Further Memorandum from the Ministry of
Defence
FUTURE CARRIERS—CVF
The CVF programme remains in its Assessment
Phase, during which work continues to mature the design and our
estimates of the cost of delivering the carriers. The preferred
Physical Integrator (PI) has been selected for the Alliance and
work will now continue apace to develop the optimum build strategy;
the strategy will be essential for informing the main investment
decision, which is anticipated to take place in the latter half
of 2005. Alliancing remains the best strategy for delivering the
carriers and ensures that decisions will be taken on a "best
for project" basis, with the Department retaining the right
to have the final say on major decisions. Inclusion of Kellog
Brown and Root UK Ltd in the Alliance as the preferred PI enables
us to draw on their extensive experience of delivering bespoke,
geographically spread and logistically complex construction projects
as well as of alliances from other sectors including oil and gas
and infrastructure.
PROGRESS ON
CVF PROGRAMME
1. The CVF Assessment Phase was extended
in July 2004 to enable us to carry out further risk reduction
work before we make major commitments to industry. Work continues
to refine the total acquisition costs for the programme on the
basis of maturing design and cost information from industry, with
preparation of estimates for the Demonstration and Manufacture
(D&M) of the vessels carried out an a progressive basis. The
current estimate of most likely (50%) cost for the carriers is
around £3 billion (including combat system but excluding
the aircraft) and remains consistent with that provided in our
2004 Memorandum submitted for the Major Procurement Projects survey.
Cost of Capital charges add around a further £450 million
to the estimate. This remains an estimate at this point: along
with the performance and time parameters, an agreed target cost
will not be set until Main Gate, following the submission of a
mature Business Case. We anticipate that Main Gate approval will
be sought in the latter half of 2005. This is dependent on progress
with the development of the alliance and key aspects of the procurement
strategy.
PROGRESS ON
THE DESIGN
2. The extension of the CVF Assessment Phase
has enabled us to further increase the maturity of the design
for the new carriers as a means of de-risking the project. Design
maturity is now around 60-65%. This needs to be placed in context.
Design maturity represents the development of the design up to
the point at which production drawings can be produced for the
manufacturing phase. Work is currently being taken forward on
maturing the design of critical systems within the platform (for
example waste management systems, heating ventilation and air
conditioning (HVAC) systems and aircraft lifts).
ALLIANCING
3. A core activity for the project over
the coming months will be the development of an optimum shipbuild
strategy. The preferred Physical Integrator (PI)—Kellog
Brown and Root UK Ltd (KBR UK)—will take the lead on this
work, supported by all the Alliance Participants (including the
MoD as client). Proposals will be made on the shipbuilding work
that make the best use of the skills, competences and infrastructure
that already exists within UK shipyards and other manufacturing
facilities.
4. The alliance approach incentivises all
concerned to deliver the most cost effective build strategy throughout
this process. It is in the best interest of the preferred PI,
for example, to develop an optimum solution or otherwise risk
compromising its own share in the risk and reward scheme. All
Alliance Participants will have to agree the ship build strategy
as the best means of delivering the vessels to the cost and schedule
targets and which represents best long-term value for money. The
performance of all parties will ultimately be measured—and
rewarded—on the ability of the Alliance to meet, or exceed,
the agreed targets. This is one of the key strengths of alliances,
where decisions are taken on what is best for the project and
not individual companies.
5. As the Department will be a member of
the Alliance, it will be exposed to and assist in the development
of the build strategy. There should therefore be "no surprises"
when a recommendation is brought forward. In the unlikely event
that the Government should wish to change or alter work allocation
for wider economic reasons, the Department has retained the right
to have the final say on all major decisions. This is consistent
with normal practice in alliancing. It is recognised that in the
event this right is exercised, responsibility for the implications
would rest with the Department.
IN-SERVICE
DATES FOR
THE JOINT
COMBAT AIRCRAFT
(JCA)
6. The JCA ISD noted for planning purposes
in the initial tailored Main Gate, was December 2012. The "tailored"
Main Gate was an interim approval point for the system development
and demonstration phase of the programme. Subsequently the schedule
for introducing this aircraft into service has been extensively
reviewed in the light of the time taken in the United States to
resolve the well-known weight growth problems incurred by the
STOVL variant of the JSF aircraft. Planning assumptions are now
based on a revised ISD of December 2014. A firm decision on the
ISD does not have to be made before the UK purchases significant
numbers of aircraft. Our first planned purchase is December 2008
and by this time, with aircraft design frozen and initial development
flights complete, the JCA programme will have increased maturity
to make informed decisions on In Service dates. The JCA and CVF
programmes are coherent with our intention to introduce the JCA
progressively onto the future carriers. This progressive approach
seeks to de-risk the integration of the various complex elements
of the carrier strike capability.
February 2005
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