Government fixes price on warship purchase - Supply Management
BAE Systems has produced a proposal for the new Type 31e - the Cutlass © BAE Systems
BAE Systems has produced a proposal for the new Type 31e - the Cutlass © BAE Systems

Government fixes price on warship purchase

6 September 2017

The Ministry of Defence (MoD) has announced plans to boost Britain’s shipbuilding industry with a shake-up of the procurement process.

The MoD will buy five Type 31e frigate warships and cap budgets at £250m per vessel with the first batch planned to enter service in 2023. 

“This time we are reversing the process, fixing the price from the start and making it fully competitive. The yard that can meet that price will win the competition,” defence secretary Michael Fallon told the BBC's Today programme.

This new government strategy allows the frigates to be constructed in sections by different companies across the UK, before being assembled at a central hub.

This unexpected move follows recommendations by industrialist and chairman of mining giant Anglo American, Sir John Parker, in his 2016 shipbuilding review.

He recommended a “sea change” in the way large navel projects were contracted to defence companies. The shift would allow shipyards across the country to compete for work and create jobs. 

A key focus in Sir John’s report was developing ships likely to interest foreign countries, helping to boost the declining British shipbuilding industry. The UK has failed to export a new warship for over 40 years.

“This new approach will lead to more cutting-edge ships for the growing Royal Navy that will be designed to maximise exports and be attractive to navies around the world,” said Fallon. He added that the strategy would “help boost jobs, skills, and growth in shipyards and the supply chain across the UK”.

This investment promise follows closures and job cuts in many major centres. BAE were forced to close their Portsmouth yard in 2015, ending more than 500 years of shipbuilding in the port city.

The sector makes up just 0.1% of GDP. 

The three ships, and eight more advanced Type 26's being built in Glasgow, will replace part of the navy fleet that is being phased out.

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