13 Jul 06. The Ministry of Defence and Swan Hunter have mutually agreed to close the contract for the Landing Ship Dock (Auxiliary) (LSD(A)) which has experienced considerable cost growth. The Ministry of Defence has reached the conclusion that the contract no longer represents value for money.
New arrangements have been made between the Ministry of Defence and BAE Systems for LYME BAY to be transferred to the Govan shipyard for final integration and commissioning, and for the transfer of Design Authority and the provision of Lead Yard Services from Swan Hunter to BAE Systems to ensure ongoing technical and warranty support for the ships. The MoD believes this approach will bring greater certainty to the time and cost for completing the LSD(A) project.
The LSD(A) programme is well advanced. RFA LARGS BAY was accepted off contract from Swan Hunter on 25 April 2006 in good condition, and Swan Hunter has completed the majority of the physical construction for RFA LYME BAY. BAE Systems delivered RFA MOUNTS BAY last year and this ship has now demonstrated its excellent amphibious capability in recent trials. RFA CARDIGAN BAY remains under construction at Govan and is expected to be completed under the current contract with BAE Systems this autumn.
The Ministry of Defence will make payment to Swan Hunter in full and final settlement for work done up to the date of closure in accordance with the terms of the settlement.
There has been significant cost escalation on this programme and although the commercial agreements currently remain confidential, relevant cost data will be released once it is possible to do so. It is clear that lessons will need to be learnt from this project, but the Ministry of Defence is confident that the new Defence Industrial Strategy will have a positive impact on such projects in the future.
Lord Drayson, Minister for Defence Procurement, said “This has been a difficult decision for the MoD. Our priority has always been effective delivery of the required military capability, which we have attempted to achieve through successful completion of the contract with Swan Hunter. However, the cost growth and delays on this project have been unacceptable. The Ministry of Defence has reached the conclusion that the contract no longer represents value for money. We need to act to bring certainty to the programme and this decision is fully consistent with the principles of the Defence Industrial Strategy”.
Jaap Kroese, Swan Hunter Chairman, said “I am obviously disappointed with the outcome but the Ministry of Defence has taken this decision because it makes financial sense to finish the last two ships in the one shipyard”. Swan Hunter sees its future in new opportunities including ship breaking, for which it has now received a licence from the Environment Agency. If successful, the transition may enable the company to sustain its current workforce of approximately 160 jobs.
The MoD is working with the Regional Development Agency, One North East, to identify further work based training opportunities for Swan Hunter apprentices employed under the Company’s current scheme.
The Landing Ship Dock (Auxiliary) programme will deliver a new class of four ships to replace the ageing Landing Ship Logistic vessels. The new vessels will be used to deploy Amphibious Task Groups, vehicles and equipment directly into potentially hostile operational areas. The primary role is to support amphibious operations, and they will also provide wider support to joint operations by providing strategic sealift at high readiness, support to humanitarian and peace keeping operations and sea based support to deployed land formations. Under the previous arrangements, two of the vessels were to have been designed and constructed by Swan Hunter with a further two built by BAE SYSTEMS.
DEFENCE NEWS ANALYSIS commented that Four LSD(A) were ordered; two (Largs Bay and Lyme Bay) from Swan Hunter on 19 Dec 00 and two (Mo