FOURTH REPORT
The Defence Committee has agreed to the
following Report:
MAJOR PROCUREMENT PROJECTS
SUMMARY
This inquiry, our first of this Parliament into procurement
matters, has focussed on warship procurement strategies, including
their implications for constructing the Type-45 destroyer and
Future Carrier; the Warship Support Modernisation Initiative;
the use of PFIs for acquiring particular equipment capabilities;
and the Sea Harrier's withdrawal from service.
Procurement difficulties over the Type-45 destroyers
led the MoD to take a fundamental look at the state of the warship
building industry, using RAND consultants. The result has set
a path for that destroyer's procurement which will also shape
the background for other future ship programmes. While Vosper
Thornycroft and BAE Systems Marine will be now more likely to
remain in contention for future work, genuine competition in the
UK for the assembly of warships may now be a thing of the
past. Although the MoD's approach to the Type-45 has other risks,
we have concluded that it is a reasonable approach to the intractable
problem of excess capacity that has been left unresolved for far
too long.
In the warship support modernisation initiative,
the MoD has sought to rationalise the management of the naval
bases and their nearby dockyards to address the reducing warship
repair workload. As a result, more refits will be exposed to competition
and savings of nearly £50 million a year will be made in
the naval bases. The cost will be the loss of 1,000 jobs and the
essential skills base needed to support the fleet, and a question
mark over the long term future viability of all of the naval dockyards.
But, while both the dockyards and the (management of) the naval
bases are now in private hands, the MoD cannot wash its hands
of their future direction. It must recognise the strategic importance
of dockyard facilities across the UK and the benefits of fair
competition. Decisions on the base-porting of the Fleet should
not preclude dockyards that do not have bases providing fleet
maintenance and support. The MoD will have to exercise its continuing
oversight role with great care, and ensure that it puts in place
measures to protect essential facilities in the bases and existing
dockyards.
PFIs have been getting ever closer to the front line.
Many plan to utilise 'sponsored reserves' among the contractors'
personnel so that they can continue to operate in dangerous operational
environments. The MoD sees the Heavy Equipment Transporter as
a pathfinder for other PFIs. But it will have to examine very
carefully how well sponsored reserves work in practice and be
prepared to take tough decisions in the face of any doubts about
continued operational effectiveness or quality of service in hostile
environments.
The MoD has justified its decision to withdraw the
Sea Harrier 6-8 years early on 'capability' rather than cost grounds.
There are savings that will flow from the decision—£135
million directly and at least another £230 million from not
upgrading its engine—but these are not significant sums
in terms of the potential operational ramifications. The decision
reflected the technical difficulties of upgrading the Sea Harrier
to maintain its operational usefulness, and the capabilities available
from other systems. The principal burden of air defence for our
maritime forces will now fall on the anti-air destroyers and their
missile systems. The Type-45 destroyer and its PAAMS system will
improve the capability for intercepting fast and agile missiles
which may be fired in sea-skimming and high-diving salvoes, but
only from late 2007. In the meantime, the existing Type-42 and
its 1960s Sea Dart missile technology is after much delay being
upgraded. These will help mitigate, but they will not close, the
real capability gap that will be created by the Sea Harrier's
demise.
At the heart of this case is the MoD's expectation
that maritime task forces in the future will operate in littoral
situations rather than in the open oceans, and for the most part
with major allies such as the US on whom we could rely for additional
air defence. In such operations, the threat to our warships is
likely to manifest itself as missiles rather than aircraft, and
they will be most effectively countered by the anti-missile systems
on board our destroyers. In putting its confidence in more responsive
but closer range systems, the MoD will need to ensure the equipment
programmes on which they depend are delivered in time and in full.
We examined in this inquiry some of the programmes
that concerned our predecessors. Ammunition security of supply
is now more in doubt than when our predecessors last examined
it three years ago, with a raft of Royal Ordnance Defence sites
being considered for closure. We welcome the belated reassessment
by the MoD of the war stock levels of ammunition needed, but detect
that the rationale for that review might allow stocks to be reduced
below what a sensible caution might suggest.
The MoD has been beset with collaboration difficulties
with both the BVRAAM and A400M programme. It must continue to
push its partners on both to show a stronger commitment and remind
them that there are other options for the UK if the contract negotiations
for these programmes continue to struggle.
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