Select Committee on Defence Appendices to the Minutes of Evidence


Letter to the Clerk of the Committee from the Ministry of Defence (10 July 2001)

  I am writing to let you know that Secretary of State will be making a statement to the House, this afternoon, along the following lines, to update the House on the progress that has been made on the shipbuilding procurement strategy for the Type 45 Destroyer.

  At the end of last year BAE SYSTEMS Marine made the Ministry of Defence an unsolicited proposal to build all twelve Type 45 Destroyers and a number of other warships. The unsolicited proposals have been carefully examined together with a number of other options. The Ministry of Defence has also called on the services of RAND to take a fresh look at procurement strategies for this programme in the context of the future warship programme as a whole.

  For the current procurement strategy to work, the shipbuilding companies need to work closely together during the development and manufacture of the first batch of ships already on order. Co-operation of this sort has not been encouraged by the existence of the unsolicited proposal or by the prospect of the companies having to compete against each other for the second batch of ships.

  The Secretary of State has been keen to resolve these problems, as has industry. Working with the companies, the Ministry of Defence has developed a revised strategy, which allocates work on the ships between the two shipbuilders for the whole class of Type 45 destroyers. The First of Class ship would be assembled and launched at Scotstoun. The focus of design support to the whole Class will remain there, with continuing participation by both shipbuilders. The remaining ships would be assembled and launched at Barrow, Vosper Thornycroft at Portsmouth, and BAE SYSTEMS Marine—on the Clyde and at Barrow in Furness—would both make and outfit substantial sections of each ship. The yards would continue to build the same sections throughout the programme to increase efficiency.

  The Secretary of State has not accepted BAE SYSTEMS unsolicited proposal to build two Auxiliary Oilers. There is no military capability requirement for ships of this sort.

  The cost to the defence budget could not be justified and the Secretary of State has concluded that we cannot sensibly pursue this.

  The Type 45 strategy does however involve a commitment now to six ships—doubling the number on order. The larger volume of guaranteed work will allow industry to make long term investment decisions.

  The revised procurement strategy provides better value for money to the taxpayer, gives a welcome level of stability to our warshipbuilding industry and preserves the possibility of competition for a number of subsequent programmes. It allows us to achieve the delivery of the new destroyers to the Navy, as planned, starting in 2007.

  This is good news for shipbuilding on the South Coast, the Clyde and at Barrow.

  This approach gives Vosper Thornycroft a defined and significant role in the Type 45 programme. The company will be able to move their operation, as planned into the Portsmouth Naval Base and invest in new shipbuilding facilities there. It also provides a solid foundation from which to sustain their export business and enter competitions for future naval programmes. The company believes that this substantial quantity of high quality Type 45 work should sustain a steady level of some 650 jobs well into the current decade.

  Type 45 work, together with the first three ASTUTE Class submarines and the order for two Alternative Landing Ships Logistic announced last year, should support BAE SYSTEMS Marine shipbuilding for the rest of the decade. Based on the company's own estimates, once this total construction programme is up and running, work on this package should sustain a steady level of some 1,200 jobs on the Clyde and around a further 900 jobs at Barrow in Furness. We understand in the light of this work package that the company has no plans to close any of its yards.

  Overall, this approach maintains shipbuilding capacity on the Clyde, on the South Coast and at Barrow. There is the opportunity for both BAE SYSTEMS Marine and Vosper Thornycroft to invest and compete not only for future Ministry of Defence business but also export orders.

  The Type 45s will be the biggest and most powerful air defence destroyers to service in the Royal Navy. The procurement of the first six ships is good news for Britain's armed forces and good news for British shipbuilding.

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