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When the decision was taken in November 1965 to adopt the Spey engine for our Phantom aircraft, the grounds had been that we should obtain a better performance than that of the American aircraft, that we should save expenditure in dollars, though at the expense of
additional sterling costs, and that it was right to provide Rolls Royce with development and production work. It was now apparent that the result of this decision, together with the aircraft development and
modification costs in the United States consequent on it and on the adoption of the Ferranti navigation/attack system, would be that we should pay twice as much for the smaller number of aircraft that we were now purchasing as if we had bought. them with American engines and equipment; that we should make no saving in dollar costs; and that the
performance of our aircraft would never be better than that of the American Phantoms. The British components in the aircraft would cost
three times as much as their American equivalents and one-third of this would be in dollars. We should, however, obtain the aircraft when we needed them without the risks, both as regards timescale and cost
escalation, that would have been involved in continuing with the P 1154 programme. We should, however, have to take into account the problems that were involved in incorporating British equipment in foreign aircraft
when we came to consider future policy for aircraft procurement generally.
THE MINISTER OF TECHNOLOGY said that the contractual arrangements
with Rolls Royce for the Phantom Spey would ensure that the additional
development costs needed on the engine would be borne by the firm, who
would also have to pay penalties for the late delivery of production engines; they stood to lose 6 million and their reputation in the
United States was also at risk. The order by the United States for Spey engines for the A7 (Corsair) aircraft. would not be affected, however;
this was a different version of the engine, without the components of which were causing difficulty in the Phantom Spey; and it was to bo produced by an American engine firm (Allison).
The situation on the Ferranti navigation/attack system was more
serious financially as well as from the operational point of view. The
firm was not in direct contractual relationship with us; they were sub- contractors to McDonnells, the airframe firm, and contrary to our expectation the contract between the two firms did not contain a penalty clause for failure to deliver equipment up to specification. American firm was not making progress payments to Ferranti however and this might mean that they would be in financial difficulties.
The
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