Shipbuilding Strategy
58. Four UK shipyards were identified in January
2003 as being potentially involved in the CVF programmeBAE
Systems Naval Ships at Govan, Vosper Thornycroft at Portsmouth,
Swan Hunter on Tyneside and Babcock BES at Rosyth.[88]
MoD's submission states that 'the extent of their involvement,
and the potential for involvement of other yards will be decided
on the basis of achieving VFM [Value for Money] while taking into
account the capability, capacity and resources of UK industry
to meet the full range of planned naval programmes.[89]
59. MoD's submission states that 'the creation and
integration into the Alliance of the Shipbuild Entity and the
development of the optimum shipbuild strategy is clearly a key
issue for the Alliance and work on this continues'.[90]
Mr Coles told us that the Shipbuild Entity:
was that part of the programme which would bring
together all the people who might be engaged in building the ship,
i.e. the physical construction and the detailed design, to form,
if you like, a piece in the Alliance we would contract with or
negotiate with about how this is best to be done.[91]
60. Mr Coles told us that, in relation to the progress
on developing the optimum shipbuild strategy, 'there are a number
of proposals that the industry and the Alliance have had about
where this ship could be assembled and where it could be done
and how it could be done, but we have not reached a definitive
view on any particular solution.[92]
He stressed that 'it is a long process and no decisions have been
taken.[93]
61. On the issue of where the two carriers will be
built, Mr Coles told us that 'we are going to build two aircraft
carriers in this country
. There is no wish, no need, nor
political will to go overseas'.[94]
In terms of the actual shipyards which would be used, the Minister
told us that:
We are talking with a number of yards about the
various aspects of the shipbuilding
. But we have not signed
contracts with any of them yet, so therefore I cannot say whether
a particular yard is or is not in the deal.[95]
62. When allocating the work on the two carriers
to the UK shipyards, Mr Coles told us that 'when we come to the
time to make decisions about where the work will be contracted
we will doubtless take in performance as one of the criteria'.[96]
63. MoD has yet to reach a view on the optimum
shipbuild strategy for the CVF programme. We note that MoD's plan
is to build the two carriers in the United Kingdom but it has
yet to decide on which shipyards will be involved in the construction
of the two carriers.
64. The CVF programme is of key importance to the
UK's military shipbuilding industry. The Minister told us that:
These ships are so large that they will involve
multiple shipyards to build them. They will also involve multiple
industrial companies who own these shipyards working together
in a way which has never been done before in this country. If
we do this right we have a real opportunity to help the shipbuilding
industry in this country to evolve in a direction which will be
suitable for the long-term needs of this country and be globally
competitive. The importance of getting this interaction between
the Carrier project and our long-term Maritime Industrial Strategy
is key.[97]
If we get this Carrier project right we will
put shipbuilding on a strong footing for the evolution in the
future.[98]
And:
We need to make sure that we find a new way of
getting different yards within the country to work together such
that the resources are pooled to enable more things to be done
at once as we will require, but we also need to see that the yards
make investments to improve the overall standard of efficiency
and skills in the long term, such that at the end of these we
have an industry which is more efficient and more effective than
it is now.[99]
65. The scale of the CVF programmes raises issues
about the UK's naval shipbuilding capacity, both in the short
term and the long term. Delays to Main Gate approval and to the
letting of a Demonstration and Manufacture contract can have serious
implications for UK shipyards, on, for example, investment decisions
and issues concerning training and retention of workers. The Minister
told us that he was 'very mindful that the yards around the country
need to have the earliest possible decision on the carrier project'.[100]
Mr Coles admitted us that 'the issue raised about skill loss and
facilities loss is a real issue and we are alive to it.'.[101]
In relation to short-term capacity, Mr Pryor told us that:
We now have to match a programme of two complex
ships, decide what is the cheapest, best, most easily constructible
design of the ship, how you break it up into small pieces, where
you deliver it to build into a big ship, and we are talking about
trying to do this in facilities that we are going to need in five
years' time or longer.[102]
The team has gone out to industry with request
information to assess the current state of facilities. We went
out to 21 shipyards in this country. 18 responded within the timescale,
two have since gone into administration, leaving us with 16.[103]
66. Scottish Enterprise Glasgow commented that:
procurement delays on the largest naval programme,
CVF, mean that the industry is instead currently facing significant
potential job losses. As a consequence, the potential for naval
shipbuilding projects to act as a catalyst for long term skills
development is looking increasingly problematical.[104]
67. We asked whether the UK would have the capacity
to build the two carriers. Mr Coles replied that 'our current
analysis suggests that we have enough national capacity to manufacture
and assemble these ships with some marginal increase in capacity
in manpower'.[105]
68. In respect of the longer term issues, MoD commissioned
the RAND Corporation to undertake a study of the UK's naval shipbuilding.
The outcome of the study was published in a 2005 report 'The
United Kingdom's Naval Shipbuilding Industrial BaseThe
Next Fifteen Years'. In this report, RAND noted that the impetus
for the study was a concern on the MoD's part that the confluence
of several ship-building programmes could potentially overburden
the industry. Some of MoD's ship programmes have passed Main Gate,
such as Astute-class attack submarines, Bay-class landing ship
dock (LSD(A)) and Type 45 destroyers. Other ship programmes which
are pre-Main Gate are the Future Carrier (CVF), Future Surface
Combatant (FSC), Joint Casualty Treatment Ship (JCTS) and Military
Afloat Reach and Sustainability (MARS). In its report, RAND noted
that 'the period between 2007 and 2013 is much busier for naval
shipbuilding than has been seen recently'.
69. The Minister for Defence Procurement has been
asked by the Secretary of State to deliver a Defence Industrial
Strategy by Christmas 2005.[106]
He told us that 'it has been recognised for some time in the Department
that the lack of a clear Defence Industrial Strategy has dogged
our ability to make decisions on projects within an overall framework'.[107]
The Defence Industrial Strategy would include a Maritime Industrial
Strategy.[108] On the
latter, the Minister is 'demanding gritty conclusions on shipbuilding
and ship support
.'.[109]
70. We welcome MoD's decision to produce a Defence
Industrial Strategy, which will include a Maritime Industrial
Strategy. The CVF programme is vital to the future of the UK's
military shipbuilding industry and its importance will need to
be reflected in the Maritime Industrial Strategy. We plan to examine
the Defence Industrial Strategy in the New Year.
71. We note that MoD considers that there is enough
national capacity to manufacture and assemble the two aircraft
carriers. However, we are concerned that delays to Main Gate approval
and the letting of Demonstration and Manufacture contracts are
impacting upon UK shipyards, jobs are at risk and some potential
contractors have gone into administration.
72. If there are delays to the CVF programme,
there is a risk that the construction of the two carriers will
come at a time when a number of naval shipbuilding programmes
will also be in the Demonstration and Manufacture phase. This
is likely to put pressure on the UK's naval shipbuilding capacity
and could lead to work going overseas. We recommend that MoD identify
ways to manage the potential peaks in demand for naval shipbuilding
programmes over the next ten years or so.
73. We are concerned that, once the busy period
for the UK's naval shipbuilding industry ends in 2013 or so, that
there will be another gap in work for UK naval shipyards. We expect
MoD's Maritime Industrial Strategy to set out how the peaks and
troughs seen in the UK naval shipbuilding industry in the past
will be managed in the future.
Possible French involvement
74. France also has a requirement for a new aircraft
carrier in a similar timescale to the UK. The UK and French defence
industries have been 'tasked jointly by the UK and French National
Armament Directors (NADs) to propose areas for possible co-operation
as a way of reducing costs and risk whilst preserving our respective
national programmes and timelines'.[110]
Industry has confirmed that it is technically feasible for the
basic CVF design 'to be adapted to meet French requirements, with
the French being responsible for some specific adaptations'.[111]
75. Mr Coles told us that 'the French administration
will have to decide whether they wish to pursue that with HMG
or not, and those conversations are obviously going on but are
not yet concluded nor decisions made'.[112]
Some press reports suggested that the French might make a decision
by mid-October 2005.[113]
Mr Coles thought it would be 'a little bit later than that by
couple of months'.[114]
There is a range of possibilities for French involvement in the
CVF programme. We were told that 'the dialogue about how that
would work and if it would work needs to be teased out'.[115]
76. In terms of the potential benefits from French
involvement in the CVF programme, Mr Coles told us that 'there
would have to be genuine savings, i.e. that it did not cost us
any more but it did cost us measurably less'.[116]
Non-recurring costs would offer savings and 'some of the equipments
could be bought jointly as opposed to separately, so for example
buying three of things instead of two of things could give you
some marginal savings, both in the administration and the procurement
costs'.[117] There
was also the potential for savings in whole life support costs.
Mr Coles told us that 'the long-term support of three ships as
compared to two ships is a saving to both nations'.[118]
77. Given that the UK has funded the design of the
future carriers, we asked whether, if France decided to get involved
in the CVF programme, it would contribute to the design costs.
Mr Coles told us that:
I am sure you would wish me to say that if we
have developed something in the UK over a long period of time,
we would expect some contribution towards that if we had entered
into any programme, and I suspect that would be he case.[119]
78. On the other hand, collaborative projects have,
in the past, frequently suffered from time delays. Mr Coles commented
that 'the first thing is that any relationship on any sort of
programme would have to ensure that the UK programme was not disturbed'.[120]
The Minister re-iterated the point: 'it must not negatively impact
the British project'.[121]
CDP also set out the position: 'we will not countenance anything
which will do any damage to the timescale of our programme or
do anything to adversely affect risk and cost as well'.[122]
79. The Minister was aware of the risk regarding
international collaborative projects:
history also tells us that international collaborative
defence projects can go seriously wrong, not always but quite
often and therefore we need to make sure, because of the importance
of this project to the United Kingdom's defence posture, to the
United Kingdom's maritime shipbuilding industry, that any potential
joint working which is done on the French Carrier is done in a
way which is consistent with the needs which we have'.[123]
80. There could be potentially substantial benefits
if France became involved in the CVF programme. These include
the possibility of real cost savings, both procurement and support
cost savings, and closer relations between the British and French
navies. But international collaborative projects have in the past
experienced problems, such as time slippage. If France decides
to become involved in the CVF programme, we expect MoD to ensure
that the UK programme would not suffer delays to the In-Service
Date for the UK carriers.
28 See paras 74-80 below Back
29
The Smart Acquisition cycle covers the following phases: Concept;
Assessment; Demonstration and Manufacture; In-Service; and Disposal.
There are two key approval points - Initial Gate at which parameters
for the Assessment phase are set, and Main Gate, at which performance,
time and cost targets for the Demonstration and Manufacture phase
are set. Back
30
Initially the Assessment Phase was broken down into two stages Back
31
National Audit Office, Major Projects Report 2005 Project Summary
Sheets, HC 595-II, Session 2005-2006, pp 129-130 Back
32
National Audit Office, Major Projects Report 2005 Project Summary
Sheets, HC 595-II, Session 2005-2006, p 130 Back
33
Ev 45 Back
34
Q 102 Back
35
Defence Committee, Sixth Report of Session 2003-04, Defence
Procurement, HC 572-I, para 76 Back
36
Ev 43 Back
37
National Audit Office, Major Projects Report 2005 Project Summary
Sheets, HC 595-II, Session 2005-2006, p 130 Back
38
National Audit Office, Major Projects Report 2005 Project Summary
Sheets, HC 595-I, Session 2005-2006, p 41 Back
39
National Audit Office, Major Projects Report 2005 Project Summary
Sheets, HC 595-I, Session 2005-2006, p 43 Back
40
National Audit Office, Major Projects Report 2005 Project Summary
Sheets, HC 595-I, Session 2005-2006, p 42 Back
41
National Audit Office, Major Projects Report 2005 Project Summary
Sheets, HC 595-II, Session 2005-2006, p 130 Back
42
Defence Committee, Eighth Report of Session 2002-03, Defence
Procurement, HC 694, Ev 69 Back
43
Defence Committee, Fourth Special Report of Session 2002-03, Defence
Procurement: Government's Response to the Committee's Eighth Report
of Session 2002-03, HC 1194, para 27. Back
44
Defence Committee, Fourth Report of Session 2004-05, Future
Capabilities, HC 45-II, Ev 179 Back
45
Qq 84-85 Back
46
Q 146 Back
47
Q 147 Back
48
Four shipyards to share £4bn carriers contract, Sunday Times,
2 October 2005 Back
49
UK Carrier Decision May Come in 2 Parts, Defence News, 14 November
2005 Back
50
Defence Committee, Eighth Report of Session 2002-03, Defence
Procurement, HC 694, para 80 Back
51
Defence Committee, Fourth Report of Session 2004-05, Future
Capabilities, HC 45-II, Q 534 Back
52
Q 86 Back
53
Ev 42 Back
54
Ibid Back
55
Q 104 Back
56
Q 55 Back
57
Ev 46 Back
58
Ibid Back
59
Ev 47 Back
60
Ibid Back
61
Ibid Back
62
Ibid Back
63
Ibid Back
64
Ev 7 Back
65
Defence Committee, Fourth Report of Session 2004-05, Future
Capabilities, HC 45-II, Q 534 Back
66
Q 88 Back
67
Q 89 Back
68
Q 151 Back
69
Sunday Times, 27 November 2005 Back
70
HC Deb, 30 January 2003, col 1026 Back
71
Defence Committee, Eighth Report of Session 2002-03, Defence
Procurement, HC 694, paras 78-79 Back
72
Ibid, p 50, recommendation 13 Back
73
MoD press release, KBR appointed 'Physical Integrator' for Future
Carrier project', 7 February 2005 Back
74
Ev 43 Back
75
Defence Committee, Sixth Report of Session 2003-04, Defence
Procurement, HC 572-II, Q 272 Back
76
Q 183 Back
77
Q 2 Back
78
Q 12 Back
79
Q 1 Back
80
Q 150 Back
81
Q 11 Back
82
Q 12 Back
83
Q 12 Back
84
Q 183 Back
85
Q 185 Back
86
Q 55 Back
87
Q 56 Back
88
Ev 43-44 Back
89
Ev 44 Back
90
Ev 43 Back
91
Q 53 Back
92
Q 58 Back
93
Q 58 Back
94
Q 69 Back
95
Q 195 Back
96
Q 66 Back
97
Q 148 Back
98
Q 150 Back
99
Q 154 Back
100
Q 197 Back
101
Q 72 Back
102
Q 69 Back
103
Ibid Back
104
Ev 50 Back
105
Q 73 Back
106
Q 153 Back
107
Q 152 Back
108
Q 153 Back
109
Speech to the Royal United Services Institute (RUSI), 12 September
2005 Back
110
Ev 44 Back
111
Ibid Back
112
Q 28 Back
113
UK urges France to accept existing carrier design, Jane's Defence
Weekly, 7 September 2005 Back
114
Q 31 Back
115
Q 39 Back
116
Ibid Back
117
Ibid Back
118
Ibid Back
119
Q 33 Back
120
Q 39 Back
121
Q 173 Back
122
Q 175 Back
123
Q 180 Back