Government rationale for tendering Fleet Solid Support Ships overseas criticised

Former shipyard worker turned MP for Glasgow North East Paul Sweeney has criticised the Government for failing to restrict the tendering for Fleet Solid Support Ships to the UK.

During a recent debate on UK sovereign capability, All-Party Parliamentary Group for Shipbuilding & Ship Repair Vice-Chair Paul Sweeney pointed out that despite claims to the contrary from some corners, the UK was well within its rights to protect this tendering process from international competition:

“In the context of major shipyard closures and significant downsizing, whether that is at Rosyth or Appledore, it is bizarre that the Government are quite happy to tender contracts overseas in international open competition. Under article 346 of the treaty on the functioning of the European Union, the Government could quite easily designate the industry as UK protected. It is entirely at their discretion. Any notion that their hands are tied is bogus.

They could do that, smooth the production cycles and build a firm and stable footprint for UK shipyards, which would enable them to get match fit and then go out into the world and compete effectively for other orders. That is exactly what they do in Italy with Fincantieri, and what they do in France with DCNS. It is exactly what happens in Germany.

I do not understand why other European Union member states can achieve the same objectives much more effectively than us, but we are so holier than thou that it hurts when it comes to the zealous application of these EU rules and we seem to undermine our own industrial base and our prosperity as a result, meaning that communities are broken and skills are lost. Ultimately, we undermine our objective of building a more resilient and effective industrial base to serve our defence industry and, potentially, commercial spin-offs.”

The definition of warship was also challenged. For perspective, according to the UN Convention on the Law of the Sea article 29:

“For the purposes of this Convention, “warship” means a ship belonging to the armed forces of a State bearing the external marks distinguishing such ships of its nationality, under the command of an officer duly commissioned by the government of the State and whose name appears in the appropriate service list or its equivalent, and manned by a crew which is under regular armed forces discipline.”

However, the National Shipbuilding Strategy defines warships (some would say incorrectly) as solely destroyers, frigates and aircraft carriers. This was also highlighted during the debate in this exchange, prompted by Stuart Andrew, Minister for Defence Procurement, saying the following:

“It is not a warship by definition, for the simple reason that the definition is based on the UK’s requirement to retain the ability to design, build and integrate frigates, destroyers and aircraft carriers for reasons of national security, ensuring that the complex nature of the construct is an important part of it from the very beginning. We will continue to have this argument—unions are coming to meet me very soon to discuss it.”

Sweeney responded:

“The Minister’s last remark about the need to maintain the UK’s sovereign ​capability to build complex warships being arbitrarily restricted to frigates, destroyers and aircraft carriers, the only reason we can build those ships in the UK today is that the last Labour Government placed an order for an auxiliary ship, the RFA Wave Ruler, at Govan shipyard in 1999, which enabled that yard to continue in operation.

Also, there are five River class batch 2 patrol vessels being built at Govan to sustain production there until the Type 26 kicks in. By utilising those less complex, but none the less complex, warships to smooth the build cycle, we can retain the skills, infrastructure and critical mass we need to build complex warships including frigates, destroyers and aircraft carriers.

We must look beyond that arbitrary restriction and maximise the purchasing power of the Ministry of Defence to deliver UK sovereign capability in the long term. We should broaden our horizons.”

According to a briefing paper in the House of Commons library, the programme is currently in the Assessment Phase with the competition expected to be formally launched towards the end of 2018 and a contract signed in 2020. The MoD says the contract will be for two ships with an option for a third. The briefing paper states:

“The Government intends to compete the contract internationally. Labour, the SNP and the shipbuilding trade unions argue the contract should be restricted to UK shipyards to support the shipbuilding industry, secure jobs and retain skills. They argue the proposed ships are ‘warships’ and as such, the Government can use the Article 346 exemption to exclude the contract from EU procurement rules on national security grounds.”

Two major unions, GMB and the Confederation of Shipbuilding and Engineering Unions (CSEU), have published reports outlining why they believe the ships should be classified as warships and why they should be competed domestically. The Unions arguments can be summarised as:

• The FSS should be seen as warships. They are armed and take part in counter-piracy and counter-narcotic missions;
• The Government’s commitment to revitalising domestic naval shipbuilding (as espoused in the National Shipbuilding Strategy) will only be achievable with a steady stream of orders;
• Building the FSS in the UK will help protect the UK shipbuilding industry, protect jobs and retain skills: GMB estimates up to 6,500 jobs could be created or secured, including 1,805 shipyard jobs;
• Rosyth shipyard will have a gap between the completion of HMS Prince of Wales (the second aircraft carrier) in 2019 and the expected refit of HMS Queen Elizabeth (the first aircraft carrier) in 2030, and FSS work could keep the shipyard operational in between these dates;
• The UK will financially benefit from returns to the Treasury in the form of taxes and national insurance contributions and lower welfare payments: GMB estimates £285m of the estimated £1bn contract could be returned to taxpayers this way; CSEU estimates 20% of the contract cost could be returned to the Treasury;
• The Government should factor in the revenue that could be returned to the Treasury when scoring bids between domestic suppliers and foreign competitors;
• There isn’t a level playing field as, the CSEU argues, “many foreign yards are either state owned, or receive significant direct or indirect subsidy… UK yards do not benefit in this way and are therefore at an unfair disadvantage.”

The TUC has also assessed the Article 346 exemption argument and argues the Government “has the sole right to determine” what its essential national security interests are. The TUC claims “other European nations have used the exemption to place orders for similar support ships with their own shipyards since the Directive was introduced.”

December this year will see the formal issue of documentation inviting bids for the design and build contract and in 2020, the contract for design and build is to be awarded.