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Editorial
CVF - Decision Time at Last?
26 March 2004
Five years ago the UK's Future Aircraft Carrier (CVF) project passed
Initial Gate and entered what the Ministry of Defence's Defence
Procurement Agency (DPA) calls the Assessment Phase. Several
million man hours and about £130 million of taxpayers money later it
might at last be drawing to a close, and the business of actually building
the two ships can finally begin.
Or maybe not....
In January 2003 the MOD selected BAE Systems as the preferred CVF
Prime Contractor, but ordered it to use the carrier design concept from
rival Thales, the two companies combining in a shot-gun marriage to form
the CVF Alliance. “A decision anyway”, people assumed at the
time. But since then the competing pressures of budget, demanding
user requirements, and changes insisted upon by BAE Systems have led to
at least four major design iterations. More than a year on, the
result is that the CVF Alliance still has what's far more a
concept than the refined, de-risked and fully costed design that was
expected by now.
Escalating cost estimates are fundamental source of most
problems. The MOD has allocated a budget of £2.9 billion to build
the ships, but last June it was shocked to be told by the CVF Alliance
that the cost would be at least a billion pounds more. Despite frantic
negotiations and cost trade-off exercises, that £4 billion estimate has
since hardly budged downwards. So keen is the RN to get its new
carriers that it is prepared if necessary to find the extra money from
elsewhere within its share of the equipment budget (e.g. by buying
fewer Type 45 destroyers), but some "sources" are now saying
that the true cost of building the carriers may turn out to £5 billion!
The MOD refuses to hand out to the Prime Contractor effectively a
blank cheque for building the ships, while BAE Systems is insistent that
it will only take on the work if it is sure that it will be able to make
a profit, and the customer requirements and timescales are realistic. BAE Systems' is all to aware of the huge sums it lost on
the Astute submarine and Nimrod aircraft projects by
under-estimating costs and potential technical problems, while the MOD
needs no reminding that it is also having to pay hundreds of millions of
unexpected bills due to the mistakes made by BAE's management on these
two projects - and as a result has had to take a lot of criticism
from the National Audit Office. With the two sides at an impasse, the MOD
is now having to consider alternatives to using BAE Systems as Prime
Contractor, including even letting the DPA do the job itself!
And the joker in the pack is French interest in building a CVF
derivative to meet its requirement for a second aircraft carrier
(PA2). Much to the irritation of UK officials, while Thales UK
has in private been strongly supporting BAE Systems' hard line with the
MOD on CVF cost estimates, Thales group CEO Denis Ranque has publicly promised that his company
can build the new French carrier for €2 billion (about £1.4bn),
and that's despite the substantial added cost of fitting catapults and arresting
gear to the French carrier variant compared with the UK one. In
what way, and how much the French will pay to use a design that may
eventually cost the UK tax payer nearly £1 billion to develop remains a
matter for discussion. As does how closely will France, and French
companies such as DCN, integrate in to the CVF Project -
potentially a source of months of negotiations.
With so many issues outstanding, the MOD's strategy for bring the CVF
project to Main Gate (approval to actually order the ships) is
unclear. Officially the objective date is "Spring 2004"
- or is it now "Summer 2004"? - but there seems every possibility
that it will slip by up to a year. And with every delay, the Royal
Navy's target date of late 2012 for the first ship (HMS Queen
Elizabeth) to enter service becomes less likely to be met, and the
Marine Nationale's target of the end of 2014 for its new carrier looks
to be an ever more realistic alternative.
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