Naval Shipbuilding in the United Kingdom
(Source: Rand Europe; issued Jan. 18, 2007)
Long-term planning may force the MOD to re-evaluate its competition policy for shipbuilding, says Rand. Seen here is the bow section of the first Type 45 destroyer. (VT Group file photo)
RAND Europe researchers were commissioned by the UK Ministry of Defence to examine many key aspects of the UK's future naval shipbuilding programme. This research brief highlights research findings and provides concise summaries of each study.

Over the next 15 years, the United Kingdom (UK) will embark upon its largest naval shipbuilding programme in recent memory. This effort will be challenging, as it follows a period of reduced warship and submarine demand that has led to consolidation and reduction in the capacity of the UK shipbuilding industrial base.

From 2001 to 2005, researchers at RAND Europe have studied, on behalf of the Ministry of Defence (MOD), many aspects of the proposed shipbuilding programme. This research, spread over nine specific studies, looked at the broad issues of demand and supply across the general shipbuilding and nuclear submarine shipbuilding industrial bases, in addition to challenges facing specific programmes such as the Type 45 destroyer and the Future Aircraft Carrier (CVF).

Other research concentrated on the factors affecting UK shipbuilding, such as the differences between military and commercial ship construction, outsourcing and outfitting practices, and initial fuelling options for nuclear submarines.

Processes available to the MOD for monitoring the progress of future shipbuilding programmes were also examined. Together these reports represent a significant body of work that has already proved influential and should remain useful to those responsible for making decisions that will affect the future of the UK’s shipbuilding industrial base.

Some findings of these studies, such as costs and specific procurement recommendations, will become less relevant as programmes move forward and decisions are taken. Therefore, the purpose of this overview is to highlight RAND’s research in these areas, paying particular attention to those recommendations that are more enduring and will likely retain their long-term value to defence policymakers.

Key research findings and recommendations

One of the most important findings that consistently arose from the RAND research is the importance of a comprehensive, long-term, MOD shipbuilding strategy or plan. Such a plan will help the MOD define its future shipbuilding goals and courses of action, establish a schedule or roadmap to meet its plans, and highlight such areas of required future investment as facilities or workforce requirements and skills.

More specifically, a long-term strategy will help to eliminate the “boom and bust” cycle that has plagued shipbuilding production and design, make more efficient use of shipyard facilities and workforce skills, and exploit the government’s ‘smart buyer’ expertise.

Additionally, it will help the MOD better understand the financial implications of its acquisition strategy and anticipate problems by allowing the MOD to independently assess shipyard demand, and it should lead to reduced cost and schedule risk through greater programme certainty.

By examining its shipbuilding strategy in the long term, the MOD can ensure that it retains the technical and programme management skills necessary for effective project control, finds its optimum level of responsibility and risk, and plays a more active role in shaping the future of the industrial base. Of course, such planning must also take into account operational requirements and the need to deliver ships to the Royal Navy in a timely manner that meets mission needs.

Three main conclusions regarding long-term planning were made:

-- The MOD should attempt to smooth, or ‘levelload,’ the production and design demands it places on the industrial base. Several factors will impact this ‘loading,’ such as drumbeat between ships in a class, duration of design/build, total force size, and expected time in service of each platform. However, the considerable benefits include better workforce and facilities use, more stable financial costs, and a greater ability for the industrial base to make long-term investment decisions.

-- Long-term planning may force the MOD to re-evaluate its competition policy. In order to best use the industrial base, competition may not always be the default option; in some cases, it may be in the MOD’s interest to allocate work for certain types of warships. However, this should not excuse the need to obtain value for money in procurement, and the MOD will need to work closely with industry to ensure that this remains the case. Competition will likely remain a viable value for money consideration.

-- Long-term planning will require the MOD to work more closely with industry than previously, in order to understand factors impacting its plans. This closer working relationship may require the MOD to supply industry with more information regarding long-range plans, future budgets, and procurement options. However, it should also reduce risk in shipbuilding programmes by providing the government with greater understanding and certainty regarding industrial capacity as well as better progress indicators, such as earned value metrics.

Similarly, long-term planning may also encourage shipyards to work more closely together as they act to use complimentary skills and facilities, advance skill synergies (such as design resources), and give the MOD procurement options which result in greater industrial efficiencies.

Our research also reveals that the Ministry of Defence should consider a number of alternative strategies to improve its design and production efficiencies, within the context of a long-term shipbuilding strategy:

-- MOD placement of multi-ship contracts may provide industry with incentives for long-term facility investment and skill training. Because they have received only limited orders for new ships and have faced a highly competitive market in recent years, many UK naval shipyards have not modernised facilities. Only with longer-term contracts and prospects will the shipyards be able to justify this type of major investment. The benefit to the MOD is that the shipbuilders should achieve greater efficiencies and pass reduced costs onto the MOD. It should be kept in mind, however, that such long-term contracts work better for mature designs and, therefore, may not always be appropriate for the first-of-class ship.

-- A critical number of shipbuilding trades and skills are difficult to recruit and retain. To meet peak workload, the shipyards will have to hire and train new workers. However, after the peak, workers will likely become redundant. Therefore, UK industry should focus on training skills that are readily employable outside the shipbuilding industry. In this way, any resulting unemployment after a shipbuilding peak can be minimised. The MOD should discuss with other government departments (such as the DFES and the DTI) the potential of training programmes or incentives for these skills.

-- As the MOD’s future shipbuilding programme unfolds, UK shipyards and firms will likely need to share design, as well as production, resources to best accomplish the plan. One difficulty in sharing design resources is that shipbuilders and design firms often have different 3D CAD/CAM tools. Thus, interchanging data and working cooperatively on a common design is difficult.

The MOD should facilitate a discussion among the firms and shipyards to explore whether the industry should adopt a common set of design tools that are interoperable, or develop industry standards that would allow design work to be easily interchanged. Common design tools will also lead to common product models and databases and would benefit the MOD in lifecycle logistics support.

-- Regardless of planning efforts employed, periods of peak demand will likely remain in any future shipbuilding plan that may strain, if not exceed, industry’s capacity. During these periods, the MOD should mitigate this demand through a number of options to include outsourcing, subcontracting to smaller shipyards, or completing the work outside the UK. Increasing use of outsourcing will decrease the labour required to be resident in a shipyard; likewise, subcontracting any peak demand work to smaller shipyards with excess capacity will ease peak demands.

-- Finally, the MOD could also consider relaxing the current defence industrial policy in order to allow peak workload to be completed outside of the UK.

One of the reasons given for schedule slippage and cost increases on recent naval shipbuilding programmes has been the high number of changes introduced after production has begun. The MOD should be aware of this trend and guard against it through the following measures:

First, the MOD should ensure that designs are mature before proceeding into production; second, programme managers should strive to reduce the number of both government- and industry-introduced change orders into a mature design. Finally, when changes are proposed to a design, the MOD should attempt to resolve these changes as quickly as possible in order to reduce schedule slippage.

Within warship production, the MOD can encourage best practices in order to reduce cost and shorten build schedules. RAND’s research highlighted the potential benefits of increasing the use of advanced outfitting in warship construction and encouraging the use of greater outsourcing, where appropriate. Of note, both of these tasks require a mature pre-production design that should facilitate greater outfitting.

Additionally, the use of commercially available equipment solutions may be less costly than ones that conform to traditional military standards, given no adverse impact on operations or safety.


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