Navy Matters | CVF Official Statements

This section documents progress on the Future Aircraft Carrier (CVF) Programme via official statements. Statements are given in date order.

FUTURE CARRIERS—CVF
The CVF programme remains in its Assessment Phase, during which work continues to mature the design and our estimates of the cost of delivering the carriers. The preferred Physical Integrator (PI) has been selected for the Alliance and work will now continue apace to develop the optimum build strategy; the strategy will be essential for informing the main investment decision, which is anticipated to take place in the latter half of 2005. Alliancing remains the best strategy for delivering the carriers and ensures that decisions will be taken on a "best for project" basis, with the Department retaining the right to have the final say on major decisions. Inclusion of Kellog Brown and Root UK Ltd in the Alliance as the preferred PI enables us to draw on their extensive experience of delivering bespoke, geographically spread and logistically complex construction projects as well as of alliances from other sectors including oil and gas and infrastructure.

PROGRESS ON CVF PROGRAMME
1. The CVF Assessment Phase was extended in July 2004 to enable us to carry out further risk reduction work before we make major commitments to industry. Work continues to refine the total acquisition costs for the programme on the basis of maturing design and cost information from industry, with preparation of estimates for the Demonstration and Manufacture (D&M) of the vessels carried out an a progressive basis. The current estimate of most likely (50%) cost for the carriers is around £3 billion (including combat system but excluding the aircraft) and remains consistent with that provided in our 2004 Memorandum submitted for the Major Procurement Projects survey. Cost of Capital charges add around a further £450 million to the estimate. This remains an estimate at this point: along with the performance and time parameters, an agreed target cost will not be set until Main Gate, following the submission of a mature Business Case. We anticipate that Main Gate approval will be sought in the latter half of 2005. This is dependent on progress with the development of the alliance and key aspects of the procurement strategy.

PROGRESS ON THE DESIGN
2. The extension of the CVF Assessment Phase has enabled us to further increase the maturity of the design for the new carriers as a means of de-risking the project. Design maturity is now around 60-65%. This needs to be placed in context. Design maturity represents the development of the design up to the point at which production drawings can be produced for the manufacturing phase. Work is currently being taken forward on maturing the design of critical systems within the platform (for example waste management systems, heating ventilation and air conditioning (HVAC) systems and aircraft lifts).

ALLIANCING
3. A core activity for the project over the coming months will be the development of an optimum shipbuild strategy. The preferred Physical Integrator (PI)—Kellog Brown and Root UK Ltd (KBR UK)—will take the lead on this work, supported by all the Alliance Participants (including the MoD as client). Proposals will be made on the shipbuilding work that make the best use of the skills, competences and infrastructure that already exists within UK shipyards and other manufacturing facilities.

4. The alliance approach incentivises all concerned to deliver the most cost effective build strategy throughout this process. It is in the best interest of the preferred PI, for example, to develop an optimum solution or otherwise risk compromising its own share in the risk and reward scheme. All Alliance Participants will have to agree the ship build strategy as the best means of delivering the vessels to the cost and schedule targets and which represents best long-term value for money. The performance of all parties will ultimately be measured—and rewarded—on the ability of the Alliance to meet, or exceed, the agreed targets. This is one of the key strengths of alliances, where decisions are taken on what is best for the project and not individual companies.

5. As the Department will be a member of the Alliance, it will be exposed to and assist in the development of the build strategy. There should therefore be "no surprises" when a recommendation is brought forward. In the unlikely event that the Government should wish to change or alter work allocation for wider economic reasons, the Department has retained the right to have the final say on all major decisions. This is consistent with normal practice in alliancing. It is recognised that in the event this right is exercised, responsibility for the implications would rest with the Department.

IN-SERVICE DATES FOR THE JOINT COMBAT AIRCRAFT (JCA)
6. The JCA ISD noted for planning purposes in the initial tailored Main Gate, was December 2012. The "tailored" Main Gate was an interim approval point for the system development and demonstration phase of the programme. Subsequently the schedule for introducing this aircraft into service has been extensively reviewed in the light of the time taken in the United States to resolve the well-known weight growth problems incurred by the STOVL variant of the JSF aircraft. Planning assumptions are now based on a revised ISD of December 2014. A firm decision on the ISD does not have to be made before the UK purchases significant numbers of aircraft. Our first planned purchase is December 2008 and by this time, with aircraft design frozen and initial development flights complete, the JCA programme will have increased maturity to make informed decisions on In Service dates. The JCA and CVF programmes are coherent with our intention to introduce the JCA progressively onto the future carriers. This progressive approach seeks to de-risk the integration of the various complex elements of the carrier strike capability.

The Secretary of State for Defence (Mr. Geoffrey Hoon): I am pleased to announce that we have decided to extend the future aircraft carrier (CVF) programme assessment phase. This extension will enable us to carry out further risk reduction work and increase the maturity of the design prior to making our main investment decision on demonstration and manufacture (D&M). In line with smart acquisition principles by spending the right amount of time and money in the assessment phase, we will gain a better understanding of the technical and supply-side risks before we make any major commitments. We had planned to complete this risk reduction work within the original demonstration phase. The underlying programme has not been adjusted, but rather the point at which we make the main investment decision has shifted.

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. These will continue to be refined during the remainder of the assessment phase. Our target in service dates (ISO) for the CVF remain 2012 and 2015. When built the two vessels will be the largest and most powerful warships ever constructed in the United Kingdom.

We have also agreed the alliancing principles with industry for the CVF programme which confirms the commitment of all parties to the programme and to an alliance based on commercial best practice. The alliancing principles will provide the most effective way of managing risk and reward and will bring together all parties with a vested financial interest, thus ensuring that we deliver CVF collaboratively. We will now discuss and agree the detailed alliancing arrangements with industry, including the roles and responsibilities of alliance members.

1. Under the CVF project, we will procure two large aircraft carriers to replace the three Invincible-class carriers from around 2012. These carriers will operate the Short Take Off and Vertical Landing (STOVL) variant of the Joint Strike Fighter (which has been selected to fill the role of Joint Combat Aircraft), the Maritime Airborne Surveillance and Control (MASC) capability and other aircraft in a variety of roles.

2. CVF received Initial Gate approval in December 1998 and in November 1999, competitive contracts for the Assessment Phase were awarded to BAE SYSTEMS and Thales UK. Following the January 2003 announcement of an alliance approach involving BAE SYSTEMS, Thales UK and the MOD as the best method for delivering CVF, Stage 3 of the Assessment Phase formally started on 5 September 2003 and ran until 31 March 2004. Work is continuing to develop the carrier design to a high degree of maturity and the MOD is discussing the alliancing strategy for the Demonstration and Manufacture (D&M) Phases with the two companies. The programme remains on target to meet the ISDs of 2012 and 2015.

3. The requirement for the Future Aircraft Carrier (CVF) was endorsed in the Strategic Defence Review (SDR) which identified a continuing need for rapidly deployable forces with the reach and self-sufficiency to act independently of host-nation support. The SDR concluded that the ability to deploy offensive air power will be central to future force projection operations, and aircraft carriers can provide valuable flexibility in a range of operational circumstances. The SDR conclusions were endorsed by the New Chapter work of 2002 and the Defence White Paper in December 2003.

4. It was therefore decided to replace the three INVINCIBLE-class carriers with a new class of two larger and more capable carriers known as CVF. These ships—which will be called "Queen Elizabeth and Prince of Wales"—will have the objective of supporting an increased emphasis on offensive air operations and force projection as a central component of joint maritime operations.

5. The design parameters for the ships continue to evolve to meet our capability requirement; as a routine part of the Assessment Phase, cost capability trade-off work has been carried out to ensure that the programme provides the best value for money capability that is consistent with the needs of defence policy and is affordable within the overall defence budget. We anticipate being in a position to refine our assumptions towards the end of the year and in the meantime, our primary focus remains on delivering the capability that offers the best value for money solution.

6. Costs incurred to the end of 31 March 2004 (including pre-feasibility studies) total around £153 million. This represents an increase of £35 million over the approved Initial Gate costs of £118 million as a result of the revised procurement strategy and renegotiations to the Stage 3 contracts that were placed with the two companies in September 2003. The costs remain within the boundary set for the project.

7. Estimates for the Demonstration and Manufacture (D&M) are being prepared on a progressive basis throughout the Assessment Phase. The current estimate of most likely (50%) cost for the carriers is around £3 billion (including combat system but excluding the aircraft). Cost of Capital charges add a further £450 million to the estimate. Total acquisition costs are being refined during the remainder of the Assessment Phase to take into account maturing design and price information from BAE SYSTEMS and Thales UK.

8. ISD will be declared when the military capability provided by CVF is assessed as available for operational use. The first CVF is scheduled to enter operational service in 2012 and the second in 2015. Current work in the CVF Assessment Phase suggests that it is possible to meet these dates, although work is continuing to identify the optimum design and build strategy. Each CVF is planned to have an in-service life of 30 years with a stretch target of up to 50 years.

9. The CVF Assessment Phase began in November 1999 with the award of competitive contracts to BAE SYSTEMS and Thales UK and has been split into a number of phases. Stage 1 involved the examination of several carrier designs and an assessment of the costs of extending the lives of the three existing carriers by 10 years to provide a baseline against which the cost effectiveness of all the options could be evaluated. During Stage 2, BAE SYSTEMS and Thales UK concentrated on refining their designs and taking key trade-off decisions. From September 2002, work concentrated on building the carriers to an innovative, adaptable design which will enable them to operate the STOVL variant of the JSF aircraft; and with modifications, a further generation of conventionally launched aircraft. This represents a sensible way to secure the best return from our investment in the carriers and good long term value for money.

10. An innovative Continuous Assessment process was used throughout Stage 2 to evaluate the contractors' performance. This concluded that an alliance approach involving BAE SYSTEMS, Thales UK and the MOD represented the best approach to delivering CVF within the time and cost parameters. The alliance procurement strategy was announced in January 2003. The alliance is envisaged as a co-operative relationship between the customer (the MOD) and the key contractors which will enable us to make the most of the resources and strengths of all the alliance members with the shared objective of improving on agreed performance targets.

11. A third Stage of the Assessment Phase was taken forward on the basis of an evolving alliance approach and formally started on 5 September 2003. The maturity of the design was increased and discussions continued to be held with the companies on the alliancing strategy to take the programme through the D&M Phases. Design maturity has already reached a comparatively higher level for CVF than for other legacy maritime projects. We believe that the alliance approach remains the best method for delivering the programme to time and cost. Stage 3 completed on 31 March 2004. Advice has been submitted to Ministers on the way forward for the programme, and an announcement is expected shortly.

12. Opportunities for international co-operation are being reviewed during Assessment, especially for equipment systems and subsystems. Although whole ship collaboration is unlikely to be a viable option, opportunities to share best practice in assembly integration and outfitting will be explored. In particular, discussions are continuing with the French and US to explore areas for possible co-operation in common areas of aircraft carrier technology at a system or sub-system level. There is agreement between the UK and France, at Ministerial level, that industry to industry co-operation represents the best way forward for any UK/France co-operation on aircraft carrier issues.

13. The CVF programme is adopting and further developing a range of Smart Acquisition techniques and has embedded a number of Smart Acquisition processes into its activities with the Aircraft Carrier Team (formed by BAE SYSTEMS and Thales UK). A greater emphasis is being placed on identifying, evaluating and implementing effective trade-offs between system performance, whole-life costs and time. Incremental acquisition is being adopted in areas such as mission systems, which will allow for the incorporation of up-to-date technologies to avoid obsolescence. SMART project management processes are being used to achieve early risk reduction, such as the use of Technology Readiness Levels (TRL) to ensure that any technologies that need developing have reached a sufficient TRL at appropriate points within the acquisition cycle. We are also developing a mature risk assessment process based around a joint risk register, linked with Earned Value Management (EVM), which enables the project team to track and manage key risks and ensure that, if required, appropriate mitigation strategies are being implemented.

14. In accordance with current government policy for the construction of Royal Navy warships, the CVF will be assembled in UK shipyards. Industrial factors were taken into account in the decision to adopt the alliance approach for CVF; in January 2003, we identified that, subject to value for money considerations, the best way forward was for CVF to be potentially built by a combination of four UK shipyards (BAE SYSTEMS Naval Ships at Govan, Vosper Thornycroft at Portsmouth, Swan Hunter on Tyneside and Babcock BES at Rosyth) although the involvement of other UK yards has not been ruled out. This approach was underpinned by a detailed analysis of facilities, capabilities and likely capacity across the UK shipbuilding industrial base. Final decisions will be made based on achieving value for money while taking due account of the capability, capacity and resources of UK industry to meet the full range of planned naval programmes. Discussions are continuing with the yards on the precise arrangements and work allocation on this basis. The predicted overall loading in the yards during the CVF construction timefraname is also being examined. It is estimated that CVF will sustain or create some 10,000 jobs across the UK during the course of its design and manufacture.

15. It is unlikely that this project will lead directly to whole-ship sales, although the commercial marketing of CVF design skills and production technology could benefit UK industry. Much of the ship's equipment could have export potential. Industrial Participation proposals will be invited, as appropriate, for offshore content of the proposed solution.

16. Contractor Logistic Support (CLS) will be considered for some or all of the maintenance and logistics and OLS options for up to 30 years are being examined during Assessment. One option to be considered is the adoption of best practice in supply chain techniques, to minimise MOD ownership of spares, by contracting for agreed spares availability from industry. We are also developing options to let a contract for an Initial Support Period up to and including the dry docking of the first vessel.

17. The upkeep cycle of the CVF will reflect both the vessels' modern design and developments in upkeep practice such as "reliability centred maintenance" rather than lengthy and expensive refits. This will enable availability requirements to be met by only two carriers.

18. Stage 3 completed on 31 March 2004. Advice is currently with Ministers on the way forward for the programme, and an announcement is expected shortly. In the meantime, work on the project continues and negotiations are on-going between the MOD and the companies over the alliance strategy for the Demonstration and Manufacture phases. The target ISDs for the carriers remain unchanged at 2012 and 2015.

Under the CVF project, we will procure two large aircraft carriers to replace the three Invincible-class carriers from around 2012. These carriers will operate the STOVL variant of the Joint Strike Fighter, the Maritime Airborne Surveillance and Control (MASC) capability and other rotary wing aircraft in a variety of roles.

Competitive contracts for the CVF Assessment Phase were awarded in November 1999 to BAe Land and Sea Systems (now BAE SYSTEMS) and Thomson-CSF (now Thales Naval Ltd). As was announced on 30 January 2003, we now envisage taking the project through an alliance approach, with BAE SYSTEMS acting as the Prime Contractor and Thales taking a major role as the Key Supplier. The Ministry of Defence will also take up a formal role in the alliance. The MoD is currently negotiating with the two companies on establishing the alliance structure. A move into the next phase of the project is expected in May.

Operational Requirement
The Strategic Defence Review (SDR) concluded that the ability to deploy offensive air power will be central to future force projection operations, and that aircraft carriers can provide valuable flexibility in a range of operational circumstances. They can also offer a coercive presence, which may forestall the need for war fighting. There is an increasing likelihood of future operations being conducted by forces far from their home bases. In such operations, host-nation support, including access to suitable air bases, cannot be guaranteed, particularly during an evolving regional crisis or the early stages of a conflict.

The SDR concluded that the three INVINCIBLE-class carriers should be replaced with a new class of larger and more capable carriers, known as the Carrier Vessel Future (CVF) class. The objective is for these ships to support an increased emphasis on offensive air operations and force projection as a central component of joint maritime operations. As such, it is intended that CVF will operate the STOVL variant of the F35 Joint Strike Fighter (JSF), the Maritime Airborne Surveillance and Control (MASC) capability and other rotary wing aircraft from all three services in a variety of roles. The SDR also saw advantage in future carriers being capable of carrying more fixed-wing aircraft than the INVINCIBLE class vessels, in order to be able to contribute more effectively to the support of operations on land and at sea.

Trade-offs
Decisions on trade-offs between cost and capability and time and capability will be finalised during the third and final stage of CVF Assessment.

Numbers
We shall procure two large carriers, each capable of carrying up to about 48 aircraft. The vessels are likely to be in the region of 60,000 tonnes.

Strategic Defence Review
The SDR assessed the requirement for aircraft carriers within the overall requirement for an offensive air capability. It concluded that "there is . . . a continuing need for Britain to have the capability offered by aircraft carriers" and the emphasis for replacement carriers should be on "increased offensive air power, and an ability to operate the largest possible range of aircraft in the widest possible range of roles" (The Strategic Defence Review, Supporting Essays, pages 6-6 to 6-8). These conclusions were endorsed by the New Chapter work of 2002.

Military Capability
The CVF will deploy offensive air power in support of the full spectrum of future operations, including force projection, as a central component of the maritime contribution to joint operations.

Equipment to be Replaced and In-Service Date
The planned out of service dates for HMS INVINCIBLE, HMS ILLUSTRIOUS, and HMS ARK ROYAL are 2010, 2012, and 2015 respectively. The first CVF is scheduled to enter operational service in 2012 and the second in 2015.

Acquisition Strategy
The CVF procurement strategy is based on competition and prime contractorship, with clear and unambiguous output requirement specifications.

The first stage of the Assessment Phase involved the examination of carrier design options and helped inform the UK's decision, in January 2001, to select JSF as the aircraft with the best potential to meet the JCA requirement. The remainder of Stage 1 then focused on vessels capable of supporting JSF. This stage of Assessment was completed in June 2001.

Stage 2 of the Assessment Phase ran from November 2001 to November 2002, during which time the competing consortia concentrated on refining their designs. For much of this stage, a twin-track approach was followed looking at designs capable of supporting the two variants of JSF under consideration for the JCA role; namely a conventional CV carrier, utilising catapults and arrestor gear, and a STOVL design, fitted with a ramp and optimised for STOVL aircraft operations. When the decision was announced on 30 September 2002 to proceed with the STOVL variant of JSF, it was concluded that, in the interests of flexibility, value for money and maximising our investment over the whole of its service life, the carrier should be built to an innovative adaptable design. This will be CV based but modified to operate STOVL aircraft in the short to medium term whilst retaining the ability to be adapted to operate other aircraft types after the JSF leaves service.

During Stage 2, the Department continuously assessed the two consortia's work in order to provide a firm factual basis for the selection of the preferred prime contractor in early 2003. The evidence from the Continuous Assessment process confirmed that, in order for the carriers to enter service on time, both companies would need to augment substantially their available resources to achieve the necessary maturity before manufacturing could begin. Our detailed analysis showed that each company has significant strengths. BAE SYSTEMS displayed a good understanding of the project's complexities in its project management and prime contracting, and had developed a good relationship with all the key shipyards. The company also demonstrated the skills that are necessary to integrate the different systems into an effective warship. Thales UK provided an innovative design that is flexible enough to meet our needs and has strengths in a number of key areas, including weapon and defence systems and the interface between the ship, aircraft and flight deck operations.

It was this evidence that led us to the conclusion that, to deliver value for money, provide the best capability and significantly reduce risk to the programme, we needed to exploit all the strengths of both companies. An alliance approach appeared to offer the best means of bringing together the necessary resources and expertise to deliver the programme. We envisage that this alliance will be led by BAE SYSTEMS as the preferred prime contractor, with responsibility for project and shipbuilding management. Thales UK will assume a major role as key supplier to produce design solutions. The Ministry of Defence will also take up a formal role in the alliance. The precise details of the alliance arrangement are now being discussed and agreed between the two companies and the MoD. They will be based on all parties working together, as a single team to deliver the capability to time and cost. The MoD's role will include ensuring the availability of other assets for which we are rightly responsible, such as suitably trained manpower and the JSF aircraft, during the design and build phase.

It is anticipated that the alliance will formally start in the third and final stage of assessment in May and that this will take the programme through to the award of a Demonstration and Manufacture (D&M) contract early in 2004. In order to avoid any delays to the programme, both companies are continuing to progress key elements of assessment phase activity ahead of the formal commencement of Alliance working.

The Demonstration element of the D&M phase will initially continue design and risk reduction work from the Assessment Phase, the intention being to achieve the highest possible level of design maturity before construction begins. The planned In-Service Dates of the two carriers remain unchanged at 2012 and 2015.

Alternative Acquisition Options
During the first stage of Assessment, a wide range of carrier and aircraft options were considered, including conventional take-off and landing, short take off and vertical landing, and short take off, but with arrested recovery. The costs of extending the lives of the three existing carriers by 10 years was also assessed to provide a baseline against which the cost effectiveness of all the options could be evaluated.

Co-operation with France and the US
Whole ship collaboration is unlikely to be a viable option, but opportunities for co-operation are being reviewed during Assessment, especially for equipment systems and subsystems. In particular, discussions are continuing with the French and US to explore areas for possible co-operation in common areas of aircraft carrier technology at a system or sub-system level. A two-star steering committee has been set up with France, to oversee the activities of two working level groupings, looking at operational and future procurement aspects of aircraft carriers. There is a mutual understanding between the UK and France, at Ministerial level, that industry to industry co-operation represents the best way forward for any UK/France co-operation on aircraft carrier issues.

Export Potential
It is unlikely that this project will lead directly to whole-ship sales, although the commercial marketing of CVF design skills and production technology could benefit UK industry. Much of the ship's equipment could have export potential. Industrial Participation proposals will be invited, as appropriate, for offshore content of the proposed solution.

Industrial Factors
In accordance with government policy for the construction of Royal Navy warships, the CVF will be built in UK shipyards. Industrial factors were taken into account in the decision to adopt the alliance approach for CVF. In terms of shipbuilding, analysis has concluded that the optimum solution appears to revolve around the involvement of four main yards: BAE SYSTEMS Marine at Govan; Swan Hunter in the North East; Vosper Thornycroft in Portsmouth; and Babcock BES at Rosyth. The participation of other yards has not yet been ruled out. It is estimated that CVF will sustain or create some 10,000 jobs across the UK during the course of its design and manufacture.

Smart Acquisition
The CVF programme is adopting and further developing a range of Smart Acquisition techniques. These include a greater emphasis on identifying, evaluating, and implementing effective trade-offs between system performance, whole-life costs and time; the adoption of incremental acquisition for areas such as the combat systems; and the use of off-the-shelf equipment and commercial standards, where appropriate. An Integrated Project Team (IPT) is managing the project under the leadership of an industrialist recruited in an open competition. In accordance with Smart Acquisition, what would previously have been Feasibility and Project Definition stages have been combined into a single Assessment phase, with increased investment and innovation through the use of SMART project management processes to achieve early risk reduction. The two consortia have been encouraged to be innovative throughout the project.

The alliance proposal for CVF emerged from the findings of the CA process. This has provided a new and faster means of determining the relative strengths and weaknesses of competing contractors. The process also broke new ground by addressing significant but less tangible issues—such as the contractors' ability to work with the MoD, which is important when the MoD could be working with the selected prime and key supplier for many years. The CA process ran throughout Stage 2 and provided the MoD with a robust and transparent method of determining the way ahead for the programme. It was a move away from the traditional tender assessment approach and enabled the MoD to make its decision more quickly than would otherwise have been possible.

This innovative alliance approach also builds on the principles of the Defence Industrial Policy document published in October 2002. It will enable us to make the most of the resources and strengths of both companies and the skills and expertise of the IPT. We will continue to maximise the advantages offered by competition (at the sub-contractor level) during the remainder of the Assessment Phase, thus ensuring that we achieve best value for money. The alliance approach is intended to allow a seamless transition from Assessment through to Demonstration and Manufacture and will directly address the concerns of industry and the MoD about the level of risk reduction required on major programmes. Both BAE SYSTEMS and Thales have welcomed the alliance approach.

Acquisition Phases
A number of small-scale pre-feasibility studies were completed prior to the award of the assessment contracts. A risk register will be maintained throughout the life of the project as the core of an integrated risk management system. This contains both MoD and contractor inputs and is the focus for risk reduction work during the Assessment phase. The risk reduction work will help to provide confidence in the data that will support the Main Gate submission to proceed with Demonstration and Manufacture.

Milestones and Costs
Recent and planned CVF milestones are shown in the table below.

Total acquisition costs for the two carriers are currently being revised by the CVF Alliance and will take account of the adaptable design. We envisage that the costs will be in the region of £3.2 billion to £3.4 billion (resource costs, outturn prices), excluding the aircraft. Costs incurred to the end of FY02/03, including pre-feasibility studies, total around £101 million.

In-Service Support
We plan to investigate the let of a contract for design, build and an initial support period as one package. Collaborative support arrangements are unlikely.

Contractor Logistic Support (CLS) will be considered for maintenance and logistics where value for money and coherence with wider Royal Navy support systems can be demonstrated. The benefits of CLS include a strong focus on reliability for initial designs; better standards of availability, reliability, and maintenance; and an incentive to the contractor to design and build systems that minimise support costs. One option to be considered is the adoption of best practice in supply chain techniques, to minimise MoD ownership of spares, by contracting for agreed spares availability from industry.

The upkeep cycle of the CVF will reflect the vessels' modern design, and developments in upkeep practice such as "reliability centred maintenance" rather than lengthy and expensive refits. This will enable availability requirements to be met by only two carriers.

Interoperability
The aim is to maximise the interoperability of the CVF with the greatest possible range of UK and allied aircraft and with other carriers, to the extent that this can be achieved cost-effectively. This is being explored further during the Assessment Phase.

Disposal of Equipment Replaced
Prospects for the sale of the INVINCIBLE class will be explored in due course.

In-Service Life
Each CVF is planned to have an in-service life of 30 years with a stretch target of up to 50 years.

Development Potential
The CVF programme is closely linked with the JCA and MASC programmes (the latter managed by a dedicated team within the CVF Integrated Project Team). The carriers' innovative adaptable design means it could be adapted in future to operate other aircraft types after the JSF leaves service.

The Secretary of State for Defence, Geoff Hoon MP, set out in the House of Commons on 30 January 2003 a proposal for BAE Systems and Thales UK to work in partnership to design and build two new aircraft carriers for the Royal Navy, planned to enter service in 2012 and 2015.

The competition for the future carrier programme's Prime Contract had been closely run between bids from the two companies. Following detailed analysis of their proposals by the MOD, particular strengths were identified in each. The Ministry of Defence has therefore recommended drawing these areas of expertise together to provide the best possible solution for meeting the project's requirements. It has suggested that the partnership would be led by BAE Systems as the Prime Contractor, responsible for project and shipbuilding management, while Thales UK would be the Key Supplier for the whole ship design. The MOD would participate in the Alliance, managing appropriate risks and contingencies, as well as ensuring the provision of necessary assets such as trained manpower and the JSF aircraft which the carriers will embark.

Both companies have indicated their willingness in principle to participate in such an Alliance, which would be underpinned by robust contractual agreements. Work will now be carried through to Spring 2004, when the final investment decision for the programme is scheduled. It is currently envisaged that building work for the two carriers would involve four shipyards: BAE Systems at Govan, Vosper Thornycroft at Portsmouth, Swan Hunter on Tyneside and Babcock BES at Roysth. Other shipyards may become involved in due course, while Rolls-Royce is expected to provide the engines. Some 10,000 jobs are likely to be created or sustained by the project.

  The Royal Air Force and Royal Navy are to get a force of the world's most advanced stealthy supersonic jump jets to equip both the new class of two large aircraft carriers and to fly from shore bases, Defence Procurement Minister Lord Bach announced today.

     Up to 150 Short Take Off and Vertical Landing (STOVL) versions of the new the Lockheed Martin F35s, which MoD has chosen as having the best potential to replace both land-based and carrier-based Harrier aircraft, are planned in a programme worth up to £10 billion. They will enter service with the first of the new carriers in 2012.

     Lord Bach said: "This is a critically important decision. We have chosen this variant, which is the one being bought by the US Marine Corps, because it fully meets our military needs - and it builds on Britain's unique and valuable knowledge of STOVL aircraft acquired during nearly four decades of operations with Harrier on land and at sea.

     "We have also made a key decision on the design of the new carriers. These ships must have the maximum flexibility to meet our defence needs throughout their service lives of up to 50 years. That is why we've decided they will be built to an innovative 'adaptable' plan so that they will operate STOVL F35 aircraft, but can be modified to fly the generation of aircraft - which might possibly be unmanned combat aerial vehicles - even beyond the F35, whether or not these too are STOVL. This represents a sensible way to maximise the benefits of our investment in the carriers, and is good long term value for money."

     Industry estimates that some 3,500 jobs could be created or sustained by work on the F35 in the UK, rising to 8,500 once the aircraft moves into production and then into service. The total value of the F35 programme, including exports, to UK industry could be as much as £27 billion. More jobs will be sustained in the UK shipbuilding industry on the carriers.


     BACKGROUND NOTES:

     --STOVL aircraft are launched over a ski-jump and land vertically on aircraft carriers, as on the current Invincible class. The US Navy 'Carrier Variant' aircraft use catapults to take off. They land on decks fitted with arrestor wires, as in current US Navy and French carriers.

     --On current assumptions the two new carriers, known in MoD as the CVF project, are expected to displace between 55,000 and 60,000 tonnes. On this basis we expect these immensely powerful and impressive aircraft carriers will be largest warships ever built in the UK, or indeed anywhere outside the USA and the Russian Federation. They are expected to cost no more than about £3 billion to build.

     --Ministers will announce early in 2003 which of two competing prime contractors, Thales Naval and BAE Systems, will be responsible for the design and build of the ships. A contract for the design & build of both ships is expected to be placed in 2004 with the chosen prime contractor.

     --The two competing carrier contractors have each been developing alternative designs based on STOVL or CV aircraft. The CV designs could be adapted to operate STOVL aircraft with minimum change and could be modified if necessary with catapults and arrestor gear to operate a future generation of assisted launch & recovery aircraft. MoD has decided to take forward the CV design, modified to operate STOVL in the short to medium term, but with the flexibility to operate other types of aircraft after the F35 has left service.

     --The MoD project for the STOVL F35 is named the Joint Combat Aircraft (JCA). The JCA and CVF projects are being managed at Defence Procurement Agency headquarters at Bristol. CVF IPT is led by Mr Ali Baghaei and JCA IPT is led by Cdre Simon Henley RN.

     --UK Companies teamed with F35 contractor Lockheed Martin include: BAES Aerostructures; BAES Avionics; Smith Industries; Rolls Royce; Martin Baker; TRW-Lucas; Ultra Electronics; Flight Refuelling.

     --We expect to place the contract for the F35 production, having confirmed the numbers of aircraft required, in 2005/6.

The decision in the Strategic Defence Review to purchase two large aircraft carriers to replace the three Invincible-class carriers from around 2012 is being taken forward and competitive contracts for the CVF Assessment Phase were awarded in November 1999 to BAe Land and Sea Systems (now BAE SYSTEMS) and Thomson-CSF (now Thales Naval Ltd). The first part of this phase examined a wide range of carrier designs, to reflect the options for the Future Joint Combat Aircraft (JCA (formerly known as the Future Carrier Borne Aircraft (FCBA))—see separate memorandum). This work helped to inform a decision, in January 2001, to select the Joint Strike Fighter (JSF) as the aircraft with the best potential to meet the JCA requirement. A new strategy for the remainder of the Assessment phase was agreed in Autumn 2001 and a revised Stage 2 of Assessment began in November 2001. Carrier design work is now focusing on vessels capable of supporting JSF pending a decision on aircraft variant selection, which is currently planned by autumn 2002.

The SDR concluded that there is a continuing need for Britain to have the capability offered by aircraft carriers. Our three Invincible-class carriers were designed for Cold War anti-submarine operations. Our intention, announced in the SDR, is to replace these with a new class of larger and more capable carriers, known as the Carrier Vessel Future (CVF) class.

2. In accordance with the Smart Acquisition model, CVF is following a two-stage approval process that involves an Initial and a Main Gate. Initial Gate approval, utilising the Smart Acquisition model, was given in December 1998 for an Assessment phase. Studies being undertaken in Assessment with examine the User Requirement Document and develop it, using cost/capability trade-offs to produce an affordable and achievable System Requirements Document. The objective is to build a replacement for the current carriers that has an increased emphasis on offensive air operations and is capable of operating the largest possible range of aircraft in the widest possible range of roles.

3. Trade-offs between cost and capability and time and capability are integral to the Assessment Phase work.

4. The original plan was to replace the three Invincible-class carriers with three 20,000 tonne vessels. Operational analysis demonstrated, however, that it would be more cost-effective to procure two large carriers, each capable of carrying up to about 50 aircraft. The SDR also saw advantage in future carriers being capable of carrying more fixed-wing aircraft than the current vessels, in order to be able to contribute more effectively to the support of operations on land and at sea.

5. The SDR assessed the requirement for aircraft carriers within the overall requirement for an offensive air capability. It concluded that "there is....a continuing need for Britain to have the capability offered by aircraft carriers" and the emphasis for replacement carriers should be on "increased offensive air power, and an ability to operate the largest possible range of aircraft in the widest possible range of roles" (The Strategic Defence Review, Supporting Essays, pages 6-6 to 6-8).

6. The CVF will deploy offensive air power in support of the full spectrum of future operations, including force projection, as a central component of the maritime contribution to joint operations.

7. The planned out of service dates for HMS Invincible, HMS Illustrious, and HMS Ark Royal are 2010, 2012 and 2015 respectively. The SDR introduced no changes to this programme of withdrawals from service. The first CVF is scheduled to enter operational service in 2012 and the second in 2015. The in-service date of CVF will be declared as the date when the military capability provided by the CVF is assessed as available for operational use in its minimum usefully deployable form, i.e at least as capable as the system it replaces.

8. The CVF procurement strategy is based on competition and prime contractorship, with clear and unambiguous output requirement specifications.

9. Invitations to tender for the Assessment Phase were issued in January 1999 to six potential prime contractors—BAE, Lockheed Martin, Boeing, Marconi Electronic Systems, Raytheon, and Thomson-CSF. Responses were received in May from two teams: the .rst led by Thomson-CSF of France with BMT Defence Services Ltd and Raytheon Systems as major sub-contractors; the other by BAe Land and Sea Systems with Marconi Electronics Systems as a sub-contractor.

Following tender evaluation and face-to-face meetings with industry it was judged that the bids offered the basis for robust and e.ective competition and contracts were awarded to both teams in November 1999. BAe and Marconi subsequently merged to form BAE SYSTEMS and in February 2000 Lockheed Martin joined the Thomson-CSF team (now known as Thales).

10. The Assessment phase was originally intended to comprise two main stages. The first involved the examination of carrier design options and helped inform the decision, in January 2001, to select JSF as the aircraft with the best potential to meet the FJCA requirement. Reflecting this decision, the remainder of Stage 1 focused on vessels capable of supporting JSF.

11. Stage 2 was previously planned to involve detailed work, informed by our choice of JSF, to determine the carriers’ design parameters and to reduce technological risk, and culminate in the Main Gate approval decision, planned for December 2003, to down-select to one preferred prime contractor to proceed to Demonstration and Manufacture.

12. The first stage of Assessment was completed in June 2001. The Department carefully considered the proposals received from the contractors for the originally configured Stage 2, taking into account their views of the amount of work required to minimise the level of risk in the CVF programme. Having revisited our strategy to determine the most efficient and cost effective way forward for the remainder of the Assessment Phase, we concluded that the original approach no longer offered best value for money.

13. As a result, the CVF procurement strategy was changed. In a revised and shortened stage 2, until November 2002, the competing consortia will concentrate on refining their designs and on taking key tradeoff decisions. During this period the Department will continuously assess the two consortia’s work so that we can announce a single preferred prime contractor in early 2003.

14. The selected prime will then work on the third stage of assessment from early 2003 through to the award of a Demonstration and Manufacture contract early in 2004.

15. In adopting this revised approach we are seeking to apply Smart Acquisition principles. This approach will allow us to maximise the advantages offered by competition and thus ensure that we achieve best value for money. The new strategy concentrates the forces of competition at appropriate levels; namely between the candidate primes whilst designs are refined and key trade-off decisions are made; and then, once the prime has been selected, at the sub-contractor level to ensure that robust prices are achieved. The new strategy will allow a seamless transition from Assessment through to Demonstration and Manufacture. The strategy also addresses industry’s concerns about the level of risk reduction required on major programmes. Both BAE SYSTEMS and Thales have welcomed the revised approach.

16. The revised strategy provides additional funding for the remainder of the Assessment Phase but offsets this by the fact that only one prime will be contracted for Stage 3 post-November 2002. We will also seek to withhold some of the payments for this stage until after the award of the D&M contract. The additional cost of the revised strategy is around £20 million. This additional funding will enable the selected prime to compile more confidently their performance, time and cost proposals, which we will expect them to achieve during the build programme. The programme remains within its previously approved maximum acceptable cost for the Assessment phase. The planned In-Service Dates of the two carriers remain unchanged at 2012 and 2015.

17. The Demonstration element of the D&M phase will initially continue design and risk reduction work from the Assessment Phase, the intention being to achieve the highest possible level of mature design before construction begins.

18. A cost model has been developed to generate whole-life cost estimates for CVF and this is populated with regularly updated data from industry. In the event of competition collapsing before the end of Stage 2, this model would be used as the basis for negotiations with industry.

19. During the first stage of Assessment, a wide range of carrier and aircraft options, including conventional take-o. and landing, short take o. and vertical landing, and short take off but arrested recovery were considered. As part of this work and following normal practice, the cost of extending the three existing carriers, by ten years, has been assessed to provide a baseline against which the cost effectiveness of all the options can be evaluated.

20. Whole ship collaboration is unlikely to be a viable option, but opportunities are being reviewed during Assessment, especially for equipment systems and subsystems. In particular, discussions are continuing with the French and US to explore areas for possible co-operation in common areas of aircraft carrier technology at a system or sub-system level.

21. It is unlikely that this project will lead directly to whole-ship sales, although the commercial marketing of CVF design skills and production technology could benefit UK industry. Much of the ship’s equipment could have export potential. Industrial Participation proposals will be invited, as appropriate, for offshore content of the proposed solution.

22. In accordance with government policy for the construction of warships, the CVF will be built in a UK shipyard or shipyards. Industrial factors will be taken into account in the selection of the prime contractor.

23. The CVF programme is adopting and further developing a range of Smart Acquisition techniques including a greater emphasis on identifying, evaluating, and implementing effective trade-offs between system performance, whole-life costs and time; the adoption of incremental acquisition for areas such as the combat systems; and the use of off-the-shelf equipment and commercial standards, where appropriate. An Integrated Project Team (IPT) is managing the project under the leadership of an industrialist recruited in an open competition. In accordance with Smart Acquisition, what would previously have been Feasibility and Project Definition stages have been combined into a single Assessment phase, with increased investment at this stage to achieve early risk reduction. The two consortia have been encouraged to be innovative throughout the project.

24. The preferred contractor for the CVF programme will be selected through a continuous assessment process. This offers a new and faster means of discriminating between two competing contractors. The process also breaks new ground by addressing significant but less tangible ‘soft issues’—such as the contractors’ ability to work with the MoD, which is an important issue when the MoD could be working with the selected prime for many years. The continuous assessment process will run throughout the coming year and will provide the MoD with a robust and fair method of determining which contractor is best placed to build the carriers. It is a move away from the traditional tender assessment approach and should mean that the MoD will be able to make its decision more quickly than would otherwise be possible.

25. A number of small-scale pre-feasibility studies were completed prior to the award of the assessment contracts. A risk register will be maintained throughout the life of the project as the core of an integrated risk management system. This contains both MoD and contractor inputs and is the focus for risk reduction work during the Assessment phase. The risk reduction work will help to provide confidence in the data to be assessed in the Combined Operational Effectiveness and Investment Appraisal that will support the Main Gate submission to proceed with Demonstration and Manufacture.

User Requirements Document endorsement and Initial Gate approval	December 1998
Issue Invitation to Tender (ITT)	January 1999
Start ITT Assessment	November 1999
FCBA decision	January 2001
Start Stage 2 of Assessment	November 2001
Announcement of preferred prime contractor, start Stage 3 of Assessment	January 2003
Main Gate approval	December 2003
Order date	2004
ISDs	2012 and 2015

27. We envisage a total acquisition cost for the two carriers of £3 billion (resource costs, outturn prices), including combat system and initial support costs, but excluding the aircraft. The peak years of expenditure are likely to be between 2008 and 2012. Costs incurred so far, including pre-feasibility studies, total around £46 million.

28. We plan to investigate the let of a design/build/through-life support/disposal contract as one package. Collaborative support arrangements are unlikely.

29. Manning levels will be based on work by human factors designers, to achieve a balance between automated and manual tasks, and by training needs analysis, in accordance with the RN training equipment strategy. The size of ship’s complement is planned to be about the same as for the Invincible class. Contractors will be tasked to propose the most efficient manning strategies for their designs, which will be examined during Assessment.

30. All logistic support associated with CVF will be considered as a direct cost to the project, with an emphasis on avoiding expenditure on new infrastructure. The maintenance management system will be required to integrate with other MoD logistic systems and to take account of emerging developments in IT.

Innovative support solutions will be examined, using Integrated Logistic Support methodology to minimise costs throughout the ship’s life.

31. Contractor Logistic Support (CLS) will be examined for some or all of the maintenance and logistics. The benefits of CLS include a strong focus on reliability for initial designs; better standards of availability, reliability and maintenance; and an incentive to the contractor to design and build systems that minimise support costs. One option to be considered is the adoption of best practice in supply chain techniques, to minimise MoD ownership of spares, by contracting for agreed spares availability from industry. CLS options for up to 30 years will be examined during Assessment.

32. The upkeep cycle of the CVF will reflect the vessels’ modern design and developments in upkeep practice such as ‘reliability centred maintenance’ rather than lengthy and expensive refits. This will enable availability requirements to be met by only two carriers.

34. The aim is to maximise the interoperability of the CVF with the greatest possible range of UK and allied aircraft and with other carriers, to the extent that this can be achieved cost-effectively. This is being explored further during the Assessment phase.

35. Prospects for the sale of the Invincible class will be explored in due course.

36. Each CVF is planned to have an in-service life of 30 years with a stretch target of up to 50 years.

37. The CVF programme is closely linked with JCA and Maritime Airborne Surveillance and Control (MASC—formerly known as the Future Organic Airborne Early Warning (FOAEW) programmes (the latter managed by a dedicated team within the CVF Integrated Project Team).

   The Ministry of Defence has today progressed its flagship naval procurement programme by awarding BAE Systems and Thales Naval Ltd competing contracts worth around £30M each for the next stage of the Future Aircraft Carrier project. Stage 2 of the Assessment phase will involve further design and risk reduction work, providing the basis for the choice of preferred prime contractor by the MoD in early 2003.

     Minister for Defence Procurement Lord Bach said:

     "The future carriers are very much a lynchpin of our planned defence capability and will greatly enhance our ability to intervene decisively in the world's trouble spots.

     "The value of such large carriers is being underlined on a daily basis by our American allies in operations over Afghanistan. That demonstration of power, reach, and strategic mobility of carrier-borne air power provides ample confirmation that our commitment to this project is the right way to go.

     "We believe that our revised procurement strategy will help to ensure the maximum potential for competition throughout the rest of the assessment phase. This is in line with Smart Acquisition principles and I am pleased that both Thales and BAE Systems have welcomed this decision."

     Up to November 2002, the competing consortia will concentrate on refining their design proposals allowing the Department to announce a single prime contractor in early 2003. The selected prime contractor will then ensure the maximum degree of competition amongst potential sub-contractors so as to provide, in mid-2003, a robust, costed proposal for the Demonstration and Manufacture of two vessels. The MoD intends to award a build contract early in 2004.The In-Service Date of the two Carriers remains, as planned, in 2012 and 2015 respectively.


     BACKGROUND NOTES:

     1. Competitive contracts for the CVF Assessment Phase were awarded in November 1999 to two industry teams led by BAE Systems and Thales Naval Ltd (at that time named Thomson-CSF Naval Systems). The Assessment phase was originally split into two stages. Stage 1 completed in June and work carried out by the two teams during this stage helped to inform the decision, in January 2001, to select the Joint Strike Fighter (JSF) as the aircraft with the best potential to meet the UK's Future Joint Combat Aircraft (FJCA) requirement.

     2. The Future Aircraft Carrier(CVF) will deploy offensive air power in support of the full spectrum of future operations. It is planned that each carrier will have the capacity to carry up to 50 aircraft including the joint RN/RAF Future Joint Combat Aircraft (FJCA), and helicopters from all three services in a variety of roles. (ends)

The decision in the Strategic Defence Review to purchase two large aircraft carriers to replace the three Invincible-class carriers from around 2012 is being taken forward and competitive contracts for the CVF Assessment Phase were awarded in November 1999 to BAe Land and Sea Systems (now BAe Systems) and Thomson-CSF (now Thales Naval Systems). The first part of this phase examined a wide range of carrier designs, to reflect the options for the Future Carrier Borne Aircraft (FCBA—see separate memorandum). This work helped to inform a decision, in January 2001, to select the Joint Strike Fighter (JSF) as the aircraft with the best potential to meet the FCBA requirement. Carrier design work is now focusing on vessels capable of supporting JSF pending a decision on aircraft variant selection.

1. The Strategic Defence Review (SDR) concluded that the ability to deploy offensive air power will be central to future force projection operations, and that aircraft carriers can provide valuable flexibility in a range of operational circumstances. They can also offer a coercive presence, which may forestall the need for war fighting. The SDR recognised that there is an increasing likelihood of future operations being conducted by forces far from their home bases. In such operations, host-nation support, including access to suitable air bases, cannot be guaranteed, particularly during an evolving regional crisis or the early stages of a conflict. The SDR concluded that there is a continuing need for Britain to have the capability offered by aircraft carriers. Our three Invincible-class carriers were designed for Cold War anti-submarine operations. Our intention, announced in the SDR, is to replace these with a new class of larger and more capable carriers, known as the Carrier Vessel Future (CVF) class.

2. In accordance with the Smart Acquisition model, CVF is following a two-stage approval process that involves an Initial and Main Gate. Initial Gate approval, utilising the Smart Acquisition model, was given in December 1998 for an Assessment phase. Studies being undertaken in Assessment will examine the User Requirement Document and develop it, using cost/capability trade-offs to produce an affordable and achievable System Requirements Document. The objective is to build a replacement for the current carriers that has an increased emphasis on offensive air operations and is capable of operating the largest possible range of aircraft in the widest possible range of roles.

3. Trade-offs between cost and capability and time and capability are integral to the Assessment phase work.

5. The SDR assessed the requirement for aircraft carriers within the overall requirement for an offensive air capability. It concluded that "there is . . . a continuing need for Britain to have the capability offered by aircraft carriers" and the emphasis for replacement carriers should be on "increased offensive air power, and an ability to operate the largest possible range of aircraft in the widest possible range of roles" (The Strategic Defence Review, Supporting Essays, pages 6-6 to 6-8).

6. The CVF will deploy offensive air power in support of the full spectrum of future operations, including force projection as a central component of the maritime contribution to joint operations.

7. The planned out of service dates for HMS Invincible, HMS Illustrious, and HMS Ark Royal are 2010, 2012, and 2015 respectively. The SDR introduced no changes to this programme of withdrawals from service. The first CVF is scheduled to enter operational service in 2012 and the second in 2015. The in-service date of CVF is defined as the "Operational Date Materiel Assessment", which is the date at which it will be accepted as fit for entry into the operational fleet.

8. The CVF procurement strategy is based on competition and prime contractorship, with clear and unambiguous output requirement specifications. Although we intend that the ships should be built in the UK, prospective prime contractors are from the UK and France.

9. In accordance with the Smart Acquisition model, the project is following a two-stage approval process. Invitations to tender for the Assessment phase were issued in January 1999 to six potential prime contractors—BAe, Lockheed Martin, Boeing, Marconi Electronic Systems, Raytheon, and Thomson-CSF. Responses were received in May from two teams: the first led by Thomson-CSF of France with BMT Defence Services Ltd and Raytheon Systems as major sub-contractors; the other by BAe Land and Sea Systems with Marconi Electronics Systems as a sub-contractor. Following tender evaluation and face-to-face meetings with industry it was judged that the bids offered the basis for robust and effective competition and contracts were awarded to both teams in November 1999. BAe and Marconi subsequently merged to form BAe Systems, and in February 2000 Lockheed Martin joined the Thomson-CSF team (now known as Thales).

10. The Assessment phase comprises two main stages. The first has so far involved the examination of carrier design options and helped inform the decision, in January 2001, to select JSF as the aircraft with the best potential to meet the FCBA requirement. Further stage one design work, reflecting this decision, is now underway focusing on vessels capable of supporting JSF, pending a decision on aircraft variant selection. Progress to the second stage of Assessment will be subject to satisfactory completion by BAe Systems and Thales of stage one, based on a review of their performance, and the timeliness and quality of their deliverables. The second stage will involve detailed work, informed by our choice of JSF, to determine the carriers' design parameters and to reduce technological risk. It will culminate in the Main Gate approval decision, planned for December 2003, to down-select to one preferred prime contractor to proceed to Demonstration and Manufacture of two carriers. The Demonstration phase will begin with the design of a virtual prototype by the selected prime contractor, using computer-aided technology. The intention is to achieve, so far as possible, a freeze on a mature design before construction begins.

11. A cost model is being developed to generate whole-life cost estimates for CVF and this will be populated with data from industry. In the event of competition collapsing, this model would be used as the basis for No Acceptable Price, No Contract negotiations.

12. During the first stage of Assessment, a wide range of carrier and aircraft options, including conventional take-off and landing, short take off and vertical landing, and short take off but arrested recovery were considered. As part of this work and following normal practice, the cost of life-extending the three existing carriers, by 10 years, has been assessed to provide a baseline against which all the options can be evaluated.

13. Whole ship collaboration is unlikely to be a viable option, but opportunities are being reviewed during Assessment, especially for equipment systems and sub-systems. In particular, arrangements have been agreed with the French to explore areas for possible co-operation in common areas of aircraft carrier technology at a system or sub-system level.

14. It is unlikely that this project will lead directly to whole-ship sales, although the commercial marketing of CVF design skills and production technology could benefit UK industry. Much of the ship's equipment could have export potential. Industrial Participation proposals will be invited, as appropriate, for offshore content of the proposed solution.

15. In accordance with government policy for the construction of warships, the CVF will be built in a UK shipyard or shipyards. Industrial factors will be taken into account in the selection of a contractor.

16. The CVF programme will adopt a range of Smart Acquisition techniques including a greater emphasis on identifying, evaluating, and implementing effective trade-offs between system performance, whole-life costs and time; the adoption of incremental acquisition for areas such as the combat systems; and the use of off-the-shelf equipment and commercial standards, where appropriate. An Integrated Project Team (IPT) is managing the project under the leadership of an industrialist recruited in an open competition. In accordance with Smart Acquisition, what would previously have been Feasibility and Project Definition stages have been combined into a single Assessment phase, with increased investment at this stage to achieve early risk reduction. The two consortia have been encouraged to be innovative throughout the project.

17. A number of small-scale pre-feasibility studies were completed prior to the award of the assessment contracts. A risk register will be maintained throughout the life of the project as the core of an integrated risk management system. It will contain both MoD and contractor inputs from the Analysis of Options studies undertaken by industry and will be the focus for risk reduction work during the Assessment phase. These will help to provide confidence in the data to be assessed in the Combined Operational Effectiveness and Investment Appraisal that will support the Main Gate submission to proceed with Demonstration and Manufacture.

19. We envisage a total acquisition cost for the two carriers of £2.7 billion at outturn prices (EP 2001), including combat system and initial support costs, but excluding the aircraft. The peak years of expenditure are likely to be between 2008 and 2012. Costs incurred so far, including pre-feasibility studies, total just over £16 million.

20. We plan to investigate the let of a design/build/through-life support/disposal contract as one package. Collaborative support arrangements are unlikely.

21. Manning levels will be based on work by human factors designers, to achieve a balance between automated and manual tasks, and by training needs analysis, in accordance with the RN training equipment strategy. The size of ship's complement is planned to be about the same as for the Invincible class. Contractors will be tasked to propose the most efficient manning strategies for their designs, which will be examined during Assessment.

22. All logistic support associated with CVF will be considered as a direct cost to the project, with an emphasis on avoiding expenditure on new infrastructure. The maintenance management system will be required to integrate with other MoD logistic systems and to take account of emerging developments in IT. Innovative support solutions will be examined, using Integrated Logistic Support methodology to minimise costs throughout the ship's life.

23. Contractor Logistic Support (CLS) will be examined for some or all of the maintenance and logistics. The benefits of CLS include a strong focus on reliability for initial designs; better standards of availability, reliability, and maintenance; and an incentive to the contractor to design and build systems that minimise support costs. One option to be considered is the adoption of best practice in supply chain techniques, to minimise MoD ownership of spares, by contracting for agreed spares availability from industry. CLS options for up to 30 years will be examined during Assessment.

24. The upkeep cycle of the CVF will reflect the vessels' modern design, and developments in upkeep practice such as "reliability centred maintenance" rather than lengthy and expensive refits. This will enable availability requirements to be met by only two carriers.

26. The aim is to maximise the interoperability of the CVF with the greatest possible range of UK and allied aircraft and with other carriers, to the extent that this can be achieved cost-effectively. This is being explored further during the Assessment phase.

27. Prospects for the sale of the Invincible class will be explored in due course.

29. The CVF programme is closely linked with the FCBA and Future Organic Airborne Early Warning programmes (the latter managed by the CVF Integrated Project Team).

Source: Select Committee on Defence, Session 1999-2000, Written Evidence
Date: 28 June 2000

The decision in the Strategic Defence Review to purchase two large aircraft carriers, to replace the three Invincible-class carriers from around 2012, is being taken forward and competitive contracts for the CVF Assessment Phase were awarded in November 1999 to BAe Land and Sea Systems, now BAE Systems, and Thomson-CSF. The first part of this phase, Analysis of Options, is examining a wide range of carrier design options, to reflect the options for the Future Carrier Borne Aircraft, FCBA, see separate memorandum.

1. The Strategic Defence Review concluded that the ability to deploy offensive air power will be central to future force projection operations, and that aircraft carriers can provide valuable flexibility in a range of operational circumstances. They can also offer a coercive presence, which may forestall the need for war fighting. The SDR recognised that there is an increasing likelihood of future operations being conducted by forces far from their home bases. In such operations, host-nation support, including access to suitable air bases, cannot be guaranteed, particularly during an evolving regional crisis or the early stages of a conflict. The SDR concluded that there is a continuing need for Britain to have the capability offered by aircraft carriers. Our three Invincible-class carriers were designed for Cold War anti-submarine operations. The intention, announced in the SDR, is to plan to replace these with a new class of larger and more capable carriers, known as the CVF, Carrier Vessel Future, class.

2. In accordance with the Smart Procurement model, CVF is following a two-stage approval process that involves an Initial and Main Gate. Initial Gate approval, utilising the Smart Procurement model, was given in December 1998 for an Assessment phase. Studies being undertaken in Assessment will examine the User Requirement Document and develop it, using cost/capability trade-offs to produce an affordable and achievable Systems Requirements Document. The objective is to build a replacement for the current carriers that has an increased emphasis on offensive air operations and is capable of operating the largest possible range of aircraft in the widest possible range of roles.

3. Trade-offs between cost/capability and time/capability are integral to the Assessment work.

5. The SDR assessed the requirement for aircraft carriers within the overall requirement for an offensive air capability. It concluded that "there is ... a continuing need for Britain to have the capability offered by aircraft carriers" and the emphasis for replacement carriers should be on "increased offensive air power, and an ability to operate the largest possible range of aircraft in the widest possible range of roles"—The Strategic Defence Review, Supporting Essays, pages 6-6 to 6-8.

6. The CVF will deploy offensive air power in support of the full spectrum of future operations, including force projection as a central component of the maritime contribution to joint operations.

7. The planned out of services dates for HMS Invincible Illustrious and HMS Ark Royal are 2010, 2012 and 2015 respectively. The SDR introduced no changes to this programme of withdrawals from service. The first CVF is scheduled to enter operational service in 2012 and the second in 2015. The in-service date for CVF is defined as the "Operational Date Materiel Assessment", which is the date at which it will be accepted as fit for entry into the operational fleet.

9. In accordance with the Smart Procurement model, the project is following a two-stage approval process. Invitations to tender for the Assessment phase were issued in January 1999 to six potential prime contractors—BAe Lockheed Martin, Boeing, Marconi Electronic Systems, Raytheon, and Thomson-CSF. Responses were received in May from two teams; the first led by Thomson-CSF of France with BMT Defence Services Ltd and Raytheon systems as major sub-contractors; the other by BAe Land and Sea Systems with Marconi Electronics Systems as a sub-contractors. Following tender evaluation and face-to-face meetings with industry it was judged that the bids offered the basis for robust and effective competition and contracts were awarded to both teams in November 1999. BAe and Marconi subsequently merged to form BAE Systems, and in February 2000 Lockheed Martin joined the Thomson-CSF team.

10. The Assessment phase comprises two main stages. The first, analysis of Options, involves the examination of carrier design options and will help inform the decision, expected in late 2000/early 2001, on the type of aircraft to meet the Future Carrier Borne Aircraft, FCBA, requirement. Progress to the second stage of Assessment will be subject to satisfactory completion by BAE Systems and Thomson-CSF of stage one, based on a review of their performance, and the timeliness and quality of their deliverables. The second stage will involve detailed work to determine the carriers' design parameters and to reduce technological risk, informed by the choice of FCBA. It will culminate in the Main Gate approval decision, planned for 2003, to down-select to one preferred prime contractor to proceed to Demonstration and Manufacture of two carriers. The Demonstration phase will begin with the design of a virtual prototype by the selected prime contractor, using computer-aided technology. The intention is to achieve, so far as possible, a freeze on a mature design before construction begins.

12. During Assessment, a wide range of carrier and aircraft options, including conventional take-off and landing, short take off and vertical landing, and short take off but arrested recovery will be considered. As part of this work and following normal practice, the cost of life-extending the three existing carriers, by10 years, will be assessed to provide a baseline against which all the options can be evaluated.

13. It is too early to be specific about the prospects for collaboration. Some informal discussions have taken place with the US, Spanish, French, and Italian navies to identify any common ground in carrier replacement programmes or requirements. At present, whole ship collaboration would appear unlikely to be a viable option, but collaborative opportunities will be reviewed during Assessment, especially for equipment and systems.

DEFENCE

Future Aircraft Carrier

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