Letter to the Chairman of the Committee
from the Minister for Defence Procurement (21 November 2001)
I am pleased to be able to inform you that the
Ministry of Defence is announcing today, by way of a written answer
to a Parliamentary Question, the award of contracts for the next
stage of assessment for the Future Carrier (CVF) project to BAE
SYSTEMS and Thales Naval Ltd. This further strengthens our clear
commitment to the CVF programme.
As you are probably aware, assessment work on
the new carrier project began back in November 1999 when contracts
were awarded to the two competing consortia headed by BAE Systems
and Thales Naval Ltd. Originally, this work was split into two
stages, with progress to the second stage depending on performance
during the first stage and the submission by the contractors of
acceptable proposals for the second stage.
The first stage of Assessment was completed
in June this year. Since then we have been working to determine
the most efficient and cost effective way forward. We have taken
into account the views of both consortia as to the level work
required to minimise the level of risk in the CVF programme.
We have therefore decided to revise the CVF
procurement strategy so as to maximise competition for the remainder
of the assessment phase. For the next twelve months, until November
2002, the competing consortia will concentrate on refining their
designs and taking key trade-off decisions. At that point we will
make a detailed analysis of the merits of the two bids before
announcing a single preferred prime contractor in early 2003.
The preferred consortia will then continue assessment
work through the summer of 2003 in order to provide the robust
cost, time and performance information we need to make our main
investment decision. This will allow us to make a decision to
place a formal build contract in early 2004 and to move seamlessly
from the Assessment to the Build phase of the programme. The selected
prime will be expected to stick to the time, cost and performance
proposals agreed at the end of the assessment phase. Following
the announcement of a preferred contractor, competition will be
maximised at the sub-contractor level to ensure that robust prices
In adopting this revised approach we are seeking
to apply Smart Acquisition principles. This will allow us to maximise
the advantages offered by competition and thus ensure that we
achieve best value for money for the taxpayer. As part of this,
we will make around a further £20 million available to the
contractors during the Assessment Phase. This will enable the
selected prime to prepare more confidently their proposals for
the build programme. Critically, the In-Service Dates of the two
new carriers remain unchanged at 2012 and 2015 respectively.
Both BAE SYSTEMS and Thales have welcomed our
new approach which demonstrates innovative thinking to deliver
value for money.
This decision is good news for the Armed Forces.
When combined with progress on the Type 45 programme, the Astute
submarines, and the Alternative Landing Ship Logistics, it re-affirms
in the strongest possible terms this Government's commitment to
ensuring that our Armed Forces are equipped with battle-winning
equipment. Combined with the Future Joint Combat Aircraft, the
carriers will provide the UK with a formidable force projection
capability. It also highlights the significant opportunities that
currently exist for UK shipbuilders to participate in our extensive
I hope that you will support the decision.