Oral evidence: National Shipbuilding Strategy Refresh, HC 1108
Tuesday 31 January 2023
Ordered by the House of Commons to be published on 31 January 2023.
Members present: Mr Tobias Ellwood (Chair); Sarah Atherton; Robert Courts; Dave Doogan; Richard Drax; Mr Mark Francois; Mr Kevan Jones; Mrs Emma Lewell-Buck; John Spellar; Derek Twigg.
I: Vice Admiral Paul Marshall CBE, Senior Responsible Owner Type 31 and FSS and Commodore Stephen Roberts, Senior Responsible Owner Type 26.
Witnesses: Vice Admiral Paul Marshall and Commodore Stephen Roberts.
Q1 Chair: Order. Welcome to this Defence Committee hearing on Tuesday 31 January 2023, and our annual update on major shipbuilding programmes. I am delighted to welcome Vice Admiral Paul Marshall, who is a senior responsible officer—SRO—for the Type 31 frigate and Fleet Solid Support ship programmes, as well as Commodore Stephen Roberts, who is the SRO for the Type 26 frigate programme. Welcome to the Committee. We are delighted to see you here today. Before we go into our session and ask specific questions on those three programmes, could I begin by asking if you could just bring us up to date on the issues to do with the propulsion system for HMS Prince of Wales?
Vice Admiral Marshall: I can confirm that the repair to the Prince of Wales starboard shaft is expected to be completed in spring this year. That will allow her to return to base in Portsmouth for a pre-planned maintenance period and re-join operations in autumn this year.
Q2 Chair: This has obviously been a bit of a setback. I think it arguably may have spent more time in dry dock than it has at sea. Can you say whether the problem with the propulsion shaft will affect the port side and the Queen Elizabeth aircraft carrier as well?
Vice Admiral Marshall: I will tell you about the QE first. We have done appropriate checks with the QE. We do not believe that there is a class issue with the shafts in the carriers. With the defects to the Prince of Wales’s shaft, we have obviously done appropriate checks on the port shaft. We have found similar issues, which could result in—
Q3 Chair: Are you still with the Prince of Wales?
Vice Admiral Marshall: Sorry, I am with the Prince of Wales now. With QE, we are confident that there is not an issue, and it is not a class issue with the carriers. Back to the Prince of Wales and the port shaft, obviously we did appropriate checks with the port shaft. We found similar issues with the port shaft and we will be repairing the port shaft at the same time as the starboard shaft.
Q4 Chair: Which makes sense, but then there is the bigger question as to how this happened. Was it something that happened while at sea or was it something that happened in the build itself?
Vice Admiral Marshall: In parallel with the repair, we are carrying out a full investigation into the root cause of the failure. That investigation is nearing completion: it would be inappropriate for me to discuss conclusions ahead of briefing our own Ministers.
Q5 Chair: So, we still cannot say whether it is something that happened—a maintenance error, while at sea, or whether it was part of the build itself.
Vice Admiral Marshall: The investigation gets to that root cause but, until I have had that opportunity to brief the MoD and Ministers, it would be inappropriate for me to brief here.
Chair: The Committee would be delighted to learn any findings as soon as possible. Staying on the carriers, Mark, did you want to come in?
Q6 Mr Francois: Briefly. The Prince of Wales was commissioned in December 2019. She suffered two serious leaks in 2020. According to The Times, between October 2020 and April 2021, she spent 193 days having that water damage repaired. In August 2021, she set sail for the east coast. She then breaks down, and has to be towed to Rosyth. What, fundamentally, is the problem with this £3 billion warship? What actually is the problem?
Vice Admiral Marshall: Again, the investigation is getting to the root cause as a failure in the starboard shaft, but at the same time, looking at systemic issues: how we conduct operations and maintenance in the carriers, and how we manage the material state of the carriers. That will be part of the investigation, but again it would be inappropriate for me to comment.
Q7 Mr Francois: She is the same design as Queen Elizabeth, which has not had any of these problems. Is the Prince of Wales just an unlucky ship, or is there something that went wrong with the build of the Prince of Wales that did not happen with QE? Why does the Prince of Wales keep breaking down? We cannot have—when you add in the air group—a £5 billion carrier with a limp.
Vice Admiral Marshall: Again, I am confident that the investigation will address the root cause. It will identify the root cause and the lessons that we need, not only to repair the ship but to improve the maintenance and material state of the Prince of Wales in particular, going forward, but it would be inappropriate of me to comment until I have had the chance to brief Ministers.
Q8 Mr Francois: Hang on. When you get this report, can the Committee see it, please?
Vice Admiral Marshall: I need to brief Ministers on the content of the report before—
Mr Francois: You can brief them, but when you have briefed them, can we, as the Defence Committee of the UK Parliament, have the report, please, so that we know what the problem is, as well?
Moving on to the Type 32. I have my own personal view that this was an error in a speech that was made, which suddenly created the Type 32. I have said that to a number of people, including the First Sea Lord. Nobody has ever corrected me or denied it. Whether the Type 32 was the figment of the imagination of the Prime Minister reading the speech out at the time or was planned, could you update the Committee on the future of the Type 32?
Commodore Roberts: The Type 32 is in the integrated review; it is in the defence command plan. It is at the concept stage at the moment. As we go through the concept stage, we will get a better idea of what the programme will look like for the Type 32. It is a very much a programme at the moment; it is at the concept stage.
Q10 Chair: Prior to the integrated review, when did you first hear of the Type 32?
Commodore Roberts: As the Type 26 senior responsible owner, I was not involved in the detail of the integrated review. The first time I heard of it was in the defence command paper, as did the rest of the public.
Chair: Right. Okay. Interesting.
Q11 Mr Kevan Jones: There is no budget for it in the budget lines of the MoD. You say that it is at concept phase. What effect is that going to have on Type 31? It was planned as a follow-on ship from the Type 31, wasn’t it? We haven’t got a budget and it is still not even on the drawing board. It is the figment of somebody’s imagination, or perhaps the then Prime Minister’s overactive imagination. What effect will that have in terms of the drumbeat of work for the yards?
Vice Admiral Marshall: As Commodore Roberts said, the Type 32 is in the concept phase. We do not set budgets for defence programmes until we go forward with a business case. That happens after concept. What the national shipbuilding strategy refresh did was set an initial budget. We are currently reviewing what the order of buy—in terms of that drumbeat—needs to be, based predominantly on the capability needs of the Royal Navy, but also the need to sustain shipbuilding in the UK.
Chair: I think we have made the point clear. Sometimes programmes get cut because they are not going anywhere. The example of Ajax springs to mind. As we heard, this has no money, yet people are starting to work on it. It is so far ahead in the future that I think the view is, “Why don’t we just concentrate on getting Type 31 correct, rather than keeping this thing bubbling, which just came out of thin air?”
Q12 Dave Doogan: Just in terms of pure industrial strategy, the Type 31 going into competition as a new class of ship kind of negates the economies of scale of 31 coming through from Babcock and Rosyth. Is it not much wiser to have a modification, iteration and evolution of 31, with a further five ships, rather than inventing and incurring the cost of a whole new class which is actually broadly similar to the class that went before—before you have even seen what the value add of Type 26 and Type 31 is. In reality, by the time those two classes combine, it is going to be difficult to know what you want to complement those 13 ships with. Given that Babcock is a common denominator in both, is it not much more intelligent to pursue the 31?
Vice Admiral Marshall: It is absolutely right that we need to continue to deliver Type 31 and meet milestones on Type 31. Looking forward, there is a lot of uncertainty in the programme. We have not yet completed the structure of Ship 1, nor started integrating the combat system into the platform—so it would be prudent to navigate those uncertainties before making any decisions. Certainly, you are right that the through-life costs of the ship are very important, and the greater commonality that we can drive into the supply chain as a result of that is a key consideration in delivering a value for money proposition for the fleet. As you say, the decision is some way off about what follows on either from Type 31 or, indeed, Type 32, after the concept phase.
Chair: Okay. We will focus on what is real rather than what is concept. Emma, do you have a quick question?
Q13 Mrs Lewell-Buck: On a follow-up, I think it was you, Vice-Admiral, who said that there are people working on Type 32. Who is working on it?
Vice Admiral Marshall: When we have a programme or project in the concept phase, that is done by the Navy command headquarters development team. They take the concept and work out the requirements that the Navy needs to meet the threats of the future. Once those requirements are set, what happens normally is that it is passed to a delivery team to get on with the business of full design and implementation.
Q14 Mrs Lewell-Buck: In terms of knowing how things operate, there will be a grid somewhere with timescales on that—so what are the development team’s next steps? What is the date that they are going to be ready to present something?
Vice Admiral Marshall: Again, bringing it back to the reality of the shipbuilding programme, one of the things that the concept team is looking at quite heavily is how we are doing on Type 31. We do not need to make any decisions until further down the delivery of Type 31—when we have started to understand the risks associated both with production and combat system integration.
Dave Doogan: They did very well on Type 31; all milestones are met.
Vice Admiral Marshall: Type 31 is currently on track to deliver exactly what is said in the contract.
Q15 Chair: I think you get the impression that we are curious about Type 32. When people invent something, such as the bouncing bomb, there is a name attached to it—obviously, that name was Barnes Wallis. There is Frank Whittle and the jet engine, for example. I am curious to know who the individual was who came up with the Type 32. I am going to keep seeking—it will probably take more than a Committee session to work that out.
Let us move on to shipbuilding capability. Can you begin by just confirming that it is 18 frigates and destroyers that the Royal Navy still seeks to have as its mainstay surface fleet?
Commodore Roberts: We have eight Type 26s on contract and five Type 31s—those are the ones that are on contract.
Q16 Chair: Okay. That is only 13, so the remainder are Type 23s. Is that right? So we continue to have 18. Is that the number, or have we dropped down from having that key number of 18 as part of the surface fleet?
Vice Admiral Marshall: The Type 45 destroyers, rather than the frigates—there are six of those, and that builds up to the surface combatant fleet of 19.
Q17 Chair: So 19 is now the new number to have. Is that right?
Vice Admiral Marshall: Going back to SDSR 2015, the decision was to go from 13 Type 26s to a class of eight focused on anti-submarine warfare. That is what we are delivering, plus five general-purpose Type 31 frigates.
Q18 Chair: Just to confirm where we are today, do we have 19 ready to go? Where is that number now?
Vice Admiral Marshall: I believe there is an availability session being planned to discuss the availability of the fleet.
Q19 Chair: Sorry, that is not an answer. I am asking you whether we have 19 ready to go. Can you give me an answer to that?
Vice Admiral Marshall: I do not have the availability figures today in front of me.
Q20 Chair: Okay. Again, if that could be provided to the Committee to explain where we are today. These are amazing bits of state-of-art equipment that are coming in. We have seen and visited them, and we in Britain can be very proud of them. Ultimately, with threats increasing—not least in the maritime domain—it would be good to know that there are 19 frigates and destroyers available for the Royal Navy, but you are not able to give me an answer to that.
Vice Admiral Marshall: I cannot give it at the moment. I think that would require us to lay out in significant detail—it would detract from the shipbuilding element—which ships are planned to be in maintenance, which are planned to be in upkeep and which are of very high readiness, and obviously the ebbs and flows of a cycle that is geared around the carrier deployments. That needs to be explained in a more nuanced way.
Q21 John Spellar: No, it doesn’t. If, for example, a significant Russian presence came down through the North sea—this is a straightforward question—how many vessels of the Royal Navy would be able to be put to sea to deal with that? That is a straightforward question.
Derek Twigg: We are having a review about it.
John Spellar: Sorry, that is a straightforward question. The Russians will know, so we are not asking about anything that is classified.
Chair: Order. Let’s give Vice Admiral Marshall one more opportunity to give clarity to this question. If you cannot, can you please provide it in writing? We have to make progress here, but it is a very straightforward question. I think it is called force effects at readiness. How does that apply to the surface fleet now?
Vice Admiral Marshall: To answer Mr Spellar’s specific question, in the example of the recent Russian activity, we were able to mobilise our fleet-ready escorts to monitor that activity successfully. That is part of the routine planning of the Royal Navy.
Q22 Mr Francois: Look, it is a perfectly straightforward question. How many of the Royal Navy’s frigates and destroyers are operationally available today? It is a very simple question.
Vice Admiral Marshall: It is a very simple question, but I came prepared today to talk about shipbuilding.
Mr Francois: You are a Vice Admiral.
Chair: Order. We have now asked the question a number of times, and you have given us the reply. We are not going to get any further from here, but it is an important question that the Committee would like an answer to, if that can be taken back with you.
Let’s make progress on the Type 31 specifically. Richard Drax, over to you.
Q23 Richard Drax: Good morning, gentlemen. All reports indicate that the Type 31 programme is still on schedule and in budget. Can you confirm that this is the case?
Vice Admiral Marshall: The Type 31 frigate programme is currently on track to deliver exactly what we set out to achieve, which is delivery of five ships by 2028.
Q24 Richard Drax: You mentioned earlier, when talking to one of my colleagues, that there were some ongoing issues with the Type 31. Is that what you were saying?
Vice Admiral Marshall: Not ongoing issues. As with any complex shipbuilding programme, we have yet to navigate some of the tricky elements. Construction is on track.
Q25 Richard Drax: What are the tricky elements?
Vice Admiral Marshall: Structural completeness of the ship, and specifically the integration of the combat system into the platform. That work is starting now, and we are in the process of building integration facilities at Portsdown Technology Park in Portsmouth as a de-risking activity for that essential part of the ship build.
Q26 Richard Drax: This is HMS Venturer, of course.
Vice Admiral Marshall: Yes, and HMS Active cut steel last week.
Q27 Richard Drax: Will Venturer be in the water this year?
Vice Admiral Marshall: We are planning on having Venturer in the water this year.
Q28 Richard Drax: How long is it from start to finish?
Vice Admiral Marshall: In terms of delivering the initial operating capability for HMS Venturer, we are planning that activity to complete in 2027.
Q29 Richard Drax: So it will be operational in 2027, but in the water at the end of this year?
Vice Admiral Marshall: Yes. It won’t have the combat system integrated at that point.
Q30 Richard Drax: So from the end of 2023, it is going to take three years—
Vice Admiral Marshall: To integrate the combats and finish the ship will take three years. Floating off the ship is one issue. Completing the outfitting of the ship, which can only happen when it is in the water, integrating the combat system and a test and trials period with the first in class always takes a little bit longer. We are confident that by taking a bit longer to learn the lessons for ship No. 1, we can deliver the full programme more effectively.
Q31 Richard Drax: I am not a shipbuilder myself, but three years does seem quite a long time once it is in the water. The Russians and Chinese might have done something by then, and we might rather need this vessel. Is three years acceptable to you? Is that a reasonable amount of time?
Vice Admiral Marshall: That is the Navy’s plan. We have the Type 23s, which will remain in operation.
Q32 Richard Drax: But is it acceptable to the Royal Navy? Are you saying that three years is fine, or are you saying, “Can you please speed it up?” Three years just seems a long time.
Vice Admiral Marshall: Our successive procurements in naval shipbuilding are becoming more effective and efficient. We are going faster; from concept to contract was under three years for the Type 31. Because we have gone commercial where we can in terms of the platform, we are leveraging commercial efficiencies in Rosyth with the capital investment that has been made in facilities, which is improving productivity. Actually, the shipbuilding pipeline is speeding up as a result of some of those decisions made by both the Royal Navy and the delivery teams.
Q33 Richard Drax: When did you say all five will be ready?
Vice Admiral Marshall: All five are planned to be delivered—off contract—by 2028.
Q34 Chair: We very much appreciated the visit to Rosyth to see the Type 31 being built. There are impressive yards there, and it is an impressive ship. It is moving to a modular capability. Critical to that are the Mark 41 launchers. I wondered if you were able to share with the Committee what missile systems it will be able to fire, and at what type of targets—land, air or on the sea surface?
Vice Admiral Marshall: We are currently planning on fitting a Mark 41 into the Type 26—
Q35 Chair: Not into the 31?
Vice Admiral Marshall: In the Type 31 we have the space available for a Mark 41 launcher midships, which is where we are currently fitting the Sea Ceptor capability. If you recall, when we placed the contract for Type 31 we envisaged a general purpose security frigate, but there is flexibility in the design to fit a Mark 41 launcher in place of the Sea Ceptor system, but it is not being delivered in-build as part of the contract.
Q36 Chair: I am curious to hear that, because essentially these are simply tubes that you have on the deck of the ship that should be able to fire a spectrum of missiles, including Tomahawk. I think that is where we wanted to go, so you didn’t have to keep having bespoke firing pods for different missile systems, but you would get MBDA and other weapons contractors to be able to use a ubiquitous system, depending on what the threat is. But you are saying that Sea Ceptor is going in?
Vice Admiral Marshall: Into Type 31. There are 24 strike-length launchers in Type 26 that give, as you say, the Royal Navy the opportunity to pick and choose from a variety of weapons systems.
Q37 Chair: You are saying that you are starting off by putting Sea Ceptor in, which, if I am right, is a surface-to-air missile system. Let’s say we place ships in the Black Sea and suddenly there is a requirement to hit something on land; at the moment, we do not have that ability, which I find slightly bizarre. None of our ships, other than by using the big gun on the front, would be able to fire any missiles inland, yet the Mark 41 launcher does exactly that. It gives you that versatility. The Tomahawk is our most powerful missile, our longest range missile, our most accurate missile. Surely we should be putting something in there that has that versatility, depending on what the threat is.
Vice Admiral Marshall: The Mark 41 absolutely has that versatility for Type 26; Type 31 could have the Mark 41 inserted into it. In the interim, the Navy is currently undertaking a bilateral procurement for its maritime offensive strike system, which will be a stopgap offensive system, and we are planning on having the first ship in service with that missile system by the end of this year.
Q38 Chair: I still don’t understand why Sea Ceptor is not designed to fit into the tubes of the Mark 41. Surely, then, that would make sense: you would have that versatility. You are welding in a Sea Ceptor missile system; I presume you would then have to do a replacement to put in the Mark 41. Is that correct?
Vice Admiral Marshall: Fitting Sea Ceptor into the Mark 41 is something that we are looking at in concert with industry now, to—exactly as you say—make sure that we get the economies of scale.
Q39 Chair: How long does it take to replace the Sea Ceptor missile system with the Mark 41?
Vice Admiral Marshall: I anticipate that if we were to choose to, for example, take the Sea Ceptor system from the Type 31 and insert the Mark 41, that would take a matter of months.
Q40 Chair: Okay, but at a cost. I still find it bizarre that this is a ship that is coming online—it is state of the art, modular, as versatile as possible—but we are putting in missile systems that only can hit things in the air; it cannot hit things inland.
Vice Admiral Marshall: When the contract was placed for the Type 31, the capability that we needed was for exactly that general-purpose security. We procured Type 31 for a set budget to prove that we could do it differently, but we valued the adaptability and modularity of the Type 31 design, where we could insert—for example—a Mark 41 launcher. Obviously, the security situation changed a year ago, and the Royal Navy is reviewing what capabilities we may need to insert into Type 31.
Q41 Chair: I don’t wish to interfere with the details of the shipbuilding programme, but you could use the Aster 15 or the Aster 30, which goes into the Mark 41. That does the same job as the Sea Ceptor, and you could do that in the interim until you actually develop the Sea Ceptor to go in the Mark 41 pods.
Vice Admiral Marshall: By far the cheapest and quickest way to build the ships is as contracted. Obviously, minimising the amount of change—
Q42 Chair: So basically, we are honouring the original contract, which now seems a little bit out of date. Is that the summary?
Vice Admiral Marshall: It is, but experience tells us that the quickest way to deliver the capability is to deliver what you want in the contract, then exploit the adaptability of modularity as post-contract choices for the Navy. That is exactly why we have invested in the modularity and adaptability of both Type 26 and Type 31.
Chair: It still feels like we are so close to having something that is so versatile, but we are missing a trick when it is not even completed yet by having the Mark 41 launcher on board. I think I am starting to milk the issue now; let’s move forward. Sarah?
Q43 Sarah Atherton: Thank you, Chair. Gentlemen, could you give the Committee an update on the status of exports for the Type 31?
Vice Admiral Marshall: As has been declared in the press, the Arrowhead 140 design, which is our export offer, is currently the preferred bidder with Poland, and we are in conversations with other potential customers. We are also in conversations with Denmark, who have the parent design for what became the Type 31. The exports campaigns are live and bearing fruit, and are generating partnerships with important countries and navies around the world. But specifically, I can comment on the Arrowhead 140 being the preferred bidder for the Polish solution.
Q44 Sarah Atherton: What about Indonesia? How is that going?
Vice Admiral Marshall: Babcock are in discussions with Indonesia about their order for three Arrowhead 140 designs. Discussions are ongoing with both Indonesia and the Indonesian shipbuilder.
Q45 Sarah Atherton: It has been reported that the Poles are playing hardball on the contract. In simple terms, is that contract signed, sealed and delivered, or is it still being negotiated?
Vice Admiral Marshall: They are the preferred bidder, so it is still pre-contract.
Q46 Sarah Atherton: So how much involvement have the UK Government and the Royal Navy had in negotiating exports?
Vice Admiral Marshall: Our role is to support the Department for International Trade in export campaigns, and it, in turn, supports industry. The export campaigns have to be industry led. It is industry that delivers the contracts. Our role is both to support that export but also to engage, navy-to-navy, on the requirements, on our experiences, and on everything from concepts through to shipbuilding and delivery and supply-chain management. By far the most mature is the export success that we have had in the design of the Type 26, with the Hunter class in Australia and the Canadian Surface Combatant.
Commodore Roberts: May I just say, for context around export, that there are two commitments that the Royal Navy makes to any potential export customers. The first is to give them honest advice about the equipment that we use, and they value that. So, if we like something, we will tell our export customers that we like it. If we don’t like it, we will tell them. That sometimes conflicts with industry’s interests, but it protects the reputation of the Royal Navy. I would also argue that it gives our exports much more confidence, so that, when the Royal Navy has the badge of approval on a particular piece of equipment or system, our export customers value that.
We also continue that engagement after we have exported it. For example, I lead the Global Combat Ship user group with our Canadian and Australian colleagues. We have regular face-to-face meetings with my colleagues at one-star level, and we flow lessons from our shipbuilding programmes across to our Australian and Canadian colleagues. We also get some of the combined buying power of three nations, as we do the exports.
It is a big commitment for the Navy, and it is one that we do not shirk, because it also helps us to improve our alliances and partnerships. However, we do work very closely with the Department for International Trade and the defence sales exports, so we have a co-ordinated response.
As future campaigns mature—as you can imagine, some countries would not like their intentions for future export campaigns to be put in the public domain just yet, but I can assure you that the Royal Navy supports all export campaigns, with that caveat that we give an honest view about what our equipment can and cannot do for us.
Q47 John Spellar: From what you’re saying, the Royal Navy, and indeed the services generally, using equipment produced in the UK is an important factor in other countries’ services purchasing them.
Commodore Roberts: My experience of being in the international forum is that other nations appreciate that we give other partner navies an honest view about how our equipment works. For example, the Sea Ceptor missile is a world-beating missile. It is a brilliant UK-produced missile system. We back it and endorse it, and it has been very successful in the exports market. The Type 26, as well, is a really good design and has been supported. But yes, you are absolutely right; it is a really important method that we support our industrial partners with.
Q48 John Spellar: So, if we don’t buy from a British company—sometimes just on Treasury-driven price—that could actually be damaging to export sales as well, on the other side of that coin.
Commodore Roberts: I wouldn’t like to comment on that. I would say that, if we are supporting industry, then we will give them the Royal Navy’s view.
Q49 Dave Doogan: On the industrial strategy, if there is a heartbeat of orders—five Type 31s, or five of another general purpose frigate that comes after that, hopefully Type 31s or 32s—the economies of scale and the pace that Babcock can go with repeatability and ever-improving knowledge of the manufacturing process will generate a downward pressure on costs.
Do you envisage that that downward pressure on costs will come up with a unit price for a general-purpose frigate—the floating, moving ship, prior to being fitted out—that will be seriously compelling to other navies around the world? Obviously, it would not be the United States or the Frances of this world, and not Indonesia or Poland either, who can build ships in their own countries, but countries who cannot actually manufacture the ship, but could co-ordinate the fitting, domestically. They could just get this off-the-shelf, excellent, Royal Navy-approved ship, built in the United Kingdom and exported around the world.
Commodore Roberts: Let me reflect that from a senior responsible owner’s position. One of the challenges that we have is incentivising industry to actually deliver value for money and highly capable products for the Navy. There are many ways of doing that. You have mentioned one, by having a consistent set of orders. The national shipbuilding strategy gives our defence industry and our maritime enterprise a clear way ahead.
There are some nuances in there. In my experience, telling an industrial partner that they are guaranteed orders does not necessarily drive value for money, so competition is sometimes appropriate. On occasion, however, as laid out in the national shipbuilding strategy, we might want to take a different approach. At various stages of programmes, it is important to keep both options on the table, because that incentivises industry. I completely understand that some industries would want complete certainty about where the Government are going to spend their money, but in some circumstances we want to keep our choices open—either to choose competition to incentivise industry, or to go through a more sole-source procurement route.
Q50 Chair: Before we move to the Type 26, the Type 31 is not a brand-new design, is it? It is based on a Danish model, the Huitfeldt class, so the hull that Dave was referring to already comes as a blueprint. It is not British owned, is it?
Vice Admiral Marshall: Babcock has sufficient control over the design to ensure that we have free rein to export—that is part of the deal it secured. The important thing for us is that, through the contract, we have invested significantly in updating the design. The Iver Huitfeldt is about a decade old in terms of being in the water, so that significant updating of the design and the systems is important to our export customers.
Q51 Chair: On the export licences, we speak of Type 31s going to Poland, but if the Polish take them around to the Black Sea and start to engage in protection there, perhaps having a bit of one-on-one against a Russian vessel, would we allow that, bearing in mind the Germans hesitating about the Leopard? Are the Polish free to do that, or do we place restrictions on any exports in that manner?
Vice Admiral Marshall: The export rules reflect the importance of us following the lead of the Department for International Trade; we ensure that we are complying with our export policies. Once those policies are formulated, we engage with the Polish navy or any partner navies to ensure that we are learning and operating together, interoperability being—
Q52 Chair: But you cannot say specifically that, if the Polish were to engage to protect grain ships from Odesa and they pushed them in, we would say, “No, you can’t do that.” They are free to use them at will.
Vice Admiral Marshall: I have no reason to believe that we would do that.
Chair: Okay. Very helpful. The Type 26—Derek on HMS Glasgow.
Q53 Derek Twigg: Commodore, the in-service date for HMS Glasgow has been delayed by a year to 2028, the same year as the first anti-submarine warfare-capable Type 23 will be retired. What actions will you take to account for the delay in the transition plan and to ensure that there is no capability gap?
Commodore Roberts: The delay is regrettable. It took us longer than we forecast to get the engineering design complete, because we have quite a complex ship here. Other factors were that the supply chain to feed that design did not perform as we expected, and that covid then hit. So yes, there is a delay.
On how we are managing the availability gap, I know that the Committee has an availability session later, which will be conducted at a much higher classification. I propose that that question about how we manage the capability for anti-submarine warfare is best taken at that level. It is certainly outside my remit as the Type 26 senior responsible owner.
What I have been left very clear about by my seniors is that I need to move that date left where possible. We are therefore investing in putting Royal Navy people up in Glasgow—I think the Committee met some of them when up there—so that we start training people early. We can start using Royal Navy people to set up and generate the standard operating procedures to drive that date left, and we can use our expertise to help the shipbuilder to bring that date forward.
As the Admiral said, we have to go through a two-stage process. When we build ships, the fastest way to deliver capability is not to change the contract. Now, that creates an anomaly in shipbuilding, because equipment that we will want to fit on that ship does not yet exist. It is part of the fast-paced nature of equipment. Nobody buys a laptop today that will be fitted on a ship in 2028. That would be daft. What we do is create the space, weight and services to fit that equipment, and we put that into the capability insertion period. What we are doing at the moment is putting people on that capability insertion period, so we are looking at those capabilities to try to drag the date left and de-risk that period.
Q54 Derek Twigg: So are you saying that the delay will not be a year?
Commodore Roberts: No, that is the forecast. So when I do the programming—
Q55 Derek Twigg: You used the words “move left”.
Commodore Roberts: That is the challenge that my seniors have presented me with. I won’t formally declare any change to the date until I see some evidence that actually backs that up. It has been a challenging conversation, quite rightly, when we delay ships. Nobody likes to see that. But the evidence that my team has presented to me suggests that October 2028 is the date when we will have a capable Type 26. I am looking at every opportunity to bring that date left, but it would be wrong of me at this stage to update the forecast until I see some more evidence.
Q56 Derek Twigg: So how confident are you about meeting the October date?
Commodore Roberts: In programming terms, the October date is what we call a P50 date. When we do complex programming and we put a schedule together, we have to overlay risks, issues and opportunities. We have a deterministic date, which is the date when the ship will be delivered if everything goes perfectly well. We know in complex warship building that things don’t go right the first time, so we add in some risk. In some cases, that is a subjective judgment about how much risk we need to add in. It is float to the programme. It means there is a 50% probability the date will be exceeded, and there is a 50% probability the date will come left. I have been left in no doubt that our seniors would like the date brought left, but it is my job to be honest in that reporting. At the moment as we go through, October 2028 is the date that I am forecasting for HMS Glasgow.
Q57 Derek Twigg: You said that you were moving extra people there. How many people are you moving?
Commodore Roberts: We have about a dozen people up in Govan; they are mostly marine engineers at the moment. The first thing we need to understand is how to operate the ship. We need to understand the power of propulsion and the switchboards. With the Type 26 being a new design, we really need to understand how to operate the ship, unlike with the Type 31 where we can go to the Danes to ask how they operate it and learn lessons from them. The best way to do that is have our engineers and technicians doing the testing commissioning, and writing the engine and conning orders.
Q58 Derek Twigg: So why weren’t they there in the first place?
Commodore Roberts: They have been there for about two years. There is a balance.
Q59 Derek Twigg: I thought you just said you had put extra people there.
Commodore Roberts: Sorry, we have planned for people to go there. Apologies if I have given the impression that we have boosted the numbers. We have always had a plan—
Q60 Derek Twigg: So you haven’t got them there yet?
Commodore Roberts: We have learned lessons from QEC that when we have people in the yard, it starts off with the very first senior naval officer for about two years, and then we grow the number of people. Sailors are an expensive and valuable resource, so we need that balance between having them at sea and learning their trade, and having them come back to HMS Glasgow and the other ships to share that knowledge.
Q61 Derek Twigg: Type 23 is due to come out of service. Is there any contingency plan to delay that if, by chance, you don’t meet the forecast date in October?
Commodore Roberts: That is outside my area of responsibility. That is a really good question for the availability session that you have coming up.
Chair: The list of things to talk about in that availability session is growing. Dave, do you want to come in?
Q62 Dave Doogan: HMS Glasgow is in Scotstoun getting the systems integration work done. How long will that take from leaving Govan to leaving Scotstoun?
Commodore Roberts: We are expecting sea trials some time next year.
Q63 Dave Doogan: How long will that have been?
Commodore Roberts: From leaving Govan to going through to sea trials?
Q64 Dave Doogan: Yes.
Commodore Roberts: HMS Glasgow was floated off in November 2022. Especially with the first of class, we will take a very measured approach to sea trials. We are expecting the ship to sail for her first sea trials some time in 2024. She will then go back into Scotstoun to complete the fit-out.
Q65 Dave Doogan: I am just curious because Type 26 is a complex anti-submarine warship and Type 31 is a general-purpose frigate, but it will take three years to get Type 31 fitted out while Type 26 is going to take less than that.
Commodore Roberts: What we described with the Type 31 was not just the fit-out, but the combat system integration. With both the Type 26 and the Type 31, we will be doing the fit-out—getting the ship to vessel acceptance date, where effectively most of the power and propulsion systems will be tested—and then taking it into a capability insertion period where some of the complex weapon systems integration takes place. To de-risk that, we have invested in land-based test facilities at Portsdown, where we can do the software testing and, as much as we can, get all the bugs out of the systems before we fit them to the ship. That work is ongoing now.
Q66 Dave Doogan: It still sounds like the Type 31 will take a long time compared to the Type 26 to get fitted out and integrated.
Vice Admiral Marshall: As an example, we cut steel on Type 31 about two years after we cut steel on Type 26, and we will deliver the first Type 31 into service a year earlier than the first Type 26. The programme has been compressed significantly, partly because of the capability choice of procuring a general purpose frigate and building it along commercial lines and the investments we have made in productivity in the yard. Type 31 is actually being delivered quicker than Type 26.
Q67 Mrs Lewell-Buck: Accepting that there are delays to HMS Glasgow, how far behind is HMS Cardiff’s in-service date and what is the knock-on effect for HMS Belfast?
Commodore Roberts: We do not tend to put the in-service dates into the public domain, but broadly each ship is on the same drumbeat of coming out each 12 to 18 months, with the final ships in service in 2035. The whole drumbeat has moved by about 12 months. That is how the ships will be delivered, but the drumbeat will stay the same. In fact, in the batch 2 contract, we incentivised by working together with our DE&S colleagues and BAE Systems as the prime to increase the drumbeat of ships coming out. It goes back to the earlier point: buying a batch of five has given our industrial partners some confidence to invest in a new shipbuild outfit haul and some additional processes, so that we can improve the drumbeat of delivering ships. But to answer your question, the whole programme has shifted.
Q68 Mrs Lewell-Buck: In terms of delays, has a Minister or an official at any point intervened to change the project during the implementation phase, and had implications for cost and timelines?
Commodore Roberts: No; if nothing else, I think it has been really helpful. When we were doing the negotiations for the batch 2 deal, the then MinDP was very much involved in the negotiations and suggested a particular negotiating strategy, which bore fruit. I had no interference in the programmatics in my time as an SRO, but I have had really helpful support from the perm sec, Government officials and Ministers in getting to what I would propose is a very good value batch 2 deal.
Q69 Chair: You remind me that I recall speaking to a previous Procurement Minister about Type 26, and asking if there was any UAV capability on board—any drones—and he replied, “No.” I got him to watch the film “Captain Phillips,” which has ScanEagle in it. He was delighted to find me a few weeks later and show me new blueprints, which showed UAV capability on board. I, of course, was delighted to see that UAV was now on the Type 26, but it was a rather peculiar method of getting our procurement to move—that I had to get him to watch a movie.
Commodore Roberts: Type 26, in its design, has always had a mission bay capability. That’s the bay just forward of the hangar. I know some members of the Committee have been and stood inside.
Chair: Yep; it was very impressive indeed.
Commodore Roberts: The key thing about is it has all the services. It has various power supplies, chilled water supplies and services. It goes back to my earlier point: we’re not going to buy a UAV today to fit into a platform—the UAVs in 2028 will be very different—but we do have the capability to store them, to move them and to operate UAVs from that platform.
Q70 Mr Francois: The Type 26 will replace the Type 23. Admiral, you said we will have 19 frigates and destroyers, but don’t we lose one of the Type 23s this year?
Vice Admiral Marshall: That is true.
Q71 Mr Francois: And we go down to 18?
Vice Admiral Marshall: That is correct.
Q72 Mr Francois: That is not what you said earlier, is it? So it’s 18?
Vice Admiral Marshall: You asked me a question—
Q73 Mr Francois: I didn’t, someone else did, but anyway. So it is 18 later this year? The Type 23s have given great service, but they are old and tired and increasingly expensive to maintain. Under your current schedule, when does the last Type 23 leave service?
Vice Admiral Marshall: I will have to check.
Q74 Mr Francois: Do you want to text someone? Phone a friend?
Vice Admiral Marshall: No. I will have to get back to you on the last out of service date for the Type 23. I will refer to my briefing and see if I can get the answer.
Q75 Mr Francois: Right, but the longer they run on, the higher the expense. They are having to run on longer because the Type 26 is so late. The 26 is a world-beating ship, which is why we want it in service as soon as possible. Jens Stoltenberg, Secretary-General of NATO, warned just a few months ago that there is a real possibility we could be dragged into a war with Russia. We don’t really want to wait another six years for a highly complex warship. Why has it been so badly delayed? Why is it going to take 11 years from when Glasgow was laid down to her achieving initial operating capability? That is over a decade.
Commodore Roberts: There are three factors. The forecast that it took us to complete the engineering design for this complex ship was optimistic at the time. It has certainly taken us as an enterprise longer than we forecasted to integrate quite a wide variety of combat systems. The big novel bits for us were ensuring that the underwater radiated noise signature of the ship is maintained. I know Committee members are aware that the really important aspect of an anti-submarine warfare frigate is that it has to be quiet. That is not just about mounting equipment on shock rafts. It means that a lot of the pipe bends have to be very smooth. One of the reasons you get noises in pipes in homes is because they have right-angle bends. The digital model has been really helpful, but it has taken us far longer than forecast to integrate all the various bits. That is a lesson we need to learn for future platforms.
Q76 Mr Francois: Presumably other ship-building neighbours around the world that build anti-submarine warfare frigates have the same challenge—they don’t want theirs to be unnecessarily noisy, so they put a lot of effort into keeping their ships quiet as well. In other words, that is not a challenge unique to us, is it? The Japanese first of class Mogami was laid down in October 2019 and commissioned into the Japanese naval service in April 2022, so in less than three years. Why can the Japanese build a modern frigate and bring it into service in under three years, while it takes us 11?
Commodore Roberts: I do not think I am qualified to answer that question, because I am not an expert in Japanese shipbuilding.
Q77 Mr Francois: It is very simple. It takes us three and a half times as long to do it as the Japanese. Why are we so bad at it?
Commodore Roberts: I reject the idea that we are bad at it. What we have done is produce a world-beating frigate—
Mr Francois: By the time she turns up the war could be over.
Commodore Roberts: We have produced a world-beating frigate that has been exported to Canada and Australia because of the design we put in there. As we have gone through the design, we have recognised that in the performance-cost-time triangle, which SROs always have to ensure they are balancing, we have maintained the performance of the equipment.
Q78 Mr Francois: You could have the most exquisite equipment in the world, but if it turns up after the war is over there is no point in it. Unfortunately, it is a matter of record—the Secretary of State wrote to us—that this very delayed ship has now slipped a further year. It is not going well, is it? It is going badly.
Commodore Roberts: It is disappointing that it is delayed, but the ship is still going to be a world-class ship. It depends on the definition of “badly”. For me, as a naval officer, I am looking forward to getting the Type 26 into service. As I have said, there has been a lot of senior direction to try to bring this date left. I am not going to bring it left until I have the evidence to do that.
Q79 Mr Francois: I understand that, but do you understand that the Committee is frustrated? We went up there and looked at it. We are not arguing about the capability of the ship. It is world class. That is why the Australians and Canadians have bought it. We are delighted by that but, because it is so good, we want it in service sooner rather than later, hence our frustration. We are very disappointed that this world-class ship keeps slipping to the right. Why the additional year from 2027 to 2028? What caused that?
Commodore Roberts: I have explained one, which is the grace in the forecast; it took us longer to complete the design of the ship. We did have supply chain issues, so there were some pieces of equipment that were not available in the forecast dates, and there was the last bit—I am not going to say it is the pacing factor, but covid did have an impact. We had to shut down the shipyard for two weeks. As we were there, I remember, with the Committee members, it was very awkward walking around the ship with all our PPE and our masks. It was a horrible thing to do and that has had an impact. The key bit that we have to take lessons from is the forecasting of how long it takes to integrate a complex warship.
Q80 Mr Francois: But presumably—I mean, they had covid in Japan, and they got through it. It was everywhere, right?
Commodore Roberts: Yes, but as I said that was not the pacing factor. The pacing factor was the engineering design—
Q81 Mr Francois: You keep talking about this highly secret operational availability session. The Navy did not use to be so coy about how many of its ships were operationally available, and we have not even got on to the Type 45 yet. The reason you do not want to talk about it is because you are embarrassed, isn’t it?
Vice Admiral Marshall: Not at all. As I said earlier, I do not have today’s availability data. On your specific question of, “How many today?”, I do not have that data with me.
Q82 Mr Francois: How many this month?
Vice Admiral Marshall: On 17 January, there were four Type 45 Destroyers available and seven Type 23, to answer your specific question about frigates and Destroyers.
Q83 Mr Francois: So that is 11.
Vice Admiral Marshall: To answer your previous question, the Type 23s will need to remain in service until completion of the ones with towed array capability and until completion of the Type 26 programme, which is currently due to finish in 2035. We are currently in the process of starting to refit the last three Type 23 towed array frigates in their six-yearly cycles to ensure that they remain certified to the end of life.
Q84 Mr Francois: So the last Type 23 will have to run for another 12 years from now.
Commodore Roberts: Correct.
Chair: Am I correct in saying that HMS St Albans is the last Type 23? HMS Portland, I think, is going to go until 2034. The point that Mark is making, which we worked out, is that we are keeping these ageing frigates a lot longer, and there is a wider question for the integrated review.
I did not know if you had a chance to read our report on the Royal Navy, so it is good to see that you have. We are on your side here. You may be barred from saying this, but the Royal Navy is too small for the threats that are coming over the hill. It needs to double in size and have much more constabulary capability just to keep our adversaries at bay. Even though we have very niche, bespoke, high-octane bits of kit, we simply do not have enough of them.
Q85 Robert Courts: Commodore, now that HMS Glasgow is on the water, we are looking at the weight and stability assessments that you have taken and the impact that that will have for the future. What assessment have you made of that so far?
Commodore Roberts: When she was floated off, we had a specialist team from both BAE Systems and DE&S to ensure that she floated off safely. All the measurements for trim and stability were in spec, and she floated off successfully.
What you may have seen from the pictures is, because we have not done the full fit-out and added in some of the combat systems, she is quite high in the water at the moment. When we do the full fit-out, we do what is known as a tilt test, which effectively works out where the geometry of the ship will stabilise. That will happen after fit-out. At the moment, it is all in spec and going well in terms of the design. When we do some more fit-out, we will do the full testing to determine how the trim of the ship will behave.
Q86 Robert Courts: So is the weight as you would expect at the moment, or has there been any growth?
Commodore Roberts: It is as we would expect at the moment. It has been a really successful float-out. Our DE&S and BAE Systems colleagues have done really well on that float-out, and it was a very successful operation.
Q87 Robert Courts: The reason I ask is that that will of course have an impact on the ship’s ability for the future, with things such as end-of-life upgrades, mid-life upgrades and modular impacts. You see all that as being on target, do you?
Commodore Roberts: Yes. One of the reasons why the design took so long is that we were quite insistent about the margins that the ship has throughout its life, so that when the ship is fully bombed up with all the missiles and the mission bay is full, at end of life we still have margins to do exactly the type of capability insertions that we have been talking about. We have had to take quite a few unique design decisions, in terms of steel and top weight, to do that. That was one of the pacing factors on the design. My proposal is that that was worth the investment, because we might be a bit late at the beginning, but over the life of the ships, the fact that we can still integrate some complex equipment later on their life will be a real benefit for the class.
Q88 Robert Courts: Is there a risk point approaching when there is a full fit-out? At the moment, if I understand you correctly, she is in the water, and the weight and the balance is as you would expect. Clearly you have got to fit out, and of course it will become heavier when that happens. Is there a point at which it might go outside expected parameters then?
Commodore Roberts: Yes, in a complex programme there are always risk points, and we just have to monitor that closely. That is why we take things very carefully as the first of class. Sea trials will be the first time we will get a real understanding about how the ship performs. With the first of class, it really is a case of the company having adopted this first principle, so you take much longer doing the first test. You gather much more data on it and you do your analysis—the lesson from previous classes of ships is that it really is worth that investment in the first of class ship to make sure you get it right—and then you get the pace in the follow-on ships.
Q89 Robert Courts: Who is responsible for managing weight control? Is it a team?
Commodore Roberts: It is a combined team. BAE Systems will have their own engineers as the prime. That will be monitored by DE&S, who have their own chief engineers as well. They report back through our organisation to ensure that the user requirements are being met. My role as the SRO is to give a set of user requirements to DE&S and the prime, and they have to deliver against that. It is up to them to use innovative and agile methods however they deliver on that, but they have to stay within the spec. That is one reason why the design has taken so long. We had no risk appetite to compromise on user requirements for the Type 26.
Q90 Robert Courts: Are you satisfied with the way that weight management assessment has taken place?
Commodore Roberts: Very much so. I have had really good support from DE&S colleagues, and from BAE Systems, in how we have managed the engineering design and growth. It was a big challenge, and it has set us fair for having that core platform design which gives confidence to our export partners that the design that we are exporting is not only a good design, but it will be tested thoroughly. We are de-risking not only our ships—the Type 26—but also Hunter and Canadian Surface Combatant. It is really important to do this properly not just for the Navy, but for our reputation as a good exporter.
Q91 Richard Drax: On the design of ships, am I right in saying that the ship is tested in a tank, at the initial stages, to various sea states? I think our ships are mainly based on Atlantic-style seas. Is that right?
Commodore Roberts: That will be one of the tests they do. Certainly, the primary purpose of the Type 26 is to protect the continuous at-sea nuclear deterrent and the carrier strike group, so they will be optimised for the north Atlantic and for blue sea operations.
Q92 Richard Drax: If you were in rougher seas and different styles of sea, like the far east, for example Indonesia, with different storms and longer swells—my father was in a hurricane, he told me, and the back end of the destroyer was out the water. I presume you cannot design a ship for every single condition, but you get as near as you can to meeting any condition.
Commodore Roberts: The primary purpose—protecting the continuous at-sea nuclear deterrent—has to be in that north Atlantic, but the shape of the hull is also really important, because it is the flow noise across the hull that reduces the underwater radiated noise, not just in different sea states, but also at different speeds. So it is quite a complex evolution. It is another example of why it took so long, because we had to get that right in making those compromises about where to best operate the ship.
Q93 Sarah Atherton: Can I just go back to HMS Glasgow and its initial operating capabilities being pushed back to 2028? The MoD has said that BAE has “not performed to expectation or sufficiently grasped the opportunities under the current Target Cost Incentive Fee arrangements”, and that it has “struggled to take design forward into production”. This is going to cost £233 million over the life of the programme—4.2% overcast. Who should pay for that? The taxpayer, or BAE?
Commodore Roberts: It is a bit of both. That additional £233 million is over the life of the programme. So it includes support costs, training costs and infrastructure, mostly made up by inflation costs and the fact that the programme is running over. BAE will be taking, as part of the target cost incentive fee, a reduction in the fee. The actual figure is commercially sensitive but is in the tens of millions. Both, is the answer.
Q94 Chair: We came up to see HMS Glasgow. It was impressive, though frustrating to see it being built outside. I think that is being rectified. If we came up to visit HMS Cardiff, what would we see today?
Commodore Roberts: Cardiff is still in the process of being consolidated on the hard stand. If you remember, when you were there, the Glasgow was outside. Cardiff will be consolidated. The target we have set ourselves is for HMS Belfast to be built under cover in that new shipbuild outfit hall.
Q95 Chair: So, Belfast is the next one, number three, but Cardiff is still in pieces.
Commodore Roberts: Cardiff is currently in two sections. One reason we floated off Glasgow in November is that the plan is to consolidate Cardiff on the hard stand in the next few months, joining the two ships together.
Q96 Chair: You have emphasised the importance of what it needs to do as a frigate. Is there a difference between the batch 1 and batch 2?
Commodore Roberts: Not from a user-requirement perspective. One of the key parts of delivering the ship is to keep the user requirement stable. From my perspective, we reviewed the user requirements, we reviewed the operational analysis, and we deduced that there was no need to change the user requirements. We set a very demanding target for the underwater radiated noise. We built an adaptability to the ship, so we did not change that.
There will be changes between each ship, for obsolescence reasons and because some of the environmental compliance regulations have changed, for example. That comes right down to the detail of what type of materials are used to coat cabinets inside the ship. Broadly, the ships all look the same, and there are benefits to that in through-life sustainability, as well.
Q97 Chair: Please tell me that the Type 26 does have the Mark 41 launcher.
Commodore Roberts: We have the Mark 41 launcher.
Q98 Dave Doogan: So, Belfast will be built in Govan under cover.
Commodore Roberts: That is the target we have set ourselves.
Q99 Dave Doogan: Cardiff will be the last one built outside on the hard standing.
Commodore Roberts: That is my plan.
Q100 Dave Doogan: And the new built hall that is going into Govan, how much taxpayers’ money is getting used to help build that?
Commodore Roberts: It is all part of the contract, but it is part of the batch 2 deal. The batch 2 deal is again a target cost incentive fee, so there are incentives, for both us in the Ministry and BAE Systems, to ensure that that build gets built on time and does not go over a particular price where the taxpayer will pick it up. In fact, one of the unique things about the batch 2 deal is that it is first time with a shipbuilder prime that we have gone for a max price.
Q101 Dave Doogan: What you are saying is that BAE are funding the build of that themselves, but the quid pro quo is that you have given them an order for further ships that the Navy needs anyway.
Commodore Roberts: It was one of the reasons that we wanted to do a five-ship deal. We have always wanted to build ships under cover in Govan, but with a three-ship deal, the money just did not add up. With a five-ship deal, it was worth the investment, both for us, because we will get a better ship on time and at a faster drumbeat, and much better working conditions for the Scottish workers, who have been remarkable during covid. I would like to say thank you very much to everybody in Scotland. During that covid period, I had really strong support from BAE systems, the unions and local authorities to get the ship back on, and get them out of the yard.
Chair: Although in fairness, nobody should be building ships outside, should they? I think we must be one of the last. Let’s turn to the Fleet Solid Support.
Q102 Mr Jones: The Secretary of State went before the Scottish Affairs Committee and said that Team Resolute was selected because it was the only compliant bid. How did we end up with a situation where we had a competition to get better spending of taxpayers’ money, and we ended up with only one compliant bid?
Vice Admiral Marshall: I think the Secretary of State’s comments were about Team UK. I am not planning to elaborate further on the Secretary of State’s comments. The procurement was set up to deliver three ships for the Royal Navy for a set budget, and to ensure that we had integration in the United Kingdom. We followed the procurement process absolutely to a conclusion where we had a successful bid and now a contract—
Q103 Mr Jones: If you only had one compliant bid at the end of the process, therefore what engagement did you have with other bidders to try and resolve any of their compliance issues?
Vice Admiral Marshall: The competition had a series of engagements with all bidders where there was an opportunity to discuss concerns that were being raised predominantly by the bidders. It was for the bidders to come to us with their questions and concerns. It was absolutely not for us as the MoD to coach them or lead them to any particular solutions, but it was very clear where the qualifying criteria were around performance, cost and time.
Q104 Mr Jones: But it is usual that if you get, for example, a final bid submission, that you would then have discussions with those bidders afterwards on issues or questions that you need to ask around those bids, wouldn’t you?
Vice Admiral Marshall: Those discussions took place throughout the period.
Q105 Mr Jones: No, I am talking now—this is quite important—about the final bid submissions. What discussions then took place after the bidders that put in and the final bid?
Vice Admiral Marshall: We were very clear in the procurement process that once the final bids were in, we would consider compliant bids. Therefore, only compliant bids—
Q106 Mr Jones: That is not the answer, sorry. You are dancing around, Admiral, I am sorry.
Vice Admiral Marshall: I think I am answering the question.
Q107 Mr Jones: Can I put it to you that it has been said to me that once the final bids went in, there was no discussion then that took place with Team UK? Is that correct?
Vice Admiral Marshall: I am not going to comment on specific bidders.
Mr Jones: I think you are because I am going to ask you the question as I think it is quite important. If you cannot remember, I am quite happy for you to write to the Committee. What discussions took place with the bidders after the final bids went in?
Vice Admiral Marshall: It is not that I cannot remember; I think I have answered the question.
Mr Jones: You have not answered the question.
Vice Admiral Marshall: It was very clear in the procurement strategy that once the bids were received, we would only consider taking forward compliant bids.
Q108 Mr Jones: So you went through this process and you got to a situation where the only one that complied with the bid was Team Resolute.
Vice Admiral Marshall: Qualifying criteria were made absolutely clear from the very start of the procurement and engagement with all bidders was fair and equitable throughout the entire process.
Q109 Mr Jones: So how fair was this procedure, then, for a competition if you ended up with one bid at the end that was compliant?
Vice Admiral Marshall: I do not recognise that as a true statement.
Mr Jones: Hang on: it has to be because you just told me that once you got the final bids in, the only one that complied with what you wanted was Team Resolute.
Vice Admiral Marshall: I did not say that.
Mr Jones: I think you did.
Vice Admiral Marshall: From memory, what the Secretary of State said at the Scottish Affairs Committee was that Team UK was non-compliant. I do not intend to elaborate on what the Secretary of State said.
Q110 Mr Jones: I am sorry: you are going to because you were in charge of it. Can I ask you a direct question? Let us make it a bit simpler for you. You had a process and you had discussions with the bidders through it. You got to a point where two bidders put the final bid in. When that took place, if I am picking it up right, you are saying that of the two final bids that came in, only one of them complied with what you were asking for.
Vice Admiral Marshall: We followed the procurement procedure absolutely as it was set out.
Q111 Mr Jones: Answer the question! I am sorry, Admiral, I am not trying to catch you out. It is very simple. I just want to get this on the record. You had a process, and I accept there were discussions that took place with the bidders. You had two bids put in and what you said a minute ago was that the only one that complied was Team Resolute. Is that correct?
Vice Admiral Marshall: I am not going to comment on the unsuccessful bidders.
Q112 John Spellar: There is a logical process here. If there are only two bidders in the final stage and if one was non-compliant and therefore, logically, the compliant one got the contract, the other must have been non-compliant. It is a straightforward binary question. This is a logical process; nothing even to do with any state secrets or anything.
Vice Admiral Marshall: I am not trying to hide behind any state secrets. What I am saying is that I am trying to respect the integrity of the competition.
Q113 John Spellar: How many bidders were there, finally?
Vice Admiral Marshall: We received three bids.
John Spellar: And in the final stage?
Vice Admiral Marshall: Team Resolute was selected as preferred—
John Spellar: In the final stage, how many bidders were there?
Vice Admiral Marshall: In the final stage, Team Resolute was selected as the preferred bidder and—
John Spellar: In that final stage, with the final evaluation of bids, were there one, two or three bidders?
Vice Admiral Marshall: In the final stage, there was one preferred bidder, which was Team Resolute.
Q114 Mr Jones: That is not the question. I am sorry. You are trying to be evasive here.
Vice Admiral Marshall: I am definitely not trying to be evasive.
Mr Jones: You are. No, I am sure you are because I think Mr Spellar was quite clear. Let’s be honest—it is on the public record: what were the two final bids you actually had put in? Final bids.
Vice Admiral Marshall: We received three final bids.
Mr Jones: Right. And of those final bids, how many were compliant?
Vice Admiral Marshall: The Secretary of State made a statement at the Scottish Affairs Committee, which I am not planning on elaborating on.
Mr Jones: No, it does. But you are the person in charge. I am sorry.
Vice Admiral Marshall: I would like to assure the Committee that I am absolutely confident that the procurement was followed appropriately.
Q115 Mr Jones: I will come on to some other things in a minute. You need to hold your water a little bit on this. I am going to just read what the Secretary of State said: “They were therefore clearly the bid that was compliant, that won, and that got the order placed with them.” So the implication of that is that the other two bids were not compliant.
Vice Admiral Marshall: I think you are reading an implication from the Secretary of State’s comments.
Mr Jones: Tell me how I am because it says: Team Resolute “were therefore clearly the bid that was compliant, that won, and that got the order placed with them.” Those are his words from the Hansard record.
Vice Admiral Marshall: He is right. Team Resolute was a compliant bid and was taken forward.
Mr Jones: No. Hang on. Were the others not compliant then?
Vice Admiral Marshall: The Secretary of State has made a statement on—
Mr Jones: Listen. You are going around in circles. It is a very clear thing. The others were not compliant then, were they?
Vice Admiral Marshall: I reiterate that I think it is important for the integrity of the bidding process and with respect to the other bidders that I do not—
Mr Jones: I can see what you have written in front of you, but I actually don’t want that. You are in charge of this process. You are not going to answer that question, which is very illuminating. Therefore, in terms of when you got your final bids in—the three you got in—what discussions, post those bids, did you have with the three bidders?
Q116 Chair: For the record, can I just confirm the three bids? It was Team Resolute, Team UK. What was the third?
Vice Admiral Marshall: They did not have a team name. It was the bid from Larsen & Toubro.
Chair: Say again.
Vice Admiral Marshall: It was a combined bid from Cammell Laird-Larsen & Toubro.
Q117 Mr Jones: So what discussions then took place with those three bidders after they put the final bids in?
Vice Admiral Marshall: All bidders were debriefed on their bids.
Mr Jones: No. That is not my question. Debriefed—that is after you have already made a decision. Before you made a decision?
Vice Admiral Marshall: There were no subsequent negotiations after receiving the bids.
Mr Jones: With any of the bidders?
Vice Admiral Marshall: Yes. To the best of my knowledge, there were no further discussions with the delivery team.
Q118 Mr Jones: So, uniquely then, on this procurement, you got the final three bids in and you had no further questions to ask of any of those bidders about any of their bids. That is unusual, isn’t it?
Vice Admiral Marshall: The clarification stages and final negotiations were all put in place ahead of the final decision.
Mr Jones: That is not how it works. You know it doesn’t work like that. You are saying then that, once the bids went in, you basically looked at them and said that your people understood every single bid and you therefore had no further questions of any of the bidders.
Q119 Chair: There were no pitch? Did not the teams come in and present?
Vice Admiral Marshall: The pitches were all made throughout the competitive process.
Q120 Mr Jones: Basically, you got three bids in and on the table; somebody looked at them and said, “Right, fair enough. We’ll have that one because that is the one that’s compliant.” There was no information in any of those three bids that you needed to ask questions about to further clarify.
Vice Admiral Marshall: A significant amount of analysis took place on all the bids to assure us that we were coming to an appropriate conclusion.
Q121 Mr Jones: But you did not go back to any of the bidders?
Vice Admiral Marshall: That was all done in the final negotiation phase, so actually the—
Q122 Mr Jones: Final negotiation stage?
Vice Admiral Marshall: Prior to receiving the bids.
Q123 Mr Jones: Hmm? You know that’s not how it works. You get a final bid from a company. You had three bids. You are saying that all you did then was look at all three and took your decision on that basis. All the information that was in those bids was crystal clear to you; no questions were raised, so you didn’t have to go back to a bidder and say, “By the way, are you sure you are meaning this?”
Vice Admiral Marshall: We achieved that clarity through the whole of the process, not just—
Q124 Mr Jones: All I’ll say is that that that is a remarkable way of doing it. My experience of procurement over the years—I have not been involved in direct naval procurement—is that you get your final bids in and there are always questions to ask. To clarify something, you go back to the bidders just to clarify; you would not go into negotiations with them.
We will kill that one, because you are not going to answer the question. May I ask this question then: on Team Resolute, who is the prime contractor?
Vice Admiral Marshall: Navantia UK.
Q125 Mr Jones: Navantia UK set up last July.
Vice Admiral Marshall: As a legal entity for the performance—
Q126 Mr Jones: It does not have any assets. It has not got anything; it is a shell company.
Vice Admiral Marshall: Navantia is a prime contractor. They have secured appropriate financial instruments to ensure that they can underwrite the programme.
Q127 Mr Jones: Who underwrites Navantia UK? The main Spanish company?
Vice Admiral Marshall: Specific contract terms are obviously commercially confidential, but the MoD has—
Q128 Mr Jones: No, no, it is not. Look, as a UK taxpayer, I am quite concerned if we are giving a £1.6 billion contract to a company which, taken at face value looking at Companies House, was only set up last year and has got no money. I want to know who I call on if things go wrong. Is it therefore the main Navantia company?
Vice Admiral Marshall: The MoD as the authority will monitor that contract closely. We have appropriate financial instruments in place to ensure that we have underwritten the contract appropriately.
Q129 John Spellar: So has Navantia Spain underwritten and provided the necessary guarantees for Navantia UK for the performance or failure to perform in the contract?
Vice Admiral Marshall: Navantia UK are the prime contractor—
Mr Jones: We know that.
Vice Admiral Marshall: —and they absolutely are underwriting the performance—
Q130 John Spellar: They do not have any assets. Who underwrites Navantia UK? As far as I can see, Navantia UK has no capital, and it has just a couple of directors appointed last June. Who underwrites Navantia UK and therefore underwrites the contract?
Vice Admiral Marshall: As the Secretary of State said at the Scottish Affairs Committee, Navantia UK are owned by Navantia Spain, who are controlled by ESPI, which is a sovereign wealth fund under the control of the Spanish Treasury.
Q131 Mr Jones: That might be the case, but if Navantia UK goes bust, unless it has a legal agreement to be actually underwritten—. Look, to reassure the taxpayer, are you saying that Navantia, the main parent board, is actually underwriting Navantia UK? If that is the case, fine, I have no problem with that.
Vice Admiral Marshall: I can absolutely reassure you that the appropriate financial instruments are in place to ensure—
Q132 Mr Jones: Don’t you think we need to know that publicly? That is not commercially sensitive. It is about guarding taxpayers’ money.
Vice Admiral Marshall: And I think I have just given you an answer to that.
Q133 Mr Jones: I do not think you have. Have you ever looked at Harland & Wolff’s balance sheet?
Vice Admiral Marshall: I have.
Q134 Mr Jones: What are your impressions?
Vice Admiral Marshall: Harland & Wolff are a subcontractor to Navantia—
Q135 Mr Jones: Ah, that is interesting. They are a subcontractor?
Vice Admiral Marshall: Navantia is the prime, and Harland & Wolff is a yard.
Q136 Mr Jones: You looked at Harland’s balance sheet. What are your impressions of it?
Vice Admiral Marshall: I can only answer questions on FSS. My opinion is that we have appropriate mechanisms in place in the contract to ensure capital investment—
Q137 Mr Jones: Wait a minute. A big play has been made for UK content—"We have Harland and Wolff on board.” This is a company—I looked it up this morning—that had a turnover last year of £18 million and lost £25 million. It does not have a strong balance sheet. Have you looked at the backgrounds of some of the directors of Harland and Wolff?
Vice Admiral Marshall: No.
Q138 Mr Jones: This was the big resurgence of UK shipbuilding, in terms of Harland and Wolff. Basically, Navantia UK got this contract by using Harland and Wolff as a poster in the window, didn’t it? Harland and Wolff cannot actually deliver this contract, can it?
Vice Admiral Marshall: I believe it can, and I believe we have the right contract to incentivise that and the right level of capital investment in Harland and Wolff to achieve—
Q139 Mr Jones: That is interesting. If you have a company that has a turnover of only £18 million a year and a loss of £25 million, how is it going to invest what it needs to invest under the contract? You have confirmed now that it is basically a subcontractor—I will ask you another question about that in a minute.
Vice Admiral Marshall: What was the question?
Mr Jones: What reassurances do you have that Harland and Wolff can deliver this in terms of the capital? Where is the capital coming from to do it?
Vice Admiral Marshall: Throughout the competition and as part of the assessment criteria, there was appropriate financial scrutiny, which included the recognition that Navantia is the prime in this and the financial instruments, as I have laid out.
Q140 Mr Jones: Can I ask you another question about Harland and Wolff? Why did you give a £55 million minesweeping contract to Appledore, which is a subsidiary of Harland and Wolff? If you look at Appledore, it has no money; I think its shareholding is only £5. You have a company of which the main parent company is Harland and Wolff, which has a turnover of £18 million, which you gave a £55 million contract and which is losing £25 million. Why are Harland and Wolff and Appledore being treated differently from anyone else? Would you give a £55 million contract to a company that had a turnover of only £18 million?
Vice Admiral Marshall: I was not involved in the contracting for the mine countermeasures capability.
Q141 Mr Jones: But they are the facts. The contract was not put out to competition. It was given directly—it was given to Appledore, but Appledore is actually a shell company—to the main parent company. I just do not get my head around why alarm bells are not ringing about the financial position of Harland and Wolff to fulfil this contract.
Vice Admiral Marshall: As I said, throughout the competition, there was close financial scrutiny of all the bids, equally and fairly, including the financial instruments to underwrite the value of the contracts.
Mr Jones: Well, I do not think there was, to be honest, and I think there are a lot of questions to be asked, which we will come to next. I think if I were in charge of this, I would be asking a few more questions about it. The way you have approached this does not give me a great deal of faith, to be honest.
Q142 Chair: To follow up on what Kevan is saying, you did not approach the companies that were not compliant. Was there no opportunity to tell the non-compliant companies, “By the way, you are non-compliant; you will be removed from this, which means that Team Resolute will by default go through, because it was the only one that was compliant”? Was there no effort to say, “By the way, you are not up to par”?
Vice Admiral Marshall: There was significant effort throughout the whole of the procurement process.
Q143 Chair: So they were informed that they would fail this major hurdle—
Vice Admiral Marshall: The qualifying criteria made very clear—
Q144 Mr Jones: No, I am sorry, Chairman; that’s wrong. I am led to believe that, yes, the conversation went throughout the process, but what you would expect with most contracts is that, after final bids went in, if there were things that were still not compliant, you would get to post negotiation before you made a final decision. No discussions took place, did they? You have already confirmed that no discussions took place with anybody else after the final bids went in.
Vice Admiral Marshall: They were final bids, and we based the evaluation on the final bids.
Mr Jones: Yes, which is very peculiar.
Q145 Chair: Could you go back and confirm exactly the chronology of events, and confirm in writing whether there was an opportunity for the failed bids to upgrade their bids in order to be compliant? We have milked this a lot—you hear the tone of the meeting.
Mr Jones: Just to add to that, could we have a list of any meetings that you or the MoD had with any of the bidders after the final bids went in?
Chair: We will leave it with you.
Mr Jones: Not the contents of the meetings, but whether you had them.
Q146 Chair: At the end of the day, we are building ships to support the carrier fleet, and at the moment there is a gap between when the Victoria-class stops, which I think is 2028, and when these are actually finally built, which is a couple of years later. As we did when the Queen Elizabeth went to sea, we are leaning on NATO assets to fill that gap. How are we going to manage that period?
Vice Admiral Marshall: You have hit on an important point. Operating with partners is going to be the way we operate the fleet in the future. That is a really important part, as we learned with the first Carrier Strike deployment.
Q147 Chair: But to repeat the Falklands point, for example, where some of our friends chose to be neutral—certainly publicly—we would have to do this on our own. Let’s hope things do not get a bit spicy in those couple of years, then, if we have to deploy the aircraft carrier on its tod.
Vice Admiral Marshall: You are right. We have one Royal Fleet Auxiliary that can fulfil that role at the moment. That is why we are replacing one with three. Yes, the timing is going to be incredibly tight. We are putting contingency in place for RFA for Victoria, and we are heavily incentivising a contractual obligation to have all three ships off contract by 2032.
Q148 Sarah Atherton: Is the contract still subject to final Treasury and ministerial approval?
Vice Admiral Marshall: No, we have signed it.
Q149 John Spellar: In what way were the two failed bids non-compliant?
Vice Admiral Marshall: To preserve the integrity of the procurement and out of respect for the businesses, I do not think it is appropriate for me to comment on that.
Chair: I don’t want to open this up again, because this has done the rounds, but we are going to ask you formally to please take this back and discuss with the Procurement Minister whether you are able to share this in one form or another. The Committee clearly has a huge interest in this.
Can I say in a more general space that the Committee is absolutely supportive of what the military do? We are able to say things that perhaps the MoD can’t, but it makes our job all the harder to make the case and support more funds from the MoD, given the threats we are facing, when we see procurement programmes such as this unravel and take so much time. Getting these ships sorted and eventually out to sea has been a miserable experience. As I have illustrated, there is going to be a gap in capability, which we will now have to contend with. I just want to make that case clearly.
Q150 Mr Francois: There is a pattern here. The Astutes are world-class attack submarines, but they have been delayed for years. The Type 26 is a world-class frigate, but it is years late. The Fleet Solid Support ships are very important for the whole Carrier Strike concept, which itself has cost billions, but they are late as well. Why does the Royal Navy keep bringing in critical ships years late? What is wrong?
Vice Admiral Marshall: As we have demonstrated with Type 31 and FSS, we can make decisions quickly and go to the market quickly compared with historic trends. Looking back through my career and the boom or bust approach to Navy procurement, in 2017 we were building the last of the Batch 2 OPVs and placing the first three Type 26s on contract with a single source supplier. If we include the ships we are taking from trade and converting, we have 18 ships on order for the Royal Navy. We have two steady-state production lines in Scotland and one that we are placing a contract for in Northern Ireland. That provides us with a huge opportunity looking forward at the 30-year programme.
Q151 Mr Francois: At the very least, you have a lot of catching up to do in terms of timings. Following on from Mr Jones’s point, what’s the total contract value for the three ships? I think that has been published, hasn’t it?
Vice Admiral Marshall: The contract value is £1.6 billion.
Q152 Mr Francois: £1.6 billion. That is a very large amount of taxpayers’ money. Did you ask the bidders for a best and final offer—a BAFO, as it’s known in the trade?
Vice Admiral Marshall: The procurement was set up to maximise the capability for a fixed price. That was the procurement strategy that we agreed.
Q153 Mr Francois: Neither of us has been a Procurement Minister, but we certainly know that for something of that value, after you get the contractors’ bids in, it is not at all unusual to go back to them and say, “What is your best and final offer? If you sharpen your pencil, what is the best price you can do for this contract?” Did you do that?
Vice Admiral Marshall: The procurement was set up to maximise the capability for budget, so—
Q154 Mr Francois: Sorry, I don’t want the usual MoD PowerPoint. Did you or didn’t you ask them for a BAFO? It is a very simple question.
Vice Admiral Marshall: I think you are describing a different procurement process from the one that we followed.
Q155 Mr Francois: So you didn’t. Right, okay. In terms of the in-service date, Fort Victoria will be some 40 years old by 2028. She has given great service to the Crown, but she will be a tired ship. How are you going to plug the gap?
Vice Admiral Marshall: We have made some contingency for the potential run-on of RFA Fort Victoria.
Q156 Mr Francois: What is the contingency?
Vice Admiral Marshall: To maintain a material state to fulfil the gap. As the Chair has pointed out, there are options to work with allies as we work through. In terms of running the programme, my absolute goal is to make sure that we minimise the gap by delivering the ships on time.
Q157 Mr Francois: Just to be clear, your first option is to run Fort Victoria on for a further two years, if you can, until 2030, when the first of the Fleet Solid Support ships arrives. Is that right?
Vice Admiral Marshall: Should that be required, yes.
Q158 Mr Francois: Right. By then, how many years will she have been in service?
Vice Admiral Marshall: As you said, she is a very old ship. But we are confident in terms of the material state that, with appropriate recertification, she can last.
Q159 Mr Francois: If for any reason that does not work, what is your plan B?
Vice Admiral Marshall: As we have laid out, plan B would be working closely with partners and allies, as we have done to successfully deliver Carrier Strike Group—
Q160 Mr Francois: So basically someone would have to lend us a supply ship for two years?
Vice Admiral Marshall: I don’t think it is lending—
Mr Francois: In simple English.
Vice Admiral Marshall: No, it is not lending or leasing. It would be operating with partners, as we did successfully in Carrier Strike Group 21, with the US, the Danes and other partners around the world.
Q161 Mr Francois: Do you admit that it would be a bit embarrassing? These two ships and the air groups are phenomenally expensive. You could argue that some of the problems in the Army are because we have spent so much on the Navy. It would be a bit embarrassing if, having had to spend all that money, we then have to rely on an ally to provide the support ship for the carrier for two years, wouldn’t it?
Vice Admiral Marshall: That is why my plan is to deliver the ships to performance, cost and time.
Q162 Mr Francois: What is your confidence rating on stretching Fort Victoria on to 2030? Is it P50, or better or worse?
Vice Admiral Marshall: I am confident that we can continue to recertify Fort Victoria.
Q163 Mr Francois: You and your colleague have explained to us how these confidence ratings work. That is your methodology. What is your P-rating for doing that?
Vice Admiral Marshall: That is our methodology for procurement. It is not our methodology for in-service support.
Mr Francois: Oh, come on!
Vice Admiral Marshall: No, that’s true.
Q164 Mr Francois: Are you more or less than 50% confident that Fort Victoria, which will be 40 years old by 2028, will do the extra two years before she basically breaks? Just put a number on it. You are not convincing the Committee with your replies.
Vice Admiral Marshall: I am convinced. The recertification of ships as we go through is something we do all the time, including with Type 23s, which are way beyond their design life. It is not where we would wish to be as a Navy, and that is why we are recapitalising the Navy as quickly as we can.
Q165 Mr Francois: It has taken years to run this competition. You cancelled the whole thing, then restarted it. Do you accept that, if you had actually run it properly from the outset and not cancelled it, you wouldn’t have a two-year gap to worry about?
Vice Admiral Marshall: That is true, certainly. I took the decision to recommend cancelling the competition on taking over as the senior responsible owner, when it became very obvious to me that we would not be able to deliver a value-for-money solution for the capability that the Royal Navy needs.
Q166 Mr Francois: Four Type 45s are available to the fleet. How many of them have been through the power improvement programme to rectify the problem with the engines?
Vice Admiral Marshall: Dauntless is the first one to have gone through, and we are seeing significant improvement in both availability and performance—
Q167 Mr Francois: Is she back with the fleet now?
Vice Admiral Marshall: She is back with the fleet now.
Q168 Mr Francois: But the other three have not had it yet.
Vice Admiral Marshall: No. Dragon is going through as part of a combined power improvement programme and upkeep. Dauntless’ power improvement programme was recently completed at Cammell Laird, and she is heading south—she might be in Portsmouth by now—to complete her upkeep. We plan on taking delivery of the improved Type 45 pretty much on the drumbeat of one per year.
Q169 Chair: On that point, may I ask an interesting question? What happens to RFA Fort Victoria once you finish using it? Sometimes, these things get sold. When did RFA Argus come in? The 1970s? You have just given that a new lease of life for interesting reasons. Will the RFA Victoria be sold, or cut for steel?
Vice Admiral Marshall: There is certainly a market for auxiliary shipping.
Q170 Chair: It still has life in it! That helps to answer the question, which I know you wanted to avoid, as to whether you could potentially extend this by a couple of years. That is probably where we are going.
Vice Admiral Marshall: Yes. Predecessor classes have been successfully sold to other nations.
Chair: That’s right. Derek wanted to come in.
Q171 Derek Twigg: Just for clarification, which is something we need as a Committee, and following on from Mr Jones’s question, rather than get into the specifics of the contract for the Fleet Solid Support, I have a simple and straightforward question. Is it the policy of the MoD not to have any discussions whatever with bidders once they have submitted their final bid and before the MoD makes a final decision?
Vice Admiral Marshall: That depends. I do not think that is the MoD’s policy, but it is set entirely by the procurement strategy that we choose, whether that is land systems, air systems or maritime.
Q172 Derek Twigg: Let’s get that right: you might not have discussions with some final bidders, depending on what?
Vice Admiral Marshall: With each capability in defence being unique in its own right, the procurement strategies need to be tailored to deliver the right outcomes. The procurement strategy we chose for FSS was a repeat of what we did successfully with the Type 31, which was to procure a capability for a set budget. Not all procurements are set up like that.
Q173 Derek Twigg: To be clear, it might be the case that in some contracts, where once final bids have been submitted and before a final decision is taken, you will have discussions with the final bidders; on other contracts, you will not.
Vice Admiral Marshall: As clearly laid down in the chosen procurement strategy.
Q174 Mr Jones: Did you do that with the Type 31?
Vice Admiral Marshall: I cannot recall specifically on the Type 31. I was the programme director at the time.
Q175 Mr Jones: If you do not know, will you write to us? Likewise, when you write with what was asked for, will you say what correspondence or contact you had with any of the bidders after the final bids were in? That would be helpful. If you do not provide it, we can just FOI it.
Vice Admiral Marshall: Okay.
Q176 Dave Doogan: Admiral, what was the nature of the political oversight of the selection of the Navantia bid?
Vice Admiral Marshall: The Secretary of State was very engaged from the start, when we had to cancel a previous competition. Actually, the current Secretary of State has provided that continuity through the whole.
On political oversight, a little as Commodore Roberts described, we engaged right at the start and throughout the competition, in terms of both delivering the military capability and laying out the Secretary of State and the Minister of Defence Procurement’s expectations of what needs to be delivered in social value. Very early on, we had an alignment with the Secretary of State on the procurement strategy, as I laid out—maximising the capability for the budget and—
Q177 Dave Doogan: In the selection of the winning bid, what political oversight was there?
Vice Admiral Marshall: Through the Minister of Defence Procurement to the Secretary of State—they were informed of the analysis and the result of the competition, but to follow the integrity of the procurement process, they were firmly outside the commercial process.
Q178 Dave Doogan: So the decision was taken by?
Vice Admiral Marshall: The decision was taken through the procurement strategy and by the analysis of the delivery team. Sorry, the recommendation was made through the analysis and the procurement strategy, and then those recommendations went forward to the Department, first as a business case which went through the investment approvals committee, at the highest level of approving authority—
Q179 Dave Doogan: Whose desk did the recommendation get on to?
Vice Admiral Marshall: Both the Minister of Defence Procurement and the Secretary of State’s.
Dave Doogan: So it was their decision, based on your recommendation.
Vice Admiral Marshall: Ultimately, yes, as with any major procurement.
Q180 Dave Doogan: I just want to cap this off because I sense that the Committee is having some real difficulty in understanding how the Team UK bid lost out. It had two shipyards, which currently have a considerable heartbeat of work and, crucially, the skills and knowledge to undertake 100% of the work in the United Kingdom—most of it in Scotland, but also at Cammell Laird and elsewhere. It lost out because of bid compliance.
Are we seriously suggesting that BAE and Babcock were somehow outfoxed by Navantia and the shell company of Harland & Wolff—a construct that, taken together, can demonstrate no assets, no record of delivery, no money and no workforce? Somehow, when the BAE and Babcock bid was put before Ministers—well, it wouldn’t have been because their bid was deemed non-compliant, which is inconceivable.
This cobbled-together Navantia consortium—my words, which you will disagree with—has given absolutely no indication that it is going to deliver this programme. Rather, I fear that it will deliver the programme but the build will be substantially in Spain, not Devon or Belfast. How has this come to pass? How could this demonstrable engineering partnership between BAE and Babcock have lost out to the Navantia bid? It is inconceivable.
Vice Admiral Marshall: The procurement strategy was absolutely focused primarily on delivering the capability that the Royal Navy needs for the budget and absolutely on deliverability—assuring ourselves on performance costs and time. That is the way we work with all bidders throughout the procurement process. As a result, Navantia were selected and are now on contract. That team were selected and are now on contract.
Q181 Dave Doogan: Not the least of the Navantia bid’s deficits in the UK context when it comes to the list of high-status requirements for being a serious shipbuilding contractor is the workforce. Where are the workers going to come from in Belfast and Devon?
In the feast and famine of ship orders that you talked about, which the Royal Navy traditionally practised, people do not hang around waiting for a ship order—they go away and feed their families through some other means. The workers are not there. Where are they going to come from? What about the lag in training them up? How is that going to impact the programme?
Vice Admiral Marshall: The mobilisation of the workforce is absolutely a key risk for the programme; it is probably the most significant risk that I see going forwards. There is a plan, first, to recruit workers into the yards. They will then go to Spain to be trained and upskilled before returning to the UK. Then, in a “train the trainer” kind of way, Spanish shipbuilders will help to train the UK workforce in the UK yards. On reducing that further, the procurement strategy of integration in a UK yard is a significant mitigation of the risk overall: we know exactly what our obligations are in the contract when it comes to not only producing the ship but how it is ultimately integrated and brought together at Harland & Wolff.
Q182 Dave Doogan: That is helpful, in terms of a plan—although I am not sure it is a good plan. Can you explain to the Committee how two yards with an existing fully trained workforce lost out to two UK yards with no workforce? In what world is that real?
Vice Admiral Marshall: Again, the deliverability is only part of the evaluation of the whole bid.
Dave Doogan: An important part, though.
Vice Admiral Marshall: It is an absolutely essential part; as I have said, mobilisation of the workforce is a significant risk to the programme. Given the position in the UK when it comes to a skilled engineering workforce, it would be a challenge for any yard to mobilise to that extent. But again, the facilities are important as well. The workforce plus the facilities plus, as I have said, the capability on offer was by far the dominant factor in the evaluation.
Q183 Dave Doogan: So Harland & Wolff are much more capable of building warships than Babcock and BAE?
Vice Admiral Marshall: There is a capability for the Navy—the capability of the ships.
Dave Doogan: Of the product?
Vice Admiral Marshall: Of the product.
Q184 Dave Doogan: In the event, which many of us are quite persuaded of, that the much-vaunted work share between Cádiz, Belfast and north Devon does not come to pass as the Secretary of State has indicated he thinks it will and they do not manage to do the work in Belfast and Harland & Wolff, what contractual requirements are on Navantia to force them to partner with other UK yards to make sure that that content remains in the UK?
Vice Admiral Marshall: There are absolutely protections in the contract to ensure that the integration takes place in a UK yard. My plan is to ensure that the build strategy is laid out, which is about block construction both in Cádiz, Harland & Wolff and Appledore, with ultimate integration. The majority of the spend and work is taking place in the UK—that absolutely is happening. It needs to happen for the predominant reason that that is the best, most efficient way to build a ship.
Q185 Dave Doogan: How are you measuring that majority? Is it tonnage, cost, hours, size?
Vice Admiral Marshall: Value.
Dave Doogan: Value. So the majority of the value add – and the cost driver for that will be hours – will be done by blocks built in the United Kingdom. Is that right?
Vice Admiral Marshall: What we have said is that the hours are really important—cost per tonne and hours are really important—but also factoring in supply chain costs, which are also an important factor. We will certainly hold the prime contractor to account through the contract for everything that they have made a commitment to, including the UK work.
Q186 Dave Doogan: So what blocks will be built in the United Kingdom—the big, expensive, complex midship blocks or the much less complex and inexpensive forward and after blocks?
Vice Admiral Marshall: A combination of both, actually. Some of the propulsion blocks will be built in Cádiz; that is the most efficient and fastest way to optimise the programme. We talk about the importance of speed on this programme. While we are investing in the facilities and workforce in Harland & Wolff and Appledore, a lot of the work will start to come together in Cádiz. But certainly by value overall and, critically, the integration, which is very skilled, will take place in the United Kingdom in Harland & Wolff.
Q187 Dave Doogan: How is the contract managed in terms of ensuring where the social value lands? How have Navantia been managed?
Vice Admiral Marshall: The social value in terms of maximising UK content investment skills is an obligation in the contract. Because it is part of the procurement—this predates the Secretary of State’s decision to increase social value to 20%, so actually the threshold social value within the FSS contract is 10%—that is an obligation within the contract and it will be managed through the usual contract governance.
Q188 Dave Doogan: Finally from me, what other peer navy builds its warships in another jurisdiction?
Chair: These were classed as warships, and I think the terminology was changed for that very reason—so that they are built in-house.
Vice Admiral Marshall: Absolutely. The original national shipbuilding strategy set out warships as being defined as aircraft carriers, frigates and destroyers. The national shipbuilding strategy refresh removed that, but also gave us the freedom to procure on a case-by-case basis, which actually allows us the freedoms to get the best value for money for the taxpayer.
Dave Doogan: But the answer is that there are no other nations that build warships in other jurisdictions.
Chair: Okay. I think that point has been made.
Q189 Mr Jones: You have already said that Harland & Wolff are a subcontractor in this process. When did Harland & Wolff last build a ship or integrate a ship as big as you are asking them to do here?
Vice Admiral Marshall: As you know, the last time that Harland & Wolff really did that was during the last auxiliary programmes in the United Kingdom, so over a decade ago.
Q190 Mr Jones: In terms of workforce, when their contract was actually let to Navantia, what was the full-time workforce at Harland & Wolff?
Vice Admiral Marshall: I do not have that figure with me, in terms of how many there were when the contract was let—
Q191 Mr Jones: You said it was just over 100. Is that a figure you recognise?
Vice Admiral Marshall: That seems about right, given the volume of work that they had at that time. Of course, in any shipyard it goes up and down, which is why I cannot give you the exact figures. The mobilisation to the 1,200 workforce in the shipyard is certainly something that, as I have highlighted, is a key risk that I am looking at—certainly at the start of the programme.
Q192 Mr Jones: But that is a risk that should have been taken into consideration when you were letting the contract. You used the words—I have just written them down—“We are investing in Harland & Wolff”. What is the investment that the MoD are putting into Harland & Wolff?
Vice Admiral Marshall: As Commodore Roberts explained, everything in the price of the contract results in those investments. The facilities that are required—
Q193 Mr Jones: Have you been to Harland & Wolff lately?
Vice Admiral Marshall: I was last there late last year.
Mr Jones: It needs a lot of investment, doesn’t it?
Vice Admiral Marshall: Yes, and I would say exactly the same was true for Rosyth ahead of the Type 31 programme. That has been a success story in terms of building—
Mr Jones: The difference there being, as Mr Doogan said, that you have got two major primes funding that, whereas here you have a company that has an £18 million turnover and £25 million loss. There is a big difference.
Q194 Mr Jones: May I just ask one final question? In terms of the various claims that have been made about jobs, they are a subcontractor of Navantia. What control do you or the MoD have to ensure that the number of jobs, training places and everything else are actually delivered in Belfast?
Vice Admiral Marshall: We will have visibility of that through the contract monitoring and the governance of the contract.
Q195 Mr Jones: What is the penalty for Navantia or Harland & Wolff not to do it?
Vice Admiral Marshall: We have absolutely appropriate protections in the contract.
Mr Jones: What are they?
Vice Admiral Marshall: I am not going to go into the specifics of the terms and conditions.
Q196 Mr Jones: I will tell you why I raised this with you. You should also look at how Harland & Wolff operate. If you look at how they are operating in Scotland, in one of their yards they actually import quite a lot of Portuguese labourers—I think it was Portuguese labourers, the last time I spoke to the union official there—to do work. Would it be possible for them to actually meet the targets for the workforce by importing labour?
Vice Admiral Marshall: No. The plan is absolutely to generate a skilled UK workforce.
Mr Jones: In Belfast?
Vice Admiral Marshall: Yes. In Belfast.
Q197 Mr Jones: It is not doable, is it?
Vice Admiral Marshall: It is going to be challenging, in the same way as—
Mr Jones: I love how you keep using the word “challenging”. I will tell you something, if I was actually buying or procuring something, I would not want to put unnecessary risk in. This is unnecessary risk, isn’t it?
Vice Admiral Marshall: I do not think it is an unnecessary risk, given the challenges of recapitalising the Navy. As you said, we need to do it as fast as possible. I do not think it is an unreasonable risk. In any complex procurement, there are risks. In the three programmes that I have had the privilege to lead on shipbuilding recently—Type 26, Type 31 and now FSS—mobilisation of the workforce and the supply chain were key, common risks to all those programmes.
Q198 Mr Jones: But what is the capital value of Babcock or BAE Systems compared with an outfit like Harland? You are not comparing apples with apples here, are you?
Vice Admiral Marshall: With respect, you are describing the primes there.
Q199 Mr Jones: You have actually answered it: this is a Navantia contract, which is fine. I understand what you have done; I am sceptical about why it is we have given a contract to the Spanish, which, by the way, it was confirmed earlier is being underwritten by the Spanish taxpayer. That is a political decision—fine; that is not your decision—but it concerns me that we have taken that decision and basically stuck Harland & Wolff on as a bit of a fig leaf to say we are actually going to get some UK content out of this. I accept that perhaps some of those decisions were not yours and were other people’s decisions, but I just say to you that this ain’t going to go away, Admiral.
Chair: No. There are clearly some big questions here; we thank you for taking some of them away and look forward to the responses. Robert has our final question on this subject.
Q200 Robert Courts: I want to be clear about the point we have been discussing. In respect of the jobs and skills we have been hearing about, is this a contractual requirement of the work, or not?
Vice Admiral Marshall: It is absolutely a contractual obligation to complete the build as—
Robert Courts: No, no, the requirement about jobs that have been provided and about UK workers and skill provision—is that a contractual requirement or just a hope?
Vice Admiral Marshall: No, that is the level of workforce required to build this ship, and therefore it is a contractual obligation.
Q201 Robert Courts: That is not the question I asked. Is it a contractual requirement that that number of jobs will be provided and that they will be provided for UK workers? Is that a contractual requirement?
Vice Admiral Marshall: It is a contractual requirement in the way that I have described, yes.
Q202 Mr Jones: No, it is not. I think this is what Mr Courts is trying to get at. Let’s be a bit more simple. Let’s say there are going to be 1,000 jobs; is there anything in this contract that says that those 1,000 jobs have got to be provided in the UK with UK workers?
Vice Admiral Marshall: Yes, there is an obligation to generate the UK workforce—
Mr Jones: An obligation. It does not actually say, “They have to be UK workers” or “It has to be done in the UK,” does it?
Vice Admiral Marshall: So, within the contract they would absolutely—when we build the ship, we need to mobilise the workforce. That will be absolutely our focus in terms of, “Are Navantia delivering against the obligations?”, which include getting the workforce trained, initially around—
Mr Jones: You have no understanding saying they have to be UK. If this was the United States, for example, and I was procuring anything, I would insist that it had to be procured and the workforce had to be in the US; under this, there isn’t anything, is there? There is an ambition, which I accept you have, but that is it all is.
Q203 John Spellar: Would it be a breach of contract if they did not?
Vice Admiral Marshall: In so far as they would not be mobilising the workforce sufficiently to hold the schedule.
Q204 Chair: How are you measuring that?
Vice Admiral Marshall: Absolutely through the mobilisation of the skills, the mobilisation of the workforce and the mobilisation of the supply chains—that is how we are measuring it.
Chair: From a British perspective.
Vice Admiral Marshall: Yes.
Q205 Dave Doogan: The skills element of this proposition is so precarious. You need an entire project to manage that workforce generation. Have you got one? What is your first milestone so that you know you are going to hit it?
Vice Admiral Marshall: We have taken the core team from the competition to create the core team for delivery, so we have that continuity in terms of the knowledge and the relationships. We are reinforcing that team to take it from a competition through to delivery, so I am confident that we are building the right team. I am the SRO at the moment. Navy Command is recruiting an SRO specifically for this programme so that we have a single oversight of commercial shipping under a single SRO.
Our first milestone will absolutely be an indication as to whether we are successfully getting that workforce trained. As I said, it will be tens of people—35 people—to start with, but that will be our first milestone in terms of the litmus test as to whether this is starting to be a success. As that is taking place, are we then being successful in terms of the recruiting campaign and bringing people through into training? That is certainly a key milestone for me: the success of that initial tranche of people being trained.
Q206 Richard Drax: You say just getting people trained; I assume these are highly skilled jobs that take time. Getting people trained is not like reading a book and then, “I’m going to build a ship.” How long does that take?
Vice Admiral Marshall: Some of the training packages are going to be months; some are going to be more than a year long, depending on the complexity. On the programme management side and the oversight in the yards, those will be longer term training packages.
Chair: Thank you, gentlemen; it has been a very productive session. We are very proud of the ships that we build and the standard that we build to; we are very concerned that it is taking such a long time. Whether it be the Type 26, the Type 31 or, indeed, the Fleet Solid Support, they are great ships but we take too long to build them. That is the focus of this Committee and why we have been asking these questions. We are very grateful to you for having been very frank, as best you can. We look forward to the answers to the questions we have left with you. I am sure we will return to this subject again.
Thank you, Vice Admiral Paul Marshall and Commodore Stephen Roberts, for your time this morning; you have been very helpful indeed. I also thank the Committee and the staff. That brings our annual update on the major shipbuilding programmes to a close.
 At the time of the session, HMS CARDIFF was in three sections.