MoD under fire over carrier contract

13 February 2003
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13 February 2003 | Robin Parker

Defence experts have accused the British government of fudging a £3 billion deal to build two new aircraft carriers.

They say the last-minute decision to split work on the UK's biggest naval procurement deal in more than 50 years between Britain's BAE Systems and Paris-based Thales could compromise BAE's design capabilities.

The decision was made even though the two firms made separate bids for the work.

BAE is to be the prime contractor, leading construction of the two aircraft carriers in four UK shipyards, but they must be built to Thales' specifications.

Thales, which is one-third owned by the French government, won a third of the value of the contract.

The Ministry of Defence (MoD) called the deal an "innovative" partnership appropriate to the size of the project, and said it will encourage competition and safeguard 10,000 British jobs over the next 15 years.

But Keith Hartley, director of the centre for defence economics at the University of York, said the deal "smacks of a last-minute compromise" by the MoD.

"Partnership was barely talked about until about a fortnight before it was awarded," he said.

"The MoD seems to want to keep Thales in the market to keep BAE competitive, and giving it a third of the work is a kind of consolation prize."

Hartley said that since the firms had no plan to collaborate, the MoD must watch closely that the project does not become further compromised.

"If BAE is genuinely the prime contractor, it should have the discretion to say what work will go to Thales, or how will it retain its own design capacity."

Jestyn Cooper, a defence procurement analyst at Eric Morris Consultancy, added that BAE could be at a strategic disadvantage, despite winning the lion's share of the work by value.

"It has ended up effectively being asked to cut sheet metal while Thales is rewarded for its technical skills in an ultimately more lucrative deal, in which large parts of its technology could be exported."

Thales is also in the running for the £800 million Watchkeeper surveillance aircraft contract, but BAE missed the shortlist.

BAE said Thales will bring "many strengths" to the alliance. Nigel Stewart, BAE's future carrier managing director, said in a statement: "Our collaborative approach throughout has been consistent, as a project of this size and complexity can only succeed through partnership."

Work will start in 2006 on the 60,000-tonne carriers, each of which is to carry up to 48 fighter aircraft and is likely to be used for up to 50 years.


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