Memorandum from the Ministry of Defence
on Major Procurement Project Survey (March 2002)
The Nimrod Maritime Reconnaissance & Attack
Mk4 (MRA4) will replace the current Nimrod MR2 as the RAF's maritime
patrol aircraft, providing significantly enhanced Anti-Submarine
and Anti-Surface Unit Warfare capability through improved aircraft
and sensor performance, a greater degree of system integration
and better Human Machine Interface design. The new aircraft will
also provide a substantial improvement in availability and supportability.
The aircraft, training system and initial support are being procured
from BAE SYSTEMS as Prime Contractor.
In November 1992, the Equipment Approvals Committee
(EAC) approved a Request for Information exercise whereby 17 companies
were invited to provide responses to the draft Replacement Maritime
Patrol Aircraft (RMPA) Staff Requirement. Following analysis of
the industry responses, the EAC endorsed the requirement and approved
an Invitation to Tender phase whereby four companies (BAe, Lockheed
Martin, Loral and Dassault) were invited to provide detailed technical
and commercial proposals for an aircraft to meet the endorsed
Staff Requirement. Dassault withdrew from the competition in January
1996, and whilst Lockheed Martin and Loral merged in May 1996,
they maintained the two separate proposals until the competition
Following assessment of these responses, selection
of BAe's Nimrod 2000 (later to be re-designated Nimrod MRA4) offer
was approved by EAC and Ministers in July 1996. This was the equivalent
of Main Gate approval. The contract was placed in December 1996
and following difficulties encountered by BAE SYSTEMS in meeting
the contractual programme, the contract was re-negotiated in May
1999. BAE SYSTEMS are now pursuing a programme which seeks to
improve contracted aircraft delivery timescales. Responsibility
for the build of the aircraft moved from FR Aviation to BAE SYSTEMS
Woodford in October 1999 as part of the drive for programme improvements.
Maintaining the intensive pace of the MRA4 programme
is dependent upon successful application of concurrent engineering
practices with, for example, no dedicated prototype aircraft.
Considerable progress has been made and the Department expects
MRA4 will satisfy or exceed the key capability requirements. Design
and development is largely complete with systems integration qualification
testing now underway and first flight expected to occur towards
the end of 2002. This target is nine months behind the programme
as rebaselined in 1999 and there is thus some risk of slippage
to the in-service date. To mitigate this risk, MOD and BAE SYSTEMS
have agreed to an Incremental Capability Acquisition approach.
This comprises the acceptance of aircraft in two steps, an initial
capability being demonstrated by the time of first aircraft delivery
will full specification compliance being demonstrated by the time
of the seventh aircraft delivery and ISD. In parallel MOD and
BAE SYSTEMS are developing a joint approach to whole life support,
under a Memorandum of Capability Partnering signed in December
2000. This appointed BAE SYSTEMS as Prime Contractor for industry
in-service support to the Nimrod MRA4 Weapon Systems where such
support is determined by MOD to be both appropriate and best value
1. To allow the UK to continue to meet its
defence commitments, in both open ocean and littoral/shallow waters,
and play its part in deterring aggression and instability, there
is a need for Maritime Patrol Aircraft (MPA). Within the overall
maritime requirement, the MPA is uniquely suited for a wide range
of tasks due to its speed, range, endurance, broad range of sensors
and substantial weapon load. Its ability to respond quickly not
only within theatre but also between theatres, to provide defence
in depth, and to engage in both offensive and defensive operations
make it an essential component of the maritime force mix. It is
a key capability in the safe deployment of UK forces.
2. There have been no significant trade
3. The 1996 requirement was for a fleet
of 21 aircraft in total. This has recently been reduced to 18
to reflect the increase in capability afforded by the MRA4 and
the revised submarine threat assessment within the Atlantic theatre.
4. The SDR confirmed the requirement for
MPA with the capabilities of MRA4.
5. The Nimrod MRA4 is being procured principally
for Anti-Submarine Warfare, Anti-Surface Unit Warfare and Search
and Rescue. However, it can be used across a full range of missions
and will contribute to 16 out of the current 27 Military Tasks.
In particular the platform has a significant role to play in `Protection
of the Deterrent (MT26)', `Counter-Drugs Operation (MT3)' and
`Integrity of UK aters in Peacetime (MT8)'.
6. The Nimrod MRA4 replaces the Nimrod MR2,
which has been in frontline service for over 20 years. The mix
of Nimrod MR2 and Nimrod MRA4s available for operations during
the programme continues to be refined by the Integrated Project
Team, BAE SYSTEMS and the MOD to maximise the available capability
consistent with the MRA4 delivery programme. The contract will
require the first aircraft to be delivered to RAF Kinloss in August
2004, with an Initial Operating Capability. The contracted In
Service Date is March 2005, marking the arrival of the 7th aircraft,
with Full Operating Capability. MOD risk assessment suggests these
dates may not be met (para 13 refers). The 18th Nimrod MRA4 is
expected to be delivered in spring 2008, when the last remaining
Nimrod MR2s will be phased out of service.
7. The original contract for the supply
of aircraft, training systems and an interim support package was
the result of competitive tendering. Competition will also be
used at the sub-contract level, as part of the process of developing
the capability partnering approach to long term in-service support
of the aircraft, with BAE SYSTEMS as the prime contractor.
8. The Nimrod MRA4 will be crewed by RAF
aircrew. With its improved sensor performance, communications,
processing capability, automation and ergonomics, the MRA4 allows
a reduction in crew numbers from the existing Nimrod MR2 minimum
of 13 to 10. These are two Pilots, two Tactical Co-ordinators,
one Communications Operator and five multi-skilled Weapons Sensor
Operators. A mixture of Service personnel and civilian industrial
staff will provide support and training. The optimum service/civilian
mix will be determined through the process to establish capability
9. In selecting the MRA4 a full Combined
Operational Effectiveness and Investment Appraisal study (COEIA)
was conducted by the Department. Operational analysis was carried
out in support of the requirement with regard to force mix within
ASW, ASuW and nuclear deterrent support operations. Only MPA provided
the speed of response, range, endurance and ability to carry an
array of weapons required to provide an outer defence to surface
forces. Within the COEIA, Nimrod 2000 (now MRA4), was compared
to the competitor P3 aircraft (Orion 2000 and Valkyrie), refurbished
Nimrod MR2 "do minimum" and also run-on of the MR2 the
"do nothing" option. The last two options provided less
than 25 per cent of the capability of the competing Nimrod 2000,
Orion 2000 and Valkyrie options. There was no significant difference
between the cost effectiveness of these three options.
10. BAE SYSTEMS are expected to accept the
US Navy invitation to bid into their requirement for a new Multimission
Maritime Aircraft to replace their P3 Orion fleet. The requirement
could exceed 130 aircraft. In the event that this were successful,
other sales could follow, notably to Australia, Japan and Korea.
In support of the Company's effort, the Department has been fostering
a close working relationship between the US and UK project teams.
11. The BAE SYSTEMS sites for the assembly
and test of the MRA4 are Warton and Woodford. Additionally, wing
manufacture and sub-assembly work is carried out at Prestwick,
Chadderton and Brough. Principal sub-contractors are Rolls Royce
(Filton and Berlin) for the engine, Boeing for the Tactical Command
System and some sensor sub-systems, Ultra for the Acoustics system
and Thales for the Radar and Training System. The aircraft carries
a number of weapon systems, including STING RAY Torpedoes, manufactured
by BAE SYSTEMS, sonobuoys currently supplied by Ultra Electronics
and US-sourced Harpoon air to surface missiles.
12. Although the MRA4 programme pre-dates
the introduction of Smart Acquisition it is being managed along
Smart Acquisition lines. Performance, time and cost measures drive
the key milestones of the programme.
|1st Delivery||At Initial Operational Capability
Predicted (50 per cent confidence)
Predicted (50 per cent confidence)
|Final Delivery|| ||***
The approved acquisition costs for the programme in resource
terms stands at some £2.98 billion.
14. The MOD and BAE SYSTEMS are developing a joint approach
to whole life support, under the Memorandum of Capability Partnering.
In the context of furthering capability partnering, agreement
has recently been reached with the company over an Initial Enabling
Package (IEP). The IEP package includes incremental capability
acquisition (the delivery of aircraft with an initial capability,
followed by the balance) in order to protect ISD, as well as a
series of measures covering integration facilities and software
tools that are vital for long term support of the aircraft and
its systems. There is also a joint commitment to conduct detailed
studies to determine the optimum whole life support solutions
to be progressively put in place from 2004. A Heads of Agreement
document was signed in February 2002 and this will form the basis
for the necessary contract action.
15. The 18 MRA4 aircraft will be split between 17 operating
fleet and 1 sustainment aircraft (covers attrition and deep servicing).
The operating fleet will be held at varying levels of readiness.
All will be available within 60 days.
16. MRA4 complies with the NATO Defence Capabilities
17. The final MRA4 delivery is contractually scheduled
for spring 2008. Those remaining MR2 aircraft which have not been
converted as part of the MRA4 programme will then be withdrawn
from use in their present role.
18. Nimrod MRA4 has an in-service life of 25 years based
upon 650 flying hours per year.
19. The mission systems have been with future development
potential in mind. Provision is included for the installation
of role fit work stations in the rear cabin. The aircraft's synthetic
aperture radar, advanced communications suite, and extensive range
and sortie duration make it a platform capable of adaptation to
REPLACEMENT FOR TRIGAT MISSILE
The UK has decided not to proceed with the collaborative
Medium Range (MR) and Long Range (LR) Third Generation Anti-Tank
(TRIGAT) programmes and is proposing to procure alternative systems.
The change in likely war-fighting scenarios since the commencement
of the TRIGAT programmes has meant that the successor programmes
will align more correctly with the envisaged threat.
1. The UK entered a collaborative arrangement with France
and Germany to develop and produce TRIGAT weapons to meet its
separate medium and long-range requirements for equipping the
2. A reassessment of the UK's long-range requirement,
which took account of the role that the Attack Helicopter would
play, led to a decision in 1991 not to proceed with the production
phase of LR TRIGAT (although the most cost-effective solution
was to complete its development under the collaborative MOU with
France and Germany).
3. For the medium range capability, while MR TRIGAT was
still considered appropriate for use with mechanised and armoured
infantry brigades, a decision was made in 1999 not to equip the
Light Forces with it because of its weight and bulk. As a result,
a requirement for the Light Forces Anti-Tank Guided Weapon (LF
ATGW) was introduced with a competition to select the most cost-effective
4. Difficulties continued with the MR TRIGAT programme
which led, in summer 2000, to a decision by the UK not to proceed
into production with this system. Balance of Investment studies
were conducted and these reported in summer 2001 that the mechanised
infantry brigades would be best equipped with the same weapon
as that to be chosen for the Light Forces. Consequently, the existing
LFATGW has been expanded to cover all medium range requirements.
The studies also concluded that a long range ATGW would be the
best solution for the armoured infantry brigades. The long range
capability is still being considered and may be taken forward
as part of the Future Rapid Effects System (FRES) work.
5. Trade-offs have been considered as part of the Balance
of Investment studies conducted during
2000-01. Further possible trade-offs may be identified when the
long range ATGW is considered in relation to the FRES requirement.
7. It will not be possible to determine the number of
long range weapons for some time as it will depend on the future
linkage with other programmes. Revalidation of the Balance of
Investment studies will also be carried out as such decisions
are not planned to be taken until 2005.
8. The Strategic Defence Review confirmed the need for
an anti-armour capability. Equipping the mechanised infantry brigades
with LF ATGW and the armoured infantry brigades with a long range
system will fulfil this requirement.
9. The current in-service Medium Range ATGW is MILAN.
While it continues to meet the requirement for which it was designed,
it is becoming increasingly ineffective as it approaches its out
of service date. It is due to be phased out between 2005 and 2008.
10. The LF ATGW is currently in its assessment phase,
which is identifying the most cost-effective Military Off The
Shelf solution. This followed the issue of an Invitation to Tender
on 21 September 2001 to two potential bidders (Raytheon-Lockheed
Martin for the US developed JAVELIN system and Matra BAe Dynamics
for the Israeli developed SPIKE system). Tenders were received
early in 2002 and a decision on which system to procure is planned
for autumn 2002.
11. The acquisition approach for the long range requirement
has still to be determined.
12. Although the possibility of developing a LF ATGW
was considered, it was not likely to be the most cost-effective
solution and it would not be possible to achieve an In Service
Date of 2005 to match the commencement of phasing out MILAN.
13. As the preferred solution is for procurement of an
existing off the shelf system, the possibilities for collaboration
14. Discussions are underway to identify opportunities
to exchange data with other nations who are conducting their own
15. Although both competing systems for the LF ATGW are
based on foreign weapons, the consortia have been requested to
maximise the amount of work carried out in the UK. The extent
to which this is achieved will not be known until the bids have
been submitted and assessed.
16. The assessment phase for LF ATGW is due to be completed
by autumn 2002. It is proposed that a contract would be set soon
after and ISD is expected to be in 2005.***
17. No detailed plans have been made for a long range
ATGW but the ISD would be expected to be about 2009. No detailed
estimate of costs has yet been made.
AIRLIFT ASSETS: A400M
It was decided in 1994 to replace a first tranche of the
Hercules air transport fleet with 25 new C-130J aircraft. We are
now seeking, through a collaborative programme, both to replace
the capability provided by the remainder of our ageing air transport
fleet and to procure for the long term a dedicated outsize strategic
lift capability. The Secretary of State announced on 16 May 2000
[Hansard col. 150] the Department's intention to order 25 aircraft
in the A400M initial launch to fulfil our long-term outsize airlift
requirements from the latter part of the decade. We have leased
four Boeing C-17 aircraft to improve our strategic airlift capability
for the period until A400M enters service.
The partner nations signed a Memorandum of Understanding
on 18 December 2001 that enabled the Organisation for Joint Armament
Co-operation (OCCAR) to place a single stage contract with Airbus
Military (AM) for the development and manufacture of A400M. This
contract has yet to enter force but will do so when Germany is
able to provide an unqualified financial commitment. The partner
nations have accepted the end of March 2002 as a realistic deadline
for Germany to resolve its outstanding difficulties.
1. The Staff Requirement to replace the RAF's ageing
fleet of Hercules transport aircraft was originally endorsed in
the summer of 1993. The roles and characteristics sought for both
tactical and strategic airlift were essentially similar to those
of the existing aircraft. They included the ability to deploy
troops or freight between theatres or within a theatre of operations
either by parachute or landing on short, semi-prepared strips.
Emphasis was placed on solutions that offered significant improvements
in reliability and maintenance and operating costs over the existing
RAF Hercules. In December 1994, the decision was announced to
buy 25 C-130J as tranche 1 of a Hercules Rolling Replacement Programme
2. In July 1977, with a view to informing decisions on
tranche 2 of the Hercules Rolling Replacement programme (HRR2),
we announced our intention to rejoin the collaborative European
Future Large Aircraft (FLA) programme (subsequently given the
Airbus family name of A400M) and to endorse the related European
Staff Requirement (ESR). The ESR was prepared to meet the future
air transport requirements of eight participating nationsBelgium,
UK, France, Germany, Turkey, Italy, Spain and Portugal. In the
event, Portugal decided not to participate formally in subsequent
stages of the FLA programme, but subsequently rejoined the programme
in January 2001. The ESR matches, and in some cases exceeds, the
original UK requirement (SR(A)435) for a Hercules replacement.
In particular, it specifies a larger cargo carrying volume, a
greater maximum payload, and a higher cruise speed.
3. The Strategic Defence Review confirmed the need to
replace the capability provided by the Hercules and concluded
that an outsize airlift capability was required to support the
deployment of the Joint Rapid Reaction Force (JRRF). The latter
requirement is to move items such as the Attack Helicopter and
certain engineer equipment but not, for example, Challenger, AS90,
or armoured bridge layers. This outsize lift capability was consistent
with the requirements for FLA set out in the ESR and thus required
no change to the procurement strategy to meet the longer-term
HRR2 requirement agreed in July 1997.
4. Studies were carried out in March 1993 to examine
various Hercules refurbishment and replacement options, including
C-17, C-130J, and FLA, using projected costs. Further studies
were conducted in 1994, based on Lockheed Martin's response to
the HRR1 Invitation to Tender. Since FLA would not be available
within the prescribed timescale, these studies included consideration
of refurbishment of the existing Hercules, followed by procurement
of C-130J or FLA, as well as early procurement of the then current
C-130H production model or its planned replacement, the C-130J.
The conclusion was that procurement of C-130J to meet the HRR1
requirement would provide best value for money, earliest maximum
increase in availability, and a significant increase in capability
compared with refurbishment options.
5. Studies in 1996 examined various options to meet the
HRR2 requirement, including procurement of C-130J, FLA, C-17,
and a mixed fleet of C-130J and C-17. These studies indicated
that none of the options could be ruled out, but it was not possible
to draw definitive conclusions in the absence of firm costs. Further
studies were carried out on the basis of the priced proposals
received from Airbus, Boeing and Lockheed Martin, and Ministers
announced their decision on 16 May 2000 to make a commitment to
procure 25 A400M aircraft in the initial production tranche. In
selecting A400M as the chosen solution, the greater industrial
benefits and technical compliance of the European solution were
taken into account.
6. Requests for Proposals issued in July 1998 quoted
a potential UK requirement for up to 45 FLA and sought prices
for stated equivalent numbers of C-17, and mixed fleets of C-17
and C-130J. Final numbers were decided in the light of further
operational analysis of the requirements, and cost-effectiveness
trade-offs between the solutions; this process took into account
the fact that we will be replacing 25 Hercules C-130K aircraft
with 25 A400Ms, the latter providing a 50 per cent increase in
7. As already noted, the SDR confirmed the need for HRR2
and for an outsize airlift capability.
8. The A400M will provide tactical and strategic mobility
to all three Services in peace, crisis and war. In crisis or war,
the A400M will be employed on inter- and intra-theatre air transport
tasks, primarily in support of the JRRF. The A400M meets the UK
operational requirement without compromise. The only technical
requirement that remains to be specified fully is the Directed
InfraRed Countermeasures systemnew technology that could
not be adequately defined at this stage but will be examined by
AM during development. The concept of a basic common standard
aircraft with a range of capability options provides each of the
air forces with an aircraft meeting their requirements.
9. To minimise the impact of cost increases caused by
a number of changes by other nations both to offtake and the timing
of deliveries, the UK has negotiated a restructured delivery schedule;
this results in a one-year delay to the ISD. An incremental acquisition
of certain configuration items for the tactical role was also
agreed. The aircraft will enter service with more tactical capability
than the C-130K it replaces, but it will not achieve full day/night
poor weather hostile environment capability until 2015, three
years later than previously planned. However, the C-130J fleetthe
main provider of tactical airlift, sufficient to support 16 Air
Assault Brigadewill be available; full tactical capability
for the A400M enhances operational flexibility but is judged a
lesser priority than competing calls for funds within the Equipment
Plan. These changes were made in agreement with other partner
nations in November 2001 and were made without affecting progress
on contract negotiations.
10. Of the original fleet of 55 Hercules C130, which
entered service in the 1960s, 25 have been replaced by C-130J
aircraft under the HRR1 project. The capability provided by the
rest of the fleet, and by that provided by the short-term lease
of 4 C-17s will be replaced and enhanced (by increasing outsize
airlift capability) by the A400M. We expect the A400M to enter
RAF service in 2010, with existing aircraft replaced progressively.
11. On 4 September 1997, the seven collaborating European
nations issued a Request for Proposals for FLA to Airbus Industrie
against the agreed ESR. Each nation specified its required in-service
date, expected off-take, support needs and other variables. The
aim would be to place a fixed price contract for acquisition and
elements of support for the first ten years. The contract would
be placed by OCCAR and embrace many aspects of Airbus's proposed
12. A second Request for Proposals was issued to Airbus
Industrie, the Boeing Company, and Lockheed Martin Aeronautical
Systems on 31 July 1998 by the UK on behalf of Belgium, France,
Spain and the UK, seeking tenders at prime contractor level against
the ESR. Securing best value for money through competition was
a condition of our willingness to remain involved with the FLA
programme. Tenders for this Future Transport Aircraft (FTA) competition
were received on 29 January 1999, coincident with those for the
Short Term Strategic Airlift. Tender assessments were conducted
jointly with other nations and in more detail on a national basis.
13. Contenders in the collaborative competition included
the Airbus A400M and the existing C-17 and C-130J aircraft, both
available as commercial off-the-shelf purchases. Germany, a non-participant
in the four-nation competition, also considered the Antonov An-7X,
(a customised version of the Russo-Ukrainian An-70) along with
France, Spain and Italy, as a further alternative to the A400M.
The UK would have been prepared to assess a compliant tender for
AN-7X offered by a Western prime contractor had it been proposed
in response to the 31 July 1998 Request for Proposals, but no
such bid was made. The C-130J cannot fulfil the `outsize lift'
element of the ESR and would only be considered as part of a mixed
14. There was a seven-nation assessment of the collaborative
A400M. When the Request for Proposals was issued, the A400M nations
indicated potential requirements totalling 288 aircraft. Airbus
offered prices for the A400M based on this and a number of other
off-takes. The partner nations announced on 27 July 2000 (the
Farnborough Declaration) that they intended to procure, in an
initial order, numbers of aircraft sufficient to launch the programme.
Since then, Italy has announced its decision not to proceed with
the programme and Portugal has rejoined the programme; Turkey
has also reduced its offtake. The partner nations subsequently
signed a revised Memorandum of Understanding on 18 December 2001
committing to a total offtake of 196 aircraft: Belgium seven aircraft,
France 50 aircraft; Germany 73 aircraft; Luxembourg one aircraft
in co-operation with Belgium, Spain 27 aircraft, Turkey 10 aircraft
(reduced from 26), Portugal three, and the UK 25 aircraft.
15. There would have been no collaborative opportunities
in respect of the purchase of C-17 or C-130J, except perhaps in
the field of shared support.
16. AM believes that there is significant market for
the A400M beyond the European collaborative partners, though estimates
for the scale of this market vary.
17. For the A400M, the aim is to ensure broadly equitable
work-sharing arrangements, without detriment to overall value
for money. A key element of Airbus's successful record in meeting
challenging delivery timescales is their system of relying on
centres of excellence in successive programmes. Thus Airbus UK,
the UK industrial partner in Airbus, has become the Airbus centre
of excellence for wing design. Our expectation is that AM will
manage the A400M programme in the same way, drawing on partner
companies' strengths as appropriate.
18. As a result of the engine supplier consortium (APA)
encountering difficulties in confirming the required performance
data for the TP400 engine, AM cancelled their arrangements with
APA for the TP400 and have re-launched the engine competition.
AM have indicated their intention to select a new engine solution
by end-March. We understand that Rolls Royce will be offering
a compliant solution, in association with other European aero-engine
19. The collaborative and commercial approach will help
to achieve a cost-effective solution, along the lines of civil
aircraft development and procurement. There will be no separate
development contract: AM will be contracted to deliver aircraft,
and will be responsible for the risk management associated with
development. The final price of the A400M will reflect the extent
to which AM will have to carry costs pending production deliveries.
This single-phase approach circumvents the potential delay evident
in collaborative programmes needing production approval. In respect
of aircraft certification, the intention is to adopt an approach
based on civil Joint Airworthiness Requirements, supplemented
by military requirements where appropriate.
20. An incremental acquisition strategy has been introduced
for the A400M's tactical capability. A400M will still enter service
with a greater level of tactical capability than the C-130K it
replaces but certain items contributing to tactical capability
will be acquired incrementally. The C-130J fleet will provide
the tactical capability that is required whilst A400M prepares
to take this role. Thus an incremental acquisition strategy permits
a more affordable programme with little impact on capability.
21. The A400M project is entering the single phase Manufacture
and Development contract with design feasibility work mature.
22. AM is inexperienced as a prime contractor in the
military domain, but we expect it to draw heavily on the military
experience of its partner companies whilst still bringing the
advantages of proven Airbus best practice in the civil market.
23. Key milestones are:
FLA Request for Proposals issued 4 September 1997
Competitive Request for Proposals issued 30 July 1998
Tender submitted 29 January 1999
Decision 16 May 2000
Contract let (subject to resolution of GE funding approval) 18
24. Total estimated costs for the acquisition and initial
support of the A400M are of the order of £3.5 billion. No
significant costs have so far been incurred.
25. AM proposes providing a range of in-service options,
with the options mainly differing in the level of contractor support
offered. The in-service support strategy likely to be selected
by the UK requires that RAF personnel carry out all first line
maintenance and on-aircraft second line maintenance. Third line
on-aircraft maintenance and second and third line maintenance
off-aircraft will be undertaken by industry. This strategy will
ensure flexible and responsive support to operations, especially
deployed operations, whilst making best use of industry experience
and resources for the conduct of the more specialised and resource
intensive tasks. Opportunities for common European support and
training continue to be evaluated but, as yet, no decisions have
been taken on this issue.
26. Potential problems during any change-over period
include the scope for dual utilisation of Service support resources,
such as equipment or manpower. Such problems will be minimised
through controlled delivery/disposal contracts and manpower planning.
27. No decision has yet been taken on the exact make-up
of the A400M fleet. The Concept of Employment is currently being
28. Future users of the A400M will include Belgium, France,
Germany, Spain, Turkey, Portugal and the UK. It is not possible
to quantify the operational effectiveness implications of different
air forces using the same type of transport aircraft, but the
A400M is expected to be able to carry the universal cargo pallet.
Savings in support costs could be expected as a result of several
nations operating the same type of aircraft. However, it will
not be possible to quantify this until each nation has decided
on the support strategy for its own aircraft.
29. The 25 Hercules C-130K aircraft that are being replaced
by C-130J will be returned to Lockheed Martin as part of the HRR1
procurement package. No decision has yet been made on the subsequent
disposal of the remainder of the C-130K fleet.
30. The Staff Requirement assumes an in-service life
of 30 years.
31. No specific options are being considered at this
stage for long-term development. Improvements to avionics and
other systems are likely to be required over the life of the aircraft.
FUTURE RAPID EFFECTS SYSTEM/WATCHKEEPER
Future Rapid Effects System (FRES) is the generic name for
a new concept being evaluated to meet the requirements of rapid
deployment with large operational impact. As such, it will meet
part of the requirement for new Armoured Fighting Vehicles. Through
its reconnaissance variant (one of nine), FRES will provide an
element of the capability planned under the TRACER programme and
will be complemented in delivering the land component commander's
Intelligence, Surveillance, Target Acquisition and Reconnaissance
(ISTAR) requirements by the WATCHKEEPER Unmanned Air Vehicle (UAV)
programme. The TRACER programme will cease at the end of July
2002 when the project completes the current concept phase and
it is anticipated that much of the technology development as part
of TRACER will be pulled through into the FRES programme. For
clarity, FRES and WATCHKEEPER have been included as separate sub-sections
to this memorandum.
FUTURE RAPID EFFECTS SYSTEM
1. FRES is still in the concept phase and the operational
requirement that it is to meet has still to be refined. Broadly,
it will be based on land-based vehicles with an emphasis being
on "rapid effect". This will enable FRES to be deployed
quickly, probably by air, and still have the operational capability
to be highly effective in theatre.
2. It is not clear yet whether FRES will be a single
type or a "family" of vehicles; if it is the latter,
commonality will be a key feature at system, sub-system and component
levels. FRES will act as the platform for Armoured Reconnaissance
and Mechanised Infantry roles. It is expected that FRES will subsume
the MRAV vehicles planned for the Mechanised Infantry role and
the Manoeuvre Support of Future Command Liaison Vehicle (FCLV);
the other requirements of these MRAV and FCLV remain and these
programmes will continue.
3. There will be four MRAV variants; an armoured personnel
carrier, a command vehicle, a communications vehicle and an ambulance.
4. No decision has been made on the number of vehicles
that will be required to meet the FRES requirement. For planning
purposes, 900 are being assumed.
5. Equally, the number of MRAV is still to be determined
but the planning assumption is 775.
6. The need to have an improved ability to conduct expeditionary
operations was highlighted in the SDR. FRES will enable this aspiration
to be met.
7. FRES will replace some of the roles carried out by
CVR(T), SAXON and FV430. Its ISD has still to be finalised but
will be towards the end of the decade.
8. MRAV will replace other roles carried out by CVR(T),
SAXON and FV430 and it is intended that it will be in service
9. As FRES is still in the concept phase, no decision
has been made of the most appropriate acquisition approach. However,
the principles of Smart Acquisition will be applied, probably
with incremental acquisition featuring significantly. A Commercial
or Military Off The Shelf (COTS/MOTS) solution is an option and
information to support consideration of this was provided by some
of the potential suppliers in May 2001. Responses to these are
currently being assessed.
10. MRAV is in the development phase under a fixed price
contract let in 1999.
11. FRES is likely to offer good opportunities for collaboration
with NATO partners at the sub-system and component levels.
12. MRAV is being acquired through a tri-national programme
with Germany and the Netherlands, and the programme is being managed
by the Organisation for Joint Armament Co-operation (OCCAR).
13. FRES has the potential to attract export orders.
However, it is still in a too immature state to establish specific
interest yet. Spain and Portugal have both expressed an interest
in the MRAV programme and received project briefings by OCCAR.
14. FRES is likely to be the most significant land programme
for UK industry this decade. Three UK companies, Vickers Defence
Systems, BAE Systems and Alvis Ltd have all expressed interest
and it is possible that the outcome of the competition will influence
the rationalisation of the industry.
15. The principal UK Company involved in the MRAV programme
is Alvis Ltd and the programme is likely to secure over 500 jobs
in this country over its life. Many of these will be in the Telford
17. *** The next key milestone for MRAV is ISD in 2008.
18. In both FRES and MRAV, methods of in-service support
will be examined and the optimum selected for each. Possible solutions
include various levels of contractor logistic support and the
supply of spares direct to the field force; a PPP type arrangement
may also prove feasible. Training Needs Analysis will be conducted
for each programme to establish requirements in this field.
19. Each programme will be planned to ensure maximum
interoperability with other NATO members.
20. The expected life of FRES and MRAV should enable
each to remain in service until the middle of the century. During
that time opportunities to upgrade them to take account of new
technologies and changing threats will be considered.
WATCHKEEPER UNMANNED AIR VEHICLE SYSTEMS
WATCHKEEPER is a programme to meet a significant proportion
of the intelligence and information requirements, principally
of land commanders. The WATCHKEEPER system will comprise UAVs,
their sensor packages and associated exploitation facilities on
the ground. It will be complemented by other programmes and existing
capabilities (for example, the FRES reconnaissance variant and
other ISTAR systems).
21. The WATCHKEEPER system will be required to provide
accurate, timely and high quality imagery and intelligence information
in all weathers, day and night. It will collect, collate, exploit
and disseminate such data and information to satisfy the critical
requirements of land commanders from Battlegroup to Division level
across the spectrum of conflict.
22. The numbers and types of UAVs and the architecture
of the overall system are currently being examined. No decision
has been made on the numbers of individual systems as this will
be determined once the preferred option has been selected and
confirmed towards the end of the assessment phase.
23. The Strategic Defence Review highlighted the need
to enhance the capability for the Armed Forces to undertake ISTAR
tasks. WATCHKEEPER is a new capability being acquired to achieve
24. WATCHKEEPER is a new wide-ranging capability that
will subsume the capability currently provided by the PHOENIX
UAV system. Any future role for PHOENIX is being considered as
part of the assessment of the solutions for WATCHKEEPER. The ISD
for WATCHKEEPER is to be finalised as part of the current assessment
work but the working assumption is an Initial Operating Capability
25. WATCHKEEPER is in its assessment phase where operational
and technical risks are being identified and minimised. A variety
of acquisition strategies are being examined to establish the
most cost-effective way of delivering the capability.
26. The solutions envisaged are not likely to involve
extensive development work and the opportunities for effective
collaboration in the initial stages of WATCHKEEPER are considered
low. High levels of co-operation among allied nations on requirement
definition, technology, operational experience and acquisition
issues are being maintained.
27. Whilst it is likely that the major components of
the WATCHKEEPER air vehicles will be based on existing off-the-shelf
components, elements of the ground station might be of interest
to other nations. However, the system architecture is currently
too immature to establish specific interest.
28. There are four Prime Contractors competing for the
WATCHKEEPER programme; Lockheed Martin, BAE SYSTEMS, Thales and
Northrup Grumman. An ITT for industry to submit proposals for
detailed assessment phase work was issued in February 2002. Based
on the proposals, two of the companies will be selected to undertake
a series of System Integration and Assurance activities towards
the end of 2002.
29. Approval has been given for the expenditure of £51M
(Resource base at outturn prices) for the completion of the Assessment
30. A number of methods of in-service support are being
examined to identify the best solution. Possible solutions include
various levels of contractor logistic support and the supply of
spares direct to the field force; a PPP type arrangement may also
prove feasible in certain circumstances. A Training Needs Analysis
is being conducted to establish training requirements.
31. It will be important to be able to disseminate information
to other systems both within the Armed Forces and to our allies.
Considerable attention is being given to the achievement of this
within the WATCHKEEPER programme.
32. Options are being considered as to how WATCHKEEPER
might best be managed over a period of 30 years. It is likely
that this will be achieved through a programme of incremental
acquisition with the opportunity for technology insertion aimed
at meeting emerging threats.
PFI/PPP IN THE DEFENCE EQUIPMENT ARENA
Public/Private Partnerships (PPPs) are a key part of the
MOD's approach to developing better ways of supporting the Armed
Forces. Ministry of Defence Policy Paper No. 4Defence Acquisition,
sets out the MOD's approach to PPPs.
The terms PPP and Private Finance Initiative (PFI) are often
used synonymously, but while PPP is usually used to describe large
partnering projects, some of which may involve private finance,
the principles apply to a wide-range of acquisition techniques
Outsourcing, where MOD contracts for services;
Strategic Partnerships between MOD and key suppliers;
Marketing of irreducible spare capacity, under
the Government's Wider Markets Initiative;
PFI, where the private sector creates or acquires
a capital asset and provides services based around that asset;
Other long-term partnering relationships such
as Defence Estates Prime Contracting.
1. In selecting projects for PPPs the approach must be
pragmatic rather than dogmatic. PPP tools such as PFI and Partnering
are employed where they offer the potential to achieve greater
value for money than could be achieved through more traditional
methods of doing business. This greater value for money is realised
through allowing MOD to focus on its core military tasks, supported
by private sector partners who are able to use their particular
expertise and skills to provide services more efficiently.
2. The Department is committed to the disposal of surplus
capacity wherever practicable, although some irreducible spare
capacity is always likely to remain. Therefore, to make the best
use of the MOD's extensive physical (equipment, land, premises)
and non-physical (intellectual property, data, skills) asset base,
MOD budget holders are encouraged to market assets for which the
Armed Services have no immediate need. The Wider Markets Initiative
often involves working with a private sector partner where they
are able to find new and innovative ways of exploiting spare capacity
and sell spare capacity to other users.
3. PFI remains the cornerstone of the MOD's PPP programme.
Consideration is given to investment from the private sector rather
than use of public funds whenever there is a need for substantial
investment. But PFI is only employed if it can be clearly demonstrated
that it is appropriate, workable and economic, compared to the
Public Sector Comparator (PSC).
4. In PFI, the contracts are for services rather than
assets. A decision is taken as to whether the requirements can
be sensibly met by a contract under which services are provided
rather than by the outright purchase of assets such as buildings
and equipment. If it does, the MOD then considers whether such
an approach has the potential to offer better value for money
than buying assets directly. Not all projects pass these two tests,
but many do.
5. PFI offers the potential to transfer risks to the
private sector where it is better placed to manage them. Among
the main risks transferred are the design and build of the asset.
Because payments are only made to the partner when satisfactory
service is received, there is a strong incentive on the partner
to provide an asset that is delivered on time and is suitable
for purpose. This is reinforced by the partner's need to service
the finance that has been raised to buy the underlying assets
for the contract. Under the process known as "due diligence",
the providers of finance will test the assumptions behind the
business plan of the partner to satisfy themselves that the question
of risk has been properly addressed. This mix of mechanisms and
incentives means that once a contract is signed, projects are
much more likely to deliver the required level of service on time
and within budget.
6. The Department aims to take PFI as close to the front
line as possible. But as the related services become more war-like
it becomes more difficult to transfer risk, for the contractors
to innovate and for meaningful measures of effectiveness to be
determined. In these circumstances, it would become uneconomic
to acquire capability through private finance. As equipment becomes
more operational in character, other issues, including security,
are brought to bear. PFI is not used in circumstances where the
operational effectiveness of the Armed Forces would be put at
risk. There are, therefore, large numbers and types of equipment
that will be bought through more conventional means applying Smart
7. The MOD has a very large and diverse PFI programme
that includes accommodation, housing, information systems, utilities,
training facilities and equipment. As at 1 February 2002, the
Department has signed 42 PFI deals resulting in over £2 billion
of private sector investment in defence. These include a contract
to refurbish the MOD's Whitehall HQ and provide serviced accommodation
for a 30-year period, the Joint Services Command and Staff College
and six aircrew training simulators.
FUTURE PPP PLANS
8. The Department is confident that PPP will deliver
quality, value for money services. PFI is still quite new, but
many of the PFI deals that have been signed have now reached the
point where services are being delivered and the initial responses
from customers are very encouraging. Aircrew simulator training
has proved to be a success as has the new housing provided through
the Defence Housing Executive's PFI projects.
9. PFI is an evolving technique, which is being improved
through MOD experience and the experience of other Departments.
A rich and wide-ranging forward programme is in place in which
over 40 projects are being pursued with the potential for a further
£12 billion private sector investment in defence. These include
the Roll On Roll Off strategic sealift, Future Strategic Tanker
Aircraft, and the MoD-wide water and wastewater project (Aquatrine).
It is intended to build upon the progress so far to explore and
develop new and more innovative forms of PPP to meeting future
requirements in partnership with industry. A private sector partner
is currently being sought to help run and maintain the Army Training
Estate (Project Vanguard) and investigations into a potential
long-term partnership with industry to improve our tri-Service
flying training are underway.
EXISTING MOD PFI PROJECTS
Future Strategic Tanker Aircraft
10. The Future Strategic Tanker Aircraft (FSTA) is expected
to replace the air to air refuelling (AAR) and some elements of
air transport (AT) capability currently provided by the RAF's
fleet of VC10 and TriStar aircraft. AAR is a key military capability
that provides force multiplication and operational range enhancement
for front line aircraft across a range of defence roles and military
tasks. The capability will remain a fundamental UK need for the
foreseeable future to support the deployment of combat forces
to operational theatres and to provide vital support in-theatre.
However, our existing AAR/AT aircraft are old, expensive to operate
and need replacing by around the end of the decade.
11. FSTA was nominated as a potential PFI programme in
1997. It was judged that the project, scoped as a service rather
than asset acquisition, offered the advantages of early up-front
investment from Industry and greater value for money than could
be obtained by conventional acquisition, through the transfer
of the risks of ownership to the private sector. There is considerable
scope for innovation in provision of the service. When not required
by the RAF the Service Provider will be able to use spare aircraft
capacity to earn revenue through commercial freight and other
non-military air transport operations.
12. Provision of an AAR service will form the primary
focus of the anticipated contract. However, elements of AT capability,
both passenger and freight, will be included if this represents
value for money when compared to capability available through
civil charter arrangements. The contract will also require provision
of a training service and the provision and maintenance of facilities,
including flight simulators. The contractor will own, manage and
maintain the aircraft, but the RAF will continue to retain responsibility
for the delivery of military capability. A mix of Regular RAF,
Sponsored Reserve and civilian contractor personnel are expected
to be involved in delivering the service.
13. The project was launched in 1997. Following a period
of market building, a Request for Information was issued to industry
in February 1999. Seven embryonic consortia responded. An Invitation
to Submit Outline Proposals was issued in September 1999 to which
four consortia responded. Following Initial Gate approval, the
project launched a formal assessment phase in December 2000, through
the issue of an Invitation to Negotiate. Two consortia submitted
formal bids and these are currently being assessed. Contract negotiations
are underway with both consortia.
14. The capital value of the FSTA aircraft and associated
infrastructure is estimated to be in the region of £2 billion
to £2.5 billion depending upon the solution adopted. However,
through life costs of the programme, with a 27-year contract duration,
are currently estimated to be in the order of £13 billion
at outturn prices. The protection of operational capability is
paramount. A PFI service would operate in close partnership with
the RAF who would continue to be responsible for delivering military
Heavy Equipment Transporter
15. The Army's requirement for a Heavy Equipment Transporter
(HET) fleet is to be able to transport the heavy armoured vehicles
of a square armoured brigade with an accompanying portion of divisional
combat support, over distances of at least 150 kilometres within
24 hours. An additional requirement is to move the minimum coherent
fighting force (defined as 2 square battlegroups, an artillery
regiment and 2 engineer squadrons) in the first lift. The HET
fleet is required to operate in a hostile environment which may
include the Rear Support Area, Main Supply Routes and brigade
16. In February 1997 the Defence Support Vehicles Private
Finance Initiative Steering Group recommended that the HET capability
should be exposed to PFI, including a full service contract and
involvement of Sponsored Reservists (SR). HET fitted the criteria
for a potential PFI and was a definable service. It was also an
ideal pathfinder project to test the principle of SR.
17. HET is an OshKosh M1070F 8-wheel drive tractor powered
by a 700 bhp Caterpillar engine, with a 7-axle King trailer. The
total numbers will be 92, comprising 84 complete HET allocated
to Squadrons, 3 tractors each with a recovery system allocated
to Squadrons, 3 complete HET allocated to war maintenance reserve,
2 complete HET allocated to training. Under PFI the contractor
will design, build, finance, maintain and operate (within limits
on operations and exercises) the HET service.
18. The adoption of the HET project as the pathfinder
scheme for the application of the SR was agreed by Army Policy
and Resources Committee in April 1998 and endorsed by the Equipment
Approvals Committee in November 1998. Invitations to Negotiate
were issued to four consortia in September. The original four
consortia were down-selected to two with Best and final offers
requested by January 2001. A contract was placed with the Fasttrax
consortia, lead by Halliburton Brown and Root, on 11 December
19. The capital value of the HET is estimated to be in
the region of £93M. Through life costs of the programme with
a 20 year contract duration are currently estimated to be in the
order of £300M in outturn prices.
20. Sponsored Reservists will form approximately one
third of the HET drivers and maintainers, and will be spread evenly
across the three tank transporter squadrons. This is the first
time that SR have been contracted to be deployed but will not
impact on the delivery of military capability which will remain
the responsibility of the Army.
21. The SKYNET 5 programme will deliver the next generation
of military satellite communications services, replacing the SKYNET
4 constellation of satellites. The programme includes ground connectivity
and management facilities and the provision of terminals for both
fixed and mobile users in the land and sea environments. Current
operational priorities place greater emphasis on satellite communications
availability over Europe and the Middle East. The result is that,
with a two-satellite solution, a small part of the coverage defined
in the Staff Requirement will be met through commercial alternatives
or MOU arrangements with other nations.
22. SKYNET 5 was heralded in the SDR as an important
and groundbreaking PFI programme, and its viability was agreed
in June 2000. It is the largest PFI project in the MoD, so far,
to have reached the Preferred Bidder stage. Satellite communications
can be delivered to users as a service, with much of the risk
transferred to the contractor, making it an ideal candidate for
PFI. The incorporation not only of the space and ground segments,
but also some terminal equipment for land and sea users, within
the project boundary will offer advantages as it mitigates the
integration risk and allows the service provider, and the customer,
to view the business as an end-to-end service. This helped to
remove the concerns of bidders and their lenders that the volume
of service (and the return they might get) might be affected by
any delay or reduction in MOD's satellite communications terminal
23. Two military satellites, augmented by some commercial
services, will meet the operational requirement. In the PFI case
at least two satellites will be launched and will be fully insured
against failure. Previous MOD conventional satellite acquisition
programmes did not insure the satellites but built and launched
three satellites primarily to guarantee against failure.
24. The proposed solution includes provisions on service
assurance. Particular emphasis will be placed on access to the
design of the military-critical features of the system (such as
satellite Electro Magnetic Pulse hardening and anti-jam measures
that cannot be corrected once in orbit). During operational service,
MoD will only pay for services actually received, thus incentivising
the service provider. If, for any reason, the service provider
is unable to deliver, contingency plans, agreed in advance with
MOD, will enable a limited number of key functions to be undertaken
by Service personnel. Should the service provider fail to deliver,
he would be in default and the contract would be subject to termination.
Compensation arrangements would then apply, and the MoD would
work with lenders to establish a new service provider.
25. The Equipment Approvals Committee endorsed the Staff
Requirement for SKYNET 5 in 1997. In 1999 contracts for competitive
PFI design phase studies were issued to two consortia, Paradigm
(led by Astrium, a joint venture between BAE Systems and EADS)
and Rosetta (BAE Systems, BT and Lockheed Martin). The Design
phase ended in January 2001 with PFI proposals from both bidders.
`Extended Revise and Confirm' and `Best and Final Offers' rounds
ensured the best possible bids have been obtained and Paradigm
was announced as the Preferred Bidder in February 2002.
26. Under PFI, the cost of the programme will depend
directly on the actual usage of the service throughout the concession
period. When considering the future requirement for satellite
communications, under conventional acquisition, the MoD needs
to determine the maximum likely level of growth and the overall
system capacity needed to meet the assumed requirement. The Department
then has to commit to the full costs of those assets. Under a
PFI programme, the MoD does not need to commit to the full costs
in advance. Instead, it needs to consider the minimum cost to
which it is committed and the incremental cost of the extra usage
above this level to meet demand at various levels of usage growth.
27. Owing to uncertainty about future usage levels, value
for money has been demonstrated using defence planning assumptions
as the basis of estimated usage. This is the most robust method
of comparison because it represents the highest assumed level
of future operational activity. Therefore, in any year that the
operational scenarios do not exceed the assumptions, there will
be a lower rate of satellite communications use and, consequently,
a net saving. Independent of the scenarios, there remains a sum
to which the Department is committed (the "Minimum Cost to
the Department") which will be payable regardless of the
volume of service provided. This sum is subject to negotiation
with the Preferred Bidder.
Airfield Support Services Project (ASSP)
28. The MOD owns and operates 105 airfields in the UK
and word wide. Efficient operation of these airfields underpins
much of UK defence activity. To maintain and operate these airfields
requires a specific level of service provision (fuel, movements,
clearance etc). Currently these airfields are supported by a mixture
of discrete contracts and in-house provision.
29. The ASSP approach evolved from "Front Line First",
where specific defence cost studies suggested that airfield support
had potential to yield efficiencies, possibly by public-private
partnering. A number of multi-activity contracts (private contractor
arrangements) have been in place at RAF airfields for some years.
ASSP draws together the experience and lessons learned from running
those contracts and looks at whether one, overarching, contract
would provide the best value for money, without compromising operational
30. ASSP is a tri-service, defence-wide project looking
at the viability of a PPP for the provision of airfield support
services to the MOD worldwide. All the key stakeholders have been
involved, to ensure that, if it proceeds, ASSP provides the right
service and outputs. The project will, in particular, be assessing
provision of the following services:
Aircraft Fuelling Operations.
Movements and Air Cargo Handling Service.
Airfield Clearance (Sweeping, Snow/Ice Clearance).
Aircraft Services (Towing, Water/Waste/Cabin Services,
The project will investigate contract terms of 15 and 25
years with service provision in output based terms.
31. Three consortia have been invited to submit bids,
which are due for return by 30 April 2002. An evaluation period
of about six months will follow bid return, during which all aspects
of the project will be scrutinisedtechnical, financial,
commercial, human resources and employment legislation. A comparison
against the PSC will be made in an Investment Appraisal. Main
Gate business case is planned for submission early in 2003, with
contract let later that year for implementation in summer 2004.
If the PSC were selected then the services would continue under
current arrangements but with the benefit of the identified efficiencies.
32. The contract would have an estimated value of £3.5
billion in cash terms over the 25-year period. Operational effectiveness
will not be compromised by ASSP. In line with current Departmental
policy, the project is seeking proposals for the employment and
use of SR. Here, some of the contractor's personnel would have
a reservist commitment and would effectively become Service personnel
able to deploy on ASSP tasks in military areas when required during
times of crisis. Contractors on Deployed Operations could augment
the SR concept. The project would explore any such proposals from
bidders that could bring value for money and enhance operational
capability. The outcome of these proposals would have a direct
effect on the number of Service personnel to be employed on these
duties in the future. Where Service personnel continued to be
used, they would be embedded within the ASSP organisation, although
their military command chain and working practices would be protected.
33. Fire Study 2000 is a study into the MOD Fire Services
to review the organisation and develop a strategy to meet the
Department's future fire risk management requirements. The recommendations
of the study will be used to inform the PSC for ASSP.
Combat Support Vehicles
34. There is a tri-service requirement for the bulk distribution
of fuel on deployed operations. The principal elements are for
the re-provisioning of bulk fuel storage facilities, the provision
of fuel to all deployed units (including armoured and air manoeuvre
formations) and supply to aircraft operating from deployed airfields.
These requirements generate a need for a low mobility General
Support Tanker, a medium mobility vehicle (described as the Close
Support Tanker (CST)) and a medium mobility Tactical Aircraft
Refueller (TAR). In addition, a capability gap for the provision
of water to forces on deployed operations was identified in the
Strategic Defence Review. To provide this capability, a medium
mobility vehicle, similar to the CST, would be required. These
four elements make up the Wheeled Tanker programme. About 430
vehicles will be required.
35. The Support Vehicle programme is to meet the operational
need for the movement of various cargoes (for example, combat
supplies, ordnance, fuel and unit equipment), specialised equipment
and, on occasions, personnel. The vehicles need to be compatible
with standard containerised loads while still being able to move
large individual pieces of equipment. Many of these vehicles will
be fitted out for specialised roles such as communication centres
and mobile workshops. To maintain flexibility, operational analysis
has concluded that three types of vehicle are required and should
be based on load carrying capabilities of 6, 9 and 15 tonnes (these
being multiples of the standard 1.5 tonne pallet). They should
all have medium mobility but, in addition, there should be a smaller
fleet of 9 tonne vehicles that have improved medium mobility.
About 8,000 vehicles are required.
36. The recovery element of the Support Vehicle will
be required to retrieve wheeled vehicles that have broken down,
been damaged through accident or enemy action, or have got bogged
in. The vehicles that might require such recovery range from Land
Rovers to fully laden DROPS vehicles and M3 amphibious bridging
vehicles. The level of mobility and survivability must be commensurate
with the vehicles that might be recovered and the environments
in which they operate. Thus the recovery vehicle fleet needs to
comprise a mixture of medium and improved medium mobility vehicles.
About 400 vehicles and 70 trailers are required.
37. The Wheeled Tanker and Support Vehicle programmes
were originally considered as three separate projects: the Future
Fuel Vehicle, the Future Cargo Vehicle and the Future Wheeled
Recovery Vehicle. Since these programmes are providing support
to operations and are effectively delivering a service, a PFI
approach was considered and initial indications were that this
would be an achievable method of acquisition. The use of Sponsored
Reserves was also considered to be a possibility.
38. A considerable amount of work, over a three-year
period, was carried out both by the Department and by industry
in putting together outline proposals for PFI solutions to each
of the programmes. However, having thoroughly considered all possible
ways of proceeding with PFI, it was concluded that a conventional
approach would offer better value for money for these programmes.
The principle reasons causing this decision were that there would
be little opportunity for risk transfer, third party revenue would
be minimal and there would be little scope for innovation. Analysis
of the way in which the fleets would be used revealed that many
of the vehicles would be located in small groups at widely dispersed
units. Also many vehicles with specialised roles would be permanently
fitted out while others, to meet readiness times, would be kept
loaded. These facts lessened the ability to manage the vehicles
on a "whole fleet" basis in a manner that would be more
cost-effective than a more conventional approach. Replacing military
drivers with civilians would not result in any manpower savings
since the military personnel only drive as one of their duties;
this also weakened the case for the use of Sponsored Reserves.
In each project, an Investment Appraisal showed that a PFI solution
would not offer better value for money than buying vehicles and
using military personnel. Ministers approved the change to the
acquisition approach in March 2001. The lack of success in identifying
a PFI solution for these programmes does not mean that PFI is
not being considered further in the Combat Support area. The Heavy
Equipment Transporter programme has been discussed above, and
progress is well advanced for the provision of the Field Electrical
Power Supply through a PFI arrangement.
39. Invitations to Tender for the Wheeled Tanker were
issued in August 2001 to MAN Truck and Bus UK Ltd, Oshkosh Truck
Corporation and Volvo Truck and Bus Ltd. Tenders have been received
and are being assessed. An announcement of the result of the competition
is expected in summer 2002.
40. Invitations To Tender for the Support Vehicle were
issued in January 2002 to Leyland Trucks Ltd, MAN Truck and Bus
UK Ltd Mercedes-Benz UK Defence, Oshkosh Truck Corporation and
Stewart and Stevenson Inc. Tenders are due to be returned in summer
2002, with an announcement of the result planned to be before
the end of the year.
41. For both requirements, the bidders are being invited
to put forward innovative ways of supporting the fleets including
the use of Contractor Logistic Support.
BOWMAN will provide a secure, robust, data and voice communications
system in support of land operations, to replace the Clansman
combat radio and some of the HQ infrastructure element of the
Ptarmigan trunk communication system. It will also play a key
role in the MOD's Battlespace Digitization initiative.
Computing Devices Canada (CDC)a subsidiary of the
General Dynamics Group, and now known as General Dynamics UK Ltd
(GD UK) following an internal reorganisationwas awarded
preferred supplier status for the supply and support of BOWMAN
on 19 July 2001. The contract was signed with the company on 13
September 2001 and both parties are now working effectively to
achieve an In Service Date (ISD) of March 2004.
1. BOWMAN is required to provide a secure combat communications
system for the Army and elements of the other Services, in support
of land and littoral operations. It will serve as the primary
means of voice and data communication for tactical level operationscharacterised
by mobility and undertaken by numerous individual fighting platforms
and dismounted combatantsand will be based on radio communications
that can operate without relying on fixed infrastructure. The
BOWMAN system will be made up of: a number of radio communications
sub-systems that are connected to provide a tactical internet;
a range of computers that provide messaging, situation awareness
and management information; a local area sub-system that interconnects
data terminals and voice users within a vehicle or group of vehicles
forming a deployed divisional, brigade or battle group headquarters;
and connections to trunk, satellite and strategic communications
systems. It will have a capability for fast data communications
and connections with external networks, and excellent voice and
slower data transfer. As well as being man-portable, BOWMAN will
be an integral part of the communications fit of major equipments
such as Challenger 2 Main Battle Tank, helicopters and warships.
2. This breadth of requirement was developed over the
extended BOWMAN programme between 1988 and 1997. Reviews in 1999
and 2000 confirmed that the current scope is both appropriate
3. The scope for trade-offs was identified within the
User Requirement Document, in terms of cost, capability and time,
across the requirements spectrum, from total numbers of radios
to the level of integration that would be provided for different
platforms. Some detailed reductions in functionality were agreed,
and ruggedized off-the-shelf, rather than bespoke, computer terminals
will be used. The delivery of capability will be staged: elements
of the system that are assessed to require prolonged development
to reduce risk will be delivered after the in-service date. However,
the GD UK plan shows a rapid programme through to completion of
deliveries in 2007.
4. On current plans, BOWMAN equipment will be fitted
to some 20,000 vehicles, 149 naval vessels (including 42 capital
ships) and some 350 aircraft. Around 100,000 trained servicemen
will use it. More than 47,000 radios (excluding the Personal Role
Radiosee paragraph 9) and 26,000 computer terminals will
5. The Strategic Defence Review highlighted the importance
of effective command, control and communication systems, and confirmed
the requirement for BOWMAN.
6. As the primary means of communication at the tactical
level for land operations, BOWMAN will be used across the spectrum
of conflict, for all missions and at all scales of deployment.
BOWMAN will be central to the command and control, and therefore
the effective deployment, of forces used for military tasks ranging
from disaster relief to regional conflict.
7. BOWMAN will replace the Clansman family of combat
radios in service since the 1970s. It will also replace those
elements of the Ptarmigan trunk communication system within vehicle
borne tactical headquarters at divisional, brigade and battlegroup
8. Investment in feasibility work for BOWMAN was initially
endorsed against an ISD of December 1995. In 1993, this was revised
to June 1999 as a result of budgetary constraints and an increased
understanding of the technical complexity of the project gained
from the Phase 1 Feasibility Studies. During the competitive first
stage of the Project Development phase (PD1), the ISD was revised
to April 2001, again for budgetary reasons. Following the completion
of PD1, the ISD was slipped to March 2002 as a result of the revised
procurement strategy (see paragraph 10) and the redefinition of
the ISD to reflect the delivery of a true operational capability.
In December 1999, in the light of an assessment of the technical
risk remaining in the programme, the ISD was further slipped to
late 2003/early 2004. Main Gate approval was given for investment
against an ISD of March 2004. Since August 1998, the ISD has been
defined as the date when a brigade HQ and two battlegroups are
equipped and capable of deploying on other operations. The Clansman
family of combat radios and the relevant elements of Ptarmigan
will be progressively removed from service over the period 2003-07,
as BOWMAN is deployed.
9. It has been possible, however, to plan for the early
delivery of a small but significant operational capability that
had previously been tied to the delivery of the whole system.
Through the application of Smart Acquisition principles, in particular
incremental acquisition, the Personal Role Radio, a short range,
non-secure tactical radio for use at section level, is being delivered
in advance of the main BOWMAN system. Early deliveries were made
in late 2001 to troops deploying for Exercise Saif Sareea and
on operations in Afghanistan. ISD was declared on 29 January 2002,
two months earlier than the formal target of March 2002. In addition,
the requirement for insecure tactical ground-air communications
has been met by the Tac G-A project.
10. Initial work on BOWMAN was conducted by two consortia
that undertook Phase 2 Feasibility Study and PD1 work. Following
completion of PD1 in late 1996, the competing consortia announced
their intention to form a joint venture company, known as Archer
Communications Systems Ltd (ACSL), to bid for the BOWMAN supply
contract. This resulted in a review of the procurement options
open to the MOD, namely continuing with either one of the consortia,
continuing with ACSL, or finding a new prime systems integrator.
A revised, single source, procurement strategy for BOWMAN and
the remainder of the risk reduction work was approved in March
1997, and a risk reduction contract was placed with ACSL in August
1997. A further risk reduction contract (known as Package 0) was
placed with ACSL in October 1998 at a value of £185 million
to ensure the necessary confidence in performance, time and cost
of the programme prior to the Main Gate approval and before contractual
commitment. Package 0 was also to enable the completion of the
sub-system definition and sub-contractor selection and it was
planned to award the first of the production contracts in late
1999. An affordability review and some redefinition of the project
was carried out in March 1999 following a submission from ACSL.
The principal area of risk was the integration of sub-systems
supplied by a number of different sub-contractors. A further key
risk was the timescale for contracting for installation design
certification and conversion in over 200 platform types with complex
existing design rights.
11. Assessment of ACSL's final bid showed it as unable
to meet the minimum performance requirements and the decision
was taken to remove preferred supplier status from the Company
and to launch a fresh competition. A pre-qualification questionnaire
exercise was conducted resulting in the selection of three potential
prime contractors: CDC, Thales and TRW. An invitation to tender
(ITT) for a supply and support contract was issued to each of
them in November 2000. This sought bids within the tradable range
of the BOWMAN requirement, allowing the potential prime contractors
to offer capability, risk and cost trade-offs down to a minimum
acceptable range. The ITT also mandated a UK supplier for the
cryptographic system (Cogent) and offered preferred supplier status
for the VHF radio sub-system to ITT Defence Ltd. The principal
areas of risk remained with the new competition and so, in parallel
with the ITT, risk reduction contracts were let with each of the
potential prime contractors, and with the two key sub-contractors
(Cogent and ITT Defence Ltd). The risk reduction work aimed to
provide maximum confidence in delivering capability and informed
the assessment process prior to the announcement of the preferred
supplier. Within each general area, the potential prime contractors
had different specific areas of risk and output. All of these
areas were fully reported at Main Gate.
12. Bids for the BOWMAN supply and support contract were
received from each of the potential prime contractors on 7 February
2001. The evaluation process assessed the performance, programme
management, commercial, and risk areas of the bids, with the main
emphasis being on delivering the relevant BOWMAN criteria at the
ISD with a viable and affordable programme. The three month assessment
and clarification period concluded that CDC offered the best value
for money solution to the BOWMAN requirement, together with high
confidence of delivering an early ISD. The results of the assessment
phase informed the Main Gate submission in June last year. Preferred
supplier status was awarded to GD UK (as CDC had become) and final
negotiations resulted in the signature of a firm price contract
on 13 September 2001.
13. The options of upgrading Clansman or procuring an
austere off-the-shelf solution were examined at the time of the
review of procurement options in 1997 but were not considered
to be cost-effective for meeting the requirement. A number of
alternative technical options were examined, as was the validity
of the basic approach to BOWMAN in the light of rapid developments
in the mobile communications field. This analysis demonstrated
that the BOWMAN approach was best able to meet the military requirement
and could lead to a robust solution.
14. The sophistication and cost of BOWMAN will limit
the market for the total system but there will be scope for supplying
elements in a number of countries: those where VHF and HF radios
bought from the selected BOWMAN suppliers are already operated
and that might seek an upgrade using elements of the BOWMAN system;
and, those that wish to improve their capability at brigade level
15. Ninety-nine per cent of the work content of the winning
bid is UK basedthe highest proportion of any of the bidsand
will secure around 1,600 jobs across the UK in design, development,
manufacture and project management. Sub-contract work is expected
to secure more than 100 jobs in Scotland, more than 300 jobs in
South West England, and around 75 jobs in the South East, centred
on Hastings. Major UK sub-contractors include Alvis plc and GKN
Westland Helicopters. There will be significant technology transfer
to the UK, and MOD will hold appropriate intellectual property
rights, available for use by other companies working on linked
projects. Industry has committed itself to maintaining development
and production facilities in the UK.
16. Smart Acquisition has given the MOD scope to deal
with BOWMAN in a controlled and managed way. The freedom to trade
requirements in search of a more cost-effective solution enabled
`fallback' options to be identified in case the ACSL bid failed.
The results of these studies revealed that there were realistic
alternatives to ACSL that could be rapidly pursued. The MOD was,
therefore, able to re-open the competition in search of value
for money rather than stopping the entire programme and starting
from scratch, delaying BOWMAN even further. The Prime Contract
with GD UK incorporates Smart Acquisition principles, in partnering,
incentives and a shared date environment.
17. We have been able to adopt an incremental acquisition
approach and have delivered the Personal Role Radio element of
the programme ahead of the main BOWMAN system.
18. The principal acquisition stages are as follows:
Feasibility Studies 1988-1993;
Phase two Feasibility Study and (competitive)
Project Development first stage 1993-1996;
Single source strategyrisk reduction work
and programme review 1997-2000;
New competition and further risk reduction work
Bowman Supply and Support contractSeptember
19. Key milestones now in prospect for this project are:
|Conversion of the first unit (an infantry battalion)
|In Service Date||Mar 2004
|End of BOWMAN conversion programme||2007
20. The original budget for BOWMAN was £1.9 billion
at LTC 93 prices, excluding long-term support. This was the first
Ministerially approved total acquisition cost. Allowing for inflation,
the current cost is estimated to be £2.321 billion, excluding
long-term support (cash at outturn prices). On a resource basis
(that is including the cost of capital charge but excluding long-term
support and Post Design Services) the current cost of BOWMAN is
21. The total costs incurred to 31 March 2001 are shown
in the table below:
|Year||Costs (£ million)
|Prior to 1993-94||10.208
|Expenditure still to be incurred:
||£1.873 billion (at EP 2002 outturn prices).|
Of this £1.767 billion is committed.
|Current Forecast:||£354.762 million
||£389.775 (at outturn prices)
22. The BOWMAN supply and support contract encompasses
the provision of initial spares and facilities to support operations
that will be supplied with the prime equipment and installations,
contractor support to ensure sustainability of the deployed system
for five years, and reprovisioning activity. The level of support
required is being determined using integrated logistics support
principles. The importance of reliability and spares availability,
and their impact on equipment sustainability, is reflected in
the contract. The use of existing spares and equipment, where
appropriate, was mandated. Training is being addressed under a
tri-Service training needs analysis that will recommend training
methodologies and training media.
23. The programme to convert fighting platforms and formations
to operate BOWMAN is a major task that will be carried out over
a total of five years, including a three year period of main conversion.
For the main customer, the Army, conversion will be undertaken
as each operational unit, principally a brigade, enters its training
year within the Formation Readiness Cycle. The BOWMAN Fielding
Plan addresses the requirement to provide support to both the
new system and that being replaced, and parallel BOWMAN and Clansman
training will be needed at certain locations.
24. In accordance with the principles of whole fleet
management, BOWMAN equipment that is not assigned to the front
line will in effect be held in reserve, although there will be
no formal war reserve. Spares to support BOWMAN will be held in
storage, under arrangements still to be decided.
25. National interoperability for land operations will
be achieved, as, ultimately, all elements of the three Services
that take part in the land or littoral battle will be equipped
with BOWMAN. International interoperability will be achieving
through the implementation of all endorsed NATO Standards applicable
to the operating environment. To achieve secure interoperability,
BOWMAN mandates the endorsed NATO appliqué unit to meet
NATO encryption interoperability standards.
26. Disposal Services Agency will consider the most appropriate
disposal route (sale or scrap) for Clansman equipment that is
no longer required. Relevant parts of Ptarmigan will be retained
as spares to support the Ptarmigan elements remaining in service.
27. BOWMAN is planned to be in service for at least 25
28. Given the pace of change in information systems technology,
it is likely that there will be developments that require technology
insertion over the course of BOWMAN's service life, and the system
is being designed accordingly.
SEA LIFT ASSETS: ROLL-ON ROLL-OFF (RoRo) SHIPS
The Strategic Defence Review identified a need for four additional
Roll-on Roll-off vessels, making a total of six, to support the
deployment of the Joint Rapid Reaction Forces (JRRF). After Initial
Gate in March 1999, an Invitation to Negotiate (ITN) was issued
to four consortia. Assessment of the bids received in July 1999
indicated that a Private Finance Initiative (PFI) solution was
likely to provide value for money. After optimisation of the bids
to reflect commercial and capability trade-offs, final bids were
received on 14 January 2000. However, as MOD could not be certain
that it was receiving the best value for money, the bids were
revised and confirmed by the bidders in July 2000. The competition
confirmed that each potential service provider would intend to
build new, or convert existing, ships to meet the operational
requirement. The selection of AWSR Shipping Ltd (AWSR) as the
preferred bidder was announced on 26 October 2000.
Following a period of negotiation, MOD entered into a preliminary
agreement with AWSR in December 2000. This cleared the way for
shipbuilding contracts to be let by AWSR with the German Flensburger
yard (for four ships) and Harland and Wolff (H&W) (for two)
in time to benefit from Shipbuilding Intervention Fund support.
***. In ordering ships from two shipyards, AWSR has been able
to offer early delivery of the capability, which is of benefit
to Defence by reducing the period in which availability of sufficient
strategic sealift to support the JRRF could not be assured. However,
difficulties in the detailed commercial arrangements for the two
H&W ships were threatening the timely completion of the PFI
negotiations and early deliver of the service. In March 2001,
MOD therefore took over the commercial shipbuilding contracts
with H&W as part of the PFI arrangements. (AWSR's shipbuilding
contracts with Flensburger are unaffected). The H&W contracts
are being managed on MOD's behalf by AWSR. On delivery the H&W
ships will be taken into the PFI arrangements and AWSR will then
provide the full six ship service on PFI terms.
Contract award was planned for Summer 2001 but the negotiations
have been complicated by several factors: taking into account
the developing tax and other aspects of the Government's initiatives
on the shipping industry set out in "British Shipping Charting
a New Course"; H&W's future financial stability; and
developing with AWSR and the Seafarers Unions the relationship
between commercial crewing arrangements and the deployment of
Sponsored Reserves. These factors were compounded by the extra
wariness and risk aversion induced in the insurance, commercial
shipping and financial markets by the events of 11 September.
It is now expected that the negotiations leading to award of the
full PFI contract will be completed this spring. The expected
early full service availability date of 2003 is not affected by
the extended negotiations.
Until the full service is available a provisional service
is being managed by MOD which provides an enhanced level of sealift
compared to that previously available.
1. The requirement is for guaranteed, world-wide delivery
of JRRF early entry equipment, including containerised ammunition,
at sustained speeds of at least 18 knots. The vessels will be
of commercial design. They will not be provided with warlike features
such as a self-defence capability or military communications,
although the selection of appropriate commercially available equipment
will maximise their operational use. Ship size is a balance between
optimum load carrying capacity and the need to operate into small
ports with draught restrictions and no specialist Ro-Ro facilities;
manoeuvrability is built into the design to assist with berthing
in the absence of tug support.
2. Trade-off between operational risk and value for money
has been tested in negotiations.
3. The long-term requirement is for a capability of six
vessels in total.
4. Operational analysis in the SDR subsumed earlier studies
of strategic lift to identify the number of RoRo vessels, and
5. The RoRo service can be used across a full range of
missions and military tasks that require deployment of UK forces
into theatre through a seaport of disembarkation. It is not the
intention to use the service in `battle conditions' but the ships
may need to transit warlike zones and may be under escort as part
of a task force.
6. Following the expiry of the contracts for the bareboat
charter of RFAs SEA CRUSADER and SEA CENTURION in January and
April 2001, these two vessels have been rechartered, along with
Merchant Vessel Dart 10, to provide an enhanced level of sealift
(the `provisional service') pending the introduction of the PFI
service; a fourth vessel will be chartered on an ad hoc basis
as required. The target date for the full PFI service to be available
to provide the increased capability identified by the SDR, is
2005, but under the preliminary agreement signed in December 2000,
it will be available by 2003.
7. Under the PFI arrangements, the service provider will
be responsible for the design, finance, manning, operation and
maintenance of the service. PFI is inherently `Smart' in that
it looks at whole life costs, harnesses commercial skills and
opportunities, and seeks to place risk in the hands of the parties
best placed to manage it. The opportunity for commercial trading
of capacity under-used by MOD will reduce the cost of the service
to the MOD.
8. The PFI service provider must provide a guaranteed
service, which includes the possibility of transiting warlike
zones as well as limiting the possibility of interference from
other nations. Furthermore, there is also a clear operational
requirement to man these vessels with British seamen, as a minimum,
for security considerations. AWSR have bid, and will be contracted
to provide, British seafarers eligible to be called out as sponsored
reserves for all vessels when working for the MOD.
9. An Investment Appraisal has considered a wide range
of options including: do nothing for 20 years, short and long
term charter options, and conventional design and construction.
None of these matched the value for money offered by the PFI approach.
10. The issue of export potential does not arise directly
in the circumstances of this project.
11. Both the interim and long term requirements have
been addressed through competition. It was recognised before the
competition that the long-term requirement might involve a new
build by the selected PFI contractor. As the requirement was for
a service to be provided using commercial, non-warlike vessels,
the competition could not be restricted to UK shipyards. The selected
PFI solution involves the build of four ships by the German Flensburger
shipyard and two by H&W.
12. Although the current lack of orders to follow on
from the RoRo contracts leads to concerns over H&W's longer
term prospects, the ship building work is not affected.
13. The programme is being managed using a Smart Acquisition
14. Key milestones as currently planned:
|Initial Gate||Approving issue of Invitation to|
Negotiate assuming PFI
|Assessment of bids (including the `revise and confirm' round)
|| ||Late 1999-
|Main Gate||To approve selection of preferred bidder|
for PFI solution
|Announcement of preferred bidder||
|Preliminary agreements in relation to shipbuilding subcontracts
|| ||December 2000
|MoD take over commercial shipbuilding contract with H&W
|| ||March 2001
15. The capital cost of the asset element of the PFI
service will be around £175 million. The annual service cost
to the MoD is related to usage but might amount to £40 million
per annum (fuel excluded).
16. Under a PFI arrangement the service provider is responsible
for the operation and maintenance of the service and is paid against
17. The intention is that all six ships, under a PFI
arrangement, with optimum risk transfer, should be at the graduated
readiness required for JRRF operations.
18. The service supports the NATO Defence Capabilities
Initiative in a number of areas but full commitment is limited
by contractual limitations appropriate to a PFI contract.
19. As the PFI vessels become available, the charters
for the ships providing the `provisional service' will expire.
20. The contract will be 20 years from the introduction
of the full service and the contractor will be responsible for
the disposal of the assets at the end of the contract. The 20-year
period is related to value for money, financing and ship life.
21. A change procedure will allow, for example, technical
upgrades offering value for money to be introduced by agreement.
FUTURE CARRIERS- (CVF)
The decision in the Strategic Defence Review to purchase
two large aircraft carriers to replace the three Invincible-class
carriers from around 2012 is being taken forward and competitive
contracts for the CVF Assessment Phase were awarded in November
1999 to BAe Land and Sea Systems (now BAE SYSTEMS) and Thomson-CSF
(now Thales Naval Ltd). The first part of this phase examined
a wide range of carrier designs, to reflect the options for the
Future Joint Combat Aircraft (JCA (formerly known as the Future
Carrier Borne Aircraft (FCBA))see separate memorandum).
This work helped to inform a decision, in January 2001, to select
the Joint Strike Fighter (JSF) as the aircraft with the best potential
to meet the JCA requirement. A new strategy for the remainder
of the Assessment phase was agreed in Autumn 2001 and a revised
Stage 2 of Assessment began in November 2001. Carrier design work
is now focusing on vessels capable of supporting JSF pending a
decision on aircraft variant selection, which is currently planned
by autumn 2002.
1. The Strategic Defence Review (SDR) concluded that
the ability to deploy offensive air power will be central to future
force projection operations, and that aircraft carriers can provide
valuable flexibility in a range of operational circumstances.
They can also offer a coercive presence, which may forestall the
need for war fighting. The SDR recognised that there is an increasing
likelihood of future operations being conducted by forces far
from their home bases. In such operations, host-nation support,
including access to suitable air bases, cannot be guaranteed,
particularly during an evolving regional crisis or the early stages
of a conflict. The SDR concluded that there is a continuing need
for Britain to have the capability offered by aircraft carriers.
Our three Invincible-class carriers were designed for Cold War
anti-submarine operations. Our intention, announced in the SDR,
is to replace these with a new class of larger and more capable
carriers, known as the Carrier Vessel Future (CVF) class.
2. In accordance with the Smart Acquisition model, CVF
is following a two-stage approval process that involves an Initial
and a Main Gate. Initial Gate approval, utilising the Smart Acquisition
model, was given in December 1998 for an Assessment phase. Studies
being undertaken in Assessment with examine the User Requirement
Document and develop it, using cost/capability trade-offs to produce
an affordable and achievable System Requirements Document. The
objective is to build a replacement for the current carriers that
has an increased emphasis on offensive air operations and is capable
of operating the largest possible range of aircraft in the widest
possible range of roles.
3. Trade-offs between cost and capability and time and
capability are integral to the Assessment Phase work.
4. The original plan was to replace the three Invincible-class
carriers with three 20,000 tonne vessels. Operational analysis
demonstrated, however, that it would be more cost-effective to
procure two large carriers, each capable of carrying up to about
50 aircraft. The SDR also saw advantage in future carriers being
capable of carrying more fixed-wing aircraft than the current
vessels, in order to be able to contribute more effectively to
the support of operations on land and at sea.
5. The SDR assessed the requirement for aircraft carriers
within the overall requirement for an offensive air capability.
It concluded that "there is....a continuing need for Britain
to have the capability offered by aircraft carriers" and
the emphasis for replacement carriers should be on "increased
offensive air power, and an ability to operate the largest possible
range of aircraft in the widest possible range of roles"
(The Strategic Defence Review, Supporting Essays, pages 6-6 to
6. The CVF will deploy offensive air power in support
of the full spectrum of future operations, including force projection,
as a central component of the maritime contribution to joint operations.
7. The planned out of service dates for HMS Invincible,
HMS Illustrious, and HMS Ark Royal are 2010, 2012 and 2015 respectively.
The SDR introduced no changes to this programme of withdrawals
from service. The first CVF is scheduled to enter operational
service in 2012 and the second in 2015. The in-service date of
CVF will be declared as the date when the military capability
provided by the CVF is assessed as available for operational use
in its minimum usefully deployable form, i.e at least as capable
as the system it replaces.
8. The CVF procurement strategy is based on competition
and prime contractorship, with clear and unambiguous output requirement
9. Invitations to tender for the Assessment Phase were
issued in January 1999 to six potential prime contractorsBAE,
Lockheed Martin, Boeing, Marconi Electronic Systems, Raytheon,
and Thomson-CSF. Responses were received in May from two teams:
the first led by Thomson-CSF of France with BMT Defence Services
Ltd and Raytheon Systems as major sub-contractors; the other by
BAe Land and Sea Systems with Marconi Electronics Systems as a
Following tender evaluation and face-to-face meetings with
industry it was judged that the bids offered the basis for robust
and effective competition and contracts were awarded to both teams
in November 1999. BAe and Marconi subsequently merged to form
BAE SYSTEMS and in February 2000 Lockheed Martin joined the Thomson-CSF
team (now known as Thales).
10. The Assessment phase was originally intended to comprise
two main stages. The first involved the examination of carrier
design options and helped inform the decision, in January 2001,
to select JSF as the aircraft with the best potential to meet
the FJCA requirement. Reflecting this decision, the remainder
of Stage 1 focused on vessels capable of supporting JSF.
11. Stage 2 was previously planned to involve detailed
work, informed by our choice of JSF, to determine the carriers'
design parameters and to reduce technological risk, and culminate
in the Main Gate approval decision, planned for December 2003,
to down-select to one preferred prime contractor to proceed to
Demonstration and Manufacture.
12. The first stage of Assessment was completed in June
2001. The Department carefully considered the proposals received
from the contractors for the originally configured Stage 2, taking
into account their views of the amount of work required to minimise
the level of risk in the CVF programme. Having revisited our strategy
to determine the most efficient and cost effective way forward
for the remainder of the Assessment Phase, we concluded that the
original approach no longer offered best value for money.
13. As a result, the CVF procurement strategy was changed.
In a revised and shortened stage 2, until November 2002, the competing
consortia will concentrate on refining their designs and on taking
key trade-off decisions. During this period the Department will
continuously assess the two consortia's work so that we can announce
a single preferred prime contractor in early 2003.
14. The selected prime will then work on the third stage
of assessment from early 2003 through to the award of a Demonstration
and Manufacture contract early in 2004.
15. In adopting this revised approach we are seeking
to apply Smart Acquisition principles. This approach will allow
us to maximise the advantages offered by competition and thus
ensure that we achieve best value for money. The new strategy
concentrates the forces of competition at appropriate levels;
namely between the candidate primes whilst designs are refined
and key trade-off decisions are made; and then, once the prime
has been selected, at the sub-contractor level to ensure that
robust prices are achieved. The new strategy will allow a seamless
transition from Assessment through to Demonstration and Manufacture.
The strategy also addresses industry's concerns about the level
of risk reduction required on major programmes. Both BAE SYSTEMS
and Thales have welcomed the revised approach.
16. The revised strategy provides additional funding
for the remainder of the Assessment Phase but offsets this by
the fact that only one prime will be contracted for Stage 3 post-November
2002. We will also seek to withhold some of the payments for this
stage until after the award of the D&M contract. The additional
cost of the revised strategy is around £20 million. This
additional funding will enable the selected prime to compile more
confidently their performance, time and cost proposals, which
we will expect them to achieve during the build programme. The
programme remains within its previously approved maximum acceptable
cost for the Assessment phase. The planned In-Service Dates of
the two carriers remain unchanged at 2012 and 2015.
17. The Demonstration element of the D&M phase will
initially continue design and risk reduction work from the Assessment
Phase, the intention being to achieve the highest possible level
of mature design before construction begins.
18. A cost model has been developed to generate whole-life
cost estimates for CVF and this is populated with regularly updated
data from industry. In the event of competition collapsing before
the end of Stage 2, this model would be used as the basis for
negotiations with industry.
19. During the first stage of Assessment, a wide range
of carrier and aircraft options, including conventional take-off
and landing, short take off and vertical landing, and short take
off but arrested recovery were considered. As part of this work
and following normal practice, the cost of extending the three
existing carriers, by ten years, has been assessed to provide
a baseline against which the cost effectiveness of all the options
can be evaluated.
20. Whole ship collaboration is unlikely to be a viable
option, but opportunities are being reviewed during Assessment,
especially for equipment systems and subsystems. In particular,
discussions are continuing with the French and US to explore areas
for possible co-operation in common areas of aircraft carrier
technology at a system or sub-system level.
21. It is unlikely that this project will lead directly
to whole-ship sales, although the commercial marketing of CVF
design skills and production technology could benefit UK industry.
Much of the ship's equipment could have export potential. Industrial
Participation proposals will be invited, as appropriate, for offshore
content of the proposed solution.
22. In accordance with government policy for the construction
of warships, the CVF will be built in a UK shipyard or shipyards.
Industrial factors will be taken into account in the selection
of the prime contractor.
23. The CVF programme is adopting and further developing
a range of Smart Acquisition techniques including a greater emphasis
on identifying, evaluating, and implementing effective trade-offs
between system performance, whole-life costs and time; the adoption
of incremental acquisition for areas such as the combat systems;
and the use of off-the-shelf equipment and commercial standards,
where appropriate. An Integrated Project Team (IPT) is managing
the project under the leadership of an industrialist recruited
in an open competition. In accordance with Smart Acquisition,
what would previously have been Feasibility and Project Definition
stages have been combined into a single Assessment phase, with
increased investment at this stage to achieve early risk reduction.
The two consortia have been encouraged to be innovative throughout
24. The preferred contractor for the CVF programme will
be selected through a continuous assessment process. This offers
a new and faster means of discriminating between two competing
contractors. The process also breaks new ground by addressing
significant but less tangible `soft issues'such as the
contractors' ability to work with the MoD, which is an important
issue when the MoD could be working with the selected prime for
many years. The continuous assessment process will run throughout
the coming year and will provide the MoD with a robust and fair
method of determining which contractor is best placed to build
the carriers. It is a move away from the traditional tender assessment
approach and should mean that the MoD will be able to make its
decision more quickly than would otherwise be possible.
25. A number of small-scale pre-feasibility studies were
completed prior to the award of the assessment contracts. A risk
register will be maintained throughout the life of the project
as the core of an integrated risk management system. This contains
both MoD and contractor inputs and is the focus for risk reduction
work during the Assessment phase. The risk reduction work will
help to provide confidence in the data to be assessed in the Combined
Operational Effectiveness and Investment Appraisal that will support
the Main Gate submission to proceed with Demonstration and Manufacture.
26. CVF milestones, as currently planned, are shown in
the table below.
|User Requirements Document endorsement|
and Initial Gate approval
|Issue Invitation to Tender (ITT)||January 1999
|Start ITT Assessment||November 1999
|FCBA decision||January 2001
|Start Stage 2 of Assessment||November 2001
|Announcement of preferred prime contractor,
start Stage 3 of Assessment
|Main Gate approval||December 2003
|ISDs||2012 and 2015
27. We envisage a total acquisition cost for the two
carriers of £3 billion (resource costs, outturn prices),
including combat system and initial support costs, but excluding
the aircraft. The peak years of expenditure are likely to be between
2008 and 2012. Costs incurred so far, including pre-feasibility
studies, total around £46 million.
28. We plan to investigate the let of a design/build/through-life
support/disposal contract as one package. Collaborative support
arrangements are unlikely.
29. Manning levels will be based on work by human factors
designers, to achieve a balance between automated and manual tasks,
and by training needs analysis, in accordance with the RN training
equipment strategy. The size of ship's complement is planned to
be about the same as for the Invincible class. Contractors will
be tasked to propose the most efficient manning strategies for
their designs, which will be examined during Assessment.
30. All logistic support associated with CVF will be
considered as a direct cost to the project, with an emphasis on
avoiding expenditure on new infrastructure. The maintenance management
system will be required to integrate with other MoD logistic systems
and to take account of emerging developments in IT. Innovative
support solutions will be examined, using Integrated Logistic
Support methodology to minimise costs throughout the ship's life.
31. Contractor Logistic Support (CLS) will be examined
for some or all of the maintenance and logistics. The benefits
of CLS include a strong focus on reliability for initial designs;
better standards of availability, reliability and maintenance;
and an incentive to the contractor to design and build systems
that minimise support costs. One option to be considered is the
adoption of best practice in supply chain techniques, to minimise
MoD ownership of spares, by contracting for agreed spares availability
from industry. CLS options for up to 30 years will be examined
32. The upkeep cycle of the CVF will reflect the vessels'
modern design and developments in upkeep practice such as `reliability
centred maintenance' rather than lengthy and expensive refits.
This will enable availability requirements to be met by only two
33. Both CVF will be assigned to the front line.
34. The aim is to maximise the interoperability of the
CVF with the greatest possible range of UK and allied aircraft
and with other carriers, to the extent that this can be achieved
cost-effectively. This is being explored further during the Assessment
35. Prospects for the sale of the Invincible class will
be explored in due course.
36. Each CVF is planned to have an in-service life of
30 years with a stretch target of up to 50 years.
37. The CVF programme is closely linked with JCA and
Maritime Airborne Surveillance and Control (MASCformerly
known as the Future Organic Airborne Early Warning (FOAEW) programmes
(the latter managed by a dedicated team within the CVF Integrated
SWIFTSURE & TRAFALGAR CLASS UPDATE
The Swiftsure & Trafalgar (S&T) Class Update is a
two-phase incremental programme to counter sonar obsolescence
and to deliver enhanced military capability to the in-service
attack submarines. The Initial Phase (Stages 1 & 2) successfully
achieved its in-service date (ISD) in June 1996. This phase resolved
sonar obsolescence, introduced enhanced sonar capability (Sonars
2074 & 2082), integrated the new submarine command system
(SMCS) and delivered an incremental improvement in weapon system
effectiveness to the Swiftsure Class and older Trafalgar Class
submarines. The Final Phase (Stages 3 & 4) will enhance the
operational effectiveness of the four newest Trafalgar Class submarines,
principally by the introduction of a new integrated sonar suite,
an upgraded Tactical Weapon System (TWS) and a number of signature
BAE Systems Astute Class Ltd (BACL), as Prime Contractor
for both the Astute Class and the S&T Class Update Final Phase,
has selected derivatives of the main Final Phase sub-systems for
the Astute Class.
Co-ordination of requirements across both programmes is ensured
as they are being managed by the same Integrated Project Team.
The new sonar suite (Sonar 2076) is a software intensive
system that represents a step change in both technology and military
capability. The sonar contractor, Thales Underwater Systems Limited
(TUSL), formerly Thomson Marconi Sonar Limited (TMSL), has experienced
difficulties in meeting the required programme. In particular,
TUSL has faced a major challenge in developing the signal and
data processing software. A lower risk recovery programme has
now been established that involves implementing the required Sonar
2076 Stage 4 functionality in incremental stages, and this contains
the slippage. The full impact of the slippage is partially mitigated
by parallel slippage in the host submarines' repair and maintenance
1. Nuclear powered attack submarines (SSNs) provide a
vital contribution to peace and security by providing conventional
deterrence. In time of conflict, the SSN's qualities of stealth,
endurance and flexibility afford it the freedom to operate unsupported,
worldwide, in a threat area, whilst remaining undetected, either
independently or in support of surface ship task groups or joint
operations. The SSN provides a capability to seek out and destroy
other submarines that may present a threat to friendly forces,
and can also detect and attack surface forces. By its actual or
potential presence in an area, the SSN can deny the use of that
area to an opposing force.
2. Those SSNs that have the capability to launch Tomahawk
Land Attack Missiles (TLAM) are able to influence the strategic
situation by posing a serious threat in periods of tension. In
the event of hostilities, they can deliver these highly accurate
and lethal weapons against important targets that might otherwise
have remained relatively invulnerable. The SSN is also able to
make a significant contribution to the intelligence collection
effort, through its ability at close range to conduct covert surveillance
and reconnaissance of opposition forces at sea or on the coastline.
In support of covert operations, Special Forces can be inserted
by a submarine, able to approach a coastline undetected and to
provide an accurate launch point for operations ashore.
3. The Royal Navy's current SSN flotilla of Swiftsure
& Trafalgar classes provides this range of operational capabilities.
The Final Phase of the S&T Update programme will provide greatly
enhanced sonar performance, Tactical Weapon System (TWS) integration
and signature reduction measures, thereby increasing the UK's
ability to fulfil these operational roles.
4. Feasibility studies, including cost/capability trade-offs
investigations, were completed in November 1990. It was concluded
that a phased approach, in four stages, would progressively satisfy
the operational requirements in a way that would reduce technical
and programme risk whilst fully exploiting the remaining submarine
5. The Initial Phase (Stages 1 & 2) introduced capability
enhancements to three of the Swiftsure Class (SSN08, 09 &
10) and the three oldest Trafalgar Class (SSN13, 14 & 15)
6. The Final Phase (Stages 3 & 4) will be limited
to the four newest Trafalgar Class submarines (SSN16, 17, 18 &
19) as the other in-service SSNs have insufficient remaining planned
service life for further updating to be cost-effective.
7. The SDR confirmed and highlighted that the nuclear-powered
attack submarine is an extremely potent weapon system with an
important role to play in support of a wide range of operations.
8. The S&T Update is designed to shift the balance
of operational capability in favour of the Royal Navy by enhancing
the submarines' sonar performance and reducing the chances of
9. The programme involves the upgrading of existing
equipment. The ISD for the Final Phase is based on the successful
completion of HMS TORBAY's sea trials with the Stage 4a increment
(Initial Operating Capability), following her first Revalidation
Assisted Maintenance Period (RAMP). This is planned to be achieved
in 2004. The Final Phase update will be introduced progressively
to the remaining submarines during their first refit and second
10. Approval for Full Development and Initial Production
for the Final Phase was given in January 1994. Procurement of
the Final Phase was initially being undertaken through eight separate
contracts with various equipment suppliers, including the Sonar
2076 contract with TUSL. These contracts were novated in 1997-98
to the prime contract with BAE SYSTEMS Astute Class Ltd (formerly
GEC Marconi Astute) as part of a risk reduction strategy embracing
both the S&T Class Update and the new Astute Class.
11. The current complement of the submarines will be
unchanged as a result of the update.
12. Alternative procurement options are not applicable
due to the maturity of development and the level of commitment
on contracts placed by competition in 1994. Radical options were
considered in mid-2000, in the context of the Sonar 2076 difficulties,
but were discounted due to their unacceptable impact on the timescales
and costs of both the S&T and Astute programmes.
13. Export potential is constrained by the high performance
and sensitive nature of the technologies involved, particularly
in respect of Sonar 2076. There are no export plans for these
14. TUSL is a major supplier of cutting edge military
sonars. This company currently employs around 350 personnel on
the Sonar 2076 programme at locations in Cheadle Heath (Manchester),
where the bulk of the system design, software development and
systems engineering work is performed, and in Church Crookham
(Hampshire) and Templecombe (Somerset) where hardware production
is carried out.
15. This is a legacy project in that its inception pre-dates
the Smart Acquisition Initiative (SPI). Nevertheless, Smart Acquisition
principles have been adopted where appropriate. This has resulted
in a more incremental development programme and the formation
of an integrated management team, in partnership with industry,
to exploit the benefits to be derived from a common product fitted
to both S&T and Astute class submarines and the appropriate
integrated programme. Finally, a `Smart' documentation set is
being adopted, where appropriate, albeit retrospectively.
16. The Key milestones and their expected dates are as
|ISD for First of Class (HMS TORBAY), providing an Initial Operating Capability (IOC)
||Stage 4a increment accepted into service
|Second Stage 4 increment installed and operating in HMS TORBAY
||Stage 4b increment accepted into service
|Final Stage 4 increment installed and operating in HMS TORBAY
||Stage 4c increment accepted into service
|Fleet Weapon Acceptance (FWA)||The full required Stage 4 functionality accepted into service in HMS TORBAY
|Final Operating Capability (FOC)||The full required Stage 4 functionality introduced into service in the last of the four Trafalgar-Class SSNs
17. The Major Projects Report for 2001 reported estimated
total programme costs of £687 million (on a resource basis
at outturn prices) for both the Initial and Final Phases (Stages
1 to 4). Of this total, some £615 million is attributable
to the Final Phase.
18. The current planning assumption is that the in-service
support responsibilities for the constituent equipments and systems
will be transferred from the Attack Submarines (ASM) Integrated
Project Team (IPT) to the appropriate IPTs within the Defence
Logistics Organisation, who will manage the required support using
existing arrangements wherever possible. However, other options
are being addressed, particularly for common equipments such as
Sonar 2076, where there may be an opportunity to provide support
more cost effectively by exploiting the Contractor Logistic Support
arrangements being established for the Astute Class submarines.
19. The Initial Phase is currently operational in three
Swiftsure-Class and the three oldest submarines of the Trafalgar-Class.
The Final Phase programme is applicable to the four newest Trafalgar-Class
submarines. At any given point in time, some of these submarines
are in the repair and maintenance cycle and are not immediately
available for operational deployment.
20. There are no operational interoperability issues.
However, the new Stage 5 programme could lead to a wider use of
commercial off the shelf technology to enable future capability
insertion and the potential re-use of common modules (software
and hardware) from other submarine combat system projects. This
may in turn facilitate the sharing of advanced signal processing
algorithms with collaborative partners, in particular the US Navy.
21. There are no equipment disposal opportunities in
this programme as the project involves either the fitting of additional
equipment or the upgrading of existing equipment.
22. The six Swiftsure and Trafalgar Class submarines
that received the Initial Phase update are due to remain in service
until their planned decommissioning ***. The first submarine to
receive the Final Phase update (1st increment at Stage 4a) is
planned to be in-service in 2004 and will provide the Initial
Operating Capability. The last submarine in the programme to receive
the full Stage 4 update is planned to be in service by ***. The
four Final Phase submarines are planned to remain in-service until
they are progressively decommissioned ***.
23. An additional programme of work (known as Stage 5)
is currently being planned. It would develop and de-risk the enabling
technology that would allow a more affordable timely and cost
effective means of sustaining and upgrading Sonar 2076 in the
TYPE 45 ANTI-AIR WARFARE DESTROYER AND
ITS PRINCIPAL ANTI-AIR MISSILE SYSTEM (PAAMS)
The Common New Generation Frigate (CNGF), a collaborative
programme with France and Italy, was planned to replace the UK's
Type 42 destroyers in the early part of the century. CNGF comprised
two distinct collaborative programmes: the Principal Anti Air
Missile System (PAAMS) and the ship with its other systems (Horizon).
Whilst the contract for the development and initial production
of PAAMS has been placed, the Horizon project did not progress
satisfactorily. The three nations agreed on 25 April 1999 that
it would not be cost-effective to pursue a single prime contract
for the ship and that the tri-national Horizon programme would
end upon completion of its Project Definition and Initial Design
Phase (Phase 1) at the end of October 1999. The UK is now taking
forward its ship programme, designated the Type 45 Anti-War Warfare
Destroyer Programme, through a national Prime Contractor, building
on the tri-national project work already carried out and pursuing
opportunities for co-operative procurement in equipping the ships.
1. PAAMS and Horizon both derived from the single Tri-Partite
Staff Requirement for CNGF. The requirement was approved by the
three participating nations, the UK, France and Italy, in December
1992. At the start of Project Definition for Horizon in 1995,
the intention was that PAAMS would provide an anti-war warfare
capability sufficient to meet the most demanding threat foreseen.
It was subsequently agreed that the initial capability sought
should be sufficient to meet the most demanding threat forecast
at the then expected In-Service Date (ISD) for CNGF (2004), but
that a growth path to provide the capability necessary to address
future predicted threats would also be identified as part of this
work. This remains the position for the Type 45, which will provide
effective area air defence against aircraft and missiles. We have
confirmed that PAAMS will be able to meet the most demanding threat
foreseen for 2007, when the Type 45 is due to enter service.
2. The principal cost/capability trade-off in the PAAMS
programme has been the acceptance of a capability sufficient to
meet the threat at ISD, rather than beyond. However, the PAAMS
Full Scale Engineering Development and Initial Production (FSED/IP)
contract (see Paragraph 14) includes a Growth Potential Study
that examines the modifications that may be required to meet the
threat beyond 2010. Studies into cost/capability and programme/capability
trade-offs for Project Horizon to achieve an affordable CNGF were
undertaken as part of Phase 1 of its programme which completed
on 31 October 1999. This work has been carried forward into the
UK's national programme.
3. The UK planning assumption is for the acquisition
of up to 12 Type 45s. The Horizon Memorandum of Understanding,
which was signed in 1994, assumed French and Italian acquisition
of four and six ships respectively.
4. The requirement to replace the Type 42 destroyers
was scrutinised in the Strategic Defence Review. No changes were
made to the operational case underpinning Project Horizon, which
is now being addressed by the Type 45 Programme.
5. Type 45 destroyers equipped with PAAMS will provide
area defence against aircraft and missiles, including local area
defence against modern anti-ship missiles, to protect lightly
armed or unarmed ships. In this role, the warships will support
maritime assets across the range, from RoRo vessels through amphibious
assault ships to aircraft carriers, in both UK national and allied/coalition
operations. In addition, the Type 45in common with all
destroyers and frigateswill be a multi-role, general-purpose
platform capable of operations across the spectrum of Defence
tasks, from peace support to high intensity warfare.
6. The warship and PAAMs are planned to replace the capability
currently provided in the Type 42 destroyer with its GWS30 Sea
Dart weapon system. It is planned that the eleven Type 42s currently
in service will be replaced progressively as Type 45s enter service,
starting with the First of Class in 2007.
7. The ISD for CNGF was defined as the completion of
Part IV Trials, which indicate the ship is fit to enter service.
The original estimated ISD was December 2002. This slipped to
June 2004, largely owing to the need to synchronise the warship
and combat system programmes. The last offer from the Horizon
industry group pointed to a UK first of class CNGF being further
delayed until 2007, although there was no detailed plan to support
even this date. The planned ISD for the Type 45 first of class
is now set at November 2007 with less risk in the programme than
would have been the case for CNGF. Deliveries of the Class of
up to 12 ships are planned to complete in 2014. Prior to Main
Gate, ISD definition for the Type 45 was revised to match the
availability of the Destroyer for operational tasking after sea
training. There was no effect on the programme as a result of
8. Marconi Electronic Systems (MES) was nominated as
the Prime Contractor for the Type 45 Programme on 23 November
1999, and at the same time contracted to complete the Preparation
for Demonstration (PFD) phase of the programme. This responsibility
passed to BAE SYSTEMS when MES merged with British Aerospace.
The nomination of BAE SYSTEMS ensured: the minimum of delay to
the overall programme; that maximum benefit from the Horizon programme
was carried forward into the UK national programme; and that the
Prime Contractor would own much of the risk associated with that
earlier work. On 20 December 2000 the Demonstration and First
of Class Manufacture (DFM) contract, which was to complete the
design and build of the first three ships, was placed with BAE
SYSTEMS Electronics, which is the commercial title for the Type
45 Prime Contract Office (PCO).
9. The MoD's original procurement strategy for the Type
45 was announced by the Secretary of State in July 2000. Under
this, the first of class (HMS DARING) would have been assembled
by BAE SYSTEMS Marine, with a substantial contribution from Vosper
Thornycroft (VT), the second (HMS DAUNTLESS) by VT, and the third
(HMS DIAMOND) by BAE SYSTEMS Marine. Both companies continue to
be jointly involved in developing the design for the Type 45.
10. Under this strategy, it was intended that the Prime
Contract would manage competitions for the manufacture and assembly
of subsequent batches of Type 45 destroyers with MOD oversight.
It was expected that all UK shipyards would have the opportunity
to bid for the manufacture of blocks for the second batch of ships
(with the competition for assembly of this batch being
limited to Marine and VT), and for both ship assembly and manufacture
for subsequent batches. In line with Government policy, there
were no plans to extend competition for warship construction for
the Royal Navy to yards overseas.
11. In late 2000, the MoD and Prime Contractor received
an unsolicited bid from BAE SYSTEMS Marine which proposed assigning
construction of twelve Type 45 ships to that company, as well
as commitment to other naval programmes. After careful consideration,
in conjunction with other Government Departments, the bid was
12. In June 2001, a possible alternative approach emerged
from BAE SYSTEMS Marine and Vosper Thornycroft. This required
MoD commitment to a further three Type 45s (bringing the total
to six, within the planned class of up to twelve) but did not
include reference to other programmes. It proposed that substantial
sections of each ship would be built by Vosper Thornycroft at
Portsmouth and BAE SYSTEMS Marine on the Clyde and at Barrow in
Furness. The First of Class (HMS DARING) would be assembled and
launched by BAE SYSTEMS Marine at Scotstoun, with the remainder
assembled and launched by BAE SYSTEMS at Barrow. The focus of
design support to the whole Class would remain at Scotstoun, with
continuing participation by both shipbuilders. After careful consideration,
involving other Government Departments, this alternative approach
was accepted in principle.
13. On 10 July 2001, it was announced that the construction
of a further three Type 45s had been approved, subject to successful
completion of contractual negotiations. The intention was to extend
the MoD's contractual commitment with the Prime Contractor to
include this second batch of three ships, bringing the total to
six. At the same time it was expected that the Prime Contractor
would sign legally binding agreements with the shipbuilders (BAE
Systems Marine and Vosper Thornycroft) for their work on the first
six Type 45 platforms. The extension to the contractual commitment
and the signature of the shipbuilding sub-contracts was announced
on 18 February 2002.
14. Collaboration continues with France and Italy on
PAAMS. On 11 August 1999, France placed a contract on behalf of
the three nations for Full Scale Engineering Development and Initial
Production (FSED/IP) with the tri-national consortium EUROPAAMS
acting as Prime Contractor. Prime Contractor members were nominated
by their governments. The UK member is UKAMS, which began as a
jointly-owned subsidiary of Siemens Plessey, GEC and BAe SEMAsee
paragraph 24 below. Following subsequent restructuring, UKAMS
is now a wholly owned subsidiary of, and remains within, the recently
formed MBDA (formerly Matra BAe Dynamics). FSED/IP sub-contracts
have been let by the Prime Contractor and the placement of second
tier sub-contracts is now complete.
15. In order to get PAAMS to sea as quickly as possible,
a strategy of incremental acquisition of platform capability,
from a baseline standard which is both affordable and achievable
in the time to in-service date, has been adopted. This will enable
the insertion of capability throughout the life of the Type 45s
as requirements become affordable and to take advantage of future
changes in defence requirements and technology advances. Following
the placement of the Demonstration and First of Class Manufacture
(DFM) contract on 20 December 2000 we have been able to accelerate
part of the Incremental Acquisition Plan (IAP) and a hull-mounted
sonar (the top priority in the Plan) will be fitted to all the
ships on build.
16. Before the 1996 PAAMS Programme Memorandum Of Understanding
(MOU) was signed, the UK considered a number of procurement options,
including life extension of Type 42s and acquisition of off-the-shelf
17. The PAAMS Programme MOU and its FSED/IP Supplement
were signed by France, Italy and the UK in March 1996. The UK
share of the costs of PAAMS FSED/IP will be higher than those
of France and Italy. This is because we are bearing the costs
of developing the Sampson Radar, which, whilst more capable than
the FR/IT EMPAR radar, will be used only in the UK variant, and
because the UK is making a contribution to the development cost
of the Family of Future Surface to Air Missile Systems (FSAF)
Programme being used for PAAMS. In addition, the UK currently
plans to fit PAAMS to a significantly larger number of ships than
the French and Italian navies combined.
18. The PAAMS Programme is managed by the tri-national
PAAMS Programme Office (PPO) in Paris which reports to a tri-national
Steering Committee. The aim is to delegate as much programme management
work as possible to the PPO, although co-ordination of UK policy
on PAAMS remains the responsibility of the Type 45 Integrated
Project Team (IPT). Charters, agreed with France and Italy, set
out the arrangements for co-ordinating PAAMS with the national
Type 45 ship-programme and the new Franco/Italian bilateral Horizon
19. At 12 February 2002, the PPO had 21 full time staff
(ten from the UK (including two locally employed), five Italian
and six French) and four part time staff (one Italian and three
French). The UK also has one member of staff located with the
FSAF Project Office in Paris. The tri-national Joint Project Office
(JPO) located in London disbanded on completion of Phase 1 of
Project Horizon on 31 October 1999. The Type 45 IPT has an annual
running costs budget of £4.2 million, including the salaries
and expenses of UK staff working in the PPO and FSAF Project Office.
20. Work is currently being undertaken to enable the
integration of PAAMS into OCCAR (Organisme Conjoint De Co-operation
En Mati"ere D'Armament). The OCCAR Board of Supervisors has
stated that entry should be completed by the end of 2002.
21. The reasons for the failure of the tri-national Horizon
programme were the subject of analysis by the tri-national Horizon
JPO and the Horizon Steering Committee. The lessons learned are
informing the UK's approach to future potential collaborative
ventures. A short paper summarising the lessons learned was provided
to the Committee as an Annex to the 2000 Memorandum.
22. The potential for achieving economies of scale by
co-operative purchasing of common items in the Type 45 and Franco-Italian
Horizon programmes has been explored without success to date.
However, there have been benefits from PAAMS industry (MBDA) working
closely with the T45 industry (BAE Systems). The most significant
was the initiative to develop a common architecture, including
servers and consoles, for the PAAMS and Combat Management System.
This improves inter-system operability and generates considerable
savings in through life costs.
23. Export potential for the Type 45 system as a whole
constrained by its high technological specification and cost,
but elements of the system such as the selected prime mover (the
Rolls Royce/Northrop Grumman WR21 gas turbine) and PAAMS (in particular
its associated multi-function radar) have considerable potential
export prospects up to the value of several billion pounds over
the next fifteen years. There could be prospects for refit programmes
as well as in new build hulls. There is a growing level of interest
from the Royal Australian Navy, which has plans for three air
defence destroyers from 2013.
24. For PAAMS, the Matra BAe Dynamics UKAMS consortium
was formed out of the companies possessing the technologies crucial
to the programmenotably the existing FSAF contractors and
the Sampson supplier Siemens Plessey Systems (now BAe Defence
Systems Ltd). PAAMS work share is constrained by existing FSAF
arrangements, but the aim is to achieve equitable work share throughout
the life of the programme as far as practicable, subject to considerations
of cost-effectiveness and competition.
25. For the national Type 45 warship programme, MES,
as part of GEC, was part of the Horizon International Joint Venture
Company (IJVC) and was heavily involved in the work that was undertaken
by the IJVC during Phase 1 of the Horizon programme which completed
at the end of October 1999. To avoid further delay to the replacement
of Type 42 destroyers, it was essential that the chosen Prime
Contractor would be able to make maximum use of the outputs of
the HORIZON definition work and demonstrate an ability to resource
the programme and deliver to the required timelines in partnership
with the IPT.
26. The Type 45 Programme is being undertaken in accordance
with the principles of Smart Acquisition. The Type 45 IPT was
formally established in September 1999, consisting of the MoD
Project Team at Abbey Wood and the single Prime Contractor Organisation
(PCO) two miles away at Filton, Bristol. A charter, setting out
the working ethos between the DPA and PCO, has been agreed. The
Department is confident that the Smart Acquisition approach to
requirements management, through the development of an initial
operating capability, which could be progressively enhanced through
a programme of incremental upgrading, will enable the first of
class ship to be delivered on time and to cost.
27. The principal lessons for the UK that were learned
from the outcome of the Horizon programme have been built into
the Smart Acquisition Initiative. These lessons covered the procurement
strategy, risk reduction, communication with industry at an early
stage of the project, and affordability.
28. The PAAMS FSED/IP contract was placed on11 August
1999. This includes the supply of the systems and associated equipments
and spares for the three nations' first of class ships. Systems
for follow-on ships will be covered by a Supplement to the PAAMS
programme MOU which is expected to be submitted to Ministers for
signature by the Summer of 2002.
29. For the warship, the Prime Contractor, BAE SYSTEMS
Electronics, was contracted on 20 December 2000 to undertake the
DFM phase. This contract has been extended to include the second
batch of three Type 45s.
30. The tables below show the currently planned milestones
and approved budget.
|Start of PAAMS FSED/IP||September 1996
|Start of warship assessment phase||July 1999
|Completion of Horizon Phase 1||July 1998
TYPE 45 DESTROYER
| ||Original approval
|Expenditure (see Note 1)||£6,168 million (approval for six ships)
|Start of warship
Demonstration and First of Class Manufacture (DFM) phase (for first three ships) (see Note 2)
|September 2000||December 2000|
(Extended to include further three ships in February 2002)
|First-of-class ISD (see paragraph 7 above)
(availability for operational tasking)
(availability for operational tasking)
|DFM completed (ISD of sixth ship)||August 2011|
(December 2009 for third ship)
(December 2009 for third ship)
Following Main Gate Approval in July 2000, figures show:
total approved level of expenditure for six ships and prior approvals
covering predominantly PAAMS FSED/IP, HORIZON and T45 Assessment
phase (Latest Approval); against the current estimate of expenditure
(Current Estimate). Expenditure is calculated at out-turn prices.
Warship assessment phase completed on placement of DFM.
31. Delays in the PAAMS programme were largely related
to slow progress in agreeing a procurement strategy with partners
and then in negotiating a satisfactory contract.
32. Forward commitment now amounts to £2,252 milliob
(this figure has been increased from the one reported last year
because of the ongoing progress in the ship programme). For the
projected class of 12 ships, the total cost is expected to be
of the order of £8 billion, including £2.8 billion total
acquisition costs for PAAMS (with figures calculated on a resource
basis, as in MPR 2001). The years of peak expenditure are expected
to be 2007-08 and 2008-09.
33. Under the terms of the Horizon MOU, the UK carried
liabilities in respect of additional expenses associated with
winding up the Horizon JPO/International Joint Venture Company
(IJVC). Following completion of the contract, the IJVC has been
wound up without any claim on the MoD. The JPO was closed on 31
October 1999, with no additional expenses being incurred.
34. As part of the initial contract to procure the first
three Type 45s, BAE SYSTEMS undertook to study options for Contractor
Logistic Support (CLS) of the platforms, reporting by the end
of 2001. As this study progressed it became clear that a CLS contract
based on whole warship availability would be extremely complex
and necessarily require a high degree of contingency built in
to cover the contractor's risk exposure. Additionally, it would
not enable the MoD to optimise its resources and priorities over
all platforms. It was therefore decided, in conjunction with the
Warship Support Agency, to alter the scope of the study into a
phased approach to support. The first phase, now on contract,
is to devise, in conjunction with the Warship Support Agency,
the optimum support solution for all T45 equipments. From this,
it is envisaged there will emerge a range of support from conventional
support, or CLS contracts through the Equipment IPT, to a core
CLS contract for the T45. The study will also define the means
of managing in service support, with the aim of delivering a bid
in late 2003 to undertake the core CLS activity including post
35. Ship staff training and spares storage are potential
bottlenecks to ships coming into operational service. The former
can be managed by the increased use of experienced Type 42 crew
which would reduce the need for pre-joining training when the
Type 45 comes into service; use of computer-based training will
reduce disruption to operational programmes. `Just In Time' stock
management techniques will also reduce the volume of spares to
be held, thus minimising the need for new storage facilities during
the transition period. It is planned that a CLS contract will
be in place a year before ISD, to provide experience in its operation
during trials and validate the in service support solution for
the In Service phase.
36. Assuming a class of 12 ships, nine or ten would,
on average, be available at any one time to the Commander-in-Chief
Fleet for tasking, while two or three would be undergoing maintenance,
including one or two in refit. It is not planned to hold any ships
in storage or as in-use reserves.
37. Commonality of many of the PAAMS systems and sub-systems,
including in particular the Aster missile, will ensure a good
level of interoperability with both France and Italy. In the warship
context, the requirement for interoperability with Joint and Combined
Forces at system and sub system level is a high priority.
38. The sales potential of Type 42 warships as they are
being disposed of is being examined.
39. The Type 45 is planned to have an in-service life
of 25 years.
40. The Type 45's systems and sub-systems will be updated
as appropriate throughout the life of the system to take account
of developments in the operational environment. It is possible
that the Future Surface Combatant programme, currently in the
early stages of concept development, will draw on major elements
of the Type 45.
THE RAND REPORT ON THE TYPE 45 PROCUREMENT
STRATEGY, AND THE WARSHIP SUPPORT MODERNISATION INITIATIVE
The MoD commissioned RAND EUROPE in April 2001 to investigate
potential procurement strategies which the MoD could pursue for
its future warship programme over the next 10-15 years with particular
reference to the Type 45 Anti-Air Warfare Destroyer. This followed
an unsolicited proposal received in December 2000 from BAE SYSTEMS
Marine, which proposed assigning construction of twelve Type 45
ships to that company, as well as commitment to other naval programmes.
This differed from the Type 45 shipbuilding procurement strategy
at that time which saw Vosper Thornycroft building one of the
first batch of three ships and competing for later batches. Interim
results from RAND's study informed MoD's decision to proceed with
a revised procurement strategy for the Type 45, which was announced
by the Secretary of State for Defence on 10 July 2001. RAND continued
their study, taking a broader look at the foreseeable balance
of demand and supply in the sector, and the potential effects
of different procurement approaches. The study is now complete
and at the time of writing RAND is expected to publish their report
shortly. This memorandum sets out the background to the study,
RAND's approach, and the results that informed the decisions on
Another issue for MoD in considering the unsolicited proposal
was the potential impact on the development of the Warship Support
Modernisation Initiative. This memorandum also provides details
of this initiative, including the MoD's current views on the relative
merits of the proposals put forward by industry and the trade
1. On 11 July 2000 the Secretary of State for Defence
announced the approval of the procurement of the first three Type
45s. At that time the procurement strategy envisaged a prime contract
placed later that year with BAE SYSTEMS Electronics with back-to-back
sub-contracts with BAE SYSTEMS Marine (Marine) (for the assembly
of the first and third ships) and Vosper Thornycroft (VT) (for
the assembly of the second ship). Marine would also be expected
to sub-contract a pre-determined amount of work on the first ship
to VT. A substantial element of the total manufacture work on
all three ships would be shared between VT and Marine. The precise
division of manufacture work was subject to negotiation between
the Prime Contractor, and Marine and VT. This strategy was intended
to ensure that both yards would have sufficient experience to
compete equitably for the second batch of Type 45 (which were
planned to be ordered around 2004), and to preserve the potential
for competition not only for later Type 45 production, but also
for future warship production, such as the Future Aircraft Carrier.
In the event, Marine and VT could not agree a risk sharing partnership
in time for sub-contracts to be let back-to-back with the prime
contract (the Demonstration and First of Class Manufacture contract)
which was placed in December 2000.
2. Later that month, the MoD received an unsolicited
proposal from Marine, through the Type 45 Prime Contract Office.
The proposal suggested, inter alia, that Marine should build all
twelve planned ships and appeared to offer substantial savings
to the MoD over the previous procurement strategy for Type 45.
As with any approach which appears to offer value for money, MoD
was obliged to consider it seriously. An immediate concern however
was that by assigning all the Type 45 work to Marine, the potential
for competition for the production of future major warship programmes
could have been put at serious risk.
3. During the early part of 2001, MoD spent considerable
effort in clarifying elements of the proposal, and sought to supplement
the internal analysis with appropriate expert advice from outside
Government. In April 2001, RAND EUROPE, a wholly-owned subsidiary
of the US RAND corporation, was commissioned to study the advantages
and disadvantages of alternative procurement strategies for MoD's
future warship programmes, and in particular in relation to options
for the Type 45, over the next 15-20 years. The study was expected
to inform (but not determine) decisions by the MoD on individual
programmes with the aim of securing value for money over the warship
programme as a whole.
4. RAND is a very experienced and influential policy-analysis
think tank, and has been conducting analyses of military shipbuilding,
industrial base, and competition issues for two decades. Most
recently, RAND has completed major studies on the US aircraft
carrier industrial base, the US submarine industrial base, and
on the appropriate role of competition in the production of the
Joint Strike Fighter. In each case, the United States' most senior
defence decision makers made policy choices based on RAND's analysis.
5. RAND has no commercial interests in the US or UK shipbuilding
industries. In this particular study, MoD set the context and
defined the problem for RAND. Thereafter, RAND independently developed
the study's approach, analysis and conclusions. While RAND considered
comments and suggestions from all interested parties along with
the way, the report's findings and conclusions are theirs and
6. RAND conducted a quantitative and qualitative comparison
of the advantages and disadvantages of having one or two shipbuilding
companies produce the Type 45 over the next 15 years. Options
examined included single source procurement, dual source competitive
procurement and dual source directed buys, employing either whole-ship
or modular (`block') production techniques in one or more shipyards.
7. RAND developed a new analytical model of the UK shipbuilding
industrial base, which considered all current and future Marine
and VT programmes. Using the model RAND estimated workforce, overhead,
and investment costs for different options, to display the relative
cost impacts on the Type 45 of different acquisition and production
strategies, and, in broad terms, to assess the effect of those
strategies both on the United Kingdom's shipbuilding industrial
base and on the costs of other current and future MoD ship programmes.
8. Using historical information and informed by previous
studies, RAND also considered the likelihood of competitive pressures
in bidding for subsequent batches of Type 45 reducing costs enough
to overcome the cost penalties of distributing work among two
producers, using break-even analysis. In addition, they considered
the risks associated with different production strategiesie
whole ship or block construction.
9. RAND were provided with information by the Equipment
Capability Customer organisation and Integrated Project Teams
in the MoD and by five UK shipbuildersVT, Marine, Swan
Hunter, Appledore, and Harland & Wolff. Much of this information
was commercially confidential, and the published report will necessarily
exclude such data.
TYPE 45 PROCUREMENT
10. RAND is expected to publish its report on the overall
study shortly (a copy of the report will be placed in the House
of Commons Library). The interim results, which informed the decision
in July 2001 to alter the Type 45 procurement strategy (described
in the separate Type 45 memorandum), were made available to the
MoD throughout June and July 2001. The key findings included the
While subject to a number of assumptions, the
RAND results suggested there was roughly an even chance that the
pressures of competition, if sustained throughout the production
programme, would yield about the same overall cost as single source
production. The interim results therefore neither strongly supported
nor rejected competitive procurement;
For strategies that directed Type 45 work to particular,
multiple shipyards, allocation of blocks was more cost-effective
than the allocation of whole ships, because the workforce would
increase their productivity as they progressively gained more
experience building those blocks. Unlike the unsolicited proposal,
such a strategy would also have the benefit of keeping both shipbuilders
involved in the Type 45 programme and potentially available to
compete for future warship programmes. RAND identified risks in
the construction, fitting and delivery of blocks, but believed
these could be managed;
Discounting the possible effects of competitive
pressure to produce savings on later batches of Type 45 (which
were uncertain and would have depended on both VT and Marine continuing
to bid), a revised strategy similar to that announced by the Secretary
of State for Defence on 10 July 2001 should offer significant
savings over the previous strategy;
While a strategy that directed the same blocks
over the life of the programme to both VT and Marine was likely
to cost more for Type 45 than the unsolicited proposal, the additional
costs were likely to be recouped if they enabled competition to
be pursued on other warship programmes.
11. RAND'S further work on the Type 45 procurement strategy
study has included looking at some of the broader capacity and
procurement policy issues in relation to the sector. The final
report is expected to outline areas which require further investigation.
In addition, RAND has been commissioned to assist the MoD in evaluating
the build strategy proposals of the two competing primes in the
Future Carrier (CVF) programme.
12. The Type 45 procurement strategy report is not expected
to make specific recommendations concerning procurement strategies
for future programmes, although it has helped clarify the issues
regarding block production (which is likely to be employed for
CVF). The study has also provided an indication of the industrial
capacity required to sustain the future programme, suggesting
that, while there is a current risk of excess capacity in the
shipbuilding industry if MoD orders are not supplemented by export
and commercial work, the workforce will need to expand considerably
by the end of this decade to accommodate the forward warshipbuilding
programme as currently planned.
13. One issue with implications for the Type 45 programme,
beyond the scope of work which RAND were commissioned to analyse
in detail, was the potential impact on the Warship Support Modernisation
14. Through the WSM initiative, the Department is pursuing
changes to warship repair and maintenance arrangements which should
help address current over-capacity and achieve significant savings
to the Defence budget.
15. Memoranda of Understanding (MoUs) outlining the principles
within which negotiations would take place were signed in January
2001 with each of the interested companiesDevonport Management
Ltd, Babcock Rosyth Defence Ltd, and Fleet Support Ltd. A separate
MoU was also signed with VT to pursue the possibility of them
moving their steel shipbuilding operations from Woolston, Southampton,
to land leased at the Naval Base. The move was a commercial decision
by the company and in their view contingent upon ship build procurement
decisionsspecificially, on the Type 45by MoD. Such
a move would lead to additional revenue to the Department, through
the WSM initiative. On 18 February this year, VT announced that
activity at their Woolston site would cease in 2003 and that they
were going ahead with the move to Portsmouth.
16. Agreement has been reached on a 125-year lease with
VT for land and buildings within Portsmouth Naval Base. VT are
to invest in new steel ship building facilities on an area at
the southern end of No. 3 basin, comprising three large dry docks
(two of which would be filled in, in order to construct a large
shipbuilding hall), extensive workshop facilities, storage facilities
and a large office complex.
17. This lease is separate from the discussions that
have been held over the last year with Fleet Support Ltd, and
their proposals for partnering. Its agreement does not pre-empt
decisions on the wider WSM Initiative, nor signal that decisions
have already been made.
18. Final detailed proposals from the trades unions and
from each of the companies were received in September 01. The
trade union proposals hinged on co-operation with Naval Base management
in the implementation of in-house efficiencies and also explored
the avoidance of transfers to the private sector through alternative
forms of partnering arrangements with industry. The company proposals
covered the provision of engineering support plus related logistics
activities and facilities and estates management at the Naval
Bases. All options have been evaluated and compared for best value
for money against an internal Benchmark. The results of this analysis
are now with the Secretary of State for a decision on the way
FUTURE JOINT COMBAT AIRCRAFTFJCA
(FORMERLY FUTURE CARRIER BORNE AIRCRAFTFCBA)
The Future Carrier Borne Aircraft (FCBA) was originally planned
to replace the capability currently provided by the RN's Sea Harrier,
in the second decade of this century. However, following the Strategic
Defence Review (SDR) and the formation of Joint Force 2000 (since
renamed Joint Force Harrier) it was envisaged that FCBA would
also replace the RAF Harrier GR7/9. The aircraft will be operated
in a joint force, from both the new aircraft carriers and land
bases, in the manner of the current Joint Force Harrier. In May
2001 the programme was re-titled Future Joint Combat Aircraft
(FJCA), better to reflect the truly joint nature of the requirement.
As the Defence Secretary announced on 17 January 2001 we
concluded that the US Joint Strike Fighter (JSF) has the best
potential to meet our needs. We accordingly decided to join the
US as a full collaborative partner in the next stage of the programmeSystem
Development and Demonstration (SDD), formerly known as Engineering
and Manufacturing Development (EMD).
On 26 October 2001 Lockheed Martin was selected as the prime
contractor for the JSF programme. UK entered the SDD phase as
a full collaborative partner with the US, having participated
in the source selection process. The purpose of the SDD phase
is to mature, complete and evaluate the detailed design of the
aircraft and to integrate key equipment prior to full production.
1. The FCBA requirement was originally intended to provide
the Royal Navy with a new multi-role fighter/attack aircraft to
replace the Sea Harrier from about 2012. There has been no significant
change to the requirement, in terms of the aircraft's capabilities,
since the Staff Target was approved in 1996. The Strategic Defence
Review (SDR), however, concluded that we should plan to replace
Invincible class carriers with two new larger aircraft carriers
and establish the Joint Force 2000 (since renamed Joint Force
Harrier), comprising RN and RAF elements. Therefore the FCBA project,
now restyled FJCA, envisaged a common aircraft to replace both
the Sea Harrier FA2 and RAF Harrier GR7, capable of being deployed
in both land and sea based operations.
2. Under a Memorandum of Understanding (MOU) signed in
December 1995, the UK participated as a full collaborative partner
in the JSF Concept Demonstration phase, which began in November
1996 and ended in October 2001. The UK will continue to be the
only full collaborative partner during the next phase of the programmeSystem
Development and Demonstration (SDD), formerly Engineering and
Manufacturing Development (EMD). Signature of a MOU in January
2001 for EMD allowed us to participate in the Source Selection
process that commenced in February 2001 and ended in October 2001
with the selection of Lockheed Martin as the prime contractor.
UK/US requirements are largely the same and UK staffs have participated
in development of the JSF Joint Operational Requirements Document
(JORD), and included UK specific requirements.
3. Trade-offs are an essential part of the acquisition
process in the JSF programme, using the `cost as an independent
variable' process. This means that, in the evolution of requirements
and design solutions, affordability is taken directly into account
along with lethality, survivability and supportability. The JSF
trade-off studies were completed in the autumn of 2000, in time
to allow the competing prime contractors to include results in
their respective SDD bids.
4. The current UK planning assumption is for 150 aircraft,
but final numbers will depend on the version of JSF (Carrier Variant
(CV) or Short Take Off and Vertical Landing (STOVL)) selected
and the outcome of ongoing work to confirm overall future offensive
air capability requirements.
5. The requirement for FCBA and other future fast jets
was closely scrutinised in the SDR. The Joint Force 2000, now
renamed Joint Force Harrier, arising from the SDR has brought
all Naval and RAF Harrier squadrons under a unified command and
control structure, with squadrons capable of operating from ashore
or afloat as required. In addition, the SDR noted that the US
JSF was a strong contender to meet our requirements for a Future
Carrier Borne Aircraft. Current plans envisage that FJCA will
start entering service in 2012.
6. JSF is a single seat, supersonic aircraft, incorporating
advanced "stealth" technology, that is capable of performing
multi-role (strike, reconnaissance and air defence) operations
from aircraft carriers and land bases. Our analysis of the available
options demonstrated that, on a through life basis, JSF should
meet most cost-effectively our military requirements.
7. Pre SDR the FCBA was planned to succeed the Sea Harrier
FA2 from 2012. Following the SDR, FJCA will now also succeed Harrier
GR7 from 2015. The FJCA in-service date is defined as the ability
to conduct sustained operations with eight aircraft and is currently
planned for late 2012.
8. JSF is a collaborative programme which runs to US
procurement procedures. It could be considered to be in the Demonstration
Phase of the Smart Acquisition process. JSF Concept Demonstration
was run on a competitive basis between consortia led by Boeing
and Lockheed Martin under cost plus fixed fee (subject to maximum
price) contracts placed by the US Government. Both consortia involved
British companies. By the nature of the competition itself and
the contract pricing mechanism, the prime contractors were expected
to maximise competition wherever possible at sub-contract level.
The US Government also has a contract on a similar basis with
Pratt & Whitney for the development of the engine. A contract
was also placed on BAE Systems to examine the viability of marinised
9. Should the JSF programme fail to deliver a suitable
aircraft a number of alternatives could be considered, but this
would potentially have implications for factors such as cost and
in-service date. These include the possible development of a Short
Take-Off But Arrested Recovery marinised Eurofighter; an off the
shelf purchase of a conventional catapult-launched aircraft, such
as the Rafale M or F/A18 E/F; and options related to an advanced
10. We contributed $200 million under an MOU with the
US, to the $2 billion JSF Concept Demonstration Phase. The UK
contribution to the next phase (SDD) will be £1.3 billion,
with a further sum, currently estimated at £600 million for
additional work on national requirements. The JSF programme is
managed from a US Joint Project Office (JPO) in Washington, which
has a total of about 150 staff, currently including nine UK staff.
There is no formal workshare agreement within the MoU for SDD,
but a number of UK companies have competed successfully to win
significant work with the US prime contractor. Two other countries
have now joined the JSF programme, the Netherlands as a level
2 partner and Canada as a level 3 partner.
11. The eventual US production requirement, extending
across the US Air Force, Navy and Marine Corps, is around 3,000
12. JSF has a considerable potential to generate export
opportunities including for UK Industry. The JSF production run,
including exports, may approach 5,000 aircraft estimated to be
worth some $400 billion.
13. The industrial implications of the alternative solutions
to the FJCA requirement were taken into account in determining
the UK's choice of aircraft. UK participation as a full collaborative
partner in the JSF programme represents a significant opportunity
for UK industry. They have won, on merit, substantial high quality
work and this is expected to continue in the future production
and support phases of potentially the largest military acquisition
14. The JSF programme accords with Smart Acquisition
principles. The joint US/UK programme office operates as an integrated
project team, including close partnering arrangements between
the programme office and the prime contractor, and operational
staffs are contributing to the development of the requirement.
The concept of "cost as an independent variable" is
a further indicator of the iterative approach to the programme,
as cost is seen as another "engineering parameter" against
which potential technical solutions have to be measured and moderated
if they produce unsatisfactory outcomes. The US programme made
significant "front end" investment, as evinced by the
Technical Maturity Program, a risk reduction measure to prove
technology before it was offered to both companies for potential
incorporation in their solutions. This early investment was also
seen in the Concept Demonstration aircraft flown by both companies.
Those aircraft were used to prove various "lean manufacturing
" techniques aimed at reducing both build and through life
costs. Early consideration is being given to an innovative support
philosophy, including a major role for industry in direct support.
15. The JSF Concept Demonstration phase, begun in November
1996, ended in October 2001. On 26 October 2001 Lockheed Martin
was chosen as the contractor for the SDD, phase of the JSF programme,
in which the Defence Secretary announced UK participation on 17
January 01. SDD started in October 2001 and will last for some
11 years. UK entered the SDD phase as a full collaborative partner
with the US, having participated in the selection of Lockheed
Martin as the US prime contractor. The purpose of the SDD phase
is to mature, complete and evaluate the detailed design of the
aircraft and to integrate key equipment prior to full production.
16. The main risk areas currently identified for JSF
are technology transfer, avionics software, aircraft controllability,
thrust/weight ratio, and safety management. A main aim of Concept
Demonstration was to reduce these risks to an acceptable level
before the programme moved into the SDD phase.
17. Approval was given for expenditure of £150m
to cover both the contribution to the US JSF Concept Demonstration
Phase and UK Feasibility Studies. Expenditure, on the same price
basis at the end of 2001-02 is £143m (all figures in resource
18. Approval has been given for expenditure of £1.3bn,
to cover the UK contribution to SDD and a further sum currently
estimated at £600m for additional work on national requirements.
This will be paid over an 11 year period beginning in October
2001. (All figures in outturn prices. Resource based figures will
be provided in accordance with the required MPR02 timescales.
19. Overall numbers and the choice of variant, both of
which have yet to be determined, will drive the cost of the programme.
It is currently estimated to be in the region of £7-10bn.
Peak expenditure is likely to occur in 2013-14 and 2014-15.
20. Support arrangements are currently being examined.
For JSF, this includes consideration of the extent of collaborative
support. Detailed plans for the transition from the current Harrier
fleet to FJCA will be formulated nearer the time.
21. The numbers have yet to be determined, but the planning
assumption is 150 aircraft.
22. JSF (STOVL or CV) will offer good interoperability
with the US and the other NATO allies who buy JSF. It will, of
course, be fully interoperable with legacy UK systems.
23. Disposal has yet to be considered. Either aircraft
type may be of interest to existing overseas STOVL customers,
but the aircraft are likely to have a limited useful life remaining.
24. FJCA is planned to have a 30-year service life.
25. It is too early to comment on the potential options
for the further development, update or use of JSF.
Eurofighter is an agile fighter aircraft that will serve
as the cornerstone of the RAF's fighting capability from the early
years of this century. The 232 aircraft we plan to acquire will
replace the Tornado F3 and Jaguar in air defence and offensive
air support roles. Eurofighter is being developed in a collaborative
project with Germany, Italy, and Spain Contracts for the production
of the first tranche of 148 aircraft, of which 55 are for the
RAF, were signed in 1998. The planned date for the first delivery
of Eurofighter is June 2002. ***
1. The original European Staff Target for the Eurofighterthen
European Fighter Aircraft (EFA)was signed in Rome in 1984,
by France, Germany, Italy, Spain and the UK. The nations' air
forces agreed a requirement for a new fighter aircraft to enter
service in the 1990s. EFA was to be agile and designed to fulfil
air defence, including air superiority and interception, and air
to surface roles. France attached equal importance to both roles;
all other nations, while wishing to retain good air to surface
capability, recognised air-to-air as the conditioning role. EFA
was to be capable of intercepting, fighting in air combat, and
destroying a wide range of aerial targets, including cruise missiles,
remotely piloted vehicles, and drones at a threat level expected
in the mid 1990s and beyond, as well as attacking enemy airfields
and enemy surface forces. EFA was to be able to operate in the
electronic warfare environment of a late 1990s European scenario
by day and by night, in all weathers for air defence, and in poor
visibility and low cloud-base for its air-to-surface role. The
numerical superiority of hostile air forces was to be compensated
for by EFA's superior quality and operational flexibility. Low
observability and survivability were key design goals, as were
reliability, maintainability and testability.
2. Following a 1984-85 feasibility study, the other four
nations found it impossible to reconcile all their requirements
with those of France, which wanted a lighter aircraft that would
not provide the overall operational capability required by the
others. France accordingly withdrew from the programme in 1985.
The key parameters agreed by the other nationsan unstable,
delta-winged aircraft, with canards, to have a "basic mass
empty" of 9.75 metric tonnes, a wing area of 50 square metres
and two engines each producing a static sea level thrust of 90
kiloNewtonswere incorporated in the European Staff Requirement
ESR) and signed by the four Chiefs of Air Staffs in 1985.
3. The collapse of the Warsaw Pact and the re-unification
of Germany led to a "reorientation" of the programme.
The ESR needed to be updated to reflect the radically changed
political and military situation in Europe after 1989 and to address
the requirement for the year 2000 and beyond, taking account of
EFA development work. Amendments were embodied in the European
Staff Requirement for Development (ESR-D) of a European Fighter
2000Eurofightersigned in 1994. The ESR-D acknowledges
that specific threats are no longer predictable in detail, but
stipulates that a future European fighter aircraft must be capable
of operating effectively in a variety of roles and theatres.
5. The original requirement of the four partner nations
was for a total of 765 aircraft250 for Germany, 165 for
Italy, 100 for Spain and 250 for the UK. The current requirement
is for 620 aircraft180 for Germany, 121 for Italy, 87 for
Spain, and 232 for the UK. Germany, Italy and Spain reduced their
numbers during the reorientation. The UK reduced its own requirement
following studies that concluded that the UK required 232 aircraft
to meet its operational commitments. The UK is now committed contractually
to the Tranche 1 production of 55 aircraft. Future production
contracts would commit the UK to 89 and 88 aircraft for Tranches
2 and 3 respectively.
6. The SDR confirmed our commitment to acquiring 232
Eurofighter aircraft. The acquisition of Eurofighter will provide
a step change in the RAF's ability to achieve air superiority
and provide air defence.
7. Eurofighter will bring a significant increase in our
air superiority capability as it replaces the Tornado F3. It will
also provide a true, adverse weather, multi-role capability. This
will allow it to be employed in the full spectrum of air operations
from air policing to peace support through to high intensity conflict.
Its multi-role capability will also allow it to fulfil the ground
attack roles now performed by Jaguar.
8. The Eurofighter will replace the Tornado F3 and Jaguar,
the out of service dates for which are 2010 and 2008 respectively.
The planned in-service date for Eurofighter, defined as the date
of the delivery of the first aircraft to the RAF, is June 2002.
*** Industry is continuing to work hard towards achieving this
date. We know through our continuous monitoring of industry's
progress that this represents for them an increasing challenge,
though we have not been formally advised of any delay to delivery.
Risk of delay is not unusual for a project of this size and complexity.
Nonetheless, we have made it very clear that we expect the prime
contractors to take all necessary action to mitigate this risk.
Delivery in June 2002 would represent a delay of 42 months against
the original ISD of December 1998. The slippage is attributable
to procurement delays caused by reorientation; delays in signature
of the Memoranda of Understanding for the Production and Support
phases (some 22 months slippage); and technical difficulties resulting
from the application of complex technologies required to enable
the equipment to meet the original Staff Requirement (some 20
months slippage). The definition of the ISD for Eurofighter relates
to procurement factors and was agreed internationally some years
9. Early work in each participating country by defence
contractors working to their national governments was co-ordinated
under Memoranda of Understanding between the partner nations.
Full collaborative development was launched in 1988. Collaborative
Production Investment and Production, including Initial Support,
was launched by the partner nations at the end of 1997, following
signature of further MoUs and contracts were signed in January
1998. Contracts for production of the first tranche of 148 aircraft,
including 55 for the RAF, were signed in September 1998.
10. Eurofighter development and production are undertaken
by two consortia: Eurofighter GmbH and Eurojet GmbH. Eurofighter
GmbH comprises BAE Systems from the UK, Alenia from Italy, EADS
(Deutschland) from Germany, and EADS (CASA) from Spain. It is
responsible for developing and producing the airframe, avionics
and the other aircraft systems and for the integration of the
EJ200 engine. The latter is being developed and produced by Eurojet
GmbH, comprising Rolls-Royce from the UK, MTU from Germany, Fiat
from Italy, and ITP from Spain.
11. The purchasing arrangements are shown in the following
|Contractor ||Contract Type
||Procurement Route |
|Eurofighter GmbH Airframe consortium comprising: Alenia, BAE Systems, EADS (Deutschland), and EADS (CASA).
||Fixed prices for airframe and aircraft equipments, with a target cost incentive arrangement for aircraft equipment integration.
||Non-competitive, but with international sub-contract competitive elements, the value of which amounts to some 30 per cent of the overall value of the prime contract.
|Eurojet GmbH Engine consortium comprising: FIAT, ITP, MTU, Rolls-Royce.
||Fixed price.||Non-competitive, but with international sub-contract competitive elements, the value of which amounts to some 10 per cent of the overall value of the prime contract.
|Contractor ||Contract Type
||Procurement Route |
|Eurofighter GmbH Airframe consortium comprising: Alenia, BAE Systems, EADS (Deutschland), and EADS (CASA).
||Overall maximum prices for production investment and production of airframes. Overall firm prices for production investment and production of aircraft equipment.
||Non-competitive, but with international sub-contract competitive elements, the value of which amounts to some 30 per cent of the overall value of the prime contract.
|Eurojet GmbH Engine consortium comprising: FIAT, ITP, MTU, Rolls-Royce.
||Overall maximum prices for production investment and production of engines.
||Non-competitive, but with international sub-contract competitive elements, the value of which amounts to some 10 per cent of the overall value of the prime contract.
12. Government oversight of the programme is exercised
through the Board of Directors of the NATO Eurofighter and Tornado
Development, Production and Logistics Management Agency (NETMA),
which carries out day-to-day management of the international contracts.
The Agency has some 300 staff and an annual budget of about 40
million Euro. Funding for the Agency is shared in accordance with
the respective participation of each nation in the Eurofighter
and Tornado programmes. The UK contribution is about 35 per cent.
The UK national project office element of the programme is managed
by an Integrated Project Team (IPT), which co-ordinates UK input
to the programme and provides national oversight. The IPT comprises
some 180 staff but is set to increase to between 190-200 as a
result of the transition to an in-service support authority. Its
annual budget is currently about £8 million.
13. Existing development work and costs are shared on
the basis of nations' planned production off-takes, as declared
in 1987, giving the UK and Germany 33 per cent shares each, Italy
21 per cent and Spain 13 percent. Production Investment and Production
work and cost share are based on aircraft off-take declared at
the start of these phases in 1997, giving the UK some 37.5 per
cent share, Germany 29 per cent, Italy 19.5 per cent and Spain
14 per cent.
14. Seven MoUs commit the four collaborative partners
to the various phases of the programme and its management.
15. Several potential customers for Eurofighter have
been identified in Europe, the Middle East, the Pacific Rim, and
South America. Export sales could run to several hundred aircraft
over many years, but there will be competition from a variety
of American, French, and Russian combat aircraft types. Eurofighter
was selected by Greece for its fourth generation fighter requirement,
although the purchase, which could involve at least 60 aircraft,
has now been postponed until after the 2004 Athens Olympiad.
16. The Eurofighter project is fundamental to maintaining
an industrial capability within the UK for the design and build
of advanced military aircraft. As the only suitably qualified
UK firms to undertake the development and manufacture of advanced
fast jet aircraft and engines, BAE Systems and Rolls-Royce were
the natural choice as the major UK partners. Similar factors influenced
the selection of contractors by our collaborative partners. The
project sustains something in excess of 6,000 jobs in the UK,
expected to rise to 14,000 jobs at the peak of production. Any
export sales will also have a positive impact on these numbers.
17. The Eurofighter programme embraces several Smart
Acquisition features. The UK has an Integrated Project Team with
collocated procurement, military customer and logistics staff,
including some seconded from industry. The design standard of
delivered aircraft will follow an incremental acquisition path,
with the first aircraft being delivered to an initial standardto
allow early trainingwith the full standard delivered later
to meet the declaration of operational capability. The prices
negotiated with industry have taken account of efficiency improvements
by industry; arrangements have been agreed to share further efficiency
benefits beyond those already included in the price. Elements
of the production contracts include firm, non-revisable prices
for the first five years and for subsequent years, Variation of
Price formulae based on Producer Output Indices. There is provision
for liquidated damages and the right of termination. Development
and adoption of innovative support arrangements for Eurofighter
in partnership with Industry has identified potential reductions
in cost of up to £1.8 billion over traditional arrangements
through the life of the aircraft, including the incentivisation
of repair and overhaul services; the transfer of risk for reliability
to suppliers; and taking advantage of the benefits offered by
evolving, more reliable, technologies.
18. There are four distinct phases within the Eurofighter
programme: pre-development, development, production and support.
19. Pre-development comprised a number of activities.
Following early concept studies and various efforts to establish
a collaborative programme, two key demonstration activities were
completed by the UK before development: the Experimental Aircraft
Programme (an airframe programme primarily aimed at proving the
feasibility of unstable flight control concepts) and the XG40
engine demonstrator programme at Rolls-Royce. The results of these
demonstrators and associated studies, and similar work by the
other nations, were harmonised in a definition, refinement and
risk reduction phase that run from the end of 1985, when the four
nations signed the MoU covering this phase, to 1988.
20. The main development contracts were signed in November
1988 and amended in November 1995.
21. The Eurofighter production contract strategy is based
on an "umbrella contract" that secures maximum prices
for all production investment and the total order of 620 aircraft.
Commitments against this contract are made as a series of supplements
against fixed prices within the overall maximum price. The umbrella
contract and the first supplement covering production investment
were signed in January 1998. The second supplement, covering the
production of the first tranche of 148 aircraft, was signed in
September 1998. The first production aircraft for the Royal Air
Force are now being assembled at BAE Systems, Warton, and production
engines are currently being built at Rolls-Royce, Filton.
22. Integrated logistic support procedures were embedded
in the programme from the outset, to ensure that adequate attention
was given to support issues throughout the development phase.
Concurrently with the umbrella contract, the first two support
procurement contracts were let, following agreement that industry
would ensure that support is available when the first aircraft
23. A reliability maintenance panel meets every three
months to monitor progress against the reliability plan. In-service
demonstration is also part of the programme.
24. The current assessment of risks associated with the
timely completion of the programme highlights the flight test
programme the achievement of incremental increases to functionality,
and the integration of development results into production aircraft
as the greatest areas for concern. The first flight of an instrumented
production aircraft, which was scheduled for August 2001, is now
expected to take place at the end of March. *** The results will
provide the evidence to allow series production aircraft to be
accepted into service. Risk management processes in industry and
MoD, and contractual incentives for industry, aim to ensure that
these risks are mitigated as far as possible to protect delivery
25. The four nations signed the Full Development MoU
and consequent contracts in November 1988. MoUs for Production
Investment/Production and Support were signed in December 1997.
These were followed by signature of the Production Investment/Production
and Support overarching contracts in January 1998 and the first
tranche of Production contracts in September 1998. The first aircraft
is scheduled to be delivered to the RAF in June 2002. *** Commitment
to tranches two and three is planned for 2003 and 2007 respectively.
26. Expenditure to 31 March 2001 was £5444 million
(presented on resource basis at outturn prices). The estimated
total acquisition costs as at 31 March 2001 are £18,869 million,
some £1,505 million in excess of the totals approved in 1987.
This is an increase of £37 million on the projected excess
reported last year. The difference is the result of increases
arising from obsolescence due to rapid changes in computer hardware
technology, latest estimates of the use of QinetiQ testing facilities
to support development trails, and greater Interest on Capital
charges due to changes in the accounting treatment of the delivery
of assets. These increases amount to a projected additional £108
million. Balanced against this is a projected decrease of £71
million. This decrease comprises revised exchange rate and inflation
assumptions and savings arising from the deletion of the 1500L
fuel tank and the CRV7 rocket from the programme.
27. In the event of late delivery, the production contracts
with Eurofighter GmbH and Eurojet GmbH both include provision
for liquidation damages up to a maximum of three per cent of individual
weapon system value. All interim payments made prior to delivery
are subject to the achievement of technical milestones. If a milestone
is not achieved, payment is not made.
28. Support for Eurofighter is being managed collaboratively
to reduce life cycle costs. MoUs and International Framing Agreements
aim to ensure that all elements of the project are taken forward
on an agreed international basis. Costs are shared in proportion
to the aircraft off-take of each nation. This is the first major
international project to apply integrated logistic support (ILS)
procedures, thus enabling all aspects of logistic support to be
optimised. Emphasis is being placed on partnership with industry
to define the most cost-effective solution.
29. For 18 months following the delivery of the first
aircraft, Eurofighter will be operated and supported at BAE Systems,
Warton. This enables the support arrangements for these aircraft
to be optimised through combined use of RAF assets and support
from BAE Systems production line facilities and resources, during
this period of relatively low flying hours. Additional benefits
will be achieved through the close proximity of RAF flying training
and BAE Systems test flying at Warton.
30. The Eurofighter IPT is maintaining close liaison
with the RAF throughout the planning process to ensure that the
end users contribute to the development of support policy and
have a clear understanding of the developing support concepts.
The IPT is also ensuring that, where it is cost-effective, maximum
use is made of existing support capability and also that, where
possible, any new generic support equipment being procured for
in-service aircraft is compatible with Eurofighter.
31. The most obvious potential bottleneck is the support
infrastructure at the Main Operating Bases (MOBs). As each MOB
converts, there will be a short period where both Tornado F3 and
Eurofighter will be required to operate together and, as each
maintenance facility is converted, the Tornado F3 would potentially
be left unsupported. This risk will be overcome by ensuring that
the MOBs provide mutual support during the conversion phase. Another
potential problem that has been identified is the maintenance
of minimum manning levels at the front line whilst training the
first tranche of Eurofighter tradesmen and building up the Operational
Conversion Unit and the first squadrons. Such potential difficulties
are being addressed by a series of working groups. All are currently
considered to be manageable.
32. The active RAF fleet of Eurofighter will be 137 aircraft,
covering the seven front-line squadrons, the Operational Conversion
Unit (OCU), and the Operational Evaluation Unit. Each squadron
will have one in-use reserve and the OCU will have two in-use
reserves, giving a total of nine. The remaining aircraft allow
for assumptions of attrition and overall use of the aircraft over
the 25 year life of the aircraft, with the last aircraft being
scheduled for delivery in 2014. The fleet once in steady state
will be managed around engineering requirements, such as scheduled
servicing and modification programmes.
33. Interoperability is fundamental to the Eurofighter
design. The Eurofighter programme has adhered to NATO Standardisation
Agreements (STANAGs) and protocols to ensure Eurofighter's compatibility
with current and future systems, both operational and logistic.
34. The aircraft being replaced will be at the end of
their productive lives and will probably be scrapped.
Eurofighter is planned to be in service for 25 years.
36. Unlike previous programmes, where major enhancements
were incorporated via a major in-service upgrade, we shall, following
Smart Acquisition principles, establish a programme for through-life
evolution of the RAF Eurofighter fleet. The aim is to acquire
and incorporate emerging technology, on an incremental basis,
to maintain the capability of the weapon system. Partnership between
the MoD and industry will provide the necessary expertise and
focus to enable us to identify, prioritise and pursue modifications
to Eurofighter that balance operational effectiveness, life cycle
costs, and obsolescence issues.
37. Further development of Eurofighter derivatives is
among the options being considered to meet the requirement for
Future Offensive Air Systems (FOAS).
Meteor is an all-weather, beyond visual range air-to-air
missile to equip Eurofighter, which is being procured from MBDA
(formerly Matra BAE Dynamics) in collaboration with our Eurofighter
partner nations (Germany, Italy, and Spain), France and Sweden.
It was selected in May 2000, following a competition between MBDA
and Raytheon Systems Ltd. Germany has yet to sign the Memorandum
of Understanding (MOU) for Meteor due to protracted Parliamentary
clearance procedures requiring signature of an acceptable final
draft contract before approving signature of the MOU. Other partner
nations signed the MOU during 2001. Contract negotiations with
MBDA are at an advanced stage. We had hoped to sign the contract
in 2001 but this was not possible. We now aim to sign the contract
this year Meteor should come into service on Eurofighter around
the turn of the decade.
1. The requirement is for a medium range air-to-air missile
for the Eurofighter. Initial planning assumptions were based on
the ability of the AIM-120B Advanced Medium Range Air-to-Air Missile
(AMRAAM) to meet the longer-term threat, but changes in the operational
environment led to the issue of a revised Staff Requirement in
1995. It underlined the need for the fighter to achieve a large
"no escape zone" against manoeuvring targets during
beyond visual range air-to-air combat, and to maximise the number
of firing opportunities. The Staff Requirement also employed the
principle of "performance objectives" as opposed to
"essential criteria". This was designed to prompt bidders
to propose innovative solutions and as wide a range of options
2. It should be possible to upgrade major missile sub-systems
to incorporate more cost-effective technology and to match the
evolving threat. The Staff Requirement sought to encourage the
designers to share the risk by matching and trading the performance
requirements to a realisable and affordable design solution.
4. The BVRAAM programme was considered during the Strategic
Defence Review, when the difficulties of achieving the in-service
date were assessed. It was concluded that BVRAAM remained a key
5. Meteor will be the primary air-to-air weapon for Eurofighter.
It will provide a key capability in achieving and maintaining
air superiority wherever Eurofighter is deployed Meteor will allow
Eurofighter to engage multiple and manoeuvring targets simultaneously,
at greater range than before, in all weathers, day or night, and
with greater survivability.
6. Meteor will not specifically replace any other programme.
Instead, it represents a new generation of weapon designed to
equip a new generation of fighter.
7. The original "most likely" ISD for BVRAAM
was 2005, but this moved in the SDR partly because the technology
was insufficiently mature, to a planning assumption of around
2008. Subsequently, however, in assessing the BVRAAM competition,
it was recognised that this 2008 assumption for Meteor was unrealistic.
Under the new approvals procedures. A 90 per cent confidence ISD
of August 2012 was approved for Meteor at Main Gate; the approved
50 per cent date is September 2011. Until Meteor comes into service,
Eurofighter will be armed with the Advanced Medium-Range Air-to-Air
Missile (AMRAAM), manufactured by Raytheon. An interim buy of
AMRAAH missiles would have been required whichever BVRAAM solution
8. Competition was maintained throughout the pre-Main
Gate phase, both at prime and sub-contractor levels, to ensure
best value for money. Bidders were required to submit firm prices
for an initial five-year period from award of contract and fixed
9. A Request for Information was issued in 1994 to a
wide range of national and foreign government agencies, potential
prime contractors and major equipment suppliers. Responses received
by the MOD in late 1994 suggested that a project was technically
feasible and capable of completion within a suitable timescale.
Four potential partner nations. Germany, Italy, Spain and Sweden,
agreed in principle in 1995 that the UK BVRAAM specification broadly
met their baseline missile requirements for Eurofighter and, in
the case of Sweden. JAS 39 Gripen. These nations were invited
to assess the bids jointly with the UK, with a view to agreeing
on a common solution. In July 1999 France joined the programme,
having identified that the BVRAAM specification broadly met their
capability requirements for Rafale.
10. An invitation to tender was issued in 1995, requesting
bids for the full capability missile, as well as proposals for
a staged capability (ie an interim capability missile with the
potential for upgrade). Two companies, Raytheon Systems Ltd (formerly
Hughes) and Matra BAE Dynamics (now MBDA), submitted bids. Raytheon
submitted proposals for a Future Medium Range Air-to-Air Missile
(FMRAAM), a full capability missile, and the Extended Range Air-to-Air
Missile (ERAAM), with a proposed growth path to full capability.
MBDA proposed only a full capability missile, Meteor.
11. Assessment highlighted areas of major technical risk
in each bid, and it was decided not to award an immediate Development
and Production contract. Instead, contracts for a Project Definition
and Risk Reduction phase were placed with the two bidders in August
1997. Revised bids to meet the requirement were received in May
1998, and these were followed by an additional, unsolicited offer
of Raytheon's ERAAMunder the umbrella of a joint UK/US
collaboration. Best and Final Offers were received from both companies
in September 1999 and, following Ministerial consideration, a
decision to buy Meteor was announced on 16 May 2000.
12. Since then, we have been in contractual negotiations
with the company. We stated in last year's report that we expected
to sign the contract around the middle of 2001. This was not achieved.
A number of complex technical and commercial issues delayed the
contract negotiations. In addition, we are applying lessons learned
from the Advanced Short-Range Air-to-Air Missile (ASRAAM) programme.
We intend to ensure that both we and MBDA are in full agreement
on the requirement and the means by which the requirement will
be demonstrated and accepted. We are working with the company
to resolve outstanding issues and we expect the contract to be
placed this year. The approved ISDs were based on the assumption
that the contract would be placed in April 2001. The extent of
the delay in achieving this is almost certain to have an impact
on the ISD.
13. No suitable "off-the-shelf" missile was
assessed as being able to meet the BVRAAM requirement. Options
considered in the early stages but deemed not to have the required
performance, were the Matra MICA, the Alenia Aspide, and the British
Aerospace Dynamics Active Skyflash.
14. Meteor is a collaborative project in partnership
with Germany, Italy, Spain, France, and Sweden. The UK is leading
the programme, with industry responsible for defining work-share
based on technical excellence, manageable risk and best value
for money, rather than any predetermined formula. It has been
agreed that the Meteor collaborative demonstration and manufacture
contract will be placed by the MOD under UK contracting law. The
UK intend to place a combined full demonstration and manufacture
contract with MBDA, with production options included to cover
potential partner nations who do not wish to commit to production
from the outset. An MOU, setting out the contractual, financial,
and management arrangements for the programme, has been agreed.
The UK, France and Sweden signed the MOU in June 2001; Italy signed
in September 2001; Spain signed in December 2001. As mentioned
above, Germany has yet to sign but has signalled a clear intention
to do so.
15. Missile requirements and in-service dates (ISDs)
for the other nations have yet to be advised. An International
Joint Project Office (IJPO) has been established within the MOD
Defence Procurement Agency under the UK's BVRAAM Integrated Project
Team Leader. The salary cost of partner nations' representatives
are being borne by their governments.
16. Meteor has excellent prospects for sales, particularly
as part of an integrated package on Eurofighter. The opportunities
for overseas sales could be widened by possible sales of Gripen
17. Industrial factors were taken into account in the
assessment of bids. Meteor offered particular advantages in terms
of the quality and sustainability of the jobs involved. MBDA stated
that a total of 2,400 jobs would be created or sustained in Europe:
1,200 in the UK.
18. The Meteor programme embodies a number of Smart Acquisition
principles. Whole life costs formed an integral part of the decision
process. The IPT has also entered into a partnering agreement
with the Prime Contractor. Emphasis is being placed on continued
delivery of value for money, and gain-sharing potential will be
kept under continuous review. In addition, the contractor has
agreed to a series of four key technological milestones, to demonstrate
successful progress during the development phase. If the company
fails to achieve any of these milestones, against clearly measurable
acceptable criteria, termination of the contract can be initiated,
with all money being returned to the partner nations.
Key Technical Risks (used to define key milestones)
The ability of the missile motor to operate in a reliable
and repeatable manner throughout the launch envelope.
The ability to maintain sufficient control of the missile to ensure
that it intercepts its target.
The ability to minimise missile/launch aircraft navigation system
The ability of the missile to achieve target intercept in a defined
set of countermeasure environments.
19. The acquisition phases are shown in the table below:
||Request for Information issued. Cardinal Points Specification issued (Apr 94). Invitation to tender issued (Dec 95)
|Project Definition and Risk Reduction||August 1997
||Reduction of major technical risk|
|Assessment of tenders||May 1998
||Included Best and Final Offers in September 1999, to reflect the late involvement of France
||Contract negotiation. Drafting of Memorandum of Understanding
20. Expenditure up to 31 March 2001 was £20 million
(on a resource basis at outturn prices). The total approved (90
per cent) acquisition resource costs at Main Gate in May 2000
is £1440 million, including the purchase of interim AMRAAM
missiles. The expected (50 per cent) cost is £1368 million.
The years of peak expenditure are likely to be 2010/11 and 2011/12.
21. The aim of the Meteor Integrated Logistic Support
strategy is to minimise the support costs whilst maintaining weapons
availability. The weapon is being designed under an "all
up round" principle to reduce through life logistic support.
MBDA will be responsible for the first 10 years of logistics support.
Very little maintenance will be required on the Meteor system
in service. Missiles and support equipment will be returned for
repair to MBDA once any fault has been confirmed. Contracts after
the initial 10-year period will be subject to negotiation.
22. Discussions between the UK, MBDA, and our partner
nations on support are now complete. All partner nations have
indicated that they would like to pursue a collaborative logistic
support contract for Meteor with the benefit of greatly reducing
each partner nation's support costs. The draft 10-year logistic
support contract has been worded to enable any partner nation
to join in this combined support contract as they commit to production.
23. Provision of initial operator and maintainer instructor
training and the associated training package are the responsibility
of MBDA. Future continuation training will be undertaken with
in-service resources. A number of ground-handling training missiles,
telemetered operational missiles and explosive ordnance disposal
training missiles will be procured. Technical publications will
be produced in full electronic format.
25. The BVRAAM programme was conceived exclusively for
Eurofighter, where the main carriage method is semi-recessed under
the fuselagea key design driver. Meteor will be integrated
on Gripen (for Sweden) and Rafale (for France) and will therefore
be interoperable with these nations in addition to our Eurofighter
partners. Whilst the extant UK requirement provides only for integration
on Eurofighter, integration issues with respect to the Joint Strike
Fighter variant selected as the UK's Future Carrier Borne Aircraft
will also be assessed.
26. Meteor has a required 25-year design life.
27. Through-life development of the missile will be considered
as the project progresses.
ADVANCED SHORT RANGE AIR-TO-AIR MISSILE
The Advanced Short Range Air-to-Air Missile (ASRAAM) is a
highly agile, passively guided anti-air weapon, manufactured by
MBDA (formerly Matra BAE Dynamics). It is due to be deployed on
the Tornado F3 to replace the Sidewinder AIM-9L missile and it
will also be fitted to Eurofighter. ASRAAM entered service at
an interim standard in January 2002 and is planned to be available
for operational deployment this summer. Incremental improvements
will lead to a full operational capability for ASRAAM, which we
aim to achieve by the end of 2003.
1. The requirement for a highly agile missile with good
infra-red countermeasures resistance was driven by the need for
short-range air superiority in visual combat. Such a missile was
to provide Eurofighter with a substantial advantage against the
forecast threat at the turn of the century, and would be complementary
to Skyflash and Meteor (see separate memorandum). The missile
would, additionally, be an important factor in the overall capability
of the Tornado F3.
2. Initially, the UK sought to meet the national requirement
for a short-range air-to-air missile through participation in
a collaborative development for a family of weapons. In accordance
with a Memorandum of Understanding between the UK, the US, and
Germany, signed in 1980, a tri-national Staff Requirement was
agreed in October 1984. Subsequent budgetary pressures, technical
and management problems, and changes to US requirements caused
our partners to withdraw from the project. The Staff Requirement
was re-endorsed as a UK national programme in 1990 without any
significant changes since the original approval.
3. We have accepted that, for a short period of time,
the missile will be beneath the exacting performance standard
we specified. We have agreed to this only after having established
a clear and robust route map towards achieving the missile's full
operational capability. There is no additional cost to the Department
for the work that MBDA will have to do to achieve this. Notwithstanding
this, the missile that has entered service is the best in its
5. The Strategic Defence Review did not affect the requirement
or existing orders.
6. ASRAAM will provide a significant contribution to
achieving and maintaining air superiority, as well as providing
critical self-defence capability for a variety of current and
future UK air assets. It will be employed in the full spectrum
of air operations from air policing to peace support through to
high intensity conflict.
7. ASRAAM will replace Sidewinder AIM-9L on Tornado F3,
Harrier GR9, and Sea Harrier FA2 in a delivery programme that
started in January this year and is the planned short-range air-to-air
weapon for UK Eurofighters.
8. The ISD set at ASRAAM's Main Gate equivalent was December
1998. ASRAAM entered service in January this year, 37 months late.
The achievement of ISD marked the successful resolution of a contractual
dispute between MOD and MBDA. Prior to this, ASRAAM had been expected
to enter service in April 2001 but, as stated in last year's report,
we could not accept the missile as a number of specified performance
standards had not been met. The performance shortfalls were in
the areas of lethality, target acquisition, tracking, and resistance
to countermeasures. The Department worked closely with MBDA to
agree a clear and robust route map to full operational capability,
enabling the new ISD to be set.
9. The incremental route to full operational capability
comprises a number of stages. The missiles accepted for ISD are
at an interim standard that is higher than that offered by the
MBDA for the ISD of April 2001. Even though improvements over
and above this standard are required, the missile's level of performance
at ISD standard is far superior to that of AIM-9L and it is the
best short-range air-to-air missile available. Delivery of production
missiles at a higher interim standard is to begin in mid-2002.
The ASRAAM development programme will continue with further software
upgrades that will lead to full operational capability. We hope
to achieve this by the end of 2003 but certainly by no later than
2005. ASRAAM is available for use now, if needed, but safety,
training, integration and other clearance activities mean that
we are unlikely to deploy the missile before this summer. The
delay has had no impact on Eurofighter's operational capability.
10. Under the provisions of the 1980 MoU, the US was
to develop an advanced medium air-to-air missile, and the UK and
Germany, along with Norway and Canada, who had subsequently joined
the programme, were to develop the short-range system. The European
programme was managed by a joint project office, with Bodenseewerk
Geratetechnik GmbH and British Aerospace Dynamics Ltd as the principal
contractors. Difficulties with the programme led to the withdrawal
of Germany from the programme in 1989 and the US, Norway, and
Canada in 1990.
11. Once ASRAAM had been re-endorsed as a UK national
programme, an invitation to tender was issued in 1991. It called
for a package deal, covering development, production, and associated
logistic support of the missile and its associated training variants.
We also stipulated the minimum use of Government Furnished Facilities
and Equipment, and the earliest possible ISD.
12. A number of candidate weapons were considered. British
Aerospace Defence Ltd; Raytheon; a consortium of GEC, Marconi,
and Matra; Bodenseewerk Geratetechnik GmbH. (BGT); and Loral Aeronutronic
all expressed an interest in the competition. In the event, Raytheon
and Loral did not respond to the ITT. The BAE bid of ASRAAM, the
GEC Marconi/Matra bid of MICA ASRAAM, and the BGT AIM9L IRIS were
considered as options in early 1992. Other weapons, including
a further BGT bid, the AIM 9LI (an improvement over the standard
(AIM9L) and a number of US options either in service or in development
were also considered, but were not assessed as capable of meeting
the UK requirement.
13. The BAE bid met the Staff Requirement and offered
a number of advantages over the BGT and GEC Marconi/Matra bids.
BAE Defence Ltd (now MBDA) was awarded a fixed price contract
14. ASRAAM won its first order in December 1998 when
it was selected for the Royal Australian Air Force, with whom
we are working closely. Like us, they have now decided to accept
that the missile will enter service with an interim operating
capability and an incremental path towards full operating capability.
There is also interest from a number of other nations, including
Greece, Switzerland, Spain, South Korea and Canada. Missiles with
similar capabilities are being built in the USA, Germany, Russia,
Israel, France, and South Africa.
15. The decision on the main development and production
contracts took account of the employment implications for the
UK. MBDA has estimated that more than 80 per cent of the work
in total would be in the UK, securing some 7,000 jobs. The GEC
Marconi/Matra bid offered only 50 per cent of work in the UK,
although they estimated that this would rise to 70 per cent if
potential sales were achieved.
16. MBDA proposed in September 1998 a number of Smart
Acquisition "gain sharing" initiatives. These included
the introduction of a more powerful processor into the missile,
enhancing the potential for future performance upgrades and eliminating
an obsolescence problem at no cost to the MOD, and better alignment
of missile production deliveries with candidate aircraft platforms.
A contract amendment was agreed in September 1999. The contractual
MOD and MBDA was resolved by tackling the issues head-on and the
outcome, an incremental route map to full operational capability;
follows Smart Acquisition principles. Lessons from our experience
of the ASRAAM programme are informing our acquisition from MBDA
of the Meteor beyond-visual-range air-to-air missile. (See separate
17. The acquisition phases are shown in the table below:
||Endorsement of UK support to NATO operational|
objectives for ASRAAM & AMRAAM
||Systems studies including IR detectors, transparent|
materials and sub-systems
|Project definition||December 1984
||Design of prototype missile and launcher sub-systems
|December 1987||Confirmation of image processing algorithms: manufacture|
of inert safety and arming units and design of strap down
|July 1988||Study into detailed proposals for an integrated missile|
configuration and more efficient management structure
||Full development and production of ASRAAM starts
18. Expenditure to 31 March 2001 (on a resource basis
at outturn prices) totalled £584 million, comprising £72
million on Feasibility and £512 million on Development and
Production. Total approved costs are £866 million. The expected
final cost is £857 million. The delay in achieving ISD resulted
in the Department incurring approximately £7 million additional
costs. These include extra intramural expenditure and costs arising
from the need to maintain Sidewinder missiles in service.
19. Delays to the programme have triggered liquidated
damages. The majority of these have already been collected in
the form of consideration payments totalling some £19 million.
The amended contract (see paragraph 16) makes provision for further
liquidated damages up to a maximum of 6 per cent (approximately
£23 million) of the value of deliverable items. MOD will
continue to claim any liquidated damages that fall due. We have,
however, accepted the company's claim that some of the programme
delay has been caused by the need to dedicate significant resources
to MOD/company negotiations. Accordingly as part of the overall
agreement to bring ASRAAM into service, a period of grace has
been allowed in the schedule determining liquidated damages. But
any further delays by MBDA could negate the benefit the company
derives from this period of grace.
20. ASRAAM is an industry-supported missile, with the
bulk of its maintenance to be undertaken by the prime contractor.
Although Eurofighter aircraft delivered to Germany, Spain, and
Italy will be able to fire ASRAAM, these nations are not committed
to buying ASRAAM. At least initially, therefore, in-service support
costs will fall to the UK.
21. Most of the support equipment and handling procedures
for ASRAAM will be the same as for the current AIM-9L weapon.
However, as the design has been completed under the "all
up round" principle, there will be a substantial reduction
in routine servicing requirements at the front line and all major
servicing will be undertaken by industry. Having identified potential
storage difficulties (the result of ASRAAM stocks building up
without equivalent reductions in AIM-9L stocks), we undertook
a Weapon Loading and Storage Study. The recommendations are now
being implemented and we are confident that no significant problems
will arise. Since the operational and training missiles both have
classified software, unlike the current air-to-air weapons, of
which only the operational weapons are classified, modified handling
procedures have been put in place.
23. ASRAAM has demonstrated its compatibility with earlier
AIM-9L launch equipment and interfaces. It is capable of being
carried and fired, with minimum modification, by all UK and other
allied air forces' aircraft that can carry and employ AIM-9L.
The system is compatible with the rail launchers on Eurofighter.
It is also designed to be employed using multiples sensors, such
as the infra-red search and track systems and helmet-mounted sights
planned for Eurofighters, as well as radar.
24. Surplus Sidewinders may have potential for re-sale.
Missiles that cannot be sold will have no operational use and
will be scrapped.
25. ASRAAM is planned to be in service for 25 years.
26. We continue to work, in partnership with Australia,
to establish a programme of through-life development. The programme
is primarily to ensure a useful service life of 25 years and could
involve the acquisition of emerging technology on an incremental