GMB, the shipbuilding union, says a Ministry of Defence decision to halt a vital Type 31e frigate order is a body blow to shipbuilding communities.
The MoD says it has been forced to rethink the acquisition strategy for its Type 31e general-purpose frigate programme after abruptly terminating the original acquisition process, citing insufficient compliant bids for an effective and robust competition.
Ross Murdoch, GMB National Officer & CSEU Maritime Chair, said:
“This is a real body blow to many shipbuilding workers and their families the length and breadth of the UK.
Some are already seeing significant redundancies as the Carrier programme runs down, while others are in shipyards with a distinct lack of future orders meaning they will see nothing but a gloomy future ahead.
Depending on which consortium would have been successful, these ships potentially could have brought work in Scotland on the Clyde and at Rosyth, to yards in Devon and Cornwall, to Liverpool, Belfast and potentially other areas.
We have previously had the disappointment of the cancellation of the world class Frigate factory on the Clyde, the reduction from 13 Type 26 Frigates down to eight – then the promise of the other five being replaced with five Type 31e’s – only for this now to be paused due to insufficient bids and competition. Is our sovereign defence capability this Government’s priority, or treasury budget setting?
The renaissance in shipbuilding and the steady drumbeat of orders rhetoric from this Government are proving to be hollow words as far as our members are concerned.
Add to this the ill thought out government decision to put the three Fleet Solid Support (FSS) ships out to international tender, particularly given the shambles over Brexit, and it all adds up to a view within shipbuilding and steel communities that this Government cares little for their futures.”
Whether it is a ‘body blow’ really comes down to why it has been paused and what happens from here. If it was paused on cost grounds then the whole project may be in doubt, if however it was the compatibility of the bids with the NSS then that’s a different issue. Pausing the programme could be the best thing for the yards and workers if it is about delivering the NSS. After all, it seems that only the BAE/CL bid was based on British designs.
Lets just see what happens over the next few months
Agree Rob. Compliance is not just about cost. They need 2 bids to award a competitive design stage to.
I don’t think its cost, because yards would not have bid at all if they could do it for the price.
Rob according to todays times its down to a lack of money at the MOD
Contest to Build A ‘Budget Frigate’ On Hold as MoD Runs Out of Funds
Government plans to buy a “budget frigate” within five years have been thrown into chaos after a competition to build the warship was suspended amid a funding crisis.
Sources warned last night that the Type 31e frigate may never materialise. It is a serious blow for the Royal Navy, which needs at least five of the ships to maintain the size of its surface fleet.
Shipbuilders and yards in the running for the £1.25 billion contract were taken by surprise when the Ministry of Defence announced the freeze on Friday, just as they prepared to finalise their respective ship designs. Defence Equipment and Support, the branch of the MoD in charge of buying kit, claimed that there had not been enough “compliant bids”.
Industry insiders disputed this, saying that a failure by Gavin Williamson, the defence secretary, to secure new money by the summer to fund his ambitions for the armed forces had thrown into doubt a range of equipment contracts.
They noted that bidders for the frigate work had been waiting to receive funding from the MoD to start the competitive design phase. This should have happened by May, with initial construction targeted for next spring. Instead there was silence then the freeze.
Yeah because they’ve been forced into a humiliating defeat on pay across the entire public sector that’s why, you can afford pay rises or Frigates not both.
There is no viable NSS.
Just stumbling from one position to another in the hope that something turns up.
We also need to face up to some unfortunate truths, what is the export market for this kind of vessel?
Certainly not Europe, those countries that want this kind of vessel will build in a domestic yard with odd exceptions.
North America/Canada/Australia, maybe but again they would prefer domestic build. NZ maybe.
Africa? Well those that can’t afford to build themselves and are not that bothered about build quality can pick up a Type 056 variant from China for less than $50 million USD and on credit. Those who are concerned about quality can get an Incheon class from Hyundai for $250 million USD.
Asia, the same!
Personally I think a better policy is to shorten the in service life of RN vessels and dispose them for surplus whilst they still have more life on them and mop up the service and support contracts.
If we had a frigate factory and the desire for a fleet of say 20 to 25 ships, with one new ship launched each year, then that sounds eminently possible.
Well the NSS is proposing shorter lifetime hulls with no mid-life update for RN so your suggested policy is consistent with that and it also means the program doesn’t have to generate an unrealistic volume of export orders to maintain continuous production. Also your price examples and the specifications shown on Wikipedia for the Incheon class and also the HHI build for the Philippines show why the RFI for the Type 31e was set at £250M to be internationally competitive as well as to help with MoD budgets.
If the responses to the RFI were failing to show an ability to compete in an international export market then that might be one reason for the re-think. However its important to look at the quoted MoD response beyond the non-compliant statement, namely that the program is suspended not cancelled and still targeted for £250M but emphasizing the “wider procurement process”, i.e. NSS:
“There have been no changes in our plans to procure a first batch of five new Type 31e frigates to grow our Royal Navy. We still want the first ship delivered by 2023 and are confident that industry will meet the challenge of providing them for the price tag we’ve set. This is an early contract in a wider procurement process, and we will incorporate the lessons learned and begin again as soon as possible so the programme can continue at pace.”
Reasons could be several and we don’t know the details. Speculating is pointless. Whatever the reason the net result is interruption to the wider shipbuilding programme. Planning, investment, skills, training, supply chain, are all affected. When MoD want to come back and build the next ship, it’ll be like starting again from scratch, with all the associated costs, timetable and learning curve issues. And every time it happens it makes British shipbuilding less and less competitive. But no government cares about this
Below is what the MoD apparently said so they believe they can still achieve the original target date despite this suspension. It seems a lot of commenters haven’t seen this based on the automatic assumption of project cancellation?
“There have been no changes in our plans to procure a first batch of five new Type 31e frigates to grow our Royal Navy. We still want the first ship delivered by 2023 and are confident that industry will meet the challenge of providing them for the price tag we’ve set. This is an early contract in a wider procurement process, and we will incorporate the lessons learned and begin again as soon as possible so the programme can continue at pace.”
It’s probably more to do with the MDP i.e. it does not have a budget allocated so something else has to be cut to pay for it.
I’ve said it before and I’ll say it again it is time to cut the £14 billion a year foreign aid budget.
Yawn. If they cut the money from the foreign aid budget, where do you honestly think the money would go? Not to defence. Most of it would likely go to vote winners such as the NHS, helping councils pay for the increasing care burden that they face and/or to pay for more police given the recent surge in violent crime.
Thinking further about this, find myself in violent agreement with Fydaikin. And surprise, surprise. What design has actually had the export success? The T26. The highly sophisticated supposedly unaffordable design. Build one or two more T26 instead? What about pulling a blinder to secure the Canadian order. What about offering them that we will buy a couple of Canadian made ships if they select T26, as bare hulls, to be equipped to our standards back in U.K.? Probably cheaper that way?
That’s an interesting and creative idea. With potentially a growing level of Russian sub activity in the North Atlantic I do think that, even without sweeteners, T26 must have a very strong chance of winning the RCN bid due to its ASW credentials and if it does that potentially opens up a whole host of new possibilities where all of a sudden the global T26 production goes from 8 (RN only) to 32 (RN plus RAN plus RCN assuming no one cuts their numbers).
The twisty turny paths that our government so often seems to take in arriving at a final plan that is acted on is immensely frustrating but given where we have got to right now and with the T26 landscape already changed and maybe about to change yet again by the end of this year (RCN bid winner announced) I think HMG have done absolutely the right thing to put the T31e project on hold for a while.
What design has actually had the export success?
Khareefs and Rivers…… Thailand is building a second River class.
I’d assumed he meant T26 based on the RAN bid. Maybe a bit tennous to claim too much success off the back of a single win although as a high-end product a T26 win is 2 or 3 times more valuable than a T31e win of the same unit quantity. If the RCN bid also goes T26’s way that does add weight to the point.
I also find myself in agreement with Fedaykin’s comment that Richard was following on from. I would be very interested to know what opportunity (target market) analysis HMG did for T31e exports because I share his concern that it isn’t that great and already has established offerings (e.g. Meko-200) in that space already.
Maybe getting a really strong C3 design developed for MCM replacement with the ability to perform additional OPV and light to moderate threat policing roles might be a better export area to explore in the shipbuilding space, perhaps something akin to BMT’s Venari 85 design, maybe stretched to a Venari 90 to give some FFBNW space for a Seaceptor VLS silo and additional internal volume for an embarked force similar to River B2’s capability there.
And drones of course if we’re talking about developing strong export opportunities, something like a home-grown Camcopter drone with a bigger payload capacity than Schiebel S-100 but still able to operate out of an ISO container.
But the BAES Oz T26 win is a design export not a build export. It may help a number of UK companies whose equipment is used in T26 build but it does nothing for the NSS and doesn’t solve the fundamental problem of how to reduce the cost of hulls to the RN and perhaps RFA. A key part of MoD’s statement:
“This is an early contract in a wider procurement process, and we will incorporate the lessons learned and begin again as soon as possible so the programme can continue at pace.”
perhaps the the slow pace of construction of the 1st type 26 could be accelerated- 8 years is a very long time to build a destroyer. This would keep the ship yards busy and help plug the numbers gap
“Insufficient compliant bids” to me means this is about value for money, not simply funding. Therefore, I get where the MoD is coming from and it’s down to industry to up their game accordingly. A blow to all stakeholders it may be but the blame shouldn’t be laid the Government’s door.
As a person who is involved in complex high value public sector procurements I can and do blame the MOD for this, you don’t stop a procurement because you only get one compliant bid (especially if you cut the cost envolope to the bone, and at a level the market will struggle to make a margin on, your risk is getting no bids). If they designed their bidding process to fail if they only got one good bid on a high risk/ Borderline for cost procurement I’m afraid they are incompetent or just deluded fools.
The only other answers ( the more likely ) is that in ligh of the armed forces pay rise the MOD needed to find something for the bottom line fast and with this they can delay in year and blame the procurement process ( not our fault gov, it’s not about a lack of funding).
It rather depends on MoD’s measure for success and just placing a contract was unlikely to be it.
For the MoD and the NSS programme its imperative to show a determination to get value for money for the RN. This is especially true as their negotiating ability is undercut by a national requirement to build RN ships in the UK. Any tendering company is going to look at that and say “possibility for higher margins/profit.” It seems BAES has done this in the past and their comments leading up to this point about a “race to the bottom” with T31e seem to support that. BAES are a publicly quoted company, they are supposed to maximise returns to shareholders so its only natural they behave this way.
If the industry is shocked or surprised by this suspension then perhaps they had under estimated MoD’s commitment to NSS, possibly underspecified what they submitted in the response to RFI and failed to deliver as much value as they might have done.
Hi glass
The issue with cost effectiveness in MOD procurements historically has not been the Competative tender process, it’s been the risk sharing arrangements within the issued contracts and I suspect pursuing the cheapest bid without a clear eye on sustainability and delivery.
In my view ( and this has developed through being on the hard end of managing the quality of delivery on contracts with commercial organisations who over promised in procurements on cost and sustainability and got the themselves and the public sector in a swamp of if we go under and fail the public suffer or pay more and the public suffer as something else gets cut).
Therefore it’s better to understand what you then the market will bare ( know your sector, know your likely costs and likely inflations/risk over the life of the contract) find your funding and set your limit.
Then procure at that cost ceiling ( as the MOD did) with any competitive elements being on: quality of product and public finance risk being reduced ( but you should also have set limits of these within your procurement)
If you play it well any bid you get will be cost effective, sustainable and in the public interest. If you therefore get a bid multiple bids to pick from and grade that’s great or you get one that’s fine.
Remember in procurement is not an auction, you can’t go….have I got 240mil 230mil ect. You get the bids, check em for compliance, if you have multiples you score them, them you pick the best, if you have only one compliant bid that’s ok.
To be honest I suspect the MOD are potentially running themselves into a nightmare of legal challenge, if they have a compliant bid, suspend the bid process to let non compliant bidders rebid, the compliant bidder will probably be able to take them to court.
Hi Jonathan,
Thanks for detailed reply. I think to cut to the chase we should look at what the RFI explicitly stated it wasn’t promising contracts, it was an “Industry Market Test”. The following is from page 2 and 3 of the RFI.
“2. PURPOSE OF RFI
The MOD is conducting an Industry Market Test for a future T31e Frigate Design and Build project for a minimum of 5 ships at a maximum average price of £250m per ship. The T31e programme is charged to fulfil a number of elements of the National Shipbuilding Strategy (NSbS) with UK Prosperity and Exportability being two such key elements.”
It then goes onto to say:
“The aim of this RFI, and the returns from Industry, will be used to gain an understanding of what the market can deliver against the target key characteristics, cost and schedule. The MOD is also looking to reduce the management burden typically associated with naval projects and is keen to understand any “best practice” that can be taken from other industries or projects.”
It was as the name states a request for Information not a Request for Quote or other language that might lead to an order immediately.
This decision is purely politics and what do you mean the blame can’t b put at the government’s door you clown where does the budget come from Mrs Thatcher I mean what’s her name is waiting on brexit to see what the idiot in hollyrood is going to do then it will be announced where the work is going
Already making headlines and for all the wrong reasons.
https://www.express.co.uk/news/uk/993998/uk-defence-ministry-of-defence-gavin-williamson-type-31-frigate-war-ship
Thanks for link its in most of national papers.
Reading the express article it mentioned the ” Royal Armed Forces” never heard of them.before, is it our secret military force we keep ready just in case of an emergency?
I’m aware.
“Already making headlines and for all the wrong reasons” This is one example!
Anybody see the picture that went with the article. Apparently the Type 31 had a previous life as an Oliver Perry frigate. Well done the Express. On the ball as always.
Murdoch is not wrong. The Treasury once again sabotages the armed forces.
Mirror is reporting only one bid was below 250m so next phase is not possible. So its doable for 250m or one consortium thinks so. Personally I think its CL/BAe, having looked at what they doing on the polar research ship for 200m I recon they’ve been able to bid with Leander for 250m
https://www.mirror.co.uk/news/politics/defence-chiefs-cancel-plan-build-12974254
Alternatively one of the bidders was putting more risk on the MOD around price overruns than the other. We know no defence procurements built in the UK ever arrive within budget and so any increases have to be suffered either by the MOD or the manufacturer. I suspect the normal case is for both to be hit but the balance can be played with within the tender, 50/50, 60/40 etc.
Why not build 4 at 310M each? ?
The not enough compliant bids is a smoke screen, when you are cutting the cost envolope on a complex procurement to as close to failure to get bids as you can you are really worried about not getting any bids. If you get a compliant bid you don’t stop the bidding process because you only get one compliant bid. What you do is pat yourself on the back for pulling a blinder, take the bid through to preferred bidder quick as you like and pocket the change you saved on a shortened procurement.
Having been a member of a team that has procured a number of complex bids in the 100s of millions total contact value, I can tell you if you can take even one bid through without failure you do so, this stinks of actually running out of the cash and trying to blame the bidding process…..
Or you suspend the process and let those who were not compliant stew on the fact that perhaps one or more of their competitors were and what the long term competitive landscape will look like for them if they don’t adapt. You then re-start the process with an expectation set that no one gets to sandbag margins/profits just because RN vessels have to be built in the UK; and no one gets to automatically assume they get allocated future naval ship business and that includes BAES.
There are far bigger implications here than just five T31e. Its breaking the assumption by industry that MoD just has to pay whatever is asked because it has no choice. There will be other RN vessel contracts in the not too distant future that need to benefit from this approach. For example whatever replaces the MCMV capability whether that’s dedicated ships or more T31e with MCM mission modules has a ~2020 decision point. LPD, LSDA and not least T45 replacement with decision points around 2022. And perhaps it also sharpens minds for the FSS where despite international tender I am sure any Govt. would like to be able to award the contract to UK shipyards.
Letting non compliant bidders back in later or add new bidders/change the rules will have a very high risk of legal challenge from the compliant bidder ( you can’t mess around in public sector procurements any deviation or unbalance behaviour Will lead to millions spent in court)
I can assure you there is no way on earth the legal expert on our procurement team would let us ( if we had a compliant bid) turn around suspend a bid and let new bidders or old bidders enter the bidding process outside of the scope of the original process. At the end during standstill you would get a legal challenge, spend a year in court and be instructed to pay all costs and start the whole thing again.
Already responded above that actually industry responded to a Request for Information from MoD and not a Request for Quote. I should have picked up on that earlier.
To save you scrolling back, the following is from the RFI.
“The MOD is conducting an Industry Market Test for a future T31e Frigate Design and Build project for a minimum of 5 ships at a maximum average price of £250m per ship.”
and
“The aim of this RFI, and the returns from Industry, will be used to gain an understanding of what the market can deliver against the target key characteristics, cost and schedule. The MOD is also looking to reduce the management burden typically associated with naval projects and is keen to understand any “best practice” that can be taken from other industries or projects.”
However, even if it had been a RFQ then whether it required a single submission or indicated it was subject to multiple rounds would dictate the rules and legality of multiple cycles of an iterative tendering process. That might not be how its normally done but nothing says it can’t be.
2% unfunded pay rise…ummmmmm…….whoops our procurement went wrong, what a shame…..money…..no it’s not a budget issue, it’s the procurement rules you know……move along nothing to see here…….
Perhaps someone has realised that fixing an arbitrary and suspiciously round number is an unbelievably stupid way of procuring anything. Also the timescale is ridiculess.
I find it surprising, to say the least ,how many experts have been prepared to go along with this obviously impossible plan.
We have so many issues hitting the UK such as poor defence spending, NHS crisis, Police and also the elderly. That foreign aid budget £14 Billion which is a third of our defence budget is looking more of an extravagance every single day it goes on. Only the foolish and idiotic support it. It makes no sense whatsoever.
Another T26 would make more sense.
Given how well the MoD is doing, maybe we should trust them?
Ok, many just give them the benefit of the doubt?
No and No, based on my experience.
I suspect this is due to a number of factors, the reported single bidder meeting the price is just convenient. A year delay allows Brexit to be “over”, allows the review to be completed (with actual numbers and decimal points included), doesn’t commit the MOD to a contract when they have just increased wages across the board and crucially also allows the bidder that came in over 250m time to reconsider their proposal. Once the competition is re-started I would expect it to be shorter as the bidders are already some way “down the road” design wise etc.
Not that I like it mind you, 2023 is awfully tight. I just hope their are 0 delays with HMS Glasgow construction.