Typhoon Tranche Two - Contract Signed and Sealed

If any feeling permeated the ceremony marking the four-nations signature of the Typhoon Tranche Two contract, then it was one of optimism. And not, it should be said, the sort of optimism that stems from the point of view that, “everything else was so awful, the future can only be better …” No: from the UK camp at least (backed by supportive comments from Spain and Germany), there was a contented anticipation about what is expected to come through what was a tortuous pipeline.

Scuttlebutt emanating from MoD’s Main Building is that one of the policy’s principal drivers is to find a means of shackling BAE Systems. The logic is simple – insofar as any MoD logic is simple. BAES is the present near-monopoly supplier of surface ships and the monopoly supplier of submarines – and so has a something of a whip hand in talks. But MoD doesn’t want a duplicated naval construction industry – the need is to rationalise that which already exists.

So how can MoD dilute BAES’s naval influence? Well, remember that via various of its divisions and joint ventures, the company is also a major supplier of naval electronics and weaponry – so might become more compliant in contract negotiations. So it’s simple. Create the broadest possible alliance, so that the BAES Gulliver is tied up by the Lilliputians. Pull in VT Group, KBR (owner of Devonport) Babcock (owner of Rosyth), Thales and as many other naval suppliers as you possibly can, then BAES will fall prey to the weight of numbers.

But how this strategy would work when BAES is the design yard of choice for many surface ships to date, and for all submarines, is difficult to perceive. Even if a form of shareholding taking account of naval turnovers could be framed, it is unlikely that BAES would hold less than a majority. So why try in the first place? General (later President) Ulysses S Grant said during the American Civil War, “If you cannot have what you like, you must like what you have”. Defence Analysis feels that this would be a good motto for those MoD officials responsible for naval industrial policy.

It would require immense effort to persuade anyone that an industrial policy is not simply a cloak concealing attempts to find cash savings to calm the budget bow wave – Defence Analysis really needs convincing on this. The problem is that although a levelling-out of construction and deliveries is undoubtedly needed, the trend – to whit the cancellation of Future Surface Combatant in its existing form – is cash-driven in the first instance and then justified afterwards. And will it be accepted that if the French, Spanish, Italian and German examples are considered, then running an naval construction policy could well cost UK Ltd. more rather than less?

Those Left Out. It isn’t just who is coming to dinner – but who isn’t that is of import. The latter group includes one prominent party, Swan Hunter. All of the gossip over which yards are the subject of discussions has apparently ensured that Swan Hunter is not included, which is a bit odd for a company that is building two Landing Ships Dock (Auxiliary). But then, with its ships running late and over budget and the company reported in a many media outlets as being in commercial trouble, is this really a surprise? Do we seeing here an “active” defence industrial policy, with MoD virtually declaring that Swan has no future?

Hidden Strength. There is one area in which – so far – few have noticed that industry’s hand is becoming stronger rather than weaker in the naval sphere, namely in ship maintenance. Some in MoD – as well as a few interested politicos – probably believe that once the Type 45s come on stream there can be an allocation of maintenance and support work for those ships around the yards – Portsmouth, Devonport and Rosyth, maybe even the Clyde. But if what Defence Analysis hears is true, then the answer is a firm “No”. The issue is that the combined might of BAES and VT is contractually the proprietor of the ships’ design and configuration management. So anyone bidding for maintenance work on them must buy the data pack and suchlike from BAES/VT. MoD cannot demand that the two pass just hand this out, in which case, what future for Rosyth, which has relied much on allocated work, and for Devonport?

Industry Whispers. Can it be true that what looked to be a perfect example of industrial cooperation, the CV(F) carrier industrial alliance, might now not be as cosy as first thought? There was chat at some January cocktail parties that tensions had surfaced between BAES and other parties interested not just in the carrier but also in the UK naval scene as a whole. The buzz was about growing disagreements between BAES and some other players. As one uniformed observer commented over a glass of Italian something-or-other, “Haven’t they learned? United they will probably stand but divided they will certainly fall.”

• The US Defence Budget: Procurement Trends
• US Navy Littoral Combat Ship
• CV(F) Stop Press
• US/UK Procurement Trends
• Munitions Budgets
• French 2005 Defence Budget
• Defence Information Access
• UK Shipbuilding Industrial Policy
• Implications Of US Budget Decisions
• UK Bowman Communications Programme
• UK Watchkeeper Programme
• DEFENCE INDUSTRY NEWS
• DEFENCE DIVERSITY

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