16 June, 1927.]

Major Salmon.

5883. But it does not apply to commercial firms. As I understand it, the officer of the Air Ministry would be perfectly entitled to give a licence to a particular firm for the use of his patent, because it is part of the perquisites or part of the emoluments he is entitled to? That is assuming the Department has left with the Government servant the 1ights under the patent.

Sir Fredric Wise.

5884. Will you give us your opinion upon this, Sir Malcolm ?-(Sir Malcolm Ramsay.) This whole question came up before this particular Committee in 1920, and in their Report the Committee made certain recommendations which were adopted by the Treasury and were embodied in the circular which has been quoted. It is the Third Report, paragraphs 7 and 8, of 1920. The circular issued, which was submitted to the Committee the following year, distinctly lays down or reiterates the old principle, "That all persons employed by Government Departments should be reminded that it is their duty if they have occasion to come in contact with any matter concerning a business organisation in which they have an interest, to disclose that interest to the head of their department and to ask that some other officer may deal with the case." That paragraph was, I think, intended to cover the case that the Honourable Member has in mind.

Major Salmon.

5885. I do not want to labour the point, but what I should like to get at is this. Take the case where the patent is not in use. The commercial firm comes along and asks for a machine to be passed in which the patent is not in use. The officer may rightly say: "I do not think it is safe unless you use this patent." That case is not provided for?-(Mr. Watson.) He would be bound in that case by the specification of the contract.

5886. It is a question of a commercial concern-nothing to do with the Government? (Sir Walter Nicholson.) The hypothesis is a civil aeroplane being passed for airworthiness by the airworthiness department?

5887. Yes. I really think the Honourable Member's example could not occur,

[Continued.

to the best of my belief. The airworthiness department who pass civil aeroplanes for airworthiness might conceivably include persons who had been allowed to take out patents in respect of certain subjects, but their work on the design of civil aeroplanes submitted to them is mainly mathematical work of stressing and defining the load and the limit of manoeuvring, and so on. It is mathematical and scientific work in which, to the best of my belief, the laying down of a particular component or element would not really enter.

5888. Would it enter in the case of an airship? Our practice as regards airships is at present only beginning. At present we have two very distinguished outside scientists who are not servants of the Air Ministry engaged in considering stressing for airworthiness, and doing mathematical calculations, and so on, in connection with the designs both of our airship R.101 and the commercial airship R.100 which are submitted to them. In any case they are not Government servants. They are, however, persons of such scientific distinction that the question simply does not arise.

Sir Fredric Wise.

5889. I think what may be in Major Salmon's mind is the case we had recently before the House of Commons of some of your higher officials being directors of companies outside. That may have been in Major Salmon's mind when he raised this point of the patent. You know what I refer to ?—I know what you refer to. If it is in order, I might say that in fact that problem did not and could not conceivably have arisen in that particular case.

5890. Coming to paragraph 7 of Sir Malcolm's Report, which deals with Subhead O of Vote 3, "Construction of Airship R.101 at Cardington," I would suggest, Sir Walter, if you would be good enough, that you should give a general statement to the Committee before any questions are asked you? The facts stated in this paragraph Sir Malcolm's Report are, of course, all correct. The only thing I should like to comment on really is the last sentence. That sentence is perfectly correct, οἱ course, as a statement of fact. The Treasury in sanctioning the additional expenditure which we had to submit fer

of

16 June, 1927.]

[Continued.

a

in this

their authority did comment sense, but I am bound to say I do not think their comment was really fair or fully informed. The contract was concluded prematurely in the sense that it was concluded in what I may call an atmosphere of optimism as regards the dates of the programme, and strictly speaking, I certainly think it must be admitted that as matter of official procedure some further months' delay in placing a contract of this sort would, as it turned out, have been advisable, and that the date by which the firm were obliged to make delivery ought to have been advanced still more, that is to say, nearly a year. But it is not really the fact that the additional expenditure of £14,800 was caused by the contract being concluded prematurely. I do not know if the Committee would wish me to enlarge on the subject, but everyone who has been concerned with the matter at the Air Ministry is in fact satisfied that if we had delayed making this contract and had made it at a later date, to be concluded at a still later date again, we should have paid more than in fact, even with this additional sum, we have paid. The reason for that I would rather not go into, but the fact is that we made what actually proved to be a very hard bargain with the Company. I do not know that I have anything more to add, except that I think the Committee should appreciate the very definitely experimental character of this contract. It was not a question, and could not be a question, of the Air Ministry providing complete designs and specifications at a given date, and the firm undertaking to produce material to this definite specification by another given date. The nature of the transaction was essentially collaboration between the Air Ministry and the firm. The airship staff at Cardington were responsible for the general design of the airship and the general requirements; the firm concerned were responsible for the technique of the actual girder construction and metal construction employed; and it was a question of the two forms of work fitting in with one another. I think perhaps as a preliminary statement prior to questions, that may be sufficient.

5891. Sir Malcolm, have you anything to say to that?-(Sir Malcolm Ramsay.) No.

61421

Mr. Ellis.

5892. Really putting it shortly, is it not this: first, that the Ministry did not in fact supply the information it ought to have supplied, and secondly, the precipitate action did not achieve the end that was intended? Sir Walter Nicholson.) The Air Ministry did not supply the information by the dates at which it had hoped to supply it.

5893. That is another way of putting it, but I am not mis-stating it in putting it the way I have done shortly?—The second part of the Honourable Member's remark, I think, did mis-state it. It referred to the precipitate action not achieving the end that was intended. I do not think that is a statement of fact. That is a comment which I personally do not think a fair comment. said there was undue optimism.

I have

5894. If you object to my statement, will you tell me what the end is, and whether it was achieved, and if not, why not?--I will certainly admit that the Honourable Member is correct if he means that the end in view at the time was the more rapid completion of R.101, and that R.101 has not in fact been more rapidly completed. That is perfectly correct.

5895. There is a certain amount of paraphrastic politeness in the paragraph in the Report here, but shorn of that it is rather a serious charge against the Ministry, and in a way one that should be met very clearly? I do not wish to reply by putting a question, but I am still not clear what the gravamen of the charge in the Honourable Member's mind is. I have tried to explain that our technical officers were unduly optimistic as to the rate at which they would advance with their design in collaboration with the firm, and that the programme of dates did not work out as expected. I have also said that we firmly believe that loss to public funds was not caused thereby. That being so, I venture to submit that the use of the phrase precipitate," if not unfair, at any rate suggests that we were wasting public money by some action that we took.

you

66

5896. I do not say that. Let me help one step further, if I may. Will you accept the words "unduly optimistic errors in judgment " ?-I do not wish to quibble about words. 'Errors in

R

16 June, 1927.]

judgment" if the Committee wish to put it that way.

5897. It is not a question of what the Committee put. I am only asking the question because I want to get at the bottom of what is in your mind. Words we can change any way about, as is well known. But here is a very definite charge based on Treasury information. Looking at it quite calmly and quietly, it suggests to me that the Treasury considered that the Ministry in this particular matter did not exercise such judgment as it ought to have done, and as a result of the want of exercise of proper judgment this amount of money has been spent which would not otherwise have been spent?-Undoubtedly that is what the Treasury said. Whether they still say that I do not know. But I have endeavoured to submit that it is not a fair summary of the case.

Sir Fredric Wise.

5898. May I ask what the Treasury say now? (Mr. Fass.) I am afraid we stand by the opinion expressed in that letter. I agree that the Air Ministry have managed to get extremely well out of the hole into which they got, but that does not seem to be any reason why they should have got into the hole in the first place. The Air Ministry admit that it was their delay in giving the approval of these designs which caused the impossibility of their enforcing the contract. It may be that the price arranged then was cheaper than if they had started de novo at that time. The procedure was that the Director of Airship Development at Cardington supplied the necessary information to the contractors. They then had to submit detailed drawings of their proposals for his approval before actually putting the work in hand. Under the contract the Director had a fortnight to approve or disapprove. It should have been possible at the time the contract was being considered to discover that a fortnight was not nearly long enough. These delays were not a question of a fortnight, but a question of a whole year. When drawing the contract it should have been possible to ascertain that a fortnight was far too short a time for the Cardington man to approve the designs submitted by the contractors, and if instead of a fortnight they had put in a month, two or three months, the position

or

[Continued.

That

might have been very different. was what was in the mind of the Treasury. (Sir Walter Nicholson.) But, of course, Mr. Fass will realise that if we had, as possibly we ought to have, put two or three months in the contract in place of a fortnight we should not have obtained that price from the contractors. (Mr. Fass.) We have no information beyond that supplied by the Air Ministry.

Sir Assheton Pownall.

5899. I understood you to say that no extra expenditure had been incurred owing to this delay? (Sir Walter Nicholson.) That statement is, of course, hypothetical. I cannot prove that to demonstration. As a matter of form undoubtedly this extra payment is due to our default on the contract.

5900. What is the present position with regard to the airship?-The present position is as described here, that we are still anticipating that all this material will have been delivered by the end of this year the 31st December.

5901. Things are now going on satisfactorily as far as you can see, and everything will be in order by the 31st December? So far as one can judge. I do not wish to commit myself that it is going to be all right on the 31st December; the whole thing is a very experimental business as I have repeatedly stated.

5902. But as far as reasonably can be foreseen?—Yes, as far as can be reasonably foreseen.

Sir Malcolm Macnughten.

5903. The paragraph in the report of the Comptroller and Auditor General says this contract was of an unusual character. In what respect was it unusual? (Sir Malcolm Ramsay.) That is explained by the following words. Instead of having a contract for a fixed price, or a time-and-line contract, the contract provided that the Air Ministry should pay the actual costs of labour and materials plus fixed sums for the remaining charges.

5904. That is a very unusual form of contract? The object of that was, of course, to safeguard the Ministry against the heavy costs which experience shows that time-and-line contracts generally

[Continued.

16 June, 1927.]

land one in. (Sir Walter Nicholson.) It was not an original form of contract. It was adapted in fact from a form of contract which the War Office had used in respect of tanks.

5905. In time of war?-No, post-war. 5906. That was the form of contract the War Office made?-No, the position is that time-and-line contracts are by universal experience regarded as unsatisfactory, leading to waste. In forms of contract for experimental material where no contractor can be sure of what he is letting himself in for the contractor says, "I must have my actual expenditure on labour and material plus, of course, some fair allowance for overheads and profit."

Mr. Ellis.

5907. He says, "I refuse to be otherwise than an agent." Is not that it?That is it. He says, "I refuse to be otherwise than an agent." In certain types of contract you have to admit that that is the only fair form of contract. But then you say: "Let us at any rate limit the inclination of the contractor to go on indefinitely spending time and money on this work by fixing as a lump sum his profit, or overheads, or both.' That, simply, was the comparatively unusual nature of the contract.

Mr. Cyril Lloyd.

5908. I should like to ask this question. Was there any reason, either nationally or technically, which gave particular point to the urgency with which this contract was placed?-I think one can simply say the general desire of the Government and the Air Ministry and all concerned to get on with this airship experiment.

5909. You cannot tell me why that particular date was scheduled which is referred to in this paragraph? There seems to have been some pressure causing the supposed precipitancy in the case of this contract. I was wondering what that pressure was due to. Obviously it was no expectation of warlike necessity? -Oh, no. The airship programme was introduced as a three-year programme in 1924, and we are now in the fourth year of it, and it will certainly be in the course of the fifth year before it is completed. That is a delay of which I suppose the House of Commons has some right to

61421

complain, and undoubtedly there is general desire to get on with this job and not allow the delays to go further than necessary. I do not think one can go further than that.

5910. Is it a fact that there is a

second airship running more or less parallel in construction with this one? -Yes.

5911. In point of time and in point of design? No, the design is essentially different.

5912. Is the other one completed?— No.

5913. Will the other one be completed about the same date? Are they running more or less concurrently ?-Speaking broadly, I think you may say the answer to that is yes. The firm concerned, the Airship Guarantee Company, hope to complete their airship before the Government airship. We are somewhat doubtful whether they will.

5914. Is it necessary for any commercial or technical purpose that they should be both available together?—No, not at an identical time. In fact for some reasons it might be preferable that one should be delivered two or three months after the other.

5915. That was a point I was coming to. Would there not be some technical benefit in drawing deductions from the first one before the second one had gone too far towards completion ?-No, I do not think it can form part of the programme that experience on one should directly affect the design of the other.

5916. One other question. I understand that in the construction of this airship the contractor supplies everything except the premises. Was the construction to be done on Government premises? -No, the construction of these girders was to be done at the contractor's works. The girders were to be assembled at Cardington.

5917. But not constructed at Cardington? Not constructed. There is undoubtedly an appreciable amount of labour to be put in afterwards, apart from the question of the gasbags and the cover and the machinery, gondolas and

so on.

5918. If when it was found that this technical information was not available, it had been decided to make a clean cut and cancel the contract instead of postponing it, do you imagine that the contractors would have had a greater

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16 June, 1927.]

It

claim than this large sum which they have been paid?-That is an utterly inconceivable solution of the problem. would have delayed the completion of the airship by years.

5919. The contractors could not have established a very substantial claim, could they, because they had not the information to do it. Supposing you had gone to them and said, "We find we have not the technical information available, and therefore we must postpone it for possibly fifteen months, and we suggest cancellation and a new contract,' would not their claim have been of rather microscopic dimensions?—Oh, no, 1 think there would have been a heavy claim. I cannot answer off-hand with great confidence the question as to what the magnitude of their claim would have been. But I do submit this. As I say,

the Air Ministry airship staff and this firm were essentially collaborating in this design, and to break off the collaboration would be to terminate the whole existing scheme of building that airship.

5920. It would have interrupted the preparatory work?-It would have interrupted the whole programme most hopelessly. We should have had to start again with some other firm presumably, or else decide to do everything from A to Z at Cardington.

5921. Then it is not true to say that it was only the Air Ministry that failed to produce the technical information; it was the two working together?-It was the two working together.

5922. It was the breakdown of a sort of previous implied contract that you should do the development work together?-It was the default of both sides, yes.

Sir Malcolm Macnaghten.

5923. Officials of the Air Ministry and the officers of this company had been working together under no contract but simply co-ordinating before the contract was made is that right?-The same firm had produced a test section of the airship for test at Cardington.

5924. At their own risk and expense? -No. That was under a separate preliminary contract for an experimental section of the airship.

5925. Before this contract of unusual character was made, there had been a previous contract?-Yes, still more purely experimental—the first idea of the novel structure of this airship which is

a

[Continued.

definite break away from all previous Zeppelin practice.

5926. For that the firm had been paid? -Yes.

5927. No trouble arose under that?— There was some discussion as to the terms, but that was practically done on a time-and-line basis.

5928. They could not complain of that? --No, there is no complaint on that

score.

5929. You will never find a contractor who will complain of being paid all his expenses plus profit?-It was not quite as simple as that. It was rather a complicated story in that case too, but I do not think, unless the Committee wish, that I need go into that.

Major Salmon.

5930. I understood you to tell Mr. Cyril Lloyd that there are two airships under construction and that they are anticipated to come out together?— Broadly speaking, yes, in the summer of next year.

5931. suppose when an airship comes out it has to be fixed to something; it cannot remain in the open. Have you places to receive both these airships?They can ride at a mast, and they can be put in a shed.

5932. Have you made arrangements at Cardington to receive the one that you have under construction?-The one at Cardington is being built in a shed, and arrangements have been made to build a second shed at Cardington.

5933. For the purpose of the second airship? For the general purposes of the airship programme.

5934. But when the airship comes out from the contractors' depot where will it go? To a mast at Cardington.

5935. And your own airship will have to remain in the shed?-Yes.

5936. Whichever comes out first will go to the mast ?—Yes.

5937. Therefore it is a race as to which comes out first ?-Yes, if you like to put it so.

5938. I suppose the reason you placed this contract with this particular firm was that you had experience of them before? Yes.

5939. And no doubt by your second contract you took steps to avoid the difficulties you had with your first contract? -It was the same firm in both cases.