Submarine Compex (Hansard, 28 July 1988)

§ Mr. Sainsbury

My predecessor announced on 5 March 1987 the results of the comparison exercise for the refits of two Leander class frigates. A detailed report has now been drawn up to compare the commercial refits of the Oberon

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class submarine HMS Otter at Humber Shiprepairers Limited, and her sister ship HMS Osiris undertaken at Devonport royal dockyard.

Against an allocation of 105 weeks at the outset (including five weeks for sea trials), the submarine Otter was taken in hand on 3 December 1984 and completed on 2 March 1987, a period of 117 weeks inclusive. In effect, this was a delay of only one week since Humber Shiprepairers Limited was granted an 11-week extension to repair the port main engine at the Ministry of Defence's cost and liability. The Osiris refit commenced on 16 December 1985 and was completed on 11 June 1987, a period of just over 90 weeks inclusive. With less work to undertake, Devonport dockyard had contracted, during the refit, to complete in this time scale. Both refits achieved the required quality standards, having been examined by the same acceptance authorities, and both submarines are now operational.

The comparison of costs was again carried out by the Ministry of Defence's principal director of accountancy services, independently of the director general of ship refitting. In order to place the two refits on a comparable basis, the principal director of accountancy services made adjustments for differences in specification work content, condition of the ships, and yard facilities. He also took into account the work subcontracted by Humber Shiprepairers Limited, services provided to Humber Shiprepairers Limited and Devonport by the Ministry of Defence, and inflation between the different refit time scales. The costs were finally adjusted for the differences in the amount of work actually done on the respective submarines, with the result that the dockyard cost was assessed as approximately 30 per cent, more than Humber Shiprepairers Limited for comparable work.

Overall the performance of both yards was commendable in different ways. For HSL to complete Otter's refit to time and quality with no previous warship experience was most creditable, particularly in the light of the disruption to its schedules due to the poor quality of some of the Ministry material supplied to it. On the other hand, Devonport completed Osiris in a time not achieved for 13 years and to a high-quality standard. The report concludes that private ship repairers can compete with the royal dockyards, despite the latter's depth of experience, and recommends that, in view of the cost advantage, suitable ship repair yards should be invited to tender for future Oberon class refits. It describes the problems that arise during refits and suggests how these can be solved. Except as noted below the conclusions and recommendations of compex have been disseminated and are already being used by DGSR in the naval refit programme, the great majority of which is conducted now under commercial disciplines.

The Government are committed to the extension of competition as part of their policy of putting the royal dockyards under commercial management. The recommendation about future Oberon class refits will therefore be taken into account as decisions are made in each case. The recommended introduction of reduced complement refits will need further thought because of the budgetary implications.

Compex proved that the private ship repair sector was capable of conducting both submarine and surface warship refits. It has confirmed the opportunities for tightening our refit procedures across the board to achieve better value for money. It also confirms that we should 576W pursue the goal of greater competition to reap those benefits in the future. The transfer of the royal dockyards to commercial management was wholly consistent with this policy.

I have placed in the Library copies of the executive summary of the report on the submarine refits, and will place copies of the full report there shortly.