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Future Aircraft Carrier (CVF)

Queen Elizabeth Class

Part 8

             Article Parts 

 1. Current Project Status and

  2. Specification

  3. The Project and its Origins

  4. Role

  5. Smart Procurement

  6. Project Schedule

  7. Procurement Process I
      (until Jan 2003)

  8. Procurement Process II  
      (until July 2007)

  9. Procurement Process III
      (latest situation)

10. Management and Industry

11. Aviation Operations

12. STOVL or CV F-35?

13. Platform Design ...

14. ... and Redesign

15. C4ISR Facilities

16. Operational Concepts

17. Crew, Accommodation &

18. Propulsion and Engineering

19. Manufacture

20. Build Problems and UK

21. Basing and Support

22. Costs

23. Air Group

24. Aviation Requirements and

25. Catapults and Arresting Gear

26. Armament and Armour

27. Operations

28. Names

29. CVF Links


Procurement Process II (30 January 2003 to 24 July 2007) -
Financial Constraints and Indecision

At the time of the 30 January 2003 downselect, MOD officials said that it was hoped that BAE Systems and Thales would be able to agree a joint approach structuring the terms and work share of their enforced partnership (technically the  "Future Aircraft Carrier Alliance" but gradually shortened to just the "Carrier Alliance") within three months.  A final 6 month Assessment Phase Stage 3 (AP3) contract, expected to be worth about £20 million, would then be awarded.  During AP3, industry and the CVF Integrated Project Team were expected to work together with the preferred prime contractor (BAE Systems) in order to further mature the design (which originated from Thales and BMT), reduce risk, refine costs and decide key cost/capability trade-offs.  This would lead to the submission of the business case for the pivotal Main Gate decision, with a target date for Main Gate of December 2003   Negotiating this important and testing approval milestone would pave the way for demonstration and manufacture, and the award of the build contract in April 2004.

A graphic from May/June 2003 of the CVF Alpha design.

Talks to properly define the terms of the alliance contracting structure began immediately after the MOD's downselect announcement, but the MOD's timescale was impossible to meet.  Not only did two massive and carefully worked proposals from the BAE and Thales CVF Teams (which had taken three years to put together) have to be discarded and a new joint proposal written, but there was a number of potentially contentious issues with BAE Systems as regards Thales role which had to be resolved - sources from both companies immediately anticipating intense haggling over the value and scope of work.   It was soon agreed that a much longer AP3 study of up to 12 months was now required, also as delays in officially awarding the contract lengthened, it became obvious that AP3 type work had to start soon if the ISD was not to slip badly.  Therefore the two companies merged their CVF Teams to form a joint "Aircraft Carrier Team" consisting of over 350 people working in a joint integrated team under a single management structure.  Work had actually had been in progress for four or five months before the official AP3 start date of September, and indeed by the May 2003 statement the expected actual contract period was again just 6 months (completing in November!) to reflect this.

In early February 2003, BAE Systems split the CVF work in to six areas - design, aviation logistics, air systems, propulsion systems, metal working and support.  The elements were divided between companies as follows:- design: BAE and Thales; aviation logistics: BAE, Lockheed Martin, Northrop Grumman; air systems: BAE; propulsion: EDS, BAE, AMS, Rolls-Royce, QinetiQ; metal: Babcock, BAE, Swan Hunter, Vosper Thornycroft; support: BAE, Rolls-Royce, Vosper Thornycroft, Swan Hunter.  Thus Thales, featured as part of the design element but not in any other part, as one analyst put it: "Thales is being downplayed if not frozen out."

By early April 2003 many major issues were still unresolved: BAE's concerns at being responsible for building some else's design (although many systems in the original Thales/BMT design concept were rapidly being replaced by BAE's preferences), Thales determination to get at least a 30% workshare guaranteed, and BAE's insistence on a cost plus contract (known as Target Cost Incentive Fee (TCIF) which would pass most of the risks associated with delays and cost overruns on to the MOD and the taxpayer, rather than a firm or fixed price contract.  A source involved in the project was quoted by The Times newspaper as saying there was “always going to be a lot to achieve, but things are just not going as hoped.  There are delays and that may mean cost overruns”.  Another source said: “There is no way BAE can go for a fixed-price contract and there is no way the in-service date will be met, yet Baghaei is trying to impose this on them because he has told the MoD that he can deliver the goods.  He is talking nonsense.” The MOD's official position was that no final decision had been taken on the CVF pricing strategy, and the way forward would be finalised as part of the main investment decision (Main Gate) - which had now slipped to February 2004.

At its monthly meeting on 16 April 2003, the MOD's Investment Appraisal Board (IAB) hoped to be able to endorse the joint BAE/Thales CVF partnership agreement, which would allow AP3 to be formally awarded.  But no agreement was presented; instead the IAB received an update which anticipated a 12 month delay to the CVF programme compared with previous plans. 

On 13 May 2003 it was officially stated that:

 "Both BAE Systems and Thales UK have agreed to take the programme forward on the basis of the allocation of roles and responsibilities outlined in the announcement made by the Secretary of State for Defence on 30 January 2003.  Specifically, they have agreed to the contract for Demonstration and Manufacture being managed and executed by a single, integrated team staffed from both organisations and the Ministry of Defence.  BAE Systems will lead as preferred Prime-contractor with Thales UK as Key Supplier participating in key management posts within the integrated team.  The precise terms of the contract remain the subject of on-going negotiations which are due to complete by the end of this year."

Another bombshell emerged in early June 2003 when BAE Systems warned the Ministry of Defence that it could not build the now 65,000 tonnes  'adaptable' CVF's within the allocated budget, BAE estimated that it would cost £3.8bn ($6.2 billion) in the D&M Phase to construct the pair - a full £1 billion above the available budget.  The Financial Times reported that both industry executives and MoD officials had said that the government's decision to force BAE to build the ships to the Thales design was largely to blame for the increased costs, although BAE officials refused to respond to questions about whether they could build the two carriers to their own design within the original £2.8 bn budget.  BAE Systems officials also blamed the Royal Navy's continual adding of requirements to the CVF project for part of the cost escalation, one official saying that BAES would be happy to add gold bath taps to the design as well, but the MOD would have to pay for them.

Although much liked by the Royal Navy, the 65,000 tonnes Thales 'adaptable' design (aka Alpha) was no longer considered to be  affordable by mid-2003. 

One MOD official responding to situation said: "The choice is bleak.  We either find more money or we build smaller carriers", but the RN was told that there were no more funds available.  The new Chief of Defence Procurement (CDP) Sir Peter Spencer immediately ordered an urgent review of the CVF project.  As a result of the CDP's concerns, the Future Carrier Alliance was tasked by the DPA to undertake a 'quick-look' study into a smaller and less sophisticated design, which while retaining provision for catapults and arrestor gear at a later stage, would have a reduced air group.  Instead of carrying up to 48 aircraft each, as planned, each vessel might now carry as few as 20, although JDW reported in late July 2003 that the sketch design produced would displace 45,000-50,000 tonnes with space for around 35 aircraft (e.g.  24 F-35B, 6 Merlin, 4 MASC) - as opposed to 46 aircraft (e.g.  36 F-35B, 4 MASC, 6 Merlin) for the existing 65,000-ton design - now designated 'Alpha'. 

During the summer of 2003, several options were considered and during August/September 2003 an internal MOD decision was apparently made in favour of two smaller 'optimised' carriers of 45-50,000 tonnes with 34-35 aircraft ("Bravo" design).  In order to further save costs and try to get within budget, the CVF design would be shrunk to the minimum practical size needed to retain "adaptability" and still meet most other key requirements.  The French strongly hinting that they were interested in this reduced size but still potentially CTOL capable design. 

Because of the delays caused by the complex trilateral BAE-Thales-MOD negotiations to establish the Joint Carrier Alliance, the 6-month Assessment Phase 3 contract was not finally awarded until 5 September 2003, and the value had increased substantially from the expected £23.4 million to £50 million.  The Alliance team now comprised over 350 people, based in Bristol, working under one managing director, Nigel Stewart (former BAE Systems Future Carrier Managing Director), and with a single management team drawn from both BAE Systems and Thales.  It was hoped that a formal decision on the size, design and cost of the CVF's would be announced in the Defence White Paper which was issued on 11 December 2003, but this was deferred in order to allow the designs to be refined and compared in more detail.   Main Gate approval of the final design to an agreed price was now set for April 2004, with the D&M contract award planned for the Spring (i.e.  by the end of June).

AP3 was to focus on further risk reduction, and mature the selected design and build strategy, refine costings and decide between key cost/capability trade-offs, and develop the contracting arrangements for the Demonstration and Manufacture (D&M) of the carriers.  BAE Systems, as the preferred prime contractor, was also required to ensure the maximum degree of competition amongst potential sub-contractors in order to obtain the best proposal price.  Thales hoped to get about one third of the work as a key sub-contractor, but BAE Systems said that this is far from guaranteed.  Surprisingly it was agreed that the MOD would bear 10 per cent of any cost overruns - a considerable "U turn" compared with previous defence contracts.

One key objective of AP3 was to attain a high degree of design maturity, driving down risk before Main Gate.  "We will have design maturity from both competitors in the range of 40-50% by the end of this year [2002]," said Baghaei." By the time we get to Main Gate [then planned for late 2003] we will have about 65% design maturity."   It was hoped that by the end of AP3 the Joint Carrier Alliance would have delivered to the MOD a "robust, fully costed proposal"  for the Demonstration and Manufacture of the two vessels of about either 55,000 or 65,000 tonnes full load, a compromise third option (60,000 tonnes) was latter added. 

By Autumn 2003 BAE and Thales sources were saying that the capabilities still being demanded by the CVF IPT team overseeing the carrier project would cost at least £3.5bn.  One contractor working on the project said the MoD's current specifications had been costed at £3.8bn.  And this was after the cost reduction exercise done over the summer which had reduced the displacement  of the ships from 65,000 tonnes to 55,000, cut their length from 295 metres to 265, and reduced the number of aircraft carried from a maximum of nearly 50 to 35.  However over the next few months doubts increasingly emerged about the wisdom of moving to a smaller design which offered only  minimal savings but considerable loss of capability (below what the RN considered to be its absolute minimum) , and also about the risks associated with trying to squeeze everything to a smaller hull.  By late 2003 the Bravo design concept had grown substantially, and at 58-60,000 tonnes and 40 aircraft was now in its Delta form approaching the old Alpha design in size. 

Despite all the efforts to reduce costs, in early December 2003, BAE Systems chief executive Mike Turner, and Alex Dorrian, head of Thales UK, told the MoD's Chief of Defence Procurement, Sir Peter Spencer, that the Government's specifications for the ships could still not be met within the government's £2.9 billion budget for the D&M Phase.  A contractor said: "The brutal truth is, they are not going to get what they want for the money.  We are simply not going to build the ships they are demanding for the price they are demanding.  It can't be done."  BAE sources said that some of the cost problems had derived from integrating the Joint Strike Fighter - designed and built by Lockheed Martin - with the carriers, with both the STOVL and [potentially] CV variants of JSF having to be supported.  Defence officials, reportedly, had rejected savings such as opting to accommodate either conventional or vertical take-off and landing planes but not both, and reducing the number of possible 'sorties' per hour the ships were capable of deploying.

In January 2004 BAE Systems and Thales missed a deadline to provide the DPA with firm pricing for the CVF D&M Phase, indeed BAE Systems was indicating that it simply would not take on the role of ‘prime contractor' on the terms, schedule and pricing that the MOD wanted.  On 26 February 2004, Mr Turner Chief Executive of BAE Systems said pointedly: “We are not going to rush into any firm dates or prices, no chance.”

By January 2004 it was generally accepted by the MOD and DPA that the CVF Alliance would not submit a bid for the Demonstration and Manufacture Phase that both meet the required specification (KUR's) and was within budget, and that extra money would have to be found if two ships were to built.  BAE Systems, largely because its disastrous experience with the Astute and Nimrod MRA.4 contracts, told the MOD that it would refuse to accept a fixed price contract with penalty clauses for the whole CVF Demonstration and Manufacture Phase - the implication being that it would rather walk away from the entire order.  On the other side of the table, the MOD and DPA were less than impressed by what they considered to be BAE Systems arrogant demands in relation to the CVF D&M Phase, which came on top of its extraordinary public campaign in 2002 to have the costly competition for CVF Prime Contractor with Thales cancelled, and the contract simply awarded out right to itself.  It didn't help BAE Systems that this was a far from unique example of it trying to use its position as a dominant, nearly monopolistic, supplier in order to dictate the way things will be done to its biggest customer (the MOD), e.g.  the Type 45 project in 2000/1.  The MOD was also fed up with BAE Systems performance in recent years ("a plumber who keeps flooding the house" as one MOD official put it).

The MOD and CVF Alliance thus adopted mutually opposite negotiating positions for the CVF D&M contract, ironically both sides being driven by a lack of confidence that BAE Systems as the prime contractor would be able to deliver the new carriers on time and within budget. 

On 26 February 2004, Mr Turner Chief Executive of BAE Systems said that Main Gate, i.e., agreeing the design and price of the carriers, was still a long way off.  There was still a hope in the MOD that this could be agreed in April 2004, but he said “We are not going to rush into any firm dates or prices, no chance.  ...  Who knows? Main Gate could be next year or the year after.”  However several companies were known to be among waiting in the wings in the event of BAE Systems deciding that the risks and potential delays (and potential losses if it fails to perform) associated with the CVF project, and in particular any move to make it a joint Anglo-French project, were too great for it to be able to accept - indeed Thales France and DCN of France were publicly seeking a "slice of the action" in any event. 

An audit" in early 2004 of the CVF Project and the existing procurement strategy by the team led by the Senior Responsible Owner, Rear Admiral Nigel Guild, in order to determine the decisions for the Main Gate strategy recognised the significant successes of the combined CVF alliance arrangements.  However it also revealed so many actual or potential issues outstanding (e.g.  insufficient de-risking, industrial arrangements not agreed, arguments between customer and suppliers over time and cost targets, some fundamental user system capability requirements affecting design features still not definitively decided, and the design itself not sufficiently mature) that an April Main Gate was judged to be impossible, and instead the procurement strategy and road map to Main Gate would have to be revised.  All three parties in the CVF Alliance agreed that there had still been insufficient de-risking and good arguments for continuing to develop and mature the carrier design, systems integration and supply chain aspects.  The MOD thus made available additional funding for assessment phase de-risking work to continue to the end of the year. 

The risk assessment aspect was of particular concern, later (on 5 May 2004), Sir Richard Evans, Chief of the DPA told the Defence Select Committee “there simply has not been sufficient work done to get us to the point where anybody … could realistically today make a full assessment of the risk.  If that were the case … this programme would have gone through Main Gate.  I suspect that there is realistically at least another year’s worth of work to be done.”

The DPA’s suggested new strategy for the phases of the CVF procurement was presented to the Defence Secretary by March 2004.  Key recommendations were extending the Assessment Phase, moving away from a traditional prime contractorship arrangement, reducing the role of BAE Systems, bringing the D&M project management role in-house to the DPA, adopting an enhanced “best practices” alliance approach for the D&M phase, and appointing a new company as an “Integrator” to provide the DPA with specialist advice and consultancy services and manage the highly complex build process.  Critics argued that the new procurement approach has some risks - for example the MOD was assuming that the DPA could expand and skill-up its currently just 30-person strong CVF IPT - which had so far has been orientated towards proposal validation, verification and evaluation - so that it could perform a complex project management role so successfully that the CVF’s enter service both sooner and at a lower cost than BAE Systems and Thales believed to be possible. 

On 10 March 2004, as AP3 drew to a close, and with an April Main Gate still the theoretical target, the MOD's Investment Approval Board met to consider for the first time the CVF design iterations that had been developed during AP3 by the Carrier Alliance, and the cost/capability trade-off's associated with each:- the now favoured Delta design was considered by the Royal Navy to be the smallest which meets its aviation requirements, but it had been costed by BAE Systems at about £4.0 billion.  With the defence budget under enormous pressure and defence cuts being planned, there remained very strong pressure for a CVF design of no more than 50,000 tonnes which costing no more than £3 billion for two.  The Board was unable to recommend an investment decision.

The Aircraft Carrier Team completed its 12-month AP3 activity in March 2004.  This stage of design development saw over 270 deliverables submitted to the DPA; considered a range of cost/capability trade-offs; evolved three major design iterations (Alpha, Bravo and Delta); and concluded Design Review 1 (DR1).

Agreement on the contractor and industrial structure for the D&M was still not close, nor was agreement on cost.    The 60,000 tonnes "equilibrium" or "Delta" CVF design had become preferred, but it was clear that AP3 had failed to meet all its objectives - as was almost inevitable given all the indecision, delays, problems and arguments - and that before it would be possible to proceed to demonstration and manufacture, considerable additional work was still required in order to refine a CVF design which had been badly affected by major cost driven changes during the previous 9 months, and to achieve certainty on construction costs, also the contracting and alliance arrangements were still far from agreed.

Apparently a 8-month long Assessment Phase Extension contract was quietly awarded by the MOD to BAE Systems and Thales UK - taking the CVF Assessment Phase to November 2004 with the Main Gate set for December 2004.  The objectives for this extended AP work were defined as: concluding the formation of the Aircraft Carrier Alliance, involving key suppliers and partners; finalising the shipbuilding strategy; de-risking work on technology and supply-side arrangements (including the selection of suppliers for sub-systems and equipment); and further developing the design through an integrated team involving the Department and industry to ensure that performance, cost and schedule were sufficiently matured to enable the project to progress successfully through Main Gate.  The Alliance formation activity included undertaking benchmarking activities to benefit from the experiences of other programmes including in the commercial sector; consulting independent expert advisers on the proposed alliance and on commercial risks;  and establishing the appropriate contractual arrangements.

In total the MoD had already spent  £153 million on pre-feasibility studies and the first 3 stages of the CVF Assessment Phase (including about £20 million supporting its own CVF Integrated Project Team).  In addition the two originally competing consortia put in a considerable amount of their own money.  No official value has been given for the extension stage, but it seems to have been estimated at £16 million in March 2004.

On 25 April 2004, BAE Systems leaked to the newspapers that its shipyards were potentially up for sale, and Thales UK and VT Group quickly indicated serious interest.  This development was widely was regarded as an attempt by BAE Systems to put pressure on the MOD to award it CVF on its own [profitable] terms, or risk BAE walking away from large UK defence projects. 

Following this revelation, a meeting the following day between BAE Systems Chief Executive Mike Turner and Defence Minister Geoff Hoon is believed to have been very stormy.  Soon after this the MOD sent a letter to BAE Systems formally informing it that it was no longer regarded as the preferred Prime Contractor for the CVF D&M contract.   BAE issued a statement on 30 April 2004 saying that “The [CVF]  program must deliver value to our shareholders, and we will not enter into any contract that does not do that.  It is also important that this large and complex program is delivered in a contract management structure that ensures cost effectiveness and efficiency.”

But by mid-May BAE Systems was trying to rebuild bridges with the MOD (its largest customer) and indicated that it might accept the revised CVF procurement strategy that the DPA was proposing.  In early July 2004, Alex Dorrian, the chief executive of Thales' UK operations, said that the French owned group and BAE Systems had agreed in principle to an MOD-led alliance in which the two companies would work with the ministry to oversee the project.

With the published target dates for the CVF Main Gate milestone long missed, finally on 19 July 2004 the Secretary of State for Defence (Mr. Geoffrey Hoon) made a written statement:

"I am pleased to announce that we have decided to extend the future aircraft carrier (CVF) programme assessment phase.  …  We anticipate moving into the D&M phase during 2005, following the main gate decision.  At this point we intend to finalise performance, time and cost parameters of the carriers.  … Our target in service dates (ISD) for the CVF remain 2012 and 2015.  ....  We will now discuss and agree the detailed alliancing arrangements with industry, including the roles and responsibilities of alliance members."  

Main Gate was now expected Spring or Summer 2005.

In August 2004 the CVF IPT invited six companies to bid for the task of drawing up and managing a manufacturing master plan for the two new planned ships.  Alstom (Chantiers de l'Atlantique), AMEC, BAE Naval Ships, Halliburton Kellogg Brown & Root (KBR), VT Group and Bechtel (UK) were asked to submit proposals for the role of Physical Integrator on the project.  The core responsibilities defined for the role were innovation, prioritisation of design activities; block integration and management of the ship build strategy.   BAE Systems and VT Group only got themselves added to the list after considerable lobbying but then decided to withdraw from the competition, while Bectel was knocked out at an early stage. 

In November, American owned KBR and British owned Amec were recommended to the IAB by the MOD as being suitable for the Physical Integrator role, politics having ruled out French owned Alstom while KBR had overhauled Amec on the basis of stronger presentations. 

Lord Bach told the House of Lords on 15 December 2004:

"Building and physically integrating the vessels is one of the biggest challenges facing the [CVF] project. The role of the physical integrator is to help to strengthen that aspect of the project. We expect whoever is appointed to work with all potential shipyards—four have been named—manufacturing facilities and alliance participants to draw up a cost-effective strategy covering the manufacturing element of the programme. Among the core requirements are likely to be innovation, the prioritisation of design activities, block integration and management of the ship-build strategy.  The role of the physical integrator will not be limited to those tasks."

After over five years in the job, Mr Ali Baghaei submitted his resignation in early December, on 17 January 2005 Mr John Coles, Head of the Warship Support Agency (which was disestablished on 1 April 2005) took over as the temporary CVF IPT Team Leader, tasked with shepherding the Project through Main Gate. 

The appointment of a physical integrator continued to be a problem.  It was reported by the Daily Telegraph that BAE Systems had warned the Government that it would pull out of the CVF Alliance if Halliburton was awarded the role to manage the carriers construction. posed structure. 

On Saturday 5th February negotiating teams lead respectively by the DPA’s Sir Peter Spencer and two of BAE’s Chief Operating Officers, Chris Geoghegan and Steve Mogford, reached an eleventh hour agreement which addressed most of BAE’s concerns. It was agreed that KBR would primarily act on the DPA’s behalf as a Programme Manager for the CVF Demonstration and Manufacture Phase.  KBR would be responsible for developing and proposing the optimum build strategy for approval by the Alliance participants, creating and maintaining the programme Master Schedule, and providing support to the MoD on drawing up and negotiating the Alliance contracts.  The MOD also agreed to BAE’s demand that KBR should not directly oversee the design and manufacture of the ships, or be able to allocate such work.  Instead, a new team will now be set up to manage and undertake this task, although the Minister for Defence Procurement, Lord Bach has warned that “The MoD, as client, will of course retain the right to have the final say on all work allocation and selection decisions".  This statement can be taken as a clear sign that the government wanted final assembly to be done at the Rosyth dockyard, not the KBR owned Nigg fabrication facility. 

On 7th February 2005, the Secretary of State for Defence, Geoff Hoon, informed the House of Commons that he was “pleased to confirm the selection of Kellogg Brown and Root Ltd. as the preferred physical integrator for the future aircraft carrier project”.  Lord Bach explained:  "KBR bring significant experience from other alliances and in the management of major, multi-site programmes. We look forward to the contribution they will make in further de-risking the programme and helping to shape the shipbuilding element of this important programme.”

KBR become a risk bearing member of the CVF Alliance, alongside BAE Systems, Thales and the DPA.  An initial three month contract worth about £5 million was expected to be placed with KBR before the end of February 2005.  A key deliverable was to be a detailed description, agreed by all parties in the Alliance, on the role and responsibilities of KBR as Physical Integrator.  Estimates of the potential total value of the PI assignment to KBR varied between £15 million and £40 million, depending upon the final scope of work.

In early March 2005, Mr John Coles, the new CVF Integrated Project Team (IPT) Leader initiated a "100-day" major review of the CVF project, which completed on Friday 10 June.  The review examined and re-assessed key requirements, options, costs, schedules and risks. 

Mr Coles' final report on the CVF review rapidly found its way to the desk of the Sir Peter Spencer (Chief Executive of the DPA), and soon after to the new Secretary of State for Defence, Dr John Reid.  The report  apparently stated that the budget request for the D&M phase would have to be increased from £2.9 billion to £3.5 billion if the key user requirements were to be met. 

A report was requested from industry in 2004 by the French and British governments in to possible areas of joint procurement or collaboration between the CVF and PA2 programmes, and the associated risks.  BMT is believed to have undertaken much of the work, comparing the two preliminary design concepts to identify areas of commonality, and estimating costs.  The resulting 500-page document was jointly submitted by BAE, Thales UK, Thales France and DCN to the two defence ministries on 24 June 2005.  Officials said that the study had found that excluding flight deck and combat systems where there are significantly different national requirements, some 75 to 80% of these two programmes could be common.  Later French newspaper reports (clearly using a common source) said that the figure was 80-90%, and that an important factor was whether a collaborative Anglo-French carrier programme based on CVF would cost less than the €2.2 billion (£1.5 billion) estimated as being necessary to complete their own national project for PA2.  

Hard negotiations over the CVF build strategy, price and schedules continued through 2005 - BAE sources continued to brief the press that they cost the next phases of the project at £4 billion.

In October 2005 Mr Coles admitted that Main Gate was no longer possible that year, officials involved said the department was now aiming for the end of March 2006.  Mr Coles' declaration provoked anger from MPs on the Defence Select Committee, who accused the MoD of hiding the likelihood that the Royal Navy would not get the first ship by 2012, forcing the navy to extend the life of its two ageing carriers. Mr Coles insisted that a delay in Main Gate would not affect the construction schedule, but declined to say definitively whether the first ship would arrive in 2012, saying only that it remained a "target date".

On12 December 2005, DCN and Thales France revealed that a tailored version of CVF would be developed for France's new aircraft carrier.  They announced that they had been awarded a contract to develop a design concept based on the CVF as France’s next aircraft carrier (Porte Avions No.2 – PA2).

On 14 December 2005, the Secretary of State for Defence, John Reid, announced a number of decisions affecting the CVF Project and the construction of the new carriers.  This was the first of a now a two part Main Gate approval:

  • The current Aircraft Carrier Alliance team consisting of the MOD (in practice the Defence Procurement Agency), BAE Systems, Thales and KBR will now be joined by VT Group and Babcock. 

  • Plans for the construction and assembly of the ships at Alliance members’ yards have also been agreed, Dr. Reid stated that he was “allocating some 60% of the ships’ construction to named UK yards: BAE Systems at Govan and Barrow; VT in Portsmouth and Babcock in Rosyth.  Final assembly of the carriers will also be at Rosyth”.  

  • Approval has been given for the DPA to commit to some long-lead items for the new carriers prior to Main Gate and the formal approval to order the ships.  This has become necessary to meet what has become a very tight construction timescale, and in order to maintain a supplier base currently starved of work.

  • The minister also confirmed that “the MOD will [now] spend some £300 million to develop the design of the ships to the point at which manufacturing can begin”.

The project thus entered the Demonstration Phase with a target date for the second part of the Main Gate - approval for the actual the manufacture of the ships - apparently December 2006, although Spring 2007 was speculated as being more realistic. It was recognised off the record that the original in-service dates of 2012 and 2015 could no longer be achieved and there have been hints of one or two year slippage, but the official line was that expected programme costs and in-service dates (ISDs) for the ships would only be announced at the second and final Main Gate approval.

An August 2006 graphic of the French PA2 (aka CVF FR), the design is evolving from the UK baseline, and associated cost increases have become an issue.  (Source: DCN/Thales

A formal Memorandum of Understanding (MoU) between the UK and French Governments on cooperation on aircraft carriers was signed on 6 March 2006 on the sidelines of an informal meeting of EU defence ministers in Innsbruck by John Reid and Michele Alliot-Marie.  This gave French officials access to the detailed and often classified information and documents necessary to finalise the French adaptation of the delta variant of the British CVF design. The MoU also formalised the framework for France to compensate the UK for costs that it has already incurred, and will contribute towards future work of common benefit.   The first £30m French payment for the Royal Navy design was immediately made.

On 13 April 2006 the CVF (Future Aircraft Carrier) Demonstration Phase Alliance Agreement and individual works contracts were signed by the MoD and its five Aircraft Carrier Alliance (ACA) partners - BAE Systems, KBR, Thales UK, VT Group and Babcock . The agreement, which was legally binding, established the Alliance management arrangements, relationships and behaviours. 

On 5 May the MOD confirmed that  contracts had been placed with KBR, Thales UK, VT Group, Babcock, BAE Systems Naval Ships and BAE Systems Integrated System Technologies with a total value of about £143M, covering development of all aspects of the ship and ship equipment including hull, structure, propulsion and mission systems and the involvement of shipyard and industry design teams in this work.  Lord Drayson said: "The Aircraft Carrier Alliance has signed a formal Alliance Agreement and complementing this excellent news, I can also announce that individual companies have received contracts totalling more than £140 million to continue to refine and mature all aspects of the ship design and its ship equipment, including mission systems and the planned all-electrical power and propulsion system."

Press reports (Janes Navy International and DefenseNews) stated that Aircraft Carrier Alliance members had been requested to submit their latest details on design and pricing to the DPA by 20 September 2006, a little over a month ahead of a planned Main Gate Part 2 (MG2) submission to the Ministry of Defence's Investment Approval Board on 26 October 2006 The MOD separately confirmed that it had hired Sir John Parker, the Chairman of National Grid, to lead a "red team" of six engineers to conduct a probing and independent review of key aspects of the project as a final check before the submission for MG2 approval.

The hope was that the project would recommended at the meeting of the Investment Approvals Board scheduled for 9 November 2006, that required Treasury and Cabinet (technically "Cabinet Overseas and Defence Secretariat in the Cabinet Office") approval's could be received in mid-December, and the formal approval note (the Main Gate 2 milestone) issued and announced by the Government to Parliament  before the Christmas recess. 

BAE's in-house Wavelength magazine said in September 2006 that if the programme got a rapid go-ahead, the "target is to start production by August 2008" with the first ship entering service in late 2013 or early 2014, Alliance Chief Executive Peter McIntosh said that this timescale was "extremely challenging but achievable". and potentially the government could announce Main Gate acess.

On 18 September 2006 the Minister for Defence Procurement, Lord Drayson, made a speech to the Future Carrier “Conclave” at the Royal United Services Institute.  With 'official' information so limited, its interesting enough to repeat a substantial extract here:

'"....The Carrier alliance is an important road-test of the industry’s ability to meet that challenge. It is also an opportunity for industry to make better profits in return for improved performance.

It is an Alliance of strong partners....  and their direct, no nonsense approach has also driven a clarity which has helped the MoD team get its act together. I remember being told that unless the Equipment Capability Customer and the Navy made up their mind up about what it wanted in the design by the end of March [2006] then industry couldn’t deliver a main gate proposal by Christmas. They met that target.

The Project Team, which includes a sizeable naval element, has been reviewing the balance of the key parameters of performance, time and cost; calculating how best to meet the capability requirements within the available budget.

And, in addition, we are deliberately introducing Challenge processes against different aspects of the cost estimate. Both a Red Team review and an Independent Financial Review are underway to examine what has been done so far.

The design to cost discipline is working–I am determined that we keep focussed on the realistic and the achievable.  And it is realistic and achievable. At the budget price, CVF is affordable within the current Equipment Plan.  As I have already said, this project needs to keep within budget. There will be no additional funding.

As for the design, it is spectacular. The Queen Elizabeth Class will be capable of operating more than twice as many large aircraft than the INVINCIBLEs – but with the same sized crew. Weighing in at 65,000 tonnes, it displaces as much as the three INVINCIBLE class vessels put together. It will have four times the internal hull volume, carry 70 percent more ship and aircraft fuel, have 75 percent more range and provide accommodation to the latest and highest standards.

In time, the carriers will be joined by the new JSF aircraft – providing, as I expect, we resolve the technology transfer issues with the United States by the end of this year.  And of course we have maintained our Plan B options if we run into any issues on JSF. I’m optimistic that we wont – but planning on the basis that we might.

Issues like this have required an unprecedented degree of future-proofing in the design. This has involved extensive modelling, computer analysis and tank tests. The result is an adaptable design, with a ramp to operate STOVL aircraft, which could be altered to take catapults and arrestor gear to launch conventional carrier aircraft if needed.

The design is innovative and builds on the lessons from Ocean and Invincible. For example, the main engines are located high in the ship, avoiding penetration of large downtakes and exhausts deep in the hull. It is the first carrier with split “island” superstructure - improving control of flight deck operations.

... We have made excellent progress over the past year. I approved last December [2005] the commitment of a further £300M for the Demonstration Phase Contracts and the expansion of the Alliance. The subsequent Contracts, including the Alliance Agreement, were signed on 13 April 06. Last March, we signed a Memorandum of Understanding between the UK and France setting out a framework of cooperation, which benefits both the CVF and the French second carrier (PA2) projects.

France is making a sizable financial contribution which takes account of the investment we have already made and she will contribute to the current Demonstration Phase costs. The UK will develop a common baseline design that both countries can use further to develop their own carriers. This will bring savings in design costs, without slowing the tempo of the project. It also offers the potential of savings on shared future procurements. Co-operation was only agreed on the basis that it must deliver savings without delaying the UK or French programmes. I’m pleased to see that the pace of the project has not been slowed by this collaboration – to the credit of both teams. We need to keep this up. ... 

At a time a when the pressures on defence are severe and complex - I am pleased with the progress that CVF is making and I’m looking forward to receiving the main gate submission on time"

A report in The Times newspaper of 15 October 2006 stated that the ACA (BAE Systems, VT Group, Babcock, Thales and KBR) had finished the design specifications and submitted binding cost estimates for the carriers - unfortunately the price was for £3.8 billion, £200 million more than the maximum of £3.65 billion over nine year that the MOD had budgeted, a major problem.

By late October several serious obstacles still remain to be overcome if MG2 approval was to occur around the end of year as hoped.  One of the problems was the continuing indecision about whether the UK would buy the STOVL F-35B or CV F-35C JSF variant - as well as impacting detailed design work, this had cost implications.  And affordability and the projected design and manufacture cost remained the most serious problem (as it has been since 2003).  Proposed cost saving measures cut capability compared to user requirements to a degree considered unacceptable by the Directorate Equipment Capability (Above Water Battlespace) - DEC(AWB), i.e. the aircraft carrier being offered is not the aircraft carrier that was asked for. 

According to a report in the Daily Telegraph newspaper of 1 November 2006, the Main Gate submission was not made on Thursday 26 October 2006 as scheduled due to the ongoing argument over price.  The article stated:

"Recent guidance from the MoD has been that the cost of the two vessels would be about £3.5bn, which itself is up from an initial estimate of between £2.8bn-£3bn. However, the consortium says the carriers cannot be built for less than £3.8bn, but has agreed to work on a incentive scheme that the MoD hopes could reduce the cost to £3.6bn. The consortium partners would share any cost saving. One person linked to the alliance expressed exasperation yesterday on learning that last week's deadline for a final price had been missed. "I just can't believe that. I really thought everything had been sorted out," he said. Another source suggested that the last-minute hitch was due to concerns that the Treasury will not agree to £3.8bn. "I think that after all this time the Defence department would settle for £3.8bn - but they are not the ones paying for it." ... Once the price is approved [Main Gate] the companies can start preparing to construct the carriers  ....the MoD's latest timetable for that to start was December".

The CVF project Main Gate approval was indeed discussed by the Defence Management Board (the executive board of the Defence Council and the MODs highest non-ministerial committee) at its November meeting and general approval was given.  However while industry and the MOD were claiming that a price had been agreed by the two sides, agreement had not actually been reached on the details of the vital incentive scheme, and difficult negotiations were continuing.   There was now no possibility of final agreement and completion of the MG approval process before the Christmas break. 

On December 19, a date that just two months earlier had been pencilled in for announcing to Parliament CVF Main Gate 2 approval, instead Lord Drayson told MPs that: "It would be quite right for the MoD not to close the contract for the carriers without industrial clarity. It is a pre-condition for signing. If consolidation does not happen, then then the main gate will be pushed back."

It was already planned that the CVF build strategy, design and infrastructure work would continue as part of the Demonstration Phase until June 2007, a suspicion was starting to already develop among experienced (and jaded) observers of the project that this might have to be extended.

By 31 December 2006, the MOD had spent £411 million on the CVF Project, and the first long lead orders had been placed,  e.g. with Converteam for its Advanced Induction Motor/VDM25000 converter, part of the baseline propulsion solution.

At the end of December 2006 and in early January 2007, newspapers were filled with reports that further deep cuts were planned for the Royal Navy and that CVF would be cancelled, the MOD and senior government officials strongly rebutted the later (e.g. Lord Drayson told the Lords on 18 January that "I have made clear to the Aircraft Carrier Alliance that time is now critical. I am looking to get a robust, affordable deal negotiated quickly to allow a main investment decision to be taken as soon as possible... consider the rumours quashed"), but not the former, the MOD stating on 8 January that it "routinely reviews all Defence capabilities to ensure resources are directed where our front line Armed Forces need them most. This may mean increases for some areas and decreases for others. But we are some way from any decisions".

In early February 2007, reported that the Chief Executive of the Aircraft Carrier Alliance, Peter Macintosh had implied that the CVF project might be cancelled if a price for building the carriers could not be quickly agreed.   Apparently in a remark at a closed doors forum with maritime industry executives and Ministry of Defence officials on 24 January 2007 he said that if things aren’t hurried up, he was is in danger of being part of a project that would go on record as the longest program “never to happen.”

In February 2007 there were strong indications that KBR would lose its role as CVF programme manager and member of the Aircraft Carrier Alliance when its current £15 million Demonstration Phase contract expired in June 2007 - i.e. a follow-on contract for the Manufacture Phase, expected to be of similar value, would not be awarded.  There was a perception that since KBR's appointment in February 2005 it had failed to perform - it's team allegedly hadn't demonstrated the expected skills and expertise in managing very large physical integration projects.  Also, the role of KBR during the Manufacture Phase would be complicated by the expected merger of BAE, VT and possibly Babcock shipbuilding operations as the ShipCo joint venture  - leading to the set-up of internal management and governance structures for CVF that would by-pass KBR.

In late February a press release revealed that CVF IPT Deputy Team Leader, Commodore Bob Love, had signed the 'blueprints' for the carrier with the Carrier Alliance chief executive Peter McIntosh", and that the project was now at "Stage 2' baseline, marking the start of detailed design by the shipyards.

In early March 2007 it was quietly revealed on the MODs website that Commodore Love (who had been deputy team leader for a year) would be promoted to Rear Admiral with effect from 16 March and become the new team leader of Future Aircraft Carrier IPT on that date, replacing John Coles who has now retired from the civil service.  The website also stated that "The IPT has a mixed service/civilian manpower of 53, with 7 of these integrated within the Alliance team and the remainder based at Abbey Wood.  ...  there is a team of four French Government officers integrated within the CVF IPT in Abbey Wood, Bristol." 

In mid-March the Treasury apparently gave its required approval to a costed MOD proposal for the manufacture the two CVF's.  The MOD had reached agreement in late February with the ACA (other than KBR) in relation to a target figure of £3.74 billion, with incentives to lower the price - the shipbuilders taking a share of any cost reductions.  Under terms of the contract, the top price for the two ships would be £3.9 billion.  These costs are presumably in addition to the £599 million already approved - and mostly spent - for the Assessment and Demonstration Phases.  Separately, it was also reported that BAE Systems and VT Group were finalising the details of their joint shipbuilding venture, another key pre-condition to the CVF order. 

In late March 2007 the UK's press widely predicted that an important statement on the formation of ShipCo and approval of the CVF Project would be made to Parliament on 28 or 29 March 2007 - just before it rose for the Easter recess.  No such statement was made.

In February and March 2007 reports appeared in the French press stating that France was urgently seeking a much closer industrial linkage between its PA2 project in order to achieve substantial cost saving for the two countries -this apparently including the manufacture at the Aker shipyard, St. Nazaire, of CVF superblocks or even their whole hulls.   The French apparently proposed that BAE Systems Surface Ship Solutions (formerly known as BAE Naval Ships) and VT Shipbuilding were compensated for any loss of work by being given a share of the total savings. 

In early April 2007 UK sources confirmed that the CVF build approach was indeed under review as the MOD once again pressed for a reduction in the £3.9 billion maximum build price tag tentatively agreed with the ACA before the Treasury gave its Main Gate 2 blessing.   Unfavourable comparisons were being made between the average price the UK MOD would pay for building each CVF (£1.8 -1.95 billion) and that being agreed by the French MOD for building the single and far more generously equipped PA.2 (as little as €2.5 billion, £1.7 billion).

A number of options were apparently being considered, including splitting the manufacture of superblocks with France under worksharing arrangements.  The review was expected to complete at the end of April.

In mid April 2007 the Chief Executive of Thales, Denis Ranque, confirmed that with the backing of the French government the company had submitted a proposal to the UK MOD for merging the separate PA2 and CVF projects into a single three-ship programme.  He said that "Building the ships together would be in the best interests of British and French taxpayers."  He suggested that a French yard could build one-third of the hull for each ship; British yards could build the other two-thirds: "If we can find a way that industry is incentives, if part of the savings are going to industry itself, I do not see why our friends at BAE Systems would not take that on."  It was said by others that this new approach could realise savings of about £80 million (€120 million) per ship. 

BAE Systems was believed to be resisting the French proposal on the grounds that it would cause further delays and that UK shipyards would be unable to each build their superblocks for three ships in the time scales being demanded by the two governments.  When asked to comment, the Ministry of Defence said that it was still considering all industrial proposals for the carrier-building plan  and that the final go-ahead for the British carriers was still being negotiated -  an astonishing statement given that the project was thought to be at the end of the Demonstration Phase and awaiting Main Gate 2 approval, with all the details for the manufacture of the ships agreed and documented.  Off-the-record feedback on the French proposal was more reserved, issues identified include the lack of clarity of the savings (if any) that the UK MOD would achieve by the merger, concern that the French schedule for PA2 was considered immoveable and that the two British carriers would have to be fitted around this (effectively resulting in significant delays as they became units 02 and 03 in the programme), and an assumption that final assembly of all three ships would be in France.  French sources apparently admit that their "initial offer" should have been made more attractive to the British.

On 23 April 2007 the BBC reported that in response to press speculation (an article in The Sun newspaper) that the carriers had been approved, the MOD had told them that morning "We are in the final stages of the [CVF] approval process, we are quite close to making an announcement", but added that this would not be before the elections on 3 May.  They also interviewed the First Sea Lord, Admiral Sir Jonathon Band who said "We are anticipating an announcement sooner rather than later".

Meanwhile a virulent campaign to cancel the CVF project remained in full swing, with leaks suggesting that the Main Gate approval of the Secretary of State for for Defence, Des Browne, was now conditional on the outcome of the CSR as the money currently ring-fenced for CVF may have to be used by the MOD to pay other bills. 

On 17 May 2007 the MOD responded to press speculation regarding closer co-operation with France for building CVF - one newspaper  quoting Minister for Defence Procurement Lord Drayson as saying  "if as a result we end up with a better outcome on cost and a better outcome in terms of long term viability of the UK shipbuilding industry".  The MOD statement said "The MOD remains committed to the joint carrier programme and continues to push hard for progress, but we're not there yet. "  Industry sources expressed dismay at this development, emphasising that agreeing work sharing arrangements with France would significantly delay the CVF project, and threaten the shipbuilding Joint Venture painfully negotiated by BAE Systems and VT Group on the insistence of the MOD as a pre-condition to the CVF order.  In mid-May, Paul Lester, chief executive of VT Group, said that  "This JV [regarding surface shipbuilding] is not a done deal.  This will not go ahead without CVF. There really is no point without the carrier.  We need a firm order."

During May it became clear that a considerable and influential body of opinion had emerged, inside and outside the MOD, which believed that it is the wrong time to be committing to expensive naval orders - instead spending priorities should be focused on supporting military operations in Afghanistan and Iraq.  It was also being widely suggested that despite intensive lobbying from industry - and in particular the potential losers - if the CVF and PA2 projects progressed the adopted approach was now likely to be full Anglo-French co-operation.  Under revised French proposals the workshares for common baseline requirements (80-90% by value) would be split about 60:40 between the UK and France.  The Royal Navy would now receive the first and third carriers (entering service in 2015 and about 2020 respectively), and the French Marine Nationale the second carrier (entering service about 2017). 

On 27 June 2007 Gordon Brown took over from Tony Blair as Prime Minister.  He confirmed Des Browne as Defence Secretary, but the later had to publicly insist that he could carry out his ministerial duties effectively after also being made Scottish Secretary. 

In early July 2007, some ACA partners warned that with the CVF Demonstration Phase contract now complete but official approval to begin the Manufacture Phase still not forthcoming (and no firm date for such a decision forthcoming), most of the 350-strong staff of the Aircraft Carrier Team now had no work and the organisation would therefore have to start being run down in August.  Also, some companies that had been banking on CVF related work coming on stream by 2008, now face the prospect of at best further delays and at worst no such work at all.  Redundancies were becoming inevitable. 

In mid-July 2007  there were broad hints that the Treasury's Comprehensive Spending Review would include sufficient Defence equipment funding for the CVF project proceed, and rather than wait for CSR to be formally published in October or November, the Prime Minister was now keen for an announcement on CVF prior to Parliament recessing for the summer.  MOD officials were quietly briefing that the build approach would primarily use UK shipyards, and that a full work sharing plan with France was now considered unlikely.

On 18 July 2007 Prime Minister Gordon Brown told Parliament that the government was close to deciding on whether to go ahead with a £3.8 billion ($7.8 billion) plan to build two new aircraft carriers.  "I hope we will be able to make an announcement soon on the aircraft carriers," Brown said "Our commitment to future naval investment is very high indeed."



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 © 2004-13 Richard Beedall unless otherwise indicated.