Select Committee on Defence First Special Report

Memorandum to HCDC from the Royal Ordnance Defence Trade Unions

  The Bishopton Trades Union prepared a memorandum dated June 2000 which was sent by Mr Jack Dromey to the Defence Select Committee as an attachment to his letter dated 14 June addressed to Mr Bruce George. The issues raised in that memorandum are quoted below in italics and addressed in normal font.

  Para 2. "The purpose of our second approach to the Defence Committee is because subsequent developments have demonstrated that the justification for closure is now suspect in the extreme. Indeed, it is now clear beyond any doubt that the proposed closure is neither in the public interest nor makes any commercial sense. The time has come for there to be once again effective Parliamentary scrutiny, not least because we hope that your intervention will lead to Ministers and Managers seeing sense."

  We believe that it still makes sound commercial sense to cease manufacture of propellant at Bishopton and to procure from another source. The current World Market Price for propellant for the CHARM 3 Training Round is less than half the cost of manufacture of the material made at Bishopton, which we have benchmarked during our identification of new suppliers. Bishopton could match this price only by the investment of £11 million in consolidation and increase in manufacturing volume from the current level of 350 tonne/year to 1,000 tonne/year.

  Para 3. "The Defence Committee will be surprised to hear that it is still the case that suitable alternative sources of supply, able to replicate the vital defence products manufactured at Bishopton, have yet finally to be identified and agreed. Further, in the process of trying to identify suitable alternative sources of supply, the hopes that there might be cost savings have evaporated. Indeed, it is increasingly clear that there will be significant increases in cost associated with sourcing propellant from overseas. And to add insult to injury for the Bishopton workforce, taxpayers' money will have to be spent on first the closure of Bishopton, and then the development of alternative sources of supply in competitor companies and countries."

  We have identified a long-standing, competent, European source of supply of Gun Propellants and are in negotiation with that supplier to achieve a long-term Partnering Agreement, based on that which RO Defence has with MoD. One of the major criteria for working together will be to ensure that the supplier sustains a minimum level of investment in future propellants technology and that we shall have access to that technology. We see clear and demonstrable cost savings by this route which we have shown to the Trades Union.

  Para 4. "Perhaps of most concern to the Defence Committee is the fact that there are serious question marks over the safety and stability of some of the proposed alternative propellants. It would now appear from the initial trial quantities of propellant procured that some of the products in question are showing classic indications that, in service, in particular, in low temperature conditions, they could lead to the lives of the crews of vehicles, ships and aircraft being placed at unacceptable risk."

  The statement is based on the results of tests on the initial sample of material produced by our supplier. As in all development programmes, we undertake an iterative process where we manufacture and test batches of material. This would be the case for any new material, regardless of where it was manufactured. The sample showed poor low temperature characteristics when it was tested in gun firing. After down-selection had been completed, we were able to discuss the technical issues in detail and the problem was quickly resolved even prior to the memorandum being written. By following the planned development and qualification programmes, monitoring results and correcting any shortfalls in performance, while identifying and closely managing risk throughout, we are able to demonstrate robust technical solutions.

  Page 2. "Gun Propellants. From the original "world market" options claimed to be available, the only supplier which is actively currently being considered is the German/Swiss Government controlled company, Nitrochemie. The South African Government controlled company, Sonchem, remains an option but one that would only become viable if there was no risk that potential political instability might put at risk that option."

  In our supplier assessment programme we identified potential suppliers and assessed them in a down-selection process against a number of technical and commercial criteria in a systematic and logical fashion, as described on Page 1 in the section entitled "Gun Propellants".

  Page 2. "Rocket Propellants. Two companies are being considered as possible suppliers for propellant for missile systems, principally for the Sea Wolf missile. The companies in question are Celerg from France and Bayern Chemie from Germany. No clear alternative source of supply has been identified for the propellants used in aircraft ejection seats and for cartridge ejector release units, which allow the safe firing of missiles from aircraft."

  Point 1. Supply of Rocket Propellants is being secured as stated and the two companies identified by the Trades Union are the only ones which have the equipment or else the capability to supply the propellant charges. Point 2. Martin Baker Ltd is the supplier of ejector seats. We have spoken with them and they confirm that they are satisfied that they have a suitable alternative source of propellant. Point 3. The information re Cartridges Ejector Seat Unit is misleading. MoD have no current plans for procuring the CERU 300 series cartridges used for Skyflash missile. For that reason they did not fund the requalification of propellant which would have been required when we changed from wood based to cotton based nitrocellulose some five or six years ago. At present no propellant is qualified for this purpose.

  Page 2. "Small Arms Propellants. At present, Bishopton supplies nitrocelluloses used to manufacture the various small arms and medium calibre ammunitions in service with the Armed Forces. The company is now contemplating in future procuring all its small arms nitrocelluloses from the Czech Republic."

  The qualification programme for Czech nitrocellulose used in propellant for small arms ammunition has been completed and awaits ratification by the Ordnance Board.

  Page 3. "Safety, Performance and Reliability. The Defence Committee will remember that one of the major concerns expressed by our members was the doubts that they had from their own experience, over the capacity of alternative foreign suppliers to provide the natures of propellant which are presently in service with our Armed Forces and new variations which are in the final stages of development, all to the necessary same standard as those manufactured at Bishopton. You will understand the dismay being expressed, therefore, by those that we represent over the results from trials being carried out at the Royal Ordnance Risdale Test Range on test quantities of propellants from the preferred Germany supplier, trials that are indicating that serious difficulties have been experienced with the safety and performance of alternative propellants. In service, such suspect propellants would without doubt present an unacceptable hazard to service personnel. We believe that such information should be made available to both the Ordnance Board and to the Defence Committee."

  The supplier partner with whom we are now in negotiation is a major manufacturer of propellants, whose sole business is the supply of propellants. We have visited them and audited their procedures and have every confidence in their ability to supply a quality product. The statement regarding safety and performance is disingenuous and refers to the same sample of propellant which exhibited poor low temperature correction. The performance aspect has been dealt with above. The safety aspect refers to an allegation by the unions that the propellant sample was exuding nitroglycerine. An investigation carried out by our Safety Department has demonstrated this not to be the case. The findings of the investigation have been reported and have been accepted by the unions.

  Page 3. "Supplier Availability and Strategic Assessment. The suggestion was made in evidence to the Defence Committee from both Ministers and Managers that a number, possibly five, different suppliers had been identified, each capable of supplying the complete range of Bishopton products. The bewildering array of alternative suppliers being canvassed is proof positive that that is clearly not now the case. After an initial fact finding study, all except one have been discounted on technical grounds. A second company is to be considered as a possible future supplier on the grounds that, at a later date, it may be able to supply because it might offer lower costs. The supplier in question does not presently have any experience, however, of manufacturing the full range of the natures of propellant currently required by the MoD.

  It has become evident that the only source of propellant being considered as the possible sole alternative to Bishopton is the Germany company, Nitrochemie. However, as outlined above, there are significant safety and reliability concerns associated with this source. We have to say that, as the Trade Unions always predicted, there are no proven, competent suppliers for the full range of Bishopton products."

  In order to get to the number of five potential suppliers, we first had to undertake a thorough market survey. The use of words "bewildering array of alternative suppliers" is misleading and ignores the thoroughness of our selection process. We have undertaken an auditable, comprehensive and logical programme of identification and down-selection of suitable suppliers leading to our current strategy of procuring from a single source under a long-term Partnering Agreement.

  Page 3. "Costs. The Defence Committee will remember that BAE Systems had wanted to retain Bishopton but had reluctantly concluded that, on cost grounds, it could no longer keep the factory open. The suggestion was then that closure would lead to substantial savings, with the Ministry of Defence benefiting as a consequence. It is now apparent that the proposed savings have evaporated. Indeed, the prices being quoted by Nitrochemie exceed those of Bishopton."

  Prices quoted by our preferred supplier are at the level which we originally understood and are very much lower than the costs at which the propellants can be made at Bishopton at the volume level (ca 350 tonne pa) which we envisage.

  Page 4, Para 1. "Turning then to the manufacture of the second set of products currently produced at Bishopton, propellants for rocket motors, it would appear that an increase in price of some 12.5% has been agreed between the company and the MoD to offset the requalification costs associated with the Blackcap and Redstart motor propellants for the Sea Wolf and Sea Skua missile systems. We should add that, even now, no alternative propellant suppliers for these systems have been identified although the MoD has indirectly agreed to offset the requalification costs through the increases in contractual costs that have been agreed.

  We do not recognise the figure of 12.5%. A price increase has been negotiated for the element of cost associated with the propellant charge, but this represents approximately 2.5% increase in the price of the Sea Wolf motor. It is true that the supplier of these motors has not yet been finalised, but the qualification plan is in line with MoD's next procurement requirement in 2004.

  Page 4, Para 2. "The latest bizarre turn of events is that it would appear that the MoD is effectively prepared to invest £7.9 million in either France or Germany to ensure that the contract for Sea Wolf can be fulfilled. We believe that both Ministers and Managers should be called to account for whether or not this is in the best interests of both our Armed Forces and the tax payer."

  The figure of £7.9 million has been taken out of context. At least £2.3 million will be spent in the UK and a further £1 million will be spent on non-energetic materials which have to be qualified in any case.


    —  RO Bishopton will close on 31 May 2002.

    —  Sources of supply of propellants to be used in RO Defence products have been identified and negotiations are underway to complete a Partnering Agreement for the Supply of Gun Propellants. Confirmation of the supplier of Rocket Motor Charges will await completion of the qualification programme. A supplier of products for Martin Baker Ltd is being qualified. There is no requirement for propellant for Skyflash Cartridges.

    —  Considerable cost savings, in line with those forecast to the Defence Committee, will be achieved.

    —  The requalification programme for Small Arms Ammunition has been completed and awaits ratification by the Ordnance Board.

    —  The programme for requalification of propellant supplies is being carried out in a professional manner to ensure a robust technical solution and security of supply.

    —  The programme will provide RO with access to state-of-the art propellants technology, ensuring its capability for charge design in the future.

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Prepared 5 February 2001