Compex Exercise (Hansard, 5 March 1987)

§ Mr. Archie Hamilton

Following an initiative by my right hon. Friend the Member for Henley (Mr. Heseltine) on the scope for competition, and a report by a joint Ministry of Defence/British Shipbuilders working party, COMPEX was set up in 1984 to compare in terms of time in hand, quality and cost the refits in Devonport Dockyard of a Leander class frigate and an Oberon class submarine with those of similar vessels undertaken by private ship repair yards.

The refits of the frigates, HMS Euryalus at Tyne Shiprepair Ltd (TSL) and HMS Arethusa at Devonport dockyard, were completed in 1985 and 1986 respectively.

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A detailed report has now been drawn up. Against an allocation of 41 weeks at the outset, HMS Arethusa's refit was completed in 38 weeks; that for HMS Euryalus took just over 49 weeks. However, the report emphasises that the work required on HMS Euryalus was about 20 per cent. greater than that on HMS Arethusa, and that other delays occurred outside the company's control, particularly on material supplied by the Ministry of Defence. The report concludes that the difference in time-in-hand was insignificant given these circumstances.

Both refits were completed satisfactorily to a high standard. The Commander-in-Chief Fleet reported that it would be difficult to distinguish between them, or between these and other similar frigate refits.

The comparison of costs was carried out by the Ministry of Defence's principal director of accountancy services, independently of the Directorate General of Ship Refitting and the Chief Executive of the Royal Dockyards. In conducting the comparison, PDAS made allowance for differences in specification, work content, condition of ships and yard facilities. He also took into account the work sub-contracted by TSL, services provided to TSL by MOD and the rectification of defective Ministry-supplied materiel. With these adjustments, PDAS assessed that the cost of the Devonport refit of HMS Arethusa was 10 per cent. higher than that of the TSL refit of HMS Euryalus.

In addition to these main aims, COMPEX has afforded an unprecedented opportunity to learn lessons about refits by contract in a number of important areas. These include more accurate planning and specification of refits, working practices and our methods of supervising work done and of materiel control. These valuable lessons apply in varying measures to the Royal Yards, both now and in the future under commercial management, as well as to provide ship repairers. The report contains a number of recommendations, which are now in hand or under consideration.

Although the submarine refits will not be complete until later this year, and until then no final conclusion can be reached, so far COMPEX has shown that, despite the inbuilt advantage of depth of experience in the Royal Dockyards, private ship repairers can compete on level terms. More importantly, it shows the opportunities for tightening our refit procedures across the board to achieve better value for money, and points the way ahead as to how we can responsibly develop the scope for competition, following the introduction of commercial management into the Royal Dockyards.

I have placed in the Library a copy of the report on the frigate refits.