Select Committee on Defence Appendices to the Minutes of Evidence


APPENDIX 14

Letter to the Chairman of the Committee from the Minister for Defence Procurement (21 November 2001)

  I am pleased to be able to inform you that the Ministry of Defence is announcing today, by way of a written answer to a Parliamentary Question, the award of contracts for the next stage of assessment for the Future Carrier (CVF) project to BAE SYSTEMS and Thales Naval Ltd. This further strengthens our clear commitment to the CVF programme.

  As you are probably aware, assessment work on the new carrier project began back in November 1999 when contracts were awarded to the two competing consortia headed by BAE Systems and Thales Naval Ltd. Originally, this work was split into two stages, with progress to the second stage depending on performance during the first stage and the submission by the contractors of acceptable proposals for the second stage.

  The first stage of Assessment was completed in June this year. Since then we have been working to determine the most efficient and cost effective way forward. We have taken into account the views of both consortia as to the level work required to minimise the level of risk in the CVF programme.

  We have therefore decided to revise the CVF procurement strategy so as to maximise competition for the remainder of the assessment phase. For the next twelve months, until November 2002, the competing consortia will concentrate on refining their designs and taking key trade-off decisions. At that point we will make a detailed analysis of the merits of the two bids before announcing a single preferred prime contractor in early 2003.

  The preferred consortia will then continue assessment work through the summer of 2003 in order to provide the robust cost, time and performance information we need to make our main investment decision. This will allow us to make a decision to place a formal build contract in early 2004 and to move seamlessly from the Assessment to the Build phase of the programme. The selected prime will be expected to stick to the time, cost and performance proposals agreed at the end of the assessment phase. Following the announcement of a preferred contractor, competition will be maximised at the sub-contractor level to ensure that robust prices are achieved.

  In adopting this revised approach we are seeking to apply Smart Acquisition principles. This will allow us to maximise the advantages offered by competition and thus ensure that we achieve best value for money for the taxpayer. As part of this, we will make around a further £20 million available to the contractors during the Assessment Phase. This will enable the selected prime to prepare more confidently their proposals for the build programme. Critically, the In-Service Dates of the two new carriers remain unchanged at 2012 and 2015 respectively.

  Both BAE SYSTEMS and Thales have welcomed our new approach which demonstrates innovative thinking to deliver value for money.

  This decision is good news for the Armed Forces. When combined with progress on the Type 45 programme, the Astute submarines, and the Alternative Landing Ship Logistics, it re-affirms in the strongest possible terms this Government's commitment to ensuring that our Armed Forces are equipped with battle-winning equipment. Combined with the Future Joint Combat Aircraft, the carriers will provide the UK with a formidable force projection capability. It also highlights the significant opportunities that currently exist for UK shipbuilders to participate in our extensive warship-building programme.

  I hope that you will support the decision.



 
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