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.”