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.
SUMMARY
— 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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