BAE Systems has been awarded a contract by the Ministry of Defence worth £3.7bn to manufacture the first three of the eight Type 26 Frigate fleet.

Eight Type 26 Frigates are to be built, the contract for the second batch will be negotiated in the early 2020s.

We’re predicting now that some groups use this initial batch order to back claims that the order has been cut. That is incorrect. Ordering in batches is common for projects of this size around the world and was last seen with the Royal Navy for the Type 45 Destroyers and recent Offshore Patrol Vessels.

The Type 45s first batch order was for three vessels.

Steel is to be cut on the first ship in Glasgow in the coming weeks.

Defence Secretary Sir Michael Fallon said:

“The Type 26 Frigate is a cutting-edge warship, combining the expertise of the British shipbuilding industry with the excellence of the Royal Navy. We will cut steel on the first ship later this month – a hugely significant milestone that delivers on our commitment to maintain our global naval power. These ships will be a force to be reckoned with, there to protect our powerful new carriers and helping keep British interests safe across the world.

“Backed by a rising defence budget and a £178bn Equipment Plan, the Type 26 programme will bring vast economic benefits to Scotland and the wider UK. The contract is structured to ensure value for taxpayers’ money and, importantly, now designed to protect them from extra bills from project overrun. The investment will secure hundreds of skilled jobs at BAE Systems on the Clyde for the next twenty years, and thousands of jobs in the supply chain across Britain.”

Commenting on this important announcement, Charles Woodburn, Chief Executive, BAE Systems said:

“The award of this contract is a strong endorsement of the talent and commitment of our employees across the UK and reinforces Glasgow as the centre of shipbuilding in the UK.  We are extremely proud to be chosen to design and manufacture vessels that will give the Royal Navy an essential, next generation capability and be a vital addition to its fleet.

“We will continue to invest in our technologies, productivity and people to help us deliver these ships to the highest standards. Today we have five River Class Offshore Patrol vessels at varying stages of construction for the Royal Navy across our shipyards in Glasgow and we look forward to starting manufacture on the first Type 26 ship in the coming weeks.”

The UK Government committed to eight advanced anti-submarine warfare ships in its 2015 Strategic Defence and Security Review (SDSR). The Type 26 programme currently employs more than 1,200 people in the UK supply chain, with a number of contracts already in place for the manufacture of major equipment for the first three ships. In total, there are already 33 UK and international companies working in the supply chain to deliver the Type 26 ships – with further announcements to be made shortly.

Harriet Baldwinm, Parliamentary Under-Secretary of State for Defence, told Parliament in a written statement on Tuesday this week:

“I am today laying a Departmental Minute to advise that the Ministry of Defence (MOD) has received approval from Her Majesty’s Treasury (HMT) to recognise a new contingent liability associated with the Type 26 Global Combat Ship Manufacture Phase 1 Contract.

The Departmental Minute describes the contingent liability that the MOD will hold as a result of placing the Type 26 Global Combat Ship Manufacture Phase 1 Contract, which will provide for the manufacture and testing of the first batch of Type 26 Global Combat Ships. The maximum contingent liability against the MOD is unquantifiable and will remain until the latest Out of Service Date of the ships manufactured under the contract, in the second half of the 21st century.

It is usual to allow a period of 14 Sitting Days prior to accepting a contingent liability, to provide hon. Members an opportunity to raise any objections. I regret that on this occasion pressing commercial and industrial requirements to sign the contract within the next few days together with the dissolution of Parliament, have meant that it has not been possible to provide the full 14 Sitting Days prior to taking on the contingent liabilities. Any delay would have risked losing significant financial benefits for the taxpayer. The Secretary of State for Defence has decided to proceed with the agreement, following scrutiny by the Department’s Investment Approvals Committee which confirmed that the contract offered best value for money for the taxpayer, and subsequent approval by HM Treasury.

Within the contract the exposure of BAE Systems Maritime – Naval Ships to a number of specified claims and to Direct Losses is limited to £50 million, while in respect of Indirect Losses and, within certain prescribed categories, catastrophic risks the contractor is indemnified against claims in excess of £50 million. It is the view of the Department that the likelihood of any claim is extremely low.”

Michael Fallon said earlier in the year that cutting the first steel would help secure new investment and safeguard hundreds of skilled jobs until 2035.

An independent report into the National Shipbuilding Strategy by Sir John Parker has also recommended that the Type 31 Frigate build be spread across the UK, with blocks being constructed in yards in both Scotland and England.

The National Shipbuilding Strategy is intended to be a “radical, fundamental re-appraisal of how we undertake the shipbuilding enterprise in the UK, intending to place UK naval shipbuilding on a sustainable long term footing”.

Sir John Parker’s independent report designed to inform the strategy was released. The government say they will give Sir John’s work the full consideration that it deserves and will provide a full and detailed response in the spring 2017.

In November, after confirming that the Type 26 Frigate would be built on the Clyde, Michael Fallon also indicated that the Type 31 Frigate will be assembled there too.

Michael Fallon told BBC Radio Scotland:

“Nobody is shortchanging the Clyde. This is a huge moment for the Clyde; we’re confirming we’re going ahead with the steel cut next summer, earlier than expected. The first eight will be the Type 26 combat ships.

After that, the Clyde will be building a lighter frigate and we will end up with a fleet that is larger than the fleet at the moment.”

It’s understood that the build plan for the Type 31 Frigate will follow a similar pattern to that of the Queen Elizabeth carriers and early Type 45 Destroyers in that blocks will be built in yards around the UK and assembled on the Clyde.

Additionally, it was recently announced recently that work had started on the fourth of five new Offshore Patrol Vessels being built on the Clyde.

It is understood that the yards on the Clyde will now build 18 vessels of varying types, instead of the originally promised 13.

The two additional Offshore Patrol Vessels, hulls four and five, were announced as part of the last Strategic Defence & Security Review. The first of the five new vessels, HMS Forth, is expected to be handed over to the Royal Navy in 2017.

The Offshore Patrol Vessels had been ordered to fill a gap in orders after the second carrier and before the Type 26 frigates begin construction.

A recent report also claims that delays in the construction of the Type 26 Frigate have had a negative impact on the development of the workforce on the Clyde.

The recently released report ‘Restoring the Fleet: Naval Procurement and the National Shipbuilding Strategy’, states that:

“It is clear to us that the delays in the construction of the Type 26 have had a negative impact on the development of the workforce on the Clyde.

Apprenticeships are not being offered at the necessary rate, and those currently undertaking apprenticeships are having their skills training disrupted. Furthermore, workers are being required to move from Scotland to Barrow in order for them to undertake meaningful work.

We welcome the efforts made by the trades unions and BAE to retain the workforce during this period of uncertainty, but remain deeply concerned by warnings that further delay could be “catastrophic” for the skills base.”

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Mike Saul
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Mike Saul

I do recall back in 2010, the entire Type 26 programme of 13 warships was quoted as costing £4billion. These ships were going to be cheap to build with expensive weapons and sensors transferred from the upgraded type 23s. Lots of exports to reduce R&D costs per warship, a truly global project. Now move forwards seven years and it’s nearly £4bn for the first three frigates. Something is very wrong with UK defence procurement, at the initial stages we seriously underestimate the costs and at the final stages we end grossly overpaying. Bespoke expensive equipment for the UK armed forces,… Read more »

Tim
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Tim

We wanted 12 T45s but they got expensive so that got cut to 8. Then the first order went in for 3 and the total ended at 6. We wanted 16 T24s to replace the T23s but after giving 3 to BAE* we only had 13 left and the replacements grew into the expensive T26. That means we can only afford 8 of them and the first order has gone in for just 3 which is almost certainly going to turn into just 6. *BAE got £131m to prepare the sale of 3 T23s to Chille for the price of… Read more »

Stuart broome
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Stuart broome

Agree with all of the above but why are we building such large frigates? They are light cruisers in all but name. The leaders of the navy have some questions to answer. Type 23 seems a good model for a frigate design with some growth potential and reasonably well armed. Put the land attack missiles on the Type 45 if we need them.

Gunbuster
Guest
Gunbuster

There is no growth room in a T23.
Fortunatley the replacement of Seawolf by Sea Ceptor has actually freed up space. No need for trackers and the Silo is only 50% used.
This is the exception.

Pacman27
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Pacman27

This is just crazy, the UK can buy 10 enhanced Freedom class LCS from the US for this that will do everything we need. I am truly astonished if this is the build price (often it is not and the price includes 10 years of maintenance). I am informed by many on TD that the size of a vessel is fairly negligible in the overall cost, but given the cost of this we now know why this order has been reduced. In my opinion we should cancel and order 30 Freedom class LCS and build those on the Clyde under… Read more »

Gunbuster
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Gunbuster

LCS is not all its cracked up to be. I have talked in depth to operators and they are not that enamored with it. T26 is going to be an ASW specialist. ASW costs…Raft mounting equipment, shock mounting, Sonar, Towed array, radar, Helo Services to name but a few. An LCS simply cannot do the job.

Pacman27
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Pacman27

Hi Gunbuster I am not saying an LCS is as good as a T26 – I do not think it is, but I really do think we need to have more of something. I believe I read recently one of the top admirals stating the RN has lost its “nous” and doesn’t really know how to make a ship quiet (using old and inexpensive tricks). LCS will have a compact Captas and can be made a lot more RN friendly, but even if it is not LCS there are Meko’s, Belharras, FREMM etc, etc that we can buy and alter… Read more »

Steve
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Steve

You do realise the US Navy Top Brass openly call the LCS

the “Little Crappy Ship”

David Stephen
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David Stephen

You cant be serious Pacman. The LCS is a pile of crap and the worst example of procurement ever seen. You cant polish a turd. Nothing about the LCS is suitable. It has an abysmal range which is completely inadequate for RN needs. It cant do anything well. Not ASW, not ASuW and certainly not AAW. Most of them are broken, they need repair and port service every TWO weeks. They are utterly crap. They have no room for future growth. Check out the Navy Matters blog for several detailed analysis pieces on the LCS (both variants). Also they are… Read more »

Pacman27
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Pacman27

Hi DS I dont think they are as bad as stated but they are certainly at the right price point. For Freedom LCS you could insert a whole range of options: Belharra, Meko, C-Sword90, Venator, Spartan etc etc. It doesn’t necessarily have to be this model, there are tons of options. My point is that at £260m each (price each for 10 at 118m) you can spend another £100m per ship fixing the known issues and have a £400m 135m long capable frigate. The best part is the Americans have sunk in all the required R&D and ironed out most… Read more »

Mr Bell
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Mr Bell

The type 26 has now morphed into a hideously expensive vessel over £1 billion each judging by this order. Look at comparable French/ Italian FREMM they have similar size/ capabilities but I am sure did not cost over a billion each. This is a scandalous waste of precious tax payers money. The UK should have just gone for a revised/ enlarged and updated type 23 hull and ordered in huge numbers 16-20 hulls. The type 23 in fact is likely to be a superior ship to the type 31s coming but has advantage over type 26 in that it can… Read more »

Pacman27
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Pacman27

Fremm is costed at 680m Euros from memory – although the Belharra is targeted at a 25% reduction cost of 600m Euros that would place a FREMM in the 800m Euro price range. Make no mistake it is a top of the line ship.

David Stephen
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David Stephen

The £3.7 billion includes much more than the 3 vessels. The ships are working out around £800-£850 million a pop, not cheap but not as bad as made out in some publications. We cant update the type 23 hull as it does not meet todays standards. If we do type 31 right it be a good little ship. The FREMM ships have a few issues as well (structural deficiencies), lesser radar suite, less range (slightly) and higher crew requirements. The type 26 is what we need and we will get 8 (I hope) as the RN has specified that number… Read more »

Dan
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Dan

If the T31 is sufficiently ASW capable, or at least if sub classes can be made so, then perhaps we could cut the T26 order to 6 (or even 3-5), and then increase the T31 numbers accordingly (at an approximate rate of 2 T31 gained for each T26 cancelled). The T26 could then be the global cruiser and then a simplified T31 sonar tug variant could do a lot of the pier ASW work. Something like: 3 T26 8 ASW T31 7 GP T31 Or 5 T26 5 ASW T31 5 GP T31 If the NSS and subsequent T31 designs… Read more »

Mr Bell
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Mr Bell

The RN needs vessels of the type 26 frigates size and deep ocean/ world wide capability.
Just not at this price. Just checked French FREMM costs £610 million, Italian £590 million.
For £3.9 billion do the maths…we could be getting at least 6 potentially 7 comparable warships. They type 26 is over twice the price. Better had be twice as good to justify that massive cost.

Pacman27
Guest
Pacman27

It wont be – there are only a certain amount of variables go into these things and the hull form does not justify x2 price. Most of the rest is similar or the same, so the cost does not stack up.

Mike Saul
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Mike Saul

From defenceindustrialdaily.com Nov 2010 “Nov 29/10: Requirements. Rumors surface that the UK government is looking to sharply slash target costs for the Type 26 frigates, from GBP 500 million to GBP 250-350 million ($400 – 550 million), in order to field a large enough Royal Navy fleet. If the project is properly managed, and British shipyards can be cost-competitive, global precedents suggest that this is still enough to field a capable multi-role frigate. The question is what capabilities get removed, or become options that the frigates are fitted “for, but not with.” The latter approach has been popular in Britain,… Read more »

Mr Bell
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Mr Bell

I think if BAE cannot build warships of the right high-end capability we probably should just give up on warships building in this country sadly. National shipbuilding report is going to be ignored. BAE systems should be utterly ashamed of the quoted price of the type 26 frigates. we could be getting an Arleigh Burke flight 3 for this price, almost, which is a warship vastly more capable than anything else in Europe. So options: buy British version of FREMM for half the price of type 26. order type 26 but only for £600-700 million each and tell the suppliers… Read more »

Pacman27
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Pacman27

Or order 30 extended (135m+) Freedom class LCS from LM at £400m each ( I think they have quoted £358m previously) and spend the money wisely.

Take the ship yard back from BAE and hand it to LM.

Time for a change

Oh and stop building those god damn awful OPV’s that no one wants.

chris
Guest
chris

Pacman27 – I think now we are taking back control of our 12 mile fishing waters with the cancellation of the London Accord and will eventually on leaving the EU extend that to 200 miles / Median line those OPVs and indeed our current ones will be more than useful keeping the poachers at bay!

Pete
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Pete

Just watch the Type 31 cost explode next. It’s going to happen. The MoD is BAE’s personal piggy bank at this point.

andy
Guest
andy

the government screwed themselves and the country up by allowing bae to be more or less the sole supplier to the mod which has reduced the competition so bae are charging what they like and get away with it…time bae were scrapped or at least have some competitor to have a crack of the whip…we may get have got more for the same price

Steve
Guest
Steve

I assume this cost includes a lot of fixed costs, and that the next batch will be a lot cheaper.

Although after we massively overpaid for the river class to keep the yard open, i wouldn’t be surprised if this is the case again.

I wonder what the cost includes weapon wise, considering that most of the weaponary will be lifted from the existing ships. I hope we don’t end up with a t45 problem again, where we have an amazing platform, which is not fully armed.

chris
Guest
chris

If some of the prices being quoted above are correct for similar or better ships then this country is embarking on a downward spiral as regards naval shipbuilding. More cost per unit = less units. I will never ever support buying anything built abroad but we need to get some reality into this very limited market. I am no expert but it seems the US has developed very capable Littoral designs that have had all the development costs and I am sure we could build those designs here for less cost. What is wrong with building more Type 45 and… Read more »

Pacman27
Guest
Pacman27

Actually all the design costs are already sunk for T26 – after all it is 10 years late… The key issue here is transparency into what the cost actually gives us, but if it really is only 3 ships then as others have pointed out we have a major issue that needs addressing. The T26 should be the replacement for the T45 and be a 13 ship class of destroyer which is what it really is. The t31 should be a class of 26 and be a smaller multi role frigate and there are many capable offerings in this space… Read more »

Ian
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Ian

Numbers 10 & 11. It’s (almost) always Downing Street

Marcus
Guest
Marcus

Look at the build rate – one every other year, which has to support all the fixed costs of the yard. They would be considerably cheaper if the MoD would order at a higher rate. The original plan was one a year but George Osborne cut it back.

Steve
Guest
Steve

BAE Systems have been ripping the country off for decades.This is way to much for 3 frigates assuming they come in on budget,which given BAE’s record is unlikely.The company is unfit to compete for the Navy’s ships.

On a lighter note,any word on names?

Julian
Guest
Julian

Like others I am also shocked by the contract price but without knowing just what else apart from the first 3 fully-fitted out (I assume!) ships are included it is hard to really judge. Is there any ongoing maintenance? Does it include any additional one-off shoreside infrastructure items? Are there any final balloon payments on design costs or even some forward design costs for stuff that might proceed in parallel with the build? Is there any explicit de-escalator there whereby in return for higher initial contract award there will be pre-negotiated discounts applied to run-on orders. I’m guessing this is… Read more »

Ian
Guest
Ian

After all this growth in the MOD budget by 2020 it will be significantly smaller than it was in 2010 #persepctive

Steve
Guest
Steve

Yes Julian,along with “rising defence budget’,’Brexit uncertainty’ and ‘strong and stable’.All should be consigned to the bin.

Nick Bowman
Guest
Nick Bowman

Oh God – £3.7 billion? £1.23 billion each? That’s insane. Mr. Fallon should be pressed on the efficacy of the current one supplier strategy. It will be interesting to read what the forthcoming national shipbuilding strategy report has to say about cost control.

A. Smith
Guest
A. Smith

£3.7 billion for three ships is a shocking admission of failure and further evidence that using BAE as a single source supplier is wasting hundreds of millions in tax payer’s money and depleting our ship numbers ever further. I’d like to see 12 Type 31’s (Venator design) ordered with Mark 41 VLS, Artisan, Sea Ceptor, Brimestone Sea Spear and NSM/JSM and for them to be be built in parallel to the Type 26. What I think we’ll end up getting is a BAE “Cutlass” stretched OPV, masquerading as a frigate which will not be a capable war fighting vessel and… Read more »

Paul.P
Guest
Paul.P

Does this cost include 3 free ones for the RAN?

john
Guest
john

Everybody is right and the clowns you all voted for will go on regardless, no change no nothing, they care nothing only getting voted in next time the plebs are given a chance. So dream on lads!!

Mr Bell
Guest
Mr Bell

Maybe the cost is due to reduction of hull numbers from 13 to just 8 (with likelihood only 6 will actually get built)
Sounds like history repeating itself.
BAE warship type 45 destroyer programme was exactly the same. Outcome is a warship costing £1billion each when they are supposed to cost £500-600 million. It is all due to programme R+D costs being lobbed onto a smaller number of hulls. Maybe we should ask BAE if they will do a buy one get one free deal at that price!

Martin Symes
Guest
Martin Symes

Over £1billion for a frigate, over £200million for an off shore patrol vessel, some one call the police and report a mugging! I wonder if Sunseeker would consider quoting for warships, at least the crew would have some real luxury the same as Bae bosses.

Paul.P
Guest
Paul.P

That would do it, especially when you remember the (in)decisions regarding displacement.

Richard
Guest
Richard

Purely for context, Arleigh Burke DDGs 114-116 cost about 1.8bn dollars for all 3.

chris
Guest
chris

Richard – I have just checked some sources and I suspect you have misread the detail. Can I explain from one source?: “Ronald O’Rourke: ‘Navy DDG-51 and DDG-1000 Destroyer Programs: Background and Issues for Congress’. Since 1 and 2 ships are procured in alternate years and the ‘1 in a year’ ships cost more, the fairest estimate of unit price comes from averaging three ships across two years. US$50-300m is spent on long lead-time items in the year before the main procurement of each ship. DDG-114 and DDG-115 together cost US$577.2m (FY2010) + US$2,922.2m (FY2011) = US$3,499.4m,(p25) and DDG-116 cost… Read more »

Richard
Guest
Richard

Chris, thank you for your thorough explanation, I appreciate it.

chris
Guest
chris

An optimist would say “Blocks of 3 mean at least 9 or possibly 12 ships”

A realist knows that “Blocks of 3 mean only 6 ships”

Such is the stuff of failed plans and dreams made …

Richard
Guest
Richard

Yeah, Fallon using the example of the T45 build is hardly comforting either.

Mr Bell
Guest
Mr Bell

Scrap the type 26 programme. Totally and utterly forget it at this price. Go for an English version of Arleigh burke destroyer with some of our own unique weapons on. Cost will be as mentioned £1.5 billion each, but these are large impressive destroyers able to fullfill all roles. They really are cruiser sized and are easily able to face down almost any enemy warship. What’s not to like with that idea. A mixed force of type 45 and Arleigh burkes works for me. I no longer care about over priced BAE ship building on the Clyde. Much rather we… Read more »

Rob
Guest
Rob

Are we not forgetting that much of the contract price will end up back in the economy in the form of employment and taxes? Yes £1.2bn is a lot but paying another country to build our ships puts nothing back into our economy, doesn’t retain skills, nor does it maintain the independence of our armed forces.

I would imagine that equipping a FREMM or Arleigh Burke with RN/UK systems would be expensive as they are not designed with them in mind.

I sincerely hope though that hulls 4 to 8 come in at lower price. I won’t bet on it though.

joe
Guest
joe

Wow….
There is no way, absolutely no way that 8 of these will be built @ £1.2bn each.

David Stephen
Guest
David Stephen

it is not £3.7 billion divided by 3. The contract includes support costs and even some upgrade work at the two BAE yards. High end world beating warships cost a lot. The Type 45 is a brilliant AAW platform and cost about £1 billion a ship a decade ago. The Type 26 will be a brilliant ASW platform and will probably cost about the same per ship when all is said and done. Each class had a different massive cost driver. Type 45 had Sampson and Type 26 has noise reduction. These are mutually exclusive and force the development of… Read more »

Mr J B
Guest
Mr J B

David I respect your opinions on this matter but do believe that there is something amiss with this order. Is the cost so high per ship because we reduced order in SDSR 2015 from 13 to just 8- (same as the type 45 destroyer programme) there is economies of scale at work here. The RN needs at least 8 of these vessels- perhaps Fallon should go back to BAE and ask if we revert to 13 ships what would be the reduction based on economies of scale and a larger order. The glacial construction rate of the type 26 will… Read more »

Jassy Von Spik
Guest
Jassy Von Spik

8 types 26’s is insufficient. 13 was a minimum and trying to fill the void in numbers with toothless type 31’s is the real ripoff, too tax payers, cause a less than half capable ship, is still just that.

Mr Bell
Guest
Mr Bell

I think we need to reverse course. We cannot allow 8 frigates to be built at £1.23 billion each. we need to go back to bloody BAE and say what is the price per hull to go back to the original plan for 13 vessels? The type 26 needs to be the RN polyvalent hull form, it is the right size and armament but not at this price for gods sake. We need the type 26 hull to be adapted in the future say 12-15 years time to become the replacement for the type 45 destroyers. Unless we get a… Read more »

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[…] First Type 26 Frigate batch ordered on the Clyde in £3.7bn deal […]

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[…] At about US$350 million for a large 6,650-tonne ship, they are very economical; compare that to the £3.7-billion British government contract for three Type 26 frigates placed with BAE Systems in July. Canada’s military would be […]

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[…] At about US$350 million for a large 6,650-tonne ship, they are very economical; compare that to the £3.7-billion British government contract for three Type 26 frigates placed with BAE Systems in July. Canada’s military would be […]

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[…] At about US$350 million for a large 6,650-tonne ship, they are very economical; compare that to the £3.7-billion British government contract for three Type 26 frigates placed with BAE Systems in July. Canada’s military would be […]