The evolving equipment budget situation: of aircraft carriers and OPVs

1: Of aircraft carriers and OPVs 
2: Land forces
3: Helicopters


Replacing the Rivers?

The biggest news of the last while is the announcement that military shipbuilding in Portsmouth is closing down and 1775 jobs in the shipbuilding sector are to go, with 940 coming from Portsmouth itself and the balance from Filton, Rosyth and the Clyde's yards. The announcement did not come as a surprise, as it had been in the air for a long while. The surprise came from the fact that, althout the battle to obtain funding for the construction of two new OPVs to be produced in Portsmouth, to both reinforce the navy and keep the shipyard alive, has failed, the MOD intends to actually buy three OPVs.
This could be excellent news, wasn't for the fact that it won't actually do anything to save Portsmouth and for the fact that, at the moment at least, these three new, larger and more capable OPVs, are not presented as reinforcements but as a replacement for the current three River-class OPVs of the fishery protection squadron.

The three new OPVs are going to be larger, coming with a flight deck sized for medium helicopters up to Merlin size, and with "additional operational flexibility through extra storage capacity and accommodation". This seems to suggest that the new OPVs will have more to share with the Amazonas taken up by Brazil than with the current Royal Navy's Rivers. Depending on what exactly is meant with extra storage capacity, the new ships could also act as "prototype of sorts" for the future MHPC ships, but from the little we know the project should essentially be based on the 90m OPV design by BAE. According to BAE, the 90m OPV can embark 6 standard TEU containers 20' without occupying the flight deck.

The expected marginal cost of these three ships is expected to be in the range of 100 million pounds in addition to unavoidable TOBA fees which the MOD would have had to pay to BAE systems anyway in absence of work for the shipyards.

Under the terms of the TOBA, without a shipbuilding order to fill that gap, the MOD would be required to pay BAE Systems for shipyards and workers to stand idle, producing nothing while their skill levels faded. Such a course would add significant risk to the effective delivery of the T26 programme, which assumes a skilled work force and a working shipyard to deliver it.

Ordering ships, therefore, does make plenty of sense and it is exactly what myself and others have been shouting for a long while, asking for just two such vessels as a way to keep Portsmouth going, knowing that in a few years time the shipyards are supposed to experience another phase of major activity, enough to assume that it would be possible to keep all three major yards busy. In particular, observing the MOD plans (even bearing in mind that changes and cuts are a constant...) we have:

- Main Gate for Type 26 frigate at the end of next year with building of the first vessel expected to start in 2016. 13 vessels to be built, with the first entering service in 2021 and the last not before 2036;

- MARS Solid Support Ship: while the MARS Fleet Tanker requirement has been met ordering hulls in South Korea on the ground that tanker hulls are simple and are best built by yards which build commercial tankers all the time, the assumption is (was?) that MARS Solid Support Ship, being more complex and technologically sensitive, would be built in british yards. The Fort class supply vessels are due out of service in 2023 (Fort Austin) and 2024 (Fort Rosalie) and undoubtedly Fort Victoria is also planned to bow out roughly in the same timeframe (2025, possibly?), so the replacement vessels have to enter service in the early 2020s. If they are to be built in Britain, and now doubting of it is licit, they will overlap with the work for the Type 26 frigates.

- MHPC: in late 2012 a DSTL document said that the MCM, Hydrographic and Patrol Capability programme should deliver the first new vessel in 2028. MHPC will replace the Hunt and Sandown minesweepers and, possibly, the hydrographic ships HMS Enterprise and HMS Echo. HMS Scott and her oversized equipment are unlikely to be replaceable by the relatively small multipurpose vessel (some 3000 tons, according to most sources) envisaged for MHPC. Delivery of the first vessel in 2028 implies an overlap with the activities on the late Type 26 ships, which will continue to be built into the 2030s.

These three programs, in theory, could have kept all three the major shipyards going, if only the short gap in workload between the aircraft carriers and the Type 26 was bridged. But the decision taken indicates that either the remaining yards can do it all; or someone is anticipating being far less busy than planned; or work on MARS SSS hulls is, like that on MARS FT, heading for foreign shipyards.

The boat building activity in will survive the closure of the major surface warship activity. Of interest in this field we have the Royal Marines requirements for a Fast Landing Craft, which has however been put on hold and won't resurface before 2020, when the slow LCU Mk10 is supposed to finally retire; and the requirement for a Force Protection Craft. The fate of this second Royal Marines requirement is not clear at the moment. During DSEI this year, CTrunk, while unveiling its THOR catamaran solution for riverine, force protection and inshore mission, said that they are in contact with the MOD, which hopes to reveal its final requirements for the boat during next year.
The Force Protection Craft programme, at least until 2011 or early 2012, hoped to deliver 12 crafts, which would partially replace the current fleet of 21 LCVP MK5, from 2016.
Hopefully, the programme is still going ahead.

Waiting for clarity on how the closure of Portsmouth affects the above shipbuilding plan and hoping that closing the yard doesn't turn out to be only the first one of a series of bad news, i want to focus on the building of the three OPVs.
Subject to approval in the coming months, these new vessels will begin being built already next year, with the first due for delivery in 2017. Their biggest merits are that they do good use of money that the MOD couldn't avoid spending (in absence of the order for these ships, BAE would be entitled to around, i believe, a couple hundred millions of payments under the TOBA agreement) and that they keep the workforce going and preserves the shipbuilding skills ahead of the critically important Type 26 project.

The unpleasant bit of news about them is that they are expected, at least for now, to replace the River OPVs. These cheap and effective vessels have only been purchased outright from BAE last year, for 39 million pounds. Initially, in fact, the three ships were not owned by the Royal Navy, but they had instead been built under an arrangement with the shipbuilder, Vosper Thornycroft (VT), under which the Royal Navy leased the vessels from the shipbuilder for a period of ten years. VT were responsible for all maintenance and support for the ships during the charter period. At the end of this, the Navy could then either return the ships, renew the lease or purchase them outright. The first lease period was renewed in 2007, out to 2013. In September 2012 the outright purchase was announced.

The oldest one was only launched in 2002, so in 2017, if replaced, would bow out after a mere 15 years of life and just 14 years of service, having been commissioned in 2003. In my opinion, this is shameful and can't be allowed to happen, especially not in a Royal Navy already struggling to cover its basic, daily committments.
There is no real operational reason why the Rivers need to be urgently replaced by larger OPVs with aviation landing facilities. While additional capability is always welcome, it should not come at the cost of the Rivers. The Rivers are not combat vessels: they patrol the economic zone of the UK and control that fishery respects the rules. They are very busy ships and they are very precious in forming the officers that will then transfer to the large warships. But they have little to no combat use, they are tied to home waters and they do not really need aviation facilities that would be seldom used at best. A flight deck could be handy to operate small rotary wing UAVs, perhaps, but a Camcopter does not take a Merlin flight deck, and i'm pretty sure that enough space could be arranged in the stern of the current Rivers, if that was the idea.

The new OPVs announcement, in other words, as it has been made, smells of back-door capability slashing. The Merlin-capable flight deck immediately made me imagine an horrible scenario in which know-nothing MPs with little understanding of the military are made to think that the ability to refuel a land-based Merlin helicopter away from the shore using the OPVs is a replacement for the missing Maritime Patrol Aircraft capability, for example. Most obviously, for a tons of very good reasons, this wouldn't even rank as mitigation of the gap, and never could it be "a replacement".

The Rivers are very busy in their intended role, besides, and the replacement vessels would be just as busy, meaning that they would actually have very little chance to even try and use their greater capabilities, which in home waters are useful, at best, but not essential.
And having a Merlin-flight deck is of little use when the availability of Merlin helicopters is going to be next to none, with just 30 of them being retained and all of them already overtasked, especially with the AEW role falling on them as well, under CROWSNEST. 

One thing for which the large flight decks could be useful is for landing the S-92 helicopters of the civilian SAR service coming up, to refuel them and enable them to expand their reach out at sea, but even this might be an illusion as it is unclear if the PFI-supplied crews will even have any deck-landing certification.


MP Bob Stewart has, admiradly, thought of the same thing, but still we have no precise answer on whether that would be possible. The helicopter could surely use the deck, but would the crews be qualified for it? That's the real question.

Bob Stewart (Beckenham) (Con): Most people suggest that our biggest defence capability is not in maritime patrol aircraft. I am no expert—although I can see that there are many naval experts in the Chamber—but could this new River class OPV, with its enhanced length and helicopter deck, also be used to cover the gap between 240 nautical miles, the distance a land-based helicopter can go out from our shores into the Atlantic, and the 1,200 nautical miles for which we are treaty responsible? Could it perhaps play some sort of MPA role in that area?

Mr Hammond: I have not looked at the specification in detail, but I do not envisage that the thing will be able to take off and fly. I understand the point that my hon. Friend is making, however, and we are conscious of the gap in maritime patrol aircraft capability. It is one issue that will be addressed in SDSR 2015 and we will manage the gap in the meantime through close collaboration with our allies. We are considering all the options, including, potentially, the use of unmanned aerial vehicles in a maritime patrol role in the future.

Also note how, as i feared, irrealistic mentions of MPA capability are made. Back-door capability cutting, camouflaged as new capability being delivered. Disasterous, and tipically suited to politicians. Better to keep one hunded eyes open on this matter. 

In other words, there is no real need to replace the Rivers with these new vessels. Losing the current River vessels would be a waste, and the greater capabilities of the replacements could also end up largely wasted.
In fact, these new vessels would be perfectly suited for interdiction of smuggling, for protection of oversea territories (And the Caribbean standing task springs to mind) and counter-piracy work as well, as noted by Hammond himself in answer to a question by Peter Luff: 

 
Peter Luff (Mid Worcestershire) (Con): I commend the Secretary of State, the Minister for defence equipment—the Under-Secretary of State for Defence, my hon. Friend the Member for Ludlow (Mr Dunne)—the Chief of Defence Matériel and all those involved for making the best of a very difficult situation. Will my right hon. Friend clarify the purpose and capabilities of the three new very welcome offshore patrol vessels?

Mr Hammond: They will be more capable than the existing River class, as they will be able to take a larger helicopter and will be 10 metres longer. They will be able to undertake a full range of duties, including not only fishery protection but the interdiction of smuggling, counter-piracy operations and the protection of our overseas territories.

To do all that, though, the new vessels would have to sail far away from home and, most likely for it to have any sense, they would have to be forward based, like HMS Clyde in the Falklands. While the OPV is suited for ocean navigation, it has a very short logistic endurance in terms of stores and, in part, in terms of fuel, so that sailing it back and forth from the UK would be unworkable.
The new OPV would be a perfect solution for the West Indies committment, if it was forward based there. If the ships end up home-based, and tied to the River's current role, they won't be able to do anything of what they could and should do. 

In my opinion, the Royal Navy can obtain an excellent boost in capability if it manages to retain the Rivers for fishery protection and home waters, using the new vessels in addition, forward-basing them overseas. I can think of three locations:

Caribbean, removing a committment that has been a source of problems and embarrassment for the Royal Navy which has long struggled to find a way to send a warship, having to resort extensively to RFA vessels which would also be very much needed elsewhere, for their actual role.

Gibraltar, because from the base the OPV would be able to engage with allies, with North and West African countries while also providing much needed reassurance to the Gibraltarians, which are loudly calling for a more tangible sign of UK support

Bahrain, because the OPV would be able to provide additional anti-FAC protection to the minesweeper squadron there and/or deploy to piracy-infested waters, restoring more enduring british presence in the wider area and relieving the warships from another role which has been hard to cover with a sheet which is, at the moment, just too short.

The challenge is, of course, in budget and manpower. The Royal Navy is exceptionally lean-manned, following the latest cuts. The insufficient manpower is possibly the biggest problem that must be overcome to bring the second aircraft carrier into service alongside the first, and trying to man three new patrol vessels as well, even with the crews being pretty small, is not going to be straightforward at all.
In terms of cost, the River class costs annually just about 20 millions per year. More correctly, it did in 2010: the current value is probably different. The outright purchase of the vessels has been made in the assumption (hopefully supported by facts) that removing the lease costs would reduce the annual expenditure, while further differences are likely because of inflation and other factors. Anyway, we are talking of a very small amount for three very useful vessels with plenty of life left in them. The new OPVs will also be hopefully quite cost-effective, so the Royal Navy should make every effort to secure all six in the longer term.

The door for such a decision, at least in the words, is left open:

Mr Julian Brazier (Canterbury) (Con): I, too, pay tribute to my hon. Friend the Member for Portsmouth North (Penny Mordaunt) for her doughty struggle to get a good city deal for her constituents and for the vision for the OPVs that to my knowledge she has been outlining for at least two years. Will the Secretary of State confirm that the OPVs will to some extent provide a force multiplier for our frigate fleet? Some of the roles carried out by frigates do not require full frigate capability, so the OPVs could be a way of partially expanding that capability.

Mr Hammond: At the risk of causing her to blush, I am happy once again to praise my hon. Friend the Member for Portsmouth North. I should say to my hon. Friend the Member for Canterbury (Mr Brazier) that no decision has yet been taken about whether the old River class vessels will be retired after the new OPVs are brought into service. That decision will have to be made in SDSR 2015 based on the ongoing budget challenges of maintaining additional vessels at sea. That will be a decision for the Royal Navy.

This is somewhat reassuring, as well as the admission that there has not been a decision on where to base the new OPVs. If they were already certainly meant as a replacement for the Rivers, the basing answer would be pretty simple.
Of course, the door is not locked, but this does not make it easy to push it wide open and squeeze the new ships and the old ships through. I can only hope that the Royal Navy realizes how decisive the next SDSR is going to be for its future, and i hope people is hard at work, already now, to make sure to fight the incoming battle with the utmost determination.

Any possible solution should be actively considered. To overcome the manpower issues, it might be attractive to use RFA manpower, but we must not forget that the SDSR took away 400 men from it as well, leaving it far from being overmanned.

Another chance, which has the favor of government, is the use of reserve personnel. This is the only area that is seeing a manpower increase, and it is also low-cost manpower compared to regulars, so it might be very helpful to find ways to fill as many posts as possible on board of the OPVs with reservists, even though it is challenging: normally, a crew member on a River stays onboard for four weeks and then rotates ashore for two weeks, while the ship is at sea for most of the year. Finding a way to make good use of reserves in this cycle could be challenging. 



A note on the aircraft carriers as well: as part of the announcement, Hammond confirmed that the cost of the enterprise has grown further, to 6.2 billion, an increase of 800 million from the last announced figure. If we believe to the secretary, however, this has had no impact on projects other than the carriers themselves, as the increase has been absorbed using the programme's own built-in financial margins. This, we are told, has avoided the use of any of the 4 billion pounds contingency reserve built into the 10-year budget:

In 2012, I instructed my Department to begin negotiations to restructure the contract better to protect the interests of the taxpayer and to ensure the delivery of the carriers to a clear time schedule and at a realistic and deliverable cost. Following 18 months of complex negotiations with industry, I am pleased to inform the House that we have now reached heads of terms with the alliance that will address directly the concerns articulated by the PAC and others. Under the revised agreement, the total capital cost to Defence of procuring the carriers will be £6.2 billion, a figure arrived at after detailed analysis of costs already incurred and future costs and risks over the remaining seven years to the end of the project. Crucially, under the new agreement, any variation above or below that price will be shared on a 50:50 basis between Government and industry, until all the contractor’s profit is lost, meaning that interests are now properly aligned, driving the behaviour change needed to see this contract effectively delivered.The increase in the cost of this project does not come as a surprise. When I announced in May last year that I had balanced the defence budget, I did so having already made prudent provision in the equipment plan for a cost increase in the carrier programme above the £5.46 billion cost reported in the major projects review 2012 and I did that in recognition of the inevitability of cost-drift in a contract that was so lop-sided and poorly constructed.
I also made provision for the cost of nugatory design work on the “cats and traps” system for the carrier variant operation and for reinstating the ski-jump needed for short take-off and vertical landing operations. At the time of the reversion announcement, I said that these costs could be as much as £100 million; I am pleased to tell the House today that they currently stand at £62 million, with the expectation that the final figure will be lower still.
Given the commercially sensitive nature of the negotiations with the Aircraft Carrier Alliance, I was not able publicly to reveal these additional provisions in our budget, since to do so would have undermined our negotiating position with industry. However, the MOD did inform the National Audit Office of these provisions, and it is on that basis that it reviewed and reported on our 10-year equipment plan in January this year.

I am therefore able to confirm to the House that the revised cost of the carriers remains within the additional provision made in May 2012 in the equipment plan; that as a result of this prudent approach, the defence budget remains in balance, with the full cost of the carriers provided for; and that the centrally held contingency of more than £4 billion in the equipment plan that I announced remains unused and intact, 18 months after it was announced.
In addition to renegotiating the target price and the terms of the contract, we have agreed with the Aircraft Carrier Alliance to make changes to the governance of the project better to reflect the collaborative approach to project management that the new cost-sharing arrangements will induce and to improve the delivery of the programme. The project remains on schedule for sea trials of HMS Queen Elizabeth in 2017 and flying trials with the F35B commencing in 2018.

Hoping that this is true, because any penny matters, these days, and the two major army programmes, the FRES SV and Warrior CSP, are both dealing with some trouble and delays which might cause cost increases, and i'll talk of armour in the coming days in a new post.