View Full Version : Cost of U.K. Carriers Reported To Jump 25%

06-30-2009, 04:22 PM
By andrew chuter
Published: 30 Jun 2009 13:22

LONDON - British plans to build two 65,000-ton aircraft carriers are facing renewed controversy after the leak of a memo from the industrial alliance building the warships detailing that costs had risen by about 1 billion pounds ($1.65 billion) since late last year.
A memo obtained by the BBC said that the cost of building the biggest-ever warships for the Royal Navy had ballooned by about 25 percent to around 5 billion pounds. (BAE SYSTEMS CONCEPT)

A memo obtained by the BBC said that the cost of building the Royal Navy's biggest-ever warships had ballooned by about 25 percent to around 5 billion pounds.

About two-thirds of the cost increase was attributed to a government decision last December to delay the warships' introduction into service by up to two years as part of an effort by the Ministry of Defence (MoD) to reduce its equipment spending profile over the next two or three years and help offset a gaping hole in its budget.

The government said at the time that pushing back the new carriers would better align their availability to the introduction of the short-takeoff-and-landing version of the Joint Strike Fighters the British plan to purchase to equip the warships.

On the current timeline, the first of the warships is scheduled to be in service in 2015 followed by the second in 2018.

Along with the time delay, other cost increases resulted from inflation, interest on capital, some design changes and other issues. The deal was only signed between the BVT-led alliance building the carriers and the MoD in mid-2008 after years of haggling over costs and specifications.

The carrier alliance includes the BAE-VT Group-owned BVT, Babcock International, Thales UK and the MoD. The warships are being built in modules across yards in the U.K. and floated round to Babcock's Rosyth facility in Scotland for final assembly.

The memo, which was written for alliance chief executives, conceded that the increased cost meant there was a "very real fight for the program's survival."

Procurement minister Quentin Davies reaffirmed the MoD's position June 29, saying on the radio that there was no question regarding the carriers' delivery.

An MoD spokeswoman said the ministry was "currently re-costing the program. The MoD accounts published next month will present an initial estimate, and the formal costing will be available until later in the year.

"We took the decision to delay the two future aircraft carriers in December 2008. We did this in order to reprioritize investment to meet current operational priorities and to better align the program with the Joint Strike Fighter aircraft. We acknowledged at the time that there would be a cost increase as a result", she said.

The future of the Royal Navy's CVF carrier has been under question for years as the MoD attempts to balance spending plans with available cash.

The Royal Air Force and others have been actively trying to sink the program, most recently during budget planning for 2009-2010.

U.K. analysts reckon one way the British could tackle the cost overrun would be to cancel the second of the carriers. That, however, would come with a cost penalty of its own.

The renewed controversy comes at a time when attention is turning to exactly how much damage Britain's already under-funded military might suffer in any upcoming budget cuts caused by the need to pay down the country's huge public debt.

Spending was an issue addressed by an Institute for Public Policy Research report released Tuesday that looked at the security strategy. The study said the future of programs such as the carrier, Type 45 destroyers, Joint Strike Fighter and the Astute nuclear submarine should be reviewed.

"It is clear there is a black hole in the defense budget … The Government should thoroughly re-examine, as part of a strategic review of security, its projected defense equipment requirements. This re-examination should explore all viable options for capability downgrading and quantity reduction as well as for complete cancellation of some equipment programs," the report said.

The report's authors include Lord George Robertson, the former Secretary of State for Defence and former NATO general secretary, and Gen Lord Charles Guthrie the former chief of the Defence Staff.