Select Committee on Defence Written Evidence

Annex A (continued)


  The Type 45, equipped with the Principal Anti-Air Missile System (PAAMS), will be a versatile Destroyer capable of contributing to world-wide maritime operations in multi-threat environments. The programme came into being following agreement, in April 1999, between the UK, France and Italy not to pursue the tri-national Horizon programme. The three nations continue to collaborate on PAAMS.

  The contract for the design and build of the first three ships was placed with BAE SYSTEMS Electronics (the commercial title for the Type 45 Prime Contract Office) on 20 December 2000. The extension of the contractual commitment to six ships and the signature of shipbuilding sub-contracts was announced on 18 February 2002.

Operational Requirement

  Envisaged as a replacement for the Type 42 destroyers, the Type 45 will be a multi-role, general-purpose platform capable of operations across the spectrum of tasks, from peace support to high intensity warfare. Its primary role, utilising the PAAMS system, will be Anti-Air Warfare (AAW), providing effective area air defence against aircraft and missiles. The current requirement for PAAMS is to meet the most demanding threat foreseen for 2007 (when the Type 45 is due to enter service), with a Growth Potential Study to examine areas of potential enhancement to meet future threats.

Trade Offs

  In order to get Type 45 and PAAMS in service 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 additional 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.

  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 includes a Growth Potential Study that examines the modifications that may be required to meet emerging threats.


  The current planning assumption is for the acquisition of a class of up to 12 Type 45s.

Strategic Defence Review

  The requirement to replace the Type 42 destroyers was scrutinised and confirmed in the Strategic Defence Review. This is now being addressed by the Type 45 Programme.

Military Capability

  The Type 45s will be fitted with PAAMS, which incorporates the Sampson multi-function radar, representing a quantum leap in capability from the outset. This system will defend the Type 45 and ships in its company from multiple attacks by aircraft and even the most sophisticated anti-ship missiles. The ship will have a powerful general-purpose capability and be able to accommodate up to 60 Royal Marine commandos and their equipment. The Type 45 will also be capable of operating the Lynx and Merlin helicopters.

Equipment Replaced and In-Service Date (ISD)

  The Type 45 Destroyer and PAAMS are planned to replace the capability currently provided in the Type 42 destroyer and its GWS30 Sea Dart weapon system. It is planned that the eleven Type 42s currently in service will be replaced progressively by Type 45s starting in 2007.

  Deliveries of the Class are planned to complete by the middle of the next decade. Prior to Main Gate, the ISD definition for the Type 45 was revised to match the availability of the First of Class for operational tasking after sea training.

Acquisition Strategy


  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. On 20 December 2000 the 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).

  Under the MoD's original procurement strategy, 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. Thus, both companies would be in the position of having assembled at least one entire ship. Both companies were (and continue to be) jointly involved in developing the design for the Type 45. It was intended that the Prime Contractor would manage, with MoD oversight, competitions for the manufacture and assembly of subsequent batches of Type 45 destroyers.

  Following consideration and rejection of an unsolicited bid from BAE SYSTEMS Marine for the construction of the full class of Type 45 ships, as well as an MoD commitment to the company on other naval construction programmes, an alternative procurement approach was accepted in principle in July 2001. This required extending the existing MoD contract to a further three Type 45s (bringing the total to six). It also involved sections of each ship being built by Vosper Thornycroft at their new facility at Portsmouth and by BAE SYSTEMS Marine at the yards 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. An extension to the contractual commitment to six ships and the signature of shipbuilding sub-contracts on this basis was announced on 18 February 2002.

  On 14 March 2003, following MoD agreement to a company request, BAE SYSTEMS announced that all of their Type 45 production work planned to be undertaken at Barrow would be transferred to their yards on the Clyde. This change of plan resulted from delay to the Astute attack submarine programme. BAE SYSTEMS considered that this slippage would introduce an unacceptably high risk of conflict between the Type 45 and ASTUTE production programmes at Barrow. In addition, the company did not consider that they would be able to retain the necessary capacity at Barrow until it was required for Type 45 construction and that it would be highly unlikely that they could recruit sufficient suitably qualified people in the future to support both programmes. BAE SYSTEMS therefore concluded that the best way of reducing risk was to carry out all of their work on Type 45 at their yards on the Clyde, leaving Barrow to concentrate on ASTUTE.


  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.

  National lead contractors were nominated by their governments. The UK member is UKAMS, which began as a jointly-owned subsidiary of Siemens Plessey, GEC and BAe SEMA. Following subsequent industrial 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. The programme remains on schedule to meet the ISD for the Type 45 First-of-Class.


  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 on two counts. First, 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. Second, the UK is making a contribution to the development cost of the Franco-Italian Family of Future Surface to Air Missile Systems (FSAF) Programme, elements of which are necessary for PAAMS. In addition, the UK currently plans to fit PAAMS to a larger number of ships than the French and Italian navies combined.

  The PAAMS Programme is managed by the tri-national PAAMS Programme Office (PPO) in Paris which reports to a tri-national PAAMS Steering Committee (PSC). 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 Franco/Italian bilateral Horizon programme.

  Work is progressing on the transfer of PAAMS Munitions procurement into OCCAR (Organisme Conjoint De Co-operation En Matie"re D'Armament). This is seen as a sensible and cost effective development which will allow the UK to remain at the heart of PAAMS/FSAF production and development activities.

  The potential for achieving economies of scale by co-operative purchasing of common items in the Type 45 and Franco-Italian Horizon warship programmes has been explored, but without success to date. However, there have been benefits from PAAMS industry (UKAMS) working closely with the Type 45 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 will generate considerable savings in through life costs.

Export Potential

  Export potential for the Type 45 system as a whole is 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), the electric propulsion system (Alstom), 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 continuing interest from the Royal Australian Navy, which has plans for three air defence destroyers from 2013, with a capability very similar to Type 45.

Industrial Factors

  In accordance with government policy for the construction of Royal Navy warships, Type 45 will be built in UK shipyards. Industrial factors were taken fully into account in the decision in 2001 to adopt the alternative strategy by which MoD committed itself to the procurement of the first six Type 45 destroyers in return for changes in the shipbuilding strategy. The decision for substantial sections of each ship to be built by VT (at its Portsmouth facility) and by Marine (at its yards at Barrow and on the Clyde) allowed each yard to increase efficiency and produce better value for money for the taxpayer as well as offering the best prospect of maintaining the in-service date. The effectiveness of this approach was supported by the findings of a detailed study by RAND into the MoD's naval acquisition strategy. This revised strategy was made legally binding between the Prime (BAE SYSTEMS) and the two build sub-contractors (BAE SYSTEMS Marine and Vosper Thornycroft) in February 2002. Industrial factors were also a key consideration in the decision by BAE SYSTEMS in March 2003 to focus all of its Type 45 work at its Clyde yards while the Barrow facility concentrates on its role as a submarine producer. VT is not affected by this re-location of work and will continue to manufacture its share of the key sections at its Portsmouth facility.

  For PAAMS, the UKAMS consortium was formed as a convenient marriage of those companies possessing the technologies crucial to the programme—notably the existing FSAF contractors and the Sampson radar supplier Siemens Plessey Systems (now AMS). 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.

Smart Acquisition

  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 and has proved to be successful in creating an environment where truly joint working can take place. 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, provides the optimum environment in which the first of class ship can be delivered on time and to cost.

Acquisition Phases

  The PAAMS FSED/IP contract was placed on 11 August 1999. This includes the supply of the systems and associated equipments and spares for the three nations' first of class ships. Negotiations are currently taking place with industry for systems for follow-on ships. Contracts are expected to be signed by France, on behalf of the UK and Italy, in the summer of 2003.

  For the warship, the Prime Contractor, BAE SYSTEMS Electronics, was contracted on 20 December 2000 to undertake the DFM phase. This contract has since been extended to include the second batch of three Type 45s.

Milestones and Costs

  The tables below show the high level milestones and approved budget.


   Original ApprovalCurrent Estimate Completed
Expenditure (See Note 1)£6,168 million (approval for six ships, including PAAMS) £5,087 million
Start of warship Demonstration and First of Class Manufacture (DFM) phase (for first three ships) (see note 2) September 2000Deember 2000. (Extended to include further three ships in February 2002)
First-of-class ISDNovember 2007 (availability for operational takings) November 2007 (availability for operational tasking).
DFM completed (ISD of 6th ship)August 2011. (December 2009 for third ship) December 2001 (December 2009 for third ship)


  Original Approval Current Estimate Completed
Delivery of 1st PAAMS(s) System is First of Class Type 45 March 2006March 2006

  Note 1. 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.

  Note 2. Warship assessment phase completed on placement of DFM.

  For a projected class of up to 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 2002).

In-Service Support

  The first stage of a phased approach to support, now on contract, aims to devise the optimum support solution for all Type 45 equipments. The study will also define the means of managing in-service support, coupled with Post Design Services. It is planned that a Contractor Logistics Support (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.

Front Line, Storage and Reserve

  On average two or three ships would be undergoing maintenance (including one or two in refit) leaving the rest of the class available to the Commander-in-Chief Fleet for tasking.


  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. Multi-link capable, the ship will be able to share its operational picture with allies, and control assets in theatre with NATO land, sea and air forces that are similarly equipped, providing maximum flexibility in force mix. As part of the class solution, Type 45 will be fitted with the US Co-operative Engagement Capability which will greatly enhance the force situational awareness and bring the full benefits of the Sampson radar to other suitably equipped platforms in the task force. The Fully Integrated Communications System will provide the infrastructure to support a wide range of communications facilities, including Bowman, which will provide a secure command and control net with UK land forces.

Disposal of Equipment Replaced

  The sales potential of Type 42 warships is being examined as part of the disposal process.

In-Service Life

  The Type 45 is planned to have an in-service life of 25 years.

Development Potential

  The Type 45 has been designed with space and weight margins that will allow for greater capability to be added in the future. Its systems and sub-systems will be updated as appropriate throughout the life of the platform to take account of developments in technology and 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 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).

  A PFI contract with AWSR Shipping Ltd was signed on 27 June 2002 for a service until December 2024. The last of the six ships was delivered to AWSR this month (April). This has meant the full sealift service under PFI arrangements being in place ahead of the target date.

Operational Requirement

  The requirement is for guaranteed, worldwide delivery of JRRF early entry equipment, including containerised ammunition, at sustained speeds of at least 18 knots. The vessels are of commercial design. They are not provided with warlike features such as a self-defence capability or military communications, although the selection of appropriate commercially available equipment maximises 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 RORO facilities; manoeuvrability is built into the design to assist with berthing in the absence of tug support.


  Trade-off between operational risk and value for money has been tested in the competition and negotiations. Although MoD's sealift requirement for JRRF operations might need the full six-ship capability, its estimated routine transport needs would only support a four ship service; two ships, which remain available to MoD at short notice (20 and 30 days), can earn commercial revenue.


  The long-term requirement is for a capability of six vessels in total.

Strategic Defence Review

  Operational analysis in the SDR subsumed earlier studies of strategic lift to identify the number of RORO vessels, and aircraft, required.

Military Capability

  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.

Equipment to be Replaced and In-Service Date

  With the availability of the full service expected from April 2003, the provisional service based on three chartered ships has ended.

Procurement Approach

  After Initial Gate in March 1999, an Invitation to Negotiate (ITN) was issued to four consortia for the full six-ship service. 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 intended 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.

  After 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 entering into this preliminary agreement, MoD accepted contingent liabilities; these were discharged on signature of the PFI contract. By ordering ships from two shipyards, AWSR were able to offer early delivery of the capability, which was of benefit to Defence because it reduced the period in which availability of sufficient guaranteed strategic sealift to support the JRRF could not be assured. Difficulties in the detailed commercial arrangements for the two H&W ships subsequently threatened the timely completion of the PFI negotiations and early delivery of the service. Having sought direction from Ministers, 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 were not affected). The H&W contracts have been managed on MoD's behalf by AWSR. The latter undertook to purchase the ships on delivery at the commercial prices and take them into the PFI arrangements. One ship was purchased in this way in December 2002 and the other in March 2003.

  Award of the PFI contract was planned for Summer 2001 but negotiations were complicated by several factors: 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 2001. The PFI contract was signed on 27 June 2002 for a service until December 2024.


  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. To provide this guaranteed service, AWSR has agreed that the ships will be manned by UK seamen eligible to be called out as Sponsored Reserves.

Alternative Procurement Options

  An Investment Appraisal considered a wide range of options including: do nothing for 20 years, short and long term charter options, and conventional design and construction (with MoD ownership). None of these matched the value for money offered by the PFI approach.

Export Potential

  The issue of export potential does not arise directly in the circumstances of this project.

Industrial Factors

  The requirement has been addressed through competition. It was recognised before the competition that this 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. AWSR's service is based on four ships built by the German Flensburger shipyard and two by H & W.

  The two ships built at H & W are likely to be the last two ships built in the yard in the foreseeable future. H & W has reduced its workforce to around 130 and intends to focus on its high-skill design capability, renewable energy, structural steelwork and ship repair.

Smart Acquisition

  The programme is being managed using a Smart Acquisition approach. Under the PFI arrangements, the service provider is 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; AWSR take risk on finding commercial work for the two ships not required for MoD's routine transport work.

Milestones and Costs

  Following PFI contract let on 27 June 2002, the full service is expected to be available from April 2003, against a target date of January 2005.

  The capital cost of the asset element of the PFI service is around £175 million. The annual service cost to the MoD is related to usage but might amount to £40 million per annum (fuel excluded).

In-Service Support

  Under a PFI arrangement the service provider is responsible for the operation and maintenance of the service and is paid against performance.

"Front Line" Numbers

  All six ships, under the PFI arrangements and with optimum risk transfer, are at the graduated readiness required for JRRF operations.


  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.

Disposal of Equipment Replaced

  As the PFI vessels became available, the charters for the ships providing the "provisional service" expired.

In-Service Life

  The contract covers until December 2024, 20 years from the target date for 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.

Development Potential

  A change procedure will allow, for example, technical upgrades offering value for money to be introduced by agreement.

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