SND2 36
Memorandum from Keep Our
Future Afloat Campaign
Part A: Executive Summary
"the need for freedom to operate in an uncertain world,
make the sea a very attractive location from which to project power(1)"
(Defence
Industrial Strategy, Ministry of Defence, December 2005)
i The 'Keep Our Future Afloat Campaign', (KOFAC), is a trade
union-led lobby Campaign' that was
launched in April 2004 in response to a further round of large scale job
losses at the BAE SYSTEMS' owned Barrow shipyard in north west England
associated with completion of HMS BULWARK.
The CSEU, Amicus and GMB are the lead
unions involved. The campaign seeks
further investment by the UK Government in naval shipbuilding in northwest
England and specifically orders for a batch of four more 'Astute' class
submarines, a follow-on 'Vanguard' class submarine class and major surface ship
work for the shipyards , principally Barrow, and supplier base located in north
west England.
ii KOFAC has considered each of the five questions posed by the
Defence Select Committee(2)
in the context of the Defence Industrial Strategy 2005 and offers views in
relation to each of them.
iii The
UK Submarine Industrial Base (SIB) is a unique, small volume business serving
one customer, the Ministry of Defence.
Affordability of the nuclear submarine fleet is a key challenge because
at present "there is no new submarine
programme following on behind Astute, as such Astute is really paying for the
whole of the submarine build industry." (3) British nuclear submarines cost around 40%
less then their American counterparts.
iv The
SIB is fragile. Ministry of Defence, (MoD)
in August 2006 stated, "we are now at a
point where the supply chain is fragile and is costing significant sums to buy
and support equipment that is close to obsolete. This is forcing us to take a fundamental look at the Astute class
with a view to redesigning systems within the boat and the supply chain that
supports those systems to reduce both initial procurement and through life costs. Our relationship with our suppliers is also
a key focus for us. We need to ensure
we've got the right relationships that have reward for performance at their
core. This team is really a pioneer for
joint working(3)." To
assist the Inquiry, we offer findings of a recent, 2003, survey of the supplier
base, and refer to current supply chain work BAE SYSTEMS are undertaking.
v It
is the submarine that carries the existing Trident missile that needs
replacing, not the missile system itself. More Astute class submarines are
needed to replace ageing attack submarines. KOFAC, therefore supports the
replacement of the existing Vanguard class submarine fleet with a new submarine
fleet to carry the existing strategic deterrent. An order to build of a batch of 4 more Astute submarines will
help create a 'level load' of work that can sustain key skills, and
capabilities within the SIB, This will generate greater efficiencies , savings
to the MoD and make the overall submarine programme more affordable.
(1) Page 68, para. B.2.2,Defence Industrial
Strategy, Ministry of Defence, December 2005.
(2) House of Commons Defence Select Committee
inquiry into UK manufacturing and skills base.
Terms of Reference (Source:
Defence Committee press release 21st July 2006)
(3) The nuclear cluster, Rear Admiral Andrew
Matthews, Director, General Nuclear, Defence Logistics Organisation in DLO, the
Nuclear Cluster, August 2006, UK Ministry of Defence
vi KOFAC
believes gaps in submarine production should not be allowed to occur. Conceptual
design work on a Vanguard replacement submarine needs to start in 2007 in order
to avoid a significant workload gap for designers located at Barrow shipyard,
and build on embedded submarine design expertise. This conceptual design of the new boats should be concentrated in
Barrow shipyard rather than elsewhere, because Barrow is the only shipyard that
has experience of designing, building, integrating, testing and commissioning
nuclear powered submarines.
vii A
significant workload gap would arise and costs would increase for the SIB from
a decision not to proceed with a replacement Vanguard class submarine.
viii Since 2003-4, considerable progress is being made in making the
new build of submarines more affordable.
Industry is responding within the terms of the DIS to Government's
expressed desire to see "closer working
between MoD and industry and within the industry". Alliance and/or joint venture arrangements
should be encouraged. Regional
development agencies working with sub-regional partners have a key role to play
in helping the SIB supply chain invest to achieve the MoD affordability
criteria by enabling businesses to make use of existing Government capital grants
and other business support schemes.
ix There
is a need to sustain and grow skills development for the civil and defence
nuclear industry, and to promote the career opportunities systems integration
based naval shipbuilding offers over the next decade to people of all ages. MoD and industry need to set out a long term
view soon so that individuals can be encouraged to take-up apprenticeships,
undergraduate, postgraduate studies and careers in the nuclear sector of the
submarine industrial base. Financial
incentives for individuals may be needed to help achieve this objective.
1. The Keep Our Future Afloat Campaign (KOFAC) and the Defence Industrial Strategy (DIS)
1.1 The trade union led 'Keep Our Future Afloat
Campaign' (KOFAC), launched in April 2004, has the support of the CSEU, Barrow
Borough and Cumbria County Councils, Furness Enterprise and Northwest Regional Development
Agency. In September 2004 the then
Secretary of State for Defence the Rt. Hon. Geoff Hoon MP described the lobby
as "one of the most effective defence
lobbies he had come across." The
Rt. Hon. Alun Michael MP, Minister for Industry and the Regions on 13th
December 2005 indicated "this (KOFAC)
type of approach by management, trade unions and the local authority is very
powerful". (1) On the 27th
September 2006 Lord Drayson, the Ministry of Defence Under-Secretary of State
and Minister for Defence Procurement, said "you
do realize you are effective", adding "no-one
else is doing this type of thing".(2)
1.2 The Keep Our Future Afloat Campaign's aims
are threefold, to:
§ Sustain and grow jobs in
naval shipbuilding in north west England.
§ Secure full utilization
of the unique naval ship and submarine building assets found in the Northwest of
England's naval shipbuilding industrial base - the shipyard at Barrow and a
supply chain of 1,700 companies.
§ Sustain the naval
ship/submarine design capability, which is located in Barrow - 600 designers
comprising 60% of UK total capability.
KOFAC sets
out to influence the policy of Government, its Agencies, leading companies in
the defence industry and trade union policy.
KOFAC sought to influence the Defence Industrial Strategy throughout
2005.
1.3 KOFAC welcomed the Defence Industrial
Strategy (2005),(3) in particular its commitment to the submarine
industrial base contained within paragraphs B2.26 to B2.28 which states "for the foreseeable future the UK will
retain all those capabilities unique to submarines and their nuclear steam
raising plant, to enable their design, development, build, support, operation
and decommissioning". KOFAC notes
that "the Astute programme is really
paying for the submarine build industry"(5) and UK needs "to find a way of making it affordable with
industry", in line with the Defence
Industrial Strategy(5)".
1.4 KOFAC also supports the Government view that "a minimum nuclear deterrent...is likely to
remain a necessary element of our security".(4) KOFAC notes that "introduction
of any new submarine would probably be planned for around 2024".(5)
1.5 KOFAC considers Government
should place orders to sustain the design, build, test and commissioning capability
of the UK submarine industrial base at its current level, in particular
Government should continue to support the significant cost reduction
initiatives being achieved by BAE SYSTEMS at Barrow and MoD "to reduce both initial procurement and
through life costs". (5)
(1)
Meeting with Keep Our Future Afloat
delegation, London, 13/12/05.
(2) Lord Drayson in
visit to Keep Our Future Afloat stand G2 at Labour Party Conference, 27/9/06.
(3)
Defence Industrial Strategy, UK
Ministry of Defence, 2005.
(4) Delivering Security in a Changing World, Cmnd 6041, December
2003, para. 3.11.
(5) The Nuclear Cluster, Defence Logistics Organisation, UK
Ministry of Defence, August 2006
2. The UK Submarine
Industrial Base (SIB)
2.1 The UK submarine industrial base (SIB) is a
unique UK Defence Industry, it is a
small volume business delivering to one customer, the UK Ministry of Defence. There are only orders for three Astute class
submarines, these are currently being assembled at Barrow in Furness. The Major
gap in design and production work between Vanguard class completion and the
start of the "Astute" programme created major challenges for the SIB. KOFAC's understanding of the key
characteristics of the industry(1)(2) are as follows:
i) An estimated total employment in the UK SIB in
the region of 5,000 personnel.
ii) It depends on one
buyer, namely, the UK Government which buys nuclear-powered submarines for the
Royal Navy.
iii) It produces one
product, which cannot be exported, namely, nuclear-powered submarines and has
exited from the conventional submarine market (after the Upholder class). Nuclear-powered
submarines are highly specialised and technically complex weapons systems which
require special skills and facilities for aspects of design and construction. They differ from surface warships in that
they are designed to operate for long periods underwater at great depths, at
speed, and quietly, with a range of weapons whilst providing a safe environment
for the crew living close to a nuclear reactor
iv) There is only one UK
firm with the experience and facilities for designing, building, testing and
commissioning nuclear-powered submarines, namely, BAE SYSTEMS Submarines
Limited based at Barrow-in-Furness (see Appendix A) where 3,310 people are
employed. Barrow is the only UK nuclear
site licensed for the construction, test and commissioning of nuclear powered
submarines. Plymouth has the DML dockyard
available for refit of nuclear powered submarines - 3,800 people are employed
there. It is conceivable that demand for, and cost of, refits will reduce as
"Astute" submarines are introduced into the fleet. Faslane is the operational base.
v) The nuclear requirement
imposes major barriers to new entry, competition, and until recently,
international collaboration (Electric Boat/BAE recently partnered on production
improvements for "Astute"). It also
creates some highly-specialised resource requirements, especially in the
construction (BAE SYSTEMS, Barrow), power plant (Rolls-Royce Marine Power,
Derby) and refitting and refueling stages (Devonport Management Limited) of the
procurement cycle.
(1) The UK Submarine Industrial Base, a report to
Furness Enterprise Limited, Centre for Defence
Economics, University of York (December 2003)
(2) The
Nuclear Cluster, August 2006, DLO, Ministry of Defence, August 2006.
vi) New 'Astute' submarines
are being built with reactors which do not have to be refueled over their
operational lives. Nuclear powered
submarines that precede 'Astute' have to go through periodic 'deep refits'
which include reactor refueling which are costly and account, historically, for
75% of the budget spend "on the overhaul
programme in Devonport where at 12 year intervals, we refuel and upgrade all
the safety systems on submarines. A
typical Vanguard class (HMS Victorious) LOP(R) takes about 160 weeks and costs
£250m(1)."
vii) Much of the cost debate
for naval ships has focused on acquisition cost, a truer metric may be total
life cycle costs. Nuclear submarines
inherently possess low total operating costs due to their minimal manning, they
require no at-sea logistics train, no protective escorts and little support
infrastructure ashore.(2)
viii) The UK SIB supply chain is "now at
a point where the supply chain is fragile and is costing significant sums to
buy and support equipment that is close to obsolete (for existing
submarines). DLO are taking a
fundamental look at the Astute class with a view to redesigning systems within
the boat and the supply chain that supports those systems to reduce initial
procurement and through life costs."(1)
The supply chain is dominated by a few large companies with a
large number of relatively small firms, examples included BAE SYSTEMS
Marine Limited as prime contractor, design authority, ship/submarine builder
and integrator, with its yard at Barrow.
Other submarine specialists include Weir/Strachan & Henshaw as
design authority for weapon handling; Thales Underwater Systems as a prime and
design authority for sonar systems; and Thales Optronics (Barr and Stroud) as
design authority for periscopes.
ix) UK submarine expertise includes world leaders in the supply of
naval electric propulsion; staff trained and specialised in naval ship and
submarine building; weapons handling and discharge, submerged systems ejectors
and countermeasures; the UK's only supplier of high pressure seamless
cylinders; rubber lining for battery compartments; copper based alloy castings
to naval standards; electrical and fibre optic cables; design and manufacture
of propeller thrust bearings; design of autopilot systems; sensors and systems
for vibration monitoring; prime contractor and design authority for
dehumidification systems; low weight,
low fatigue stealthy structures; sonar reflective tiles; design and installation
of chilled water plant; structural design and analysis; waste shredders;
submarine hull penetrations; nuclear radiation shielding; naval shock-rated
switchgear; and hydrodynamics, stealth and signatures. Manufacture and design of many of these components
require skills unique the SIB that it is critical to retain in the UK. These include mechanical engineering,
hydrodynamics and safety simulation staff, research, software, design and
development staff, specialist moulds teams; welding and test engineers; clean
assembly and radioactive teams; tile preparation teams; Fitters and adjusters;
sub hull penetrator assemblers.
(1) The
Nuclear Cluster, August 2006, DLO, Ministry of Defence, August 2006.
(2) Page 16,
Life Cycle Support Maintenance Modernisation in the Contribution of the New
London Naval Submarine Base and Electric Boat to the Economy of Connecticut and
SE Connecticut, The State of Connecticut, 3 May 2005
2.2 A survey we commissioned at the end of
December 2003(1) highlighted some of the challenges facing the UK
SIB. It revealed that a number of
companies were concerned about an insufficient workload to justify future
investment and retention of key skills.
They forsaw reduced opportunity for sales; and a lack of opportunity to
maintain and grow the company's submarine expertise. These concerns could re-emerge if further submarine orders do not
materialize soon.
2.3 The survey also showed that companies would
likely respond to order gaps in a variety of ways, including reducing workload
in the short-term, reallocating resources and downsizing, looking for other
work, seeking other naval work, re-focusing on other non-MoD work. They would consider
moving, re-deployment, redundancy and re-training or mothballing facilities.
2.4 The survey also asked companies for solutions
which UK MoD could offer to help them with the challenges they face. These included:
i) Order Astute submarines 4-6.
ii) Buy British.
iii) Provide
other contracts for maintenance and order additional systems
(e.g. for Trafalgar and Vanguard refits).
iv) Continue to fund
development programmes which maintain capability.
v) Provide information on future MoD
plans.
2.5 On skills, looking ahead over
the next 10 years, 20% of companies anticipated problems in attracting skilled
labour for their submarine business(1). Firms planned a variety of policies to overcome any
skilled labour problems. Their
responses were typical of solutions likely to be used by private enterprise
firms and included:
§ Increase the training of apprentices and graduates and other
bespoke training developments.
§ In-house re-training and 'upskilling' of existing staff.
§ Employ and train to our level.
2.6 The companies felt MoD might help firms with
their skilled labour problems by agreeing a long-term design and build
programme (a number of firms supported this policy), supporting the UK defence
industrial base and supporting UK submarine research and development (R&D)
(1).
2.7 KOFAC considers that many of the points
raised at the end of 2003 are just as relevant today in the context of the need
for new boat orders.
(1) The UK Submarine Industrial Base, a report to
Furness Enterprise Limited, Centre for Defence
Economics, University of York (December 2003)
2.7 In summary, in 2006 key risks to future UK submarine
programmes include:
§ Unexpected failure or
withdrawal of key suppliers.
§ Perceived fragility of
the supply chain due to changes in submarine procurement strategy, e.g. slower
drumbeat.
§ The impact of earlier delays
to boats 1 to 3 of the 'Astute' class.
§ Global market influences.
§ Concerns over
affordability.
2.8 BAE SYSTEMS are continually working with
partners in the supplier chain to identify "supplier sustainability solutions" and
adopt new ways of working that will help MoD with their initiative for "transforming submarine support" (1)
and achieving the affordability identified in the Defence Industrial
Strategy. Detailed studies of the fragility of the supplier base identified
that over 50% of suppliers regard their equipment supply as bespoke for the UK
SIB, over 52% considered any future single boat procurement strategies would
have a negative impact on their business. Other work has categorised equipment
by status to better define that which is critical equipment/materials that would
require extensive development to replace, and that which is critical
equipment/material that could impact boat integration. The introduction of
modularization and new facilities for integration such as the Barrow "Warspite"
facility enable extensive and earlier completion of key parts of the
submarines prior to module insertion on the boats. Some suppliers have set up
facilities in Barrow to help deliver key components in a more
effective way. Seacon Phoenix from USA have partnered two local companies to
assemble, deliver and help install specialist hull penetrators. More recently
BAESYSTEMS "Wavelength" of October
2006 reports, "an industry/MoD "rainbow
team" has exceeded expectations...as part of a design for cost reduction contract..
....the boat 4 combat system team has demonstrated the potential to avoid tens
off millions of pounds of cost". (2)
(1) The Nuclear Cluster, August 2006, DLO,
Ministry of Defence, August 2006.
(2) "Team aids affordable sub drive"
,Wavelength, page 7,BAESYSTEMS , October 2006
3. The
Level of Investment Needed to Sustain Essential Infrastructure and Core Skills
in the UK Submarine Construction Industry
3.1 KOFAC
considers that the level of investment needed to sustain essential
infrastructure and core skills should be as follows:
§ A batch of 4 more Astute submarines to be ordered in a
2007-8 timeframe. The First Sea Lord
has told the House of Commons Defence Select Committee that "We need to keep building Astutes because
once I have got these my worries about accountability will go".
§ A 'drumbeat' sustained at one attack submarine delivered
every 22 months, as at present.
§ A "like for like" replacement for each of the existing
Vanguard class submarines with significant work commencing in 2007 in order to
sustain key design skills.
3.2 Industry should continue investment in cost
reduction and productivity improvements, building upon the achievements made at
Barrow since 2003 , (see Appendix B).
3.3 There needs to be sustained development of core skills, in investment
in the universities, (as we describe in section 7), and in MoD to support the
industry . MoD in August 2006 observed "it
is difficult to find design engineers in the MoD with a deep specialism in
submarines."(1) More new
graduates and young entrants through apprenticeships need to be attracted into
the industry along with fiscal and promotional initiatives to encourage them to
consider a career in the industry. BAE SYSTEMS'
involvement with schools and in education in the Barrow area may be a model to
be replicated by key partners in the SIB.
3.4 The core skills base at Barrow of 3,310
people includes 1,275 management and support staff, 1,302 trades people and 600
designers. Employment has reduced to
the 3,000 mark over recent years such that it has, in many disciplines, fallen
to levels that are critically low. Any
further reductions could result in capability being lost from the SIB. DIS recognizes the fragility of the design
skills base, which account for 600 jobs at Barrow. Fragility also applies in a
number of key production areas. The
Select Committee may wish to seek further evidence on these points from SIB
industry representatives.
3.5 Britain's existing nuclear powered submarine
fleet is modest in size and ageing (see Table 1),(2) the attack
submarine fleet especially so, and it will need replacing in the next few
years. The expected operational life of
an attack submarine is around 30 years.
Submarines produced in the 1980's will reach retirement age and begin to
leave service in 2010. The Vanguard
class submarines incorporate 1980's/1990's technology. Delivery of a replacement for the Vanguard
class into Royal Navy service by 2024(1), when HMS Vanguard will be
31 years old will enable the UK's strategic deterrent to be carried in a 21st
century submarine that is safer, quieter and more efficient operationally than
its predecessor.
(1) The Nuclear Cluster, August 2006, DLO, Ministry
of Defence, August 2006.
(2) Parliamentary
Answer, Hansard, 26th January 2005 and table 1,Royal Navy Submarine
Fleet Ageing and
Justification
for More Boats to Create Fleet of 8 Modern Submarines
3.7 KOFAC understands that design work on the
'first of class' "Astute" submarine is complete. Current design work relates to improving affordability and reducing
costs for boats 2, 3 and 4 of the Astute class. That design work will be largely completed by mid 2007. KOFAC forsees a need, over the next 6
months, to identify new design work in order to ensure critically important
design skills are retained in the UK.
KOFAC welcomed the Government announcement that £20m would be invested
in 2006 and 2007 in the field of nuclear propulsion.(1)
3.8 It is a well known fact in the naval
shipbuilding and submarine building industry that naval architects specializing
in submarine design work can temporarily be transferred to design work or
sophisticated large naval ships.
However, the same cannot be said of naval ship designers. Submarine designers therefore need
continuity of work a point recognized in UK and in USA. Ronald O'Rourke of the
USA's Congressional Research Service said "unless
a major submarine design project is begun the design and engineering base will
begin to atrophy through departure of experienced personnel. Rebuilding a design and engineering base
would be time consuming, adding time and cost to the task of the next submarine
design effort whenever it might begin." The
UK's difficulties, delays and cost over-runs in early design of the Astute
class submarine were a direct result of the UK design and engineering base
having atrophied for lack of work.(2) If order gaps occur,
individuals will leave the industry, and not return, making it then difficult
and costly to resume design work.(3)
(1) House of Commons
Defence Select Committee - Ninth Report of Session 2005-6, The Future of the
UK's
Strategic Nuclear Deterrent: The
Strategic Context - Government Response to the Committee's 8th
Report
of Session 2005-2006, House of Commons 1558.
(2) USA Submarine Industrial Base Council 2006 'World's Premier
Submarine Design Capability Leaflet'.
(3) Defence
Industrial Strategy 2005 and 'Reducing Strains on the Labour Resource available
for Warship
Building in the UK, Furness Enterprise, July 2003.
4. The Potential Consequences of a Gap in the
Submarine Building Programme for Long Term Viability of the Domestic Manufacturing
and Skills Base
4.1 KOFAC recommends that a start on conceptual
design of the Vanguard class replacement submarine should start early in 2007
to avoid any risk that skills atrophy from the industrial base's design
capability at Barrow.
4.2 DIS
(page 74) highlighted the fact that "UK
military shipbuilding requires a highly skilled workforce can be confident in an enduring and stable
career path". It also observed (page
74) that "when shipyards lay off workers,
70% of them leave the industry for good and are unavailable for hire by their
former employer".(1)
4.3 KOFAC
endorses the view expressed by Rand to UK MoD that "starting new submarine programmes after gaps in submarine production at
Barrow will incur substantial costs and risks". (2)
4.4 Rand
pointed out that if there is no follow-on to the Vanguard class production of
the remaining Astute-class boats may have to be stretched (i.e. built at a
slower drumbeat), and the start of any successor attack submarine programme
accelerated. Rand went on to say "smoothing out the demand on submarine
production resources would allow the industrial base to operate at peak
efficiency and could reduce production costs by 5 to 10 per cent per boat,
thereby contributing to affordability",(2) a view KOFAC
supports.
4.5 To ensure that the United Kingdom's nuclear
submarine industrial base is sustained and operates efficiently KOFAC believe
that MoD need to:
§ Decide as
soon as possible whether there will be a next generation SSBN class and when it
will be designed and built. This decision is
needed to inform any further actions to sustain the design base and schedule
remaining Astute production to maximise efficiency. If the Vanguard class is not to be replaced, then planning should
begin for an early follow-on SSN class if the submarine design base is to be
sustained.
§ Plan on
annual investments to sustain a core of submarine specific design resources. A core of 600 designers, engineers, and
draughtsmen would require annual funding to permit the core to participate in
meaningful work such as 'spiral development' of Astute class and continuous
conceptual design development of future classes of submarine.
§ Explore
whether collaboration between BAE SYSTEMS' Barrow-in-Furness shipyard and the
contractors employing engineers and draughting teams for in-service support is
advantageous.
§ Decide on
the timing of construction for the next Astute-class contract. Currently the
drumbeat is at 22 months. KOFAC
considers this contract should be a multi-ship contract for four boats rather
than one boat in order to give forward visibility of orders, encourage investment by
the supply chain in facilities and training.
(1) Reducing the strains in the labour force available for
warship building in the UK, Furness Enterprise,
July 2003, and Defence Industrial Strategy, UK Ministry of
Defence, December 2005,
(2) The UK's Nuclear Submarine Industrial Base, Volume 1, Sustaining
Design and Production
Resources, Rand UK, 200
5. The Implications of the Rationalization of
the UK Shipbuilding Industry for the Construction, Maintenance and Affordability
of a Possible Successor to the Vanguard Class Submarine
5.1 The DIS(1)
proposed negotiation with key companies in the submarine supply chain to form a
single industrial entity (DIS para. 2.73).
Since the DIS was published
Ministers have announced (Hansard, 25th July 2006, Column 1544W)
that, "given the number of industrial
players in the submarine domain, consolidation to one entity may not be
possible, other solutions such as an alliance or joint venture are being
examined. MoD is considering a number
of possible options with industry....negotiation is underway."
KOFAC welcomes this
latest policy statement, and supports the idea of an alliance or joint venture
as a way forward.
5.2 KOFAC considers
this approach will help achieve DIS objective for MoD and industry to "demonstrate an ability to drive down and control costs of nuclear submarine
programmes" (DIS para. B2.63). Key partners should, under the new
arrangements "play to their strengths"
rather than seek to compete for work or offer new designs, not based on proven
technology.
5.3 Co-operation is
already underway between MoD, Rolls Royce, BAE SYSTEMS and DML on certain
aspects of the submarine programme, as outlined in paragraph 2.8. Considerable progress has been made in making
the submarine industry more affordable and sustainable. Examples include:
§ Current design work at Barrow
introducing spiral or incremental developments that help reduce costs and
include commercial off-the-shelf technologies where appropriate in boats 2, 3 and
4 of the 'Astute' class.
§ Use of reactors that do not need refueling
through a submarine's life, which will help save substantial sums of the MoD
budget currently spent on refit work (see para. 2.1 , earlier).
§ Continuing annual cost base
reduction/cost base challenge initiatives designed to address duplication/affordability
and operational improvements which lead to reduced costs as outlined in
Appendix B.
5.4
KOFAC urges MoD to concentrate lead
design work on future Astute follow on boats and Vanguard class replacement
submarines at Barrow in order to take advantage of the embedded expertise in
actual design, build, test and commissioning, a capability that is not
available anywhere else, in any other company, in the UK.
(1) The UK Submarine Industrial Base, a report to
Furness Enterprise Limited, Centre for Defence
Economics, University of York (December 2003)
(2) The
Nuclear Cluster, August 2006, DLO, Ministry of Defence, August 2006.
6. The Linkage Between
the Government's Defence Industrial Strategy and the Decision on Retention, Replacement
or Abolition of the UK's Trident System.
6.1 DIS (2005) "endorsed, but has not yet committed funding for a 24-month SSN
drumbeat," (paragraph. B2.56) recognized "in the short term key design effort is focused on improving the whole
life costs in the Astute design, in areas that have direct benefit to
subsequent classes" (para. B2.62), such as a Vanguard class replacement
boat, and ensures "options for successor
to the Vanguard class...are kept open" (paragraph. B2.63).
6.2 A
decision to retain and replace the UK's Trident submarine is seen by KOFAC as
essential, in order to maintain the effectiveness of the Trident missile
deterrent which we understand has a long life span. It is also essential in order to sustain the SIB workforce and
critically important skills.
6.3 Rand have advised MoD "if the UK wishes to retain a submarine based strategic nuclear
deterrent, design of a follow-on SSBN class would have to begin immediately".(1)
6.4 Abolition of the UK's Trident system would
create a significant workload gap for submarine design and production skills. Rand informed MoD that "alternative work, such as conceptual design, spiral design, and
unmanned undersea vehicle design could not by themselves adequately sustain a
submarine design core ,(1) ,adding,)"If there is no
follow-on to the Vanguard class, Astute class boats may have to be built to a
slower drumbeat and the start of a follow-on submarine accelerated ..".
6.5 KOFAC considers gaps in submarine production
are not something that should be favoured because they would result in:
§ Loss
of embedded expertise from the industry.
§ Lower
productivity.
§ Difficulty
in maintaining certification of key production personnel.
6.6 Level loading of the future submarine
programme is essential as part of the DIS's 'Comprehensive Long Term MoD
Shipbuilding strategy to make more efficient use of shipyard facilities and
workforce skills. KOFAC therefore
endorses Rand's view that,
"To sustain and make most efficient use of the submarine
production base, an 18-month (or, at most, 24-month) drumbeat should be
employed, with no additional break between the third and fourth boats of the
class (i.e. the last boat under the current contract and the first under the
next)".
(1) Rand indicated a Vanguard class submarine needs 50% more
labour hours than Astute and envisaged a
36-month drumbeat for the delivery of the new boats.
(2) The UK's Nuclear
Submarine Industrial Base, Sustaining Design & Production Resources, Vol.
1, Rand 2005
7. The Extent to which Nuclear Expertise in
the Civil Nuclear Industry and Higher Education Sector underpins the UK Knowledge
and Skills base in the Military Nuclear Field.
7.1 Only around 7,000 people are employed in the nuclear defence sector,
although there are around 56,000 people employed in the UK civil and defence nuclear
sector as a whole. (1) The number employed on nuclear propulsion is quite
small. Skills shortages are emerging in
safety case/radiological protection and in MoD where
on the design authority side (in August 2006) they are "over 15% undermanned", because "it
is difficult to find engineers with a deep specialism in submarines." (2)
7.2 Unless action is taken nuclear education will not be robust or flexible
enough to support the industry and its growth. Only 22 of the UK's 130 universities include a nuclear element to
their courses, and nuclear education in the UK has recently been described as
being "in a very fragile state", with
"those" (students) "experiencing nuclear
education constitute a woefully small percentage".(1) Unless action is taken nuclear
education will not be robust or flexible enough to support the civil or defence
segments of the industry and its growth, particularly if UK proceeds to build
new electricity generating capacity. At
undergraduate level only taster courses are offered. This reflects the 'low demand' for specialist university training
and lack of nuclear related job opportunities in the UK in recent years. The 13 universities offering post-graduate
studies cater for 320 students per year, however, only 72 are on 100% nuclear
courses. At undergraduate level around
360 students take courses with more than a 5% nuclear content. The Royal Navy deliver 11 courses a year,
training around 500 students. HMS
Sultan (the Royal Navy college), universities of Birmingham, Surrey, and in the
north west of England Lancaster, Liverpool and Manchester, are some of the core
universities offering postgraduate 'nuclear' studies.
7.3 The future supply of
graduates for the civil and defence nuclear industry is likely to be drawn from
mechanical, electrical, electronics, chemical, civil, physics and chemistry
degree courses. In 2001, there was a
supply of 13,250 students taking these courses.
7.4 The challenges therefore
facing the civil and defence nuclear industry as a whole are to:
§ Promote the profile of the
nuclear sector to young people by increasing the apprentice intake and attracting
them into the sector from the pool of engineering and physics university students
at a time when such subjects are less popular.
§ Underpin essential learning
pathways to develop the skills needs of the civil and defence nuclear industry
and Support the educational institutions, especially those in the north west in
delivering graduates.
§ Reduce indecision about future
investment in new civil nuclear industry and in the nuclear submarine industry.
§ Address the problem of pay
which is often a 'lure to leave'.
§ Address competition for
control and instrumentation engineering skills and safety case writing skills
and competition for numerate graduates from insurance and financial services
companies.
(1) COGENT,
November 2003, Nuclear Industry Appendix to market assessment for the Sector
Skills Council for
the
chemical, nuclear, oil and gas, petroleum and polymer industries and HSE/N11,
Feb. 2002, 'Nuclear
Education
in British Universities..
(2) The Nuclear
Cluster, DLO-MoD, August 2005
8. The Economic Characteristics of
Barrow-in-Furness.
8.1 Barrow-in-Furness is the home of the UK's
nuclear submarine systems integration facility, it employs 3,310 people
directly and accounts for 9.7% of the 34,181 person workforce in the Travel to
Work Area. The Barrow 'Travel
to Work Area' contains a population of 97,000 people. The main town is Barrow-in-Furness (population 72,000). The
labour market is one of the most defence dependant, and isolated in the
UK. The next nearest towns are 47 and
34 miles away. The Northwest Regional Economic
Strategy identifies Barrow as being the one area where there is a concentration
of worklessness remote from the engines of growth (city regions) in the
northwest. Barrow is ranked 29th
most deprived District Council area in England.(1) Employment at Barrow shipyard fell from
14,250 in 1990 to 5,800 in 1995, and to below 3,000 in June 2004. It now stands at 3,200, and constitutes the
largest manufacturing employer in the Travel to Work Area. The next largest is GlaxoSmithKline with 570
employees. The real level of
unemployment in Furness is high, with Sheffield Hallam University citing the
rate as being 18.6%.
Job vacancies levels are low - the current figure being 305 (July 2006).
New job creation rates in Furness average 533
jobs per year, in 2005, 507.5 jobs were created through the work of the Furness
Enterprise Partnership.(2)
8.2 Barrow is one of
England's most "business deprived districts" and the most deprived in north
west England. It has acute levels of
worklessness, 60% higher than the England average.(3)
8.3 BAE SYSTEMS contributes significantly to the
Barrow and Furness economy. The total
annual wage bill is around £77 million. Average managerial wage is £45,000. Average skilled tradesperson wage is £20,000. The workforce is relatively young, but
experienced, 76% (2,387) of employees being under the age of 45. The multiplier effect of the shipyard is
high, and it is one of the largest contributors to Cumbria's Gross Value Added
(GVA).
8.4 Given that
'Astute' class submarine design work is largely completed, any decisions to delay
further 'Astute' class boat orders or to abandon a Vanguard class replacement
submarine or delay it by several years could put at risk a significant number
of well paid jobs in design, administration and skilled trades which would be
difficult to replace in a relatively short period of time. It is highly likely any replacement jobs
would be on a lower salary in another sector.
8.5 KOFAC considers that the
economic 'wellbeing' of the Furness area still depends to a large extent on
sustaining the nuclear submarine building industry in the Barrow shipyard. In 2003 PA Management Consultants concluded "our research has shown that the value of
one additional ('submarine') boat, employing 2,000-3,000 people for 18-24
months is worth more to Barrow than any combination of diversification possibilities".(4)
8.7 KOFAC therefore advocates MoD
should smooth out demand on submarine production resources to enable the
industrial base to operate at peak efficiency, i.e. a drumbeat of 18-22 months
for Astute submarines and a 36 month drumbeat for Vanguard replacement boats.
(1) The English Indices of Deprivation 2004 (revised), Office of the Deputy
Prime Minister
(2) Assisting Companies to Create
Jobs 1992-2005, Furness Enterprise, March 2006
(3) City Markets - business location in deprived
areas, IPPR Centre for Cities 2006
(4) PA Management
Consultants Barrow Shipyard Study for the Barrow Task Force, 12 September 2003
APPENDIX A
BARROW'S
COMPETITIVE EDGE AS A SUBMARINE CENTRE OF EXCELLENCE(1)
A.1 Barrow's competitive edge can be
considered in terms of the strengths and weaknesses associated with the
shipyard and its specific skill base.
A.2 Barrow's strengths as a
Submarine Centre of Excellence are:
§ Senior management personal
commitment to the Astute programme in the long-term by relocating into the
local area.
§ Senior level visibility of, and
buy-in to, Submarine Centre of Excellence concept with BAE SYSTEMS.
§ Committed management ream vertically
integrated up to Prime Contract Office.
§ Clarity of strategy, market, role,
focus associated with Centre of Excellence role.
§ Potential Astute workload of 6-9
boats, with the last production possibly extending through to 2020.
§ Unique and strong submarine
capability: people; processes;
facilities.
§ Value for money: it is believed by BAE SYSTEMS that Astute
will deliver 2/3 of a US boat capability at 40% of the cost.
A.3 In addition to their proven strengths in
overall submarine and surface ship design and build, Barrow has particular
capabilities and skills that are not readily available elsewhere in the UK. These include in particular:
§ Design of a highly complex, high
tech product:
Ø Systems Engineering
Ø Nuclear
Ø Noise and vibration
Ø Modular design
Ø Large, complex fabrications and
structures
Ø Complex spatial layouts and routings
Ø Advanced propulsion systems
Ø Combat systems
§ Production:
Ø Large, complex metal forming,
fabrication and assembly
Ø High integrity (nuclear) pipe work
Ø Military and commercial outfitting
Ø Complex test and commissioning
§ Design and physical integration of
highly complex, 'through boat/ship' systems and Availability of the SMITE
facility
§ Complex programme management
(1) PA
Management Consultants 2003, Barrow Shipyard Study for the Barrow Task Force, 12th September
2003
APPENDIX B
PRODUCTIVITY IMPROVEMENTS 2006 at BAE SYSTEMS, BARROW
Cost Base Reduction /
Cost Base Challenge 2006
Duplication /
Affordability / Operational Improvements aim to reduce overhead and direct man
hours:
Overhead further
reduce the overheads before the end of 2006.
Direct costs a reduction in the remaining costs to go
in terms of man- hours and materials.
Lean Manufacture
Across whole production
process using' Value Stream Mapping'. New
layouts and key manufacturing principles are being deployed to reduce material
and people movement, to shorten lead times and produce the product more
efficiently. Enhanced quality inspection methods are being developed to
increase efficiency by creation of a portable inspection system that
allows QC inspectors to input direct to their database whilst on the boat
rather than a paper then PC based system in use at the moment
Lean Design
Design for cost -
initially looking at part count and labour reduction. Pilot
workshops have shown that low innovation ideas could reduce the cost of
certain equipment by a significant
amount not including the ripple effect created by removing the need to
purchase, store, install, test and commission items on the boat. It has become
clear that potential major savings could be achieved if certain
requirements can be successfully challenged and modified.
Lean Office
Pilot project in staff
areas using 'value stream mapping'. The project is being used to increase efficiency in staff
areas and to develop a staff process improvement methodology for expansion into
other areas.
Organisational
Development
The behavioral change
program started in mid 2004 continues to embed real change. The project
continues to align processes and systems with a set of Submarines values and
competencies. Projects include continued development of organisation
strategy and objective deployment, supported by the all employee bonus and hard
wired changes to the PDR process. We also see the maturity of an
innovative employee involvement scheme 'PRIDE' which will be the core driver
for continuous improvement and engagement in Submarines, the development of a
strategic leadership development programme as well as a continuation of the
Trade Union partnership work.
Appendix C
Rand Observations on
the Nuclear Submarine Design Skills Base
"Gaps
in design and production can lead to the departure of experience personnel to
other industries and to the erosion of defence system production skills."
"The
submarine design base is rapidly eroding.
Demand for the design and engineering resources is declining as the
design of the first of class nears completion.
The number required will be fewer than that needed to sustain a viable
nuclear submarine design base."
"To
sustain the United Kingdom's nuclear submarine design expertise, some minimum
core of professionals must continuously work in that area. The number requires varies with the domain
of expertise. The total number required
across all domains is approximately 200.
The workforce could drop below this critical level in the near future without
a new design programme."
There
are options for sustaining the 200-person submarine design core, the ideal way
would be to soon commence the design effort for a new class of submarines. No decision have been made regarding any
programmes beyond the Astute class. The
current Vanguard SSBN class could begin retiring as early as 2018. Design of a follow-on SSBN class would have
to start approximately 15 years prior to the desired in-service date for the
replacement submarines. The design for
a follow-on class would have to begin immediately. The Astute-class design would have to begin some 10 years in
advance of delivery of the first of class."
"There
may still be a period of time when the design core is inadequate in at least
some of the specialties required to sustain expertise. How might the design core be sustained
through periods of slack demand? There
are several possibilities:
§ Evolution of the Astute design as more boats are
built to take advantage of new technologies.
§ Continuous work on conceptual designs for new
submarine classes, whether or not those classes are ever built.
§ Design of unmanned undersea vehicles."
"These
options could be exercised simultaneously.
However, taken together, they could not by themselves adequately sustain
a submarine design core."
"Collaboration
with the United States or another submarine-producing country should also be
considered. Design work on each
country's submarine programmes could help sustain the other's design core."
"A
core of 200 designers, engineers, and draughtsmen would require annual funding
of perhaps £15 million."
Source: Rand Europe 2005, Volume 1 of The UK's
Nuclear Submarine Industrial Base: Sustaining Design and Production Resources.
TABLE
1
ROYAL
NAVY SUBMARINE FLEET AGEING AND JUSTIFICATION FOR MORE BOATS TO CREATE FLEET OF
8 MODERN SUBMARINES
(based on Parliamentary Answer
of 26 January 2005 and Keep Our Future
Afloat Research*)
Mr.
Ingram: The Royal Navy has four Vanguard class (SSBN)
and 11 Swiftsure and Trafalgar class (SSN) submarines in service. Based on their in service dates the age of
each boat in 2005 is as follows:
Submarine
|
Age
in
Years
2005
|
Age
in
Years
2009*
|
Age in Years
2011*
|
Age in Years
2013*
|
Age in Years
2015*
|
Age in Years
2017*
|
Age in Years
2019*
|
Expected
Ship Payoff
Date - Source:
Hansard
7 Jan 2004
Col 414 W
|
Design life
Assumptions
For SSN and
SSBN Submarines
with source
|
SSBNs
|
|
|
|
|
|
|
|
|
|
HMS Vanguard
|
12
|
16
|
18
|
20
|
22
|
24
|
26
|
|
30
|
HMS Victorious
|
10
|
14
|
16
|
18
|
20
|
22
|
24
|
|
30
|
HMS Vigilant
|
9
|
13
|
15
|
17
|
19
|
21
|
23
|
|
30
|
HMS Vengeance
|
6
|
10
|
12
|
14
|
16
|
18
|
20
|
|
30
|
SSNs
|
|
|
|
|
|
|
|
|
|
HMS Sovereign
|
31
|
35
|
37
|
39
|
41
|
43
|
45
|
2006
|
32 :Hansard
|
HMS Superb
|
29
|
34
|
36
|
38
|
40
|
42
|
44
|
2008
|
32 : Hansard
|
HMS Sceptre
|
27
|
31
|
33
|
35
|
37
|
39
|
41
|
2010
|
32: Hansard
|
HMS Spartan
|
26
|
30
|
32
|
34
|
36
|
38
|
40
|
2006
|
27: Hansard
|
HMS Trafalgar
|
22
|
26
|
28
|
30
|
32
|
34
|
36
|
|
33 US Navy CRS-26***
|
HMS Turbulent
|
21
|
25
|
27
|
29
|
31
|
33
|
35
|
|
30-33
|
HMS Tireless
|
20
|
24
|
26
|
28
|
30
|
32
|
34
|
|
30-33
|
HMS Torbay
|
18
|
22
|
24
|
26
|
28
|
30
|
32
|
|
30-33
|
HMS Trenchant
|
16
|
20
|
22
|
24
|
26
|
28
|
30
|
|
30-33
|
HMS Talent
|
15
|
19
|
21
|
23
|
25
|
27
|
29
|
|
30-33
|
HMS Triumph
|
14
|
18
|
20
|
22
|
24
|
26
|
28
|
|
30-33
|
ASTUTE SSNs
|
|
|
|
|
|
|
|
|
|
HMS
Astute**
|
0
|
1
|
3
|
5
|
7
|
9
|
11
|
|
|
HMS
Ambush**
|
0
|
0
|
1
|
3
|
5
|
7
|
9
|
|
|
HMS
Artful**
|
0
|
0
|
0
|
1
|
3
|
5
|
7
|
|
|
Boat
4**
|
0
|
0
|
0
|
0
|
1
|
3
|
5
|
|
|
Follow
on boats 5
|
0
|
0
|
0
|
0
|
0
|
1
|
3
|
|
|
Notes:
Government in 2004 announced they
would sustain a fleet of 8 rather than 10 SSN submarines, originally
proposed in the Strategic Defence Review.
The UK Government have said any
decision on replacing Vanguard class would need to be made in the next
Parliament,(2005-2009).
**assumption made a new boat is
delivered into service every 24 months.
***USA Congressional Research Service Report:CRS-26 , 8 Nov 2004,"Navy attack submarine force level goal and
procurement rate :background and issues for congress".
5
October 2006