We have been discussing the Type 26 recently, specifically, the cost of the assessment phase.
In the latest NAO Major Projects Report the Type 26 Assessment Phase cost is described as £173 million to 31st march 2014 against a maximum approved cost of £158m.
We have therefore been trying to gain an appreciation of what is including in the ‘assessment phase’, this description from the same report might shed some light…
The Sustained Surface Combatant Capability pathfinder project in 2006 recommended a three-class solution; C1, a task-group enabled anti-submarine warfare frigate; C2, a general purpose frigate; C3, providing Mine Countermeasure, Hydrographic and Patrol capabilities. The Sustained Surface Combatant Capability project highlighted a need for up to ten C1s and eight C2s. Type 26 C1 was to be built first at a rate of one per year, followed by C2. This approach also met the needs of industrial sustainability whilst fulfilling the Royal Navy requirement.
It was on this basis that the Concept Phase progressed to the Initial Gate approval for Future Surface Combatant (C1) on 18 March 2010. It was anticipated that Main Gate approval would be sought by the middle of the decade and estimated that for a ten ship class the procurement cost would be *** (inclusive of VAT and inflation), with a whole life cost of *** (inclusive of VAT and inflation), assuming a ship life of 25 years. It was also recognised that there would be a Strategic Defence and Security Review following the General Election. Subsequently as part of the approval, it was planned that there would be a midphase review point to assess the impact of any changes in policy driven by that review.
The approval from the Investment Approvals Board capped the “not to exceed” value of the Assessment Phase at the 50% level. All non-UK new design and build options were discounted at the Initial Gate, as recorded in the Investment Appraisal, noting the over-arching agreement with BAE Systems Maritime – Naval Ships in the Terms of Business Agreement (TOBA) (dated 21 July 2009).
In October 2010 the Strategic Defence and Security Review reduced the total surface fleet to 19 frigates and destroyers which will include six Type 45 destroyers and the current Type 23 frigates which will be replaced by the newly renamed Type 26 Global Combat Ship (previously Future Surface Combatants) after 2020. The Strategic Defence and Security Review also merged the C1 and C2 variants into a single class of 13 ships based on a common acoustically quiet hull, eight of which would be Anti-Submarine Warfare and five General Purpose platforms.
Subject to approvals and value for money assessments, Type 26 Global Combat Ships are expected to be procured on a single source basis from BAE Systems Maritime – Naval Ships. ***
The alignment of renamed Type 26 Global Combat Ship against the goals of the Strategic Defence and Security Review was confirmed in an Information Note submitted to the Investment Approvals Board in January 2011. This Information Note stated that:
a. Approval will be split into two parts. Approval (Main Gate 1) will seek endorsement of the requirements to be delivered by Type 26 Global Combat Ship with Main Gate 2, the main investment decision, following at the end of the Assessment Phase. This will allow detailed costing and design work to proceed against a defined requirement so that the project can present an affordable design proposal for approval at Main Gate 2 and subsequent contract signing;
b. The remaining programme key milestones remain unchanged, with planned service entry as soon a possible after 2020;
c. Type 26 Global Combat Ship design is considered to have export potential with considerable effort being expended to encourage overseas partner interest.
The design and study work for the Analysis of Options stage concluded in the Capability Decision Point, held in November 2011. This identified a baseline design from which more detailed design work continues during the remainder of the Assessment Phase. The Capability Decision Point informed the Main Gate 1 submission which has been endorsed by the MOD Investment Approvals Committee. Main Gate 1 provided approval for the Project Team to continue the Assessment Phase with the detailed design work on the Type 26 Global Combat Ship capability architecture, down selected on the basis of the Capability Decision Point output; and for the Support Solution to enter its Assessment Phase. ***
The detailed design phase and industry engagement process will underpin the programme’s Main Gate 2 at the end of the Assessment Phase, which is planned to conclude at the end of 2014, allowing the production phase to begin immediately thereafter . *** Maritime Indirect Fires System has been brought under the programme umbrella, and its Main Gate approval will be integrated into the Type 26 Main Gate 2 submission. Maritime Indirect Fires System is an open competition led by the MOD for a medium calibre gun system and which passed its own Initial Gate in September 2012. The Invitation to Negotiate was issued in March 2013 to companies who successfully completed the Pre-Qualification Questionnaire.*** In order to maximise Type 26 Global Combat Ship export potential to realise wider benefits to the MOD, industry and the UK the design is being developed in close partnership with industry to improve these opportunities.
The assessment phase is also defined as;
The Assessment Phase is defined as ‘the second phase in the acquisition cycle after the Concept Phase and beginning with Initial Gate. The aim of the Assessment Phase is to develop an understanding of options for meeting the requirement that is sufficiently mature to enable selection of a preferred solution and identification, quantification and mitigation of the risk associated with that solution. At the end of the Assessment Phase a Business Case is submitted to the Investment Approvals Board for Main Gate Approval’.
The design work would come in the Demonstration Phase using the SRD and URD that would be the product of the Assessment Phase as its starting point. The Assessment Phase considers all the defence lines of development and MODAF’s various views to get to a point where we can hand over to the manufacturer for design and development. Obviously it is not as simple as that because the output from the Assessment Phase has to be technically feasible and for that, some preliminary ‘design work’ would need to be completed but fundamentally, the design work is not part of the Assessment Phase.
Looking at the same NAO report allows us to compare Assessment Phase costs for other major projects, the table below shows the project project name and cost in millions of Pounds for its assessment phase.
|Core Production Facility||107|
Is there any explanation for why Astute only cost £29m but Typhoon £78m, or why the A400M* cost the princely sum of £1m but Type 45, £232m?
Or even why warships are the Top 3?
Am none the wiser to be honest, are you?
*Not shown on the table but the NAO declares A400M Assessment Phase as £1m
** Excludes the £56 million spent in Assessment Phase for the now reversed conversion project