Select Committee on Defence Fourth Report


The Defence Committee has agreed to the following Report:



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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Prepared 10 July 2002