My right honourable friend the Secretary of State for Defence (Des Browne) has made the following Written Ministerial Statement.
The House will wish to be aware of an update to the alternative contracting arrangements for surface warship maintenance and repair. These arrangements were signalled as part of the wider defence industrial strategy and today's announcement is an important step towards ensuring that the capability requirements of the Royal Navy continue to be met now and in the future.
In 2004, the Ministry of Defence (MoD), in consultation with industry, launched a study (the Surface Ship Support Study) to identify the optimum approach for the future maintenance and repair of surface warships (aircraft carriers, major amphibious vessels, destroyers, frigates and mine warfare vessels) that would deliver the most efficient, effective and sustainable support policy and offer best value for money for defence as well as to taxpayers. Previously, surface warship upkeep contracts had been awarded following competition while operational (or fleet) time support was delivered through partnering arrangements under the Warship Support Modernisation Initiative. While these arrangements have delivered value for money to the MoD, force level reductions coupled with overcapacity in the surface ship repair market prompted a review.
In 2005, the study concluded that the option best able to meet the needs of both the department and industry would be the formation of a surface warship support alliance, which would include current providers of surface warship upkeep and fleet time support. To take this forward, the MoD entered into detailed dialogue with industry to explore the feasibility of delivering such support through an alliance. My predecessor's Written Ministerial Statement of 14 February 2006 (Official Report, col. 72-73WS) announced this exploratory phase. During this time, competition policy would be suspended to enable the alliance concept to be developed and tested progressively in a controlled manner.
An order was made by the then Secretary of State for Trade and Industry (now Business Enterprise and Regulatory Reform) excluding the maintenance and repair of surface warships from the UK Competition Act 1998. While good progress has been made on exploration of the options, it has been necessary to review these in the light of emerging findings from the naval base review and the formation of Babcock Marine and the joint venture between BAE Systems and VT. As a consequence, the exploratory phase has been extended for up to one year. This extension will have no impact on current and future support of complex warships.
An MoD project team will continue to take this work forward with the clear objective of identifying the optimum solution that would provide effective, affordable and sustainable support to Royal Navy surface warships.
The new contracting arrangements promote a sustainable industrial base that retains key operational support and system upgrade capabilities within the UK, and are therefore vital to our ability to maintain and support the Royal Navy. We will continue to work closely with industry in a spirit of transparency and trust to improve the delivery of surface ship support, securing the capabilities of the Royal Navy into the future.