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BAE REAFFIRMS CVF BID

4 Dec 02. Responding to our lead story of our last issue, THALES OUTLINES ITS WINNING CASE FOR CVF (BATTLESPACE UPDATE Vol.4 ISSUE 49 December 2nd 2002), Hugh Colver, Public Relations supremo at BAE SYSTEMS told BATTLESPACE,” I can tell BATTLESPACE categorically that BAE SYSTEMS has as its highest priority business winning campaign at present the bid to be Prime Contractor on CVF. Any suggestion of a lack of commitment is quite wrong. You are suggesting that we wish to protect our balance sheet and refer to Nimrod and Astute. Obviously we enter business on a sound business footing, but everybody understands that including the customer. There really must be no doubt about our commitment to this one.” High level representations are believed to have been made to the Government in the last few weeks on shipbuilding issues in particular.

BAE SYSTEMS has stressed the strategic implications of the CVF contract. “We hope to build on the highly successful Type 45 contract which has given sufficient work to the BAE and VT yards to ensure work into the medium term. The CVF deal will cement the strategic shipbuilding partnership which will ensure continued investment in UK shipyards, A Thales win may mean the export of critical UK design technology and IPR to France to build on their current drive to increase warship exports,” Colver continued.

Certainly the BAE record on shipbuilding to date is not brilliant, the company has made provisions of £54m to meet shortfalls on the fleet oilier and LPDR programmes. This does not take into account the delays on Astute, for which there is believed to be an MoD Committee established. One of the remedies believed to have been discussed would be for the MoD to take up the options on the full fleet of 9 boats over 10 years which would make the contract profitable overall.

The provision of £46m liquidated damages quoted in the NAO Major Project Report for Nimrod only relates to full damages in the event of total contract failure Colver later confirmed.

Thales insist that their CVF Bristol office, which was created from a brown field site bringing in experts from all over the UK is here to stay, establishing a new UK centre of excellence with 260 staff. The offer of the ‘third’ carrier from France appears to have been rejected by the Royal Navy and the MoD, with the final winner being decided on the benefits to the UK against the CVF requirement with the DPA, with no political aspects taken into account.

Certainly the MoD must take some blame for forcing BAE’s pricing to an unacceptably risk level on shipbuilding with little volume to recover overhead. The MoD is more likely to stick to the devil it knows and continue its relationship by awarding CVF to BAE, however, it could take another view that the Thales bid has a lot of merit and go with Thales to call BAE’s bluff. This would confirm whether another company could do a better job in managing a UK shipbuilding contract with BAE taking a major sub-contract. This has worked for VT for Type 45 in winning £250m of sub-contract at no risk. Perhaps forces outside BAE’s control such as a further fall in the share price may be factors which affect this decision.

In any event the final decision due in February is too close to call but certainly Thales appears to be hiding its naval capabilities under a bushel, some observers suggest this is deliberate after having its fingers burnt over BOWMAN. The IAB meeting to push the project further is believed to be slated for next Monday the 9th, with both partners being invited into to make further representations on Tuesday.

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