Feature 7 | AMPHIBIOUS SHIPS
the ‘Invitation to Tender made specific
allowance for bidders to propose solutions
which traded performance against cost’.
Tenders were submitted by Swan Hunter
(Tyneside), BAE Systems, and Appledore
Shipbuilders in June 2000. Swan Hunter,
offering a solution based on the Schelde
Naval Shipbuilding Enforcer design, was
the only bidder to submit a tender that
met all of the key performance parameter
requirements, and came in at a price of
£148 million, which was lower than the
competition.
However, broader industrial considerations
meant that it was decided that the number of
vessels to be procured should be increased
from two to four, with the additional two
vessels built at the BAE Systems Govan yard.
Separate contracts were placed with Swan
Hunter in December 2000 and with BAE Mounts Bay, one of the much-delayed Bay class, under construction.
Systems in November 2001, these aggregating
to a total value of £332 million. The Ministry
of Defence assumed an additional risk with The NAO observes that the Ministry in its lead yard services role. In effect the loss
liability for the timely delivery of design of Defence had identified all these issues, of Swan Hunter could bring the entire project
information to BAE Systems to enable it to but seemed unable to discern the wealth of to a halt with the prospect of part completed
‘build to print’ its two vessels. emerging problems. Moreover, it had failed ships at BAE System’s Govan yard.’
The Ministry of Defence comes in for to comprehend the additional and substantial On that basis, the Ministry of Defence
particular criticism for its failure to recognise risk posed by the relative immaturity of the elected to continue to fund its contract with
that Swan Hunter was encountering LSD (A) design. ‘There was shared optimism Swan Hunter so that it could continue to
problems in the design and build process. As [between Swan Hunter and the Ministry] deliver its lead yard services responsibilities
late as March 2003, the Ministry reported to that the design of the ship was far more which in turn would allow the continued
Parliament that the project was progressing mature than it actually was,’ the report states. construction of all four vessels at both yards.
satisfactorily and was due to deliver three ‘The immaturity of design at the outset led If there is a positive side to the LSD (A)
months early and within budget. to significant difficulty for Swan Hunter in story, then it is, according to the NAO, the
Yet just six months later Swan Hunter fulfilling its role in the development of the manner in which the Ministry of Defence
informed the Ministry of Defence that it design. sought to recover the programme from its
would not be able to complete the contract ‘Only 7% of the design drawings were nadir.
within the agreed price. The NAO surmises provided on time and over 52% were over a In December 2004, Swan Hunter received
that ‘although the Department identified year late. This led to significant delays in BAE an £84 million contract amendment with
many of the risks, it failed to fully apply…a Systems’ build programme and a subsequent revised dates for acceptance and delivery of
strict “eyes-on, hands off” approach. This cost of £54 million to the [Ministry] in delay the vessels. In particular, the contract included
meant that the risks were not always managed and dislocation claims from BAE Systems.’ a new target cost incentive fee payment
effectively and the scale of emerging problems The range of options open to the arrangement to encourage Swan Hunter
was not always apparent. Ministry of Defence, once Swan Hunter to reduce costs and whereby the company
‘Most project issues were identified but had acknowledged that problems afflicting would receive zero profit if the target cost
were not adequately mitigated. In addition LSD (A), was limited. ‘In particular,’ says the was breached, and a share of savings if the
to the extra risks which the four-ship project NAO, ‘Swan Hunter’s financial position was cost was reduced.
commercial structure placed on the [MoD], sufficiently fragile that cancellation of part However, Swan Hunter continued
there were a number of technical and project or the entire construction programme at the to underperform and in late June 2005
management issues.’ These included Swan yard could have pushed the company into acknowledged that it could not complete the
Hunter’s lack of recent experience of defence receivership. contract within the target cost. After a rapid
commercial arrangements and complex ship ‘In addition the [Ministry] could also have analysis of the options available, the MoD
delivery; deficiencies in the company’s risk, been faced with significant contractual claims then took the bold step to remove Swan
project, and financial management capability; from BAE Systems for the non-delivery Hunter from the contract and instead place
poor supply chain management; and a less of both the remaining ship design and a single prime contract with BAE Systems to
than robust commercial position. equipments being provided by Swan Hunter complete the project.
32 Warship Technology March 2008
WT Mar - p31+32+33.indd 32 03/03/2008 15:56:32
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