Launched in September 2017 following acceptance by Her Majesty’s Government of recommendations made within an independent report written by Sir Peter Parker, my question now is – has the UK’s National Shipbuilding Strategy (NSS) been seriously holed below the water?
With the proposed Type 31e frigate programme being the first real test of whether or not Sir Peter’s conceptual ideas of creating increased competition in navy shipbuilding fallen at the first hurdle after the MOD abandoned the first Type 31e bid process last year on the basis that an insufficient number of compliant bids had been received, we learned yesterday from a well sourced ‘Daily Telegraph’ article written by Alan Tovey that the modest and in my view, unsustainable cost budget of £250 million per ship has also now seemingly been abandoned as well.
In fact, the reality appears to be that while the MOD is actually sticking to the £250 million average ship cost it has, from a budget cost as opposed to actual view, decided to remove various capability elements from the bidding process and will now take more of the financial risk on itself.
As climb-downs by the MOD go, this is not a bad one but the real risk to the Type 31e programme is not just about the MOD trying to do something on the cheap but also the risk that several of the bidding parties have little or no experience in building Royal Navy warships.
That the UK relies on BAE Systems to build its Royal Navy frigates, destroyers and offshore patrol vessels is done not only because the company has all the expertise required it is also done because of lack of available capacity elsewhere. If the UK was building three or four ships for the Royal Navy each year then things would be different. But we are not building that number – in fact we are not even building half that number.
Of course, BAE Systems may have built almost all the destroyers, frigates and OPV’s serving in the Royal Navy and, through the Carrier Alliance with Babcock International, Thales and the Ministry of Defence, played the major role in building of the two new Queen Elizabeth aircraft carriers for the Royal Navy, we must never forget that the supply chain created by BAE Systems over very many years contains literally thousands of other UK companies that benefit.
Building ships and submarines for the Royal Navy requires unique specialisms and while it is true that problems do occur and occasionally, often through specification changes by the MOD customer, budgets can and do go awry. Compared to say twenty years ago the customer, the MOD and HM Government, carries far less risk on each navy ship or submarine programme that they used to do.
Competition has its place of course and it is right that we do what we can to protect the reduced amount of sovereign capability that we have. While there is a degree of competition in Royal Navy ship refits at Babcock International’s yards at Devonport and Rosyth and BAE Systems Portsmouth facilities the most important priority for the MOD should be providing the Royal Navy with what it needs to do the job.
Of course, when talking about the subject of increasing competition in the shipbuilding industry the old adage that people in glass houses should throw stones comes into play. Last year, rather than concentrate request to UK shipbuilding companies only, the MOD requested four international shipbuilding companies/consortiums to compete for the Fleet Solid Support ship work. The four foreign companies asked to bid were the Italian company Fincantieri, the Spanish company Navantia, the Japan Marine United Corporation and South Korea’s Daewoo Shipbuilding and Marine Engineering. One UK based consortium comprising Babcock International, BAE Systems, Rolls-Royce and Cammell Laird were also asked to bid. The final outcome of the bid process is awaited but rumours abound that the MOD wishes, just as it chose to do with the Military Afloat Reach and Sustainability programme (MARS) which was later renamed the Tide class tanker projects and that, based on BMT Defence Services designs were built by Daewoo in South Korea. We will see but if, as anticipated by many, the MOD chooses a foreign builder for the Fleet Solid Support ship programme it could well be the final blow for the National Shipbuilding Strategy.
To be fair, the MOD did award Future In-Service Support (FISS) contracts worth around £1 billion last year to UK based shipyard operations. These contracts were in regard of provision of maintenance support for 17 vessels in Royal Navy service. For the RN this is broadly good news, efficiently sustaining a large part of the fleet, strengthening shipyards while offering greater competition and diversity amongst its suppliers.
Maintenance support for the ships of the Royal Fleet Auxiliary have been very successfully provided through a range of ‘cluster contacts’ awarded to Cammell Laird and A&P Falmouth over many years. In 2018 the MoD requested tenders to renew a range of support contracts covering a period up to June 2028.
The new deal which included 13 Royal Fleet Auxiliary ships together with HMS Scott, HMS Protector, HMS Echo and HMS Enterprise includes spares, repairs and all refitting work in order to properly sustain the ships and to maximise availability. Besides scheduled refits, the contractors are expected to provide teams to send overseas for operational defect rectification when needed. They are also responsible for equipment obsolescence management, surface coatings and furnishings. Ships included in the awards to Cammell Laird and A&P include RFA Fort Victoria, Fort Austin, Fort Rosalie, Wave Knight and Wave Ruler.
Back to Type 31e. To fit in with the NSS, the MOD has encouraged no fewer than five different consortiums to bid for the five planned Type 31e frigates for the Royal Navy. Unlike the far more sophisticated and now in build Type 26 frigate for the Royal Navy, these vessels being designed primarily for submarine detection, intelligence and various other large scale maritime support work and of which 8 vessels will eventually be built by BAE Systems, the Type 31e frigate class has been primarily designed to carry out maritime security, interdiction and a range of other far less sophisticated tasks.
My understanding is that the replacement MOD Type 31 competition programme – this had followed cancellation of the first – includes two if not three different consortia – these being BAE Systems which is teamed with ship conversion specialist Cammell Laird and naval ship design company, BMT Group and secondly, Babcock International teamed with Thales Group, BMT Group, the Northern Ireland based Harland and Woolf together with the marine engineer, Ferguson Marine.
I am unable to confirm this but I believe a third consortium in the form of Atlas Elektronik teamed with Thyssenkrup Marine Systems may also be bidding.
The MOD has stated that the winning bidder will be announced before the end of 2019> Personally, I would have reservations about it meeting that date and much will depend on whether the bidders consider that rewards outweigh the potential risk. On that score I remain somewhat pessimistic!
The bottom line is that while there may well be theoretical advantages for the MOD of having an increased amount of warship building capacity in practice the issue to me becomes one that only BAE Systems and, from different aspects, Babcock International have necessary knowledge and expertise in either building or fully supporting Royal Navy warships. Thales and BMT also have excellent records in respect of design and in the case of the latter, large scale strength in respect of supplying sophisticated naval electronic equipment.
If we really had been building far more frigates, destroyers and other Royal Navy warships than we are actually doing I would of course take the view that having a Type 31e frigate competition would make absolute sense. But we don’t build enough warship and those involved also have to ask the question of themselves, what happens after Type 31e?
Meanwhile it would be wrong to ignore that the ‘E’ in Type 31e stands for export and, just as BAE Systems and Her Majesty’s Government have very successfully been able to secure significant Hunter class frigate design and build for the Royal Australian Navy (a class based on the Type 26 design) and similarly, that Type 26 design is being used by the Royal Canadian Navy for its future frigate programme, so too is it anticipated that the far less complex Type 31e design will also find an ‘export’ market as well. Indeed, speaking to the architect of the National Shipbuilding Strategy back in 2017, I recall Sir John Parker telling me that his interpretation of what was incorporated into NSS in respect of the ‘E’ was that the Royal Navy should replace its Type 31e ships after eight to ten years allowing new ships to be built.
The worry of NSS in respect of the attempt to widen the net of available navy shipbuilding capacity was always going to be that none but BAE Systems and Babcock have experience of actually building navy ships. In an age where there can be absolutely no room for risk it seems to me that the idea of giving a contract for a Royal Navy frigate such as Type 31e to a company or consortium that has no proven record in building navy ships is ridiculous.
There is another possible argument that goes against the NSS ideals too. Whilst I very much welcome abandonment of the individual £250 million Type 31e ship cost target, rightly or wrongly I take the view that in theory the winning Type 31e bidder might not easily be able to share work with the losing bidders. That could push up the cost of the programme enormously. The status quo, taking for example the Type 26 frigate programme and where BAE Systems huge supplier base already includes bidders on the Type 31e, serves industry, jobs and the Royal Navy very well.
I started by posing the question – is the National Shipbuilding Strategy dead in the water? Speaking personally and notwithstanding that it contained some good objectives, I believe that it is.
CHW (London 8th May 2019)
Howard Wheeldon FRAeS
Wheeldon Strategic Advisory Ltd,
M: +44 7710 779785