Procurement Process III (25 July 2007 onwards) -
Current Situation

On 25 July 2007, Defence Secretary Des Browne told the House of Commons: "We can confirm that we will now place orders for two 65,000 tonne aircraft carriers – the largest ships ever sailed by the Royal Navy. The carriers represent a step change in our capability, enabling us to deliver increased strategic effect and influence around the world at a time and place of our choosing."

He said that the first carrier, HMS Queen Elizabeth was expected to enter service in 2014. and the second, HMS Prince of Wales in 2016. The UK would continue to co-operate with France on the project, and further announcements about this would be made in next few months. The order would be placed with the Aircraft Carrier Alliance and would cost around £3.9 billion [the maximum agreed several months earlier], although the alliance and MOD had agreed to work together to reduce this figure before a final price is settled in 2009.

MOD statements made within hours said that the approvals and contracts for the Demonstration Phase continue through to October 2007 but the move to manufacture – the final 'Main Gate' through which the project must pass – had now been agreed.  KBR, having completed their main contribution to the work, would not be part of the Alliance for the Manufacture Phase.  The BAE Systems/VT Joint Venture, on formation, would be a member of the Alliance Management Board for manufacture as would BAE Systems (representing Barrow and INSYTE), Babcocks, Thales and, of course, MOD as both client and Alliance participant.

The MOD also said "The project has undergone independent assurance to assess the current status of the project.  The 2006 'Red Team' review, led by Sir John Parker, concluded that the project was progressing well and at a more mature stage of development than previous major naval projects prior to contract. The review also highlighted industrial restructuring, as envisaged under MOD's Maritime Industrial Strategy, as a further opportunity to remove costs and reduce risk. Linked into the Review was an Independent Financial Review (led by Deloitte, teamed with Jacobs and Rand) which assessed the robustness of the costs and created a 'should cost' estimate. This, too, was broadly positive of the project's current status. The Office of Government Commerce Gateway 3 Report concluded that the project was well placed to proceed to manufacture phase. "

The MOD also stated that during 2006 an alternative build strategy was agreed with the aim of creating more time within the assembly programme. The previously announced allocation of the modular 'super blocks' to the Alliance shipyards remains (hull lower block 4 at BAES Govan; 3 at BAES Barrow; 2 at VT Group Portsmouth, and the bow (lower block 1) at Babcock Rosyth, where assembly will take place) but the assembly sequence will be reversed with the stern (block 4) entering the dock first.  Babcock will now undertake the upper blocks above block 4 and the size of the upper blocks would also be reduced (by building 'super blocks' higher) removing the need for investment in a 'Goliath' crane at Rosyth.  Substantial elements of the ship structure would be competed and competition within the 'super blocks', sub-contract would be maximised, pushing overall competition to around 60%.

On 11 December 2007 the MOD confirmed that CVF related long lead contracts worth £28 million had been recently placed, these covered:

• Eight diesel engines and electricity generators - four for each ship - at a cost of about £18.5 million. The contract for the diesel generators had been awarded to Wartsila Defence SAS, based in Nantes France, with the engines to be manufactured in Trieste, Italy.  The alternators, which transform the diesel's power into electricity, are to be built at Converteam, in Rugby, Warwickshire.
• A contract worth in excess of £1 million for the detailed design of an integrated navigation and bridge system had been awarded to Northrop Grumman Sperry Marine, with the work to be carried out at New Malden in Surrey.
•  A contract for the Flying Control Rooms (Flyco) for the carriers had been awarded to Tex Special projects of Ipswich, Suffolk at a cost of circa £1 million; and
• A contract for visual landing aids to guide fighters and helicopters on to the deck had been awarded to Aeronautical and General Instruments Ltd of Poole, Dorset at a cost of about £7.5 million.

Press reports in early January 2008 claimed that the MOD was seriously considering delaying the CVF programme by up to two years in order to ease its current funding crisis, and was discussing this option with the Aircraft Carrier Alliance.  On the 14 January the MOD effectively confirmed this: "The Carrier programme continues to go ahead. Periodically, as part of the planning process, we consider a wide range of ideas on how we might reallocate funds. Many of these are not taken beyond initial consideration."  Shipyards had been expected to cut first steel on HMS Queen Elizabeth in late 2008, this would presumably slip to 2009 or even 2010 under these "ideas", with her in-service date similarly slipping from 2014 to 2015 or 2016.  A few days later this website was informed that first steel was expected to be cut in late January 2009 - if a contractual commitment was made by the MOD in February 2008.

In early February 2008 Prime Minister Gordon Brown said that the Carriers would definitely be built but failed to give any timescales.  MOD hinted that progress on CVF contracts depended upon the planned  VT/BAE Joint Venture - which would build much of the carriers - being established, while BAE Systems and VT Group in turn hinted that the Joint Venture would only be established when the MOD had firmly committed to a time scale for the construction carriers as part of 15-year "Terms of Business" arrangement.

On 11 February 2008 Babcock Engineering Services signed a £35 million contract with Edmund Nuttall Limited to modify No. 1 dock at Rosyth in order to accommodate the building of the carriers and widen its direct entrance.

On 4 March 2008 the MoD announced contracts worth over £70 million had been placed for CVF:

• The supply of over 80,000 tonnes of steel from Corus for manufacture of the two ships to an estimated value of £65 million;
•  The supply of Blown Fibre Optic Cable Plant (BFOCP) technology from Brand-Rex Limited for the installation of optical cables for data transfer within the ships at a cost in excess of £3 million;
•  Reverse osmosis equipment from Salt Separation Services for production of fresh water onboard the ships at an initial contract value in excess of £1 million; and
•  Aviation fuel systems equipment from Fluid Transfer International to allow the fuelling and de-fuelling of embarked aircraft at a contract value of approximately £4 million.

The steel order was something of a surprise as the French had previously suggested that there would be joint purchase sufficient for their POA2 as well, the larger buy enabling a better price to be achieved.

Throughout March British newspapers continued to speculate that the MOD wanted to delay progressing the CVF project by one to two years due to funding problems, and that only the governments reluctance to deal with the resulting political fallout was avoiding a final decision being made.  VT Group and BAE Systems told the government that the agreement to merge their shipyards in a joint venture was now seriously under threat from the delay in completing contracts for the carriers, a BAE statement said that it "remains committed to merging its shipbuilding business with that of VT Group ...dependent on the announcement if the new carrier contract by the UK government" while a VT spokesman said "we hope the carrier and joint venture issues can be resolved as soon as possible".  Reports also stated that the armed services had been told by the Treasury to find savings of £1.5 billion in a year in the equipment programme - and directed by Prime Minister Gordon Brown to do this without the embarrassment of cancelling any major projects.  The Chiefs of Staff exercised their right to see the Prime Minister to personally express their concerns about the effects that the savings that they were being told to make would have on Britain's forces.

On 3 April 2007 Defence Minister Baroness Ann Taylor announced that a £13 million contract had been placed by Thales UK, on behalf of the Aircraft Carrier Alliance, with MacTaggart Scott of Loanhead for four lifts (two per carrier) for the new carriers.  The installed weight of the two lifts on each ship will be around 500 tonnes (i.e. 250 tonnes each) and each lift platform covers 400 square metres - nearly the size of a tennis court.  Each can lift 70 tonnes - or two Joint Strike Fighters - from hangar to flight deck in 60 seconds

The MOD stated that orders for equipment, materials and infrastructure for the two ships, HMS Queen Elizabeth and HMS Prince of Wales, now totalled more than £160 million.

In early April 2008, DefenseNews claimed that "Britain, which wants 150 F-35B STOVL jets for its two new 65,000-ton aircraft carriers, is watching the U.S. Navy's evolving interest in more F-18s closely, sources said.  The Ministry of Defence will decide this summer whether to equip the Queen Elizabeth-class ships, which were intended to operate STOVL aircraft, with catapults and arresting gear for conventional carrier planes.  If the U.S. Navy seems likely to do something to boost the JSF's purchase price, the aircraft could become a target in the U.K. MoD, which is struggling to cut costs."  Despite this report the current  focus seems to be very much on adapting the CVF design to support F-35B Shipborne Rolling Vertical Landings (SRVL)  in order to increase the aircraft's bring back payload to acceptable levels (about 2500kg) without incurring the costs (£300-400 million in total) of fitting catapults and arresting gear to the carriers.

In mid-April 2008 the Financial Times reported that the government may  "give the green light for the carriers at the start of May, according to senior defence sources.  This would allow BAE and VT to form the joint venture, which needs to be in place before the government can formally place the contract.  The contract would then be in place around the end of June, or the beginning of July." 

On 21 April 2008 the CVF Integrated Project Team became part of the DE&S's new Capital Ships Directorate, headed by the former CVF IPT Team Leader - Rear Admiral Bob Love.

In mid-May 2008 the Financial Times reported that on 14 May 2008 that Amyas Morse, the commercial director at the MoD, had contacted executives at BAE Systems and VT Group confirming that the Ministry of Defence was committing to a manufacturing contract for two aircraft carriers.  This was followed with written assurance.

However the anti-carrier lobby has made a last bid to get CVF cancelled.  It's widely believed that the MOD's equipment budget faces a £1-2 billion a year funding shortfall in Planning Round 08 (PR08) and there is widespread feeling in both the MOD and industry that it is inevitable that a major multi-billion pound project will have to be sacrificed.  General Sir Timothy Granville-Chapman, the Vice-Chief of the Defence Staff, has written confidentially to all one-star and two-star officers in the Ministry of Defence asking for their views about the need for a next-generation carrier strike force, i.e. CVF and carrier strike.  Given that RN one-star (Commodore) and two-star (Rear Admiral) officers are out numbered four to one by their Army and RAF counterparts the results of the "poll" are rather pre-ordained.  It remains to be seen if the Chief of the Defence Staff, Air Chief Marshal Sir Jock Stirrup, will then feel able to take the extra-ordinary action of informing the Secretary of State for Defence or even the Prime Minister that his professional recommendation is that the project should be cancelled.  With contracts apparently about to be signed  the result will be severe political embarrassment for the government, and probably the resignation of the head of the Royal Navy, Admiral Sir Jonathon Band Admiral Sir Jonathon Band.

On 20 May 2008 a MOD statement said that "The Ministry of Defence today gave industry the green light that it was ready to go-ahead with contract signature for the two new super aircraft carriers. Industry is now expected to press ahead with forming the joint venture company that will help build the carriers. The carriers, to be named HMS Queen Elizabeth and HMS Prince of Wales, will be the biggest and most powerful surface warships ever constructed in the UK. Once they enter service in 2014 and 2016 respectively they are expected to remain in the fleet for up to fifty years.   Secretary of State for Defence, Des Browne said: "This is an important day for the project and I am delighted that we are moving closer to signing the contracts for the manufacture of the carriers."

BAE Systems and VT Group both confirmed that the move will enable them to progress finalisation of the arrangements for BVT Surface Fleet, the Joint Venture (JV) combining their shipbuilding and naval support businesses, following the framework agreement signed in July 2007.  They expect the JV transaction documentation to be signed "shortly".

Contracts between the MOD and the Carrier Alliance members for the manufacture of the two new aircraft carriers are expected to be signed in early July 2008.

The aircraft carriers will be delivered by the Aircraft Carrier Alliance, which comprises industry participants and MoD.  The Industrial Participants will be: the BAES/VT Joint Venture, Thales, Babcock and BAES (Submarine Solutions & Insyte). The MOD's DE&S is responsible for managing the procurement of the aircraft carriers. The MOD is part of the Alliance as both client and participant.

£3 billion contracts signed for largest ever UK warships An Equipment and Logistics news article 3 Jul 08   Contracts to build two Royal Navy aircraft carriers, the largest and most potent warships to be designed and built in the UK, have been signed by the MOD and industry today, Thursday 3 July 2008. Artist's impression of the Future Carrier [Picture: MOD] The contracts, worth in the region of £3 billion, were signed with a new UK maritime joint venture, formed by BAE Systems and VT Group, called BVT Surface Fleet, and the Aircraft Carrier Alliance onboard existing aircraft carrier and Fleet Flagship HMS Ark Royal at Portsmouth today, Thursday 3 July 2008. The future aircraft carriers, to be named HMS Queen Elizabeth and HMS Prince of Wales, will dramatically improve the UK's ability to project expeditionary air power over the coming decades and will be a highly versatile and potent joint defence asset, able to meet the widest range of tasks. The carriers are expected to enter service in 2014 and 2016 respectively; once they enter service they are expected to remain in the fleet for at least thirty years. Defence Secretary Des Browne said of today's announcement: "This is a historic day for everyone in defence. The two aircraft carriers will provide our forces with the world-class capabilities they will need over the coming decades. They will support peace-keeping and conflict prevention, as well as our strategic operational priorities. "Today's contract signing seals the future for thousands of jobs, and ensures that we will have a Royal Navy fit for the 21st century." Baroness Taylor, Minister for Defence Equipment and Support, added: "This is truly a national project, involving companies from the Clyde to the Solent. Construction work will create or sustain around 10,000 UK jobs at the peak of production. "I am delighted that we have signed the contracts for manufacture today and I look forward to first cutting of steel for this exciting project later this year." Contracts authorised today encompass work worth: £1,325m for the construction of giant sections of both ships by BVT Surface Fleet at Govan on the Clyde and Portsmouth; £300m for the construction of giant sections of the ships at the BAE Systems yard at Barrow-in-Furness; £675m for the bow section and final assembly and completion of the ships by Babcock Marine, with assembly taking place at Rosyth; £425m for design and engineering for Thales UK; £275m for design and supply of Mission Systems for BAE Systems Integrated Systems Technologies (Insyte). Artist's impression of how the Future Carrier will look  [Picture: MOD] The carriers will displace 65,000 tonnes at deep load, be around 280m long and 70m wide on the flight deck, accommodate around 1,500 personnel and operate a mix of up to 40 aircraft. First Sea Lord, Admiral Sir Jonathon Band, said: "I am delighted with today's news that the contract for the two new aircraft carriers, to be named HMS Queen Elizabeth and HMS Prince of Wales, has been agreed and signed. These ships, with their embarked aircraft, will provide the UK with a potent and powerful aircraft carrier force that will deliver air power in support of the full range of future operations at sea, in the air and on land." BVT Surface Fleet, the joint venture formed by BAE Systems and VT Group on 1 July 2008 will be a key member of the Aircraft Carrier Alliance of companies which will construct and assemble the new carriers.   Other members of the Alliance include Babcock, Thales UK, BAE Systems Submarine Solutions at Barrow and BAE Systems Integrated System Technologies (Insyte). All parties have signed a legally binding Alliance Agreement, including an Alliance Charter, committing them to work together in a collaborative manner. Artist's impression of the Future Carrier [Picture: MOD] Alan Johnston, CEO of BVT Surface Fleet, said: "This is an important announcement for BVT and for the UK maritime industry at large, guaranteeing work for years to come across the country. "We are looking forward to delivering these very important ships to the Fleet in the next decade and intend to begin construction work later this year." Some contracts have already been placed including those for diesel generators, aircraft lifts, the steel for the ships and key electronics. Jobs expected to be created or sustained from the construction of the carriers include: Construction of a hull section at Portsmouth - 1,200 jobs; Construction of hull sections at Govan - over 3,000 jobs on the Clyde; Construction of a hull section at Barrow-in-Furness - 400 jobs, with additional employment in the North East; Work at BAE Systems Insyte at Frimley, Surrey - 145 jobs; Work under contract to Thales UK at Bristol and Crawley - 250 jobs; Assembly of the ships at Rosyth - 1,600 jobs.

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