Sobre as Type 26
Britain Struggles With Costs for New Frigates
The Iron Duke, a UK Royal Navy Type 23 frigate, docks in Cape Town, South Africa, on Aug. 20. The Navy plans to replace its Type 23s with Type 26 ships. (Rodger Bosch / Getty Images)
LONDON — Britain’s Defence Ministry will miss the deadline to award a contract to BAE Systems to build the Royal Navy’s new Type 26 frigate, according to sources, who say it could take months before the two sides are in a position to agree to a deal.
Industry executives and others here said affordability and BAE’s ability to control cost are among the key sticking points as the two sides try to lock in a deal ahead of three major events: the May 7 general election, a strategic defense review and a possible new round of defense spending cuts starting in 2016.
Some sources are even suggesting the British might consider looking at the FREMM frigate being built by France and Italy after the First Sea Lord, Adm. Sir George Zambellas, did not rule out a non-British solution to the problem in a Defense News interview published Oct. 27.
Previously, defense ministers here targeted the end of this year for a production investment decision, signaling the start of a planned 13-ship build program to replace the Royal Navy’s fleet of capable, but aging, Type 23 frigates.
Procurement Minister Philip Dunne, though, told reporters during an Oct. 29 briefing that he wouldn’t put a date on the completion of a deal for the first batch of the Type 26s as he didn’t want to damage the department’s negotiating power.
Indications are the MoD might not be in a position to approve the anti-submarine/general purpose frigate program before at least the second quarter of next year.
Some executives here say even that date could be optimistic.
The Defence Equipment & Support (DE&S) organization, the MoD’s procurement agency, recently extended a contract with consultants McKinsey to undertake an independent cost review of the Type 26.
McKinsey was initially engaged in July to support the cost review work and the new £1.9 million (US $3 million) deal provides contract cover from Nov. 3 through the end of April 2015, DE&S confirmed last week.
Asked by Defense News whether a production decision was dependent on the completion of the McKinsey work program, officials said last week: “Cost is one of the areas of risk within the program that we are working through with BAE Systems before we commit to the manufacture decision. The support provided by McKinsey is a valuable contribution to this work.”
The defense equipment approvals process often involves the MoD’s Cost Accounting & Assurances Service, sometimes calling in external support from companies like McKinsey.
BAE avoided responding directly to a question about the likely timing of the manufacturing approval.
In a statement, Britain’s lone remaining major warship builder said: “We are working constructively with the MoD to agree [on] the best way forward. Our focus is on ensuring we deliver the right capability to the Royal Navy and value for money to the UK taxpayer.”
BAE has said it wanted to cut the first metal on the frigate in 2016 at a new £200 million facility it hopes to build at one of its two shipyards on the Clyde in Scotland.
Production of the frigate is likely to run to at least 2030, providing the Royal Navy with the backbone of a surface fleet that includes six Type 45 destroyers and two 65,000-ton aircraft carriers.
Design work is continuing to mature on the frigate. Part of that effort has seen the weight of the warship creep up slightly by 250 tons to 6,500 tons. Full load displacement is now more than 8,000 tons, officials said.
In an interview with Defense News, published Sept. 30, Bernard Gray, the UK chief of defense materiel, hinted that getting to the production contract was taking longer than expected.
“I am of the opinion we will still deliver the [first] ship in 2022; we are just working through it in a methodical, rather tedious way,” he said.
Gray said the two sides were looking at eight areas of risk “all of which we need to get better clarity on prior to making the manufacture investment.”
The DE&S boss listed building facilities, detailed ship design and cost, the strengths or otherwise of the management team, management control and an appropriately negotiated supply chain among the risks being scrutinized.
“As soon as we retire the risk or understand the risk or who should bear the risk, then we can get on with it ,” Gray said.
Another intriguing possibility over the design of the frigates emerged after Zambellas appeared to suggest the solution for the Royal Navy might not even come from the UK.
“The acquisition process looks for a solution .... to be able to give us what we need. The affordability question that comes from that depends on the best that industry can deliver. You’ll notice, I haven’t necessarily said that that’s the British industry, because the decision has not been made as to exactly what that solution to the requirement will be, and we wait to see what comes of it,” Zambellas told Defense News. “But the Navy knows what it wants. It wants a credible platform with global reach and the sort of quality, particularly in anti-submarine warfare to keep us right up there.”
MoD officials dismissed the idea Britain might consider the FREMM design to meet the Type 26 requirements.
“The department remains committed to the Type 26. The program is currently focused on maturing the Type 26 design,” an official said.
An executive Defense News approached last week to discuss the First Sea Lord’s remarks said it was “too sensitive to talk about.”
One member of Parliament said that with a general election on the horizon and the Scottish independence referendum only recently resolved, he thought the prime minister’s office would intervene to bang heads together if the speculation over FREMM interest had any substance.
Peter Roberts, the naval analyst at the Royal United Services Institute, said that with the UK government continuing to place sovereignty at the heart of defense policy, going overseas would be a very difficult option.
“The MoD would place itself in a difficult position as outsourcing the build of surface combatants outside the UK or using a foreign surface combatant design inside the UK would be a significant step change for the Royal Navy and the government,” Roberts said.
One executive said Britain could just be thinking of benchmarking Type 26 against FREMM.
The unit cost target for the Type 26 is unknown. A French Senate report last year said the average unit price of a 6,000-ton FREMM multimission frigate is €605 million (US $754 million), excluding development cost, using 2013 prices.
That is based on a total program cost of €8.75 billion for the 11 French warships, of which nine are anti-submarine warfare and two air defense versions, the report said.
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