Type 45 Procurement (Hansard, 2 July 2002)

§ Mr. Ingram

The RAND report on acquisition options for the type 45 destroyer has now been published. A copy has been placed in the Library of the House.

RAND is a very experienced and influential organisation and has been conducting analyses of military shipbuilding, the industrial base, and competition issues for two decades. The Ministry of Defence commissioned RAND last year to carry out an independent study into a range of alternative procurement strategies for our future warship programme over the next 15–20 years, with particular reference to options for type 45 destroyers. This followed receipt of an unsolicited bid from BAES Marine proposing that they should build all 12 ships planned for the class. This differed from the type 45 shipbuilding procurement strategy at that time which envisaged Vosper Thornycroft building one of the first batch of three ships and competing with BAES Marine for later batches.

Initial results from the study were used to help inform the MOD's decision to proceed with a revised procurement strategy for the type 45, in which each of the two shipbuilders, BAES Marine and Vosper Thornycroft. will be allocated modules (or blocks) of the ship to build. The revised strategy was announced by my right hon. Friend the Secretary of State for Defence on 10 July 2001, Official Report, columns 675–85.

RAND's analysis indicated that there would be roughly an even chance that competitive production of the type 45 by two shipbuilders would yield about the same overall cost as sole—source production. Noting that a competitive strategy could lead to one shipbuilder building most of the ships, RAND also investigated alternative strategies to direct work to each of the two shipbuilders to keep both involved in building warships.

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The RAND results also suggested that, for strategies that directed type 45 work to a number of shipyards, allocation of blocks is more cost—effective than the allocation of whole ships, because the work force increases productivity as it gains experience of building the same blocks. Such a strategy will also have the advantage of keeping both shipbuilders in the type 45 programme and potentially available to compete for future warship programmes. In addition, the revised strategy is likely to provide better value for money in the longer term than the unsolicited proposal, if it enables competition to be pursued on other warship programmes.

Following the type 45 decision, RAND continued their study, taking a broader look at the foreseeable balance of demand and supply in the warship building sector, and the potential effects of different procurement approaches. The report does not make specific recommendations concerning procurement strategies for future programmes, although it has helped clarify issues regarding block production (which is likely to be employed for the future carrier). It also provides an indication of the size of work force that will be required to sustain the future programme.

RAND's work has already helped the MOD to arrive at a pragmatic solution for the type 45. The report will also provide a valuable source of information for further study of the warship building sector.