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KBR POISED TO WIN UK CARRIER MANAGEMENT CONTRACT

05 Dec 04. The Sunday Times reported that, UK MoD officials will meet this week to discuss a radical review of the Royal Navy carrier programme that could see the ships shrunk in size to fit budget constraints.

The MoD has said it has £2.9bn to spend on the ships, but defence-industry experts say the two 265-metre, 60,000-tonne vessels envisaged will cost £4bn or more.

This week’s meeting, which will re-examine the Navy’s requirements and the available budget, threatens fresh turmoil for the carrier project, which has been rocked by a row over the appointment of a “physical integrator” to manage their construction.

Kellogg Brown & Root (KBR) a subsidiary of Halliburton, the controversial American defence group, is expected to win the contract.
The MoD is expected to announce KBR’s appointment within the next fortnight. Halliburton has been the subject of considerable controversy in America over its contracts in Iraq. US vice-president Dick Cheney is a former chief executive of Halliburton.

KBR’s appointment is expected to trigger a political row, with defence unions in Scotland warning it could lead to the loss of more than 1,000 jobs at Rosyth, the naval dockyard near Edinburgh, which is close to the constituency of Gordon Brown, the chancellor.

The potential threat to Rosyth comes from KBR having previously advocated the assembly of the two ships at Nigg, a huge but mothballed yard on the Cromarty Firth. Nigg, which is owned by KBR, had its heyday during the offshore construction boom for North Sea oil yards in the 1970s and 1980s, but has since struggled to find work.

It is uncertain if KBR, which will become the “physical integrator” on the carrier contract, will have a role in deciding where the ships are assembled.
Some industry sources said last night that the choice of the final assembly site would be a matter for the government. Geoff Hoon, the defence minister, is said to have pledged that work will go to Rosyth.
But others said KBR had taken officials from the Defence Procurement Agency, which is dealing with the carrier contract, on a visit to inspect the Nigg facilities.

Babcock, the company which runs Rosyth for the MoD, is keeping a close eye on developments. The MoD has agreed to underwrite the costs of redundancies at the yard, but only until October.

It is understood that if it appears there is a serious prospect of the carrier work going outside Rosyth, Babcock would consider making redundancies next year while the MoD would still pick up the bill.
KBR’s impending appointment has sparked a furious round of lobbying in

Whitehall, with defence companies opposed to the appointment pressing to have the decision overturned.

Senior executives of companies already involved in the carrier project said the involvement of KBR could also prove an obstacle to plans to consolidate the shipbuilding industry.

The prospect of a furious backlash in Scotland has prompted some in Whitehall to predict a last-minute reversal. Amec, the British construction company that was lined up for the physical-integrator role earlier this year, is the obvious choice to replace KBR.

Shipbuilding industry sources say that if the MoD was to decide to shrink the carriers, the programme risked significant delays. A cut in the vessels’ size would restrict their ability to carry different types of military aircraft. They are due to enter service in 2012 and 2015.

Comment: This is not good news for Scottish shipbuilding and Rosyth in particular. Whilst the Nigg yard will provide a temporary respite to jobs in Scotland, KBR’s involvement will almost certainly mean that any support work would go South to Portsmouth. The Clyde yards are already recognised as being too small for certain future Royal Navy requirements and with the consolidation of the yards under one management structure the VT yards in the South look set to win at the expense of Scotland. Any response from the Scottish Executi

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