May 23, 2019 |
By: Andrew Chuter
LONDON — Senior British defense procurement officials have found themselves on the wrong end of a verbal battering by the parliamentary Defence Committee.
Lawmakers on Tuesday kept up growing opposition to an international competition to build up to three logistics ships instead of favoring a local consortium.
Led by Defence Procurement Minister Stuart Andrew, ministry officials were forced to fend of repeated questions from the committee as to why they had opted for an international competition instead of awarding a contract to a consortium made up of Babcock International, BAE Systems, Cammell Laird and Rolls-Royce, known as Team UK.
The officials cited the requirement to adhere to European Union procurement rules, known as Article 346, as reasoning for their decision to open up bidding to international shipbuilders.
The fleet solid support ships could not be defined as warships and therefore could not be counted under rules allowing warships to be exempt from international bidding requirements, explained MoD officials.
But according to trade unions and lawmakers, thousands of jobs, sovereign capability and wider economic benefits are all at risk if the MoD opts for a foreign bid for the vessels, known locally as fleet solid support ships.
The deputy chief of the Defence Staff, Richard Knighton, warned the committee that stopping the competition, which could be worth up to £1 billion (U.S. $1.3 billion), would mean serious consequences.
“The competition is already running. To throw that away, the risk would be very serious. In fact there is the certainty we would deliver the capability late and there would be a capability gap,” said Knighton, who is responsible for financial and military capability at the MoD.
International shipyards Fincantieri, Navantia , Japan Marine United Corp., and Daewoo Shipbuilding and Marine Engineering were invited in 2018 to bid alongside Team UK for up to three large logistics ships earmarked to provide support for the Royal Navy’s new aircraft carrier fleet.
In recent weeks the list of interested companies shrunk. Andrew said he could confirm Fincantieri’s withdrawal but was unable to comment on reports Daewoo had also pulled the plug on its bid.
An MoD spokesperson declined to say whether Daewoo was in or out of the competition. “The MoD does not comment on speculation," the spokesperson said. “Any decision to withdraw from the competition is a matter for each tenderer.”
The ministry’s Article 346 explanation infuriated some committee members. Mark Francois, a former defense minister, termed the MoD’s position as “patently ludicrous.”
“You are treating this like a game. If you declare this ship a warship under the national shipbuilding strategy, you have to award it to a U.K. yard. But you are worried you will be over a barrel in terms of the pricing, so in order to prevent that you insist it’s not a warship so you can compete it internationally in order bear down on the price you have to pay,” Francois said.
Other members of Parliament said the position was indefensible and pointed to the fact that France and other nations had kept contracts in-house for similar ships.
“Some have chosen to class it as a warship and some have chosen not to class it as a warship, and we are trying to pretend we had to [define it as not a warship]. That seems to stretch credulity," Defence Committee Chair Julian Lewis said.
MoD officials added that by exposing local shipbuilders to international competition, they were trying to make U.K. industry more competitive, and not just for local orders but in the international market, adding that the industry can’t solely rely on domestic work.
What are the ships for?
The logistic ships are part of the Royal Fleet Auxiliary, an organization separate from the Royal Navy that is tasked with supplying warships with ammunition, food, fuel and other stores at sea, including in war zones. The ships are registered as merchant vessels and crewed largely by civilian staff, although they do carry defensive weapons like the Phalanx gun.
Under the Conservative government’s national shipbuilding strategy launched in 2017, the logistics ships were earmarked for international competition. The author of the original report, John Parker, is conducting a review of the strategy, which is due for publication this year.
The budget for the Royal Navy and the Royal Fleet Auxiliary for the coming decade has £60 billion earmarked for building surface ships and nuclear submarines. More than half of that is for renewing the submarine nuclear missile fleet.
BAE’s shipyard in Glasgow is responsible for the construction of the first three of an expected order of eight Type 26 anti-submarine frigates. A competition is underway between three bidders to build five F-31e general-purpose frigates.
Babcock recently closed a small shipyard in Appledore, Devon, after finishing an offshore patrol boat order for the Irish Navy, and there are concerns over the future of the company’s large shipyard at Rosyth, now that the assembly of the second Royal Navy aircraft carrier, HMS Prince of Wales, is nearly complete at the Scottish yard.
The Rosyth shipyard would be the likely venue to assemble the large logistics ships in the event Team UK succeeds with its bid.
The Defence Committee hearing was the latest effort to crank up pressure on the MoD to change its mind over whether international companies can bid on the deal for the logistics ships. Recently, an all-party parliamentary shipbuilding group released a report recommending the government "choose to build new Royal Fleet Auxiliary ships in the UK and thus retain the skills needed for the construction of complex warships.”
Bids for two fleet solid support ships, with an option on a third if the MoD can find the money, are due in late July 2019. The winning contractor would agree to a firm fixed-price design and build deal by July 2020. The first ship is due in service by 2026.
The new defense secretary, Penny Mourdant, has also stepped into the fray, perhaps decisively. In her first speech as defense secretary last week, she signaled that the MoD is reviewing projects such the logistics ship program.
Francois, the former defense minister, claimed Mourdant’s announcement effectively awarded the contract to Team UK, although that was denied by MoD officials.
“The secretary of state did not say that. She was explicitly asked in the questions after the speech whether she could confirm that fleet solid ships order would go to a British shipyard, and she said, ‘No,’ ” the defense procurement minister explained.
Britain has previously purchased logistics ships overseas. Four fleet oilers were recently delivered from South Korean shipbuilder Daewoo. The ships arrived months late, and the fixed-price deal cost the shipyard a pile of money remedying faults with the oilers.
On that occasion there was no British bid for the work, although a domestic shipyard did secure a deal to equip the oilers with sensitive equipment like sensors and weapons.