special adviser to then Defence Secretary Liam Fox. His concerns were ignored.
"If it does turn out to be factually correct that MoD has paid two-to-three times more than it should have done for the same aircraft, then that is shocking," Lord Dannatt said.
The independent National Audit Office - whose job it is to examine how taxpayers' money is spent - said in a report in March 2010 that the MoD had grossly overpaid and appeared to lack the skills to negotiate such a contract.
UK taxpayers, who are barely a fifth of the way through the government's £81bn in spending cuts, will be responsible for a deal which will cost them at least £10.6bn and potentially £12bn.
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