EUROPEAN NEWS
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THE LIGHTS GO OUT FOR THE BRITISH DEFENCE INDUSTRY

18 Jul 06. Reflecting the dire speech given by Lord Drayson, U.K. Defence Procurement supreme, the lights in the Farnborough Press centre failed as the Minsiter announced his stringent and painful programme to reform the U.K. Defence Industry.

Quite clearly Lord Drayson is a man on a mission and he is going to let nothing get in his way until he achieves what he wants. He also made it quite clear that if Industry does not joining his ‘Club’ then they are going to be left out of the party. He appeared peeved by BAE and VT reluctance to cement the marriage of to develop his Maritime Strategy, he was annoyed at the lack of progress on Armoured vehicles, thus he made no mention of FRRES and ticked off Raytheon Systems Limited for not responding to his missile strategy. A source suggested that whilst MBDA received his proposals two months ago. RSL only received it two weeks ago and thus the document was still with the Company’s lawyers. Not surprising given the 50% drop in orders announced! At least RSL were mentioned by name, he left out any reference to BAE which may reflect his reported spat with Mike Turner on the company’s move to take its Land Systems H.Q. to the USA. Quite clearly two powerful characters, neither of which like backing off!

Drayson announced a new industrial partnership that has been formed to meet the challenges of maintaining within the UK key skills in missile development, an area in which the Defence Industrial Strategy identified declining investment over the next five years. 'Team CW' (complex weapons) is led by MBDA and is currently centred around Qinetiq, Thales Air Defence Ltd, Thales Missile Electronics, and Roxel. BATTLESPACE sees this as a tidying up exercise to enable EADS to achieve its stated aim of buying BAE’s MBDA stake.

He also announced the procurement strategy for the Loitering Munition Demonstration and Manufacture programme, potentially worth more than £500m. This strategy will see a contract awarded single-source to Team CW, subject to the successful conclusion of the programme's assessment phase. Ultra was awarded a £20m contract. A £500m order on a 50% reduction in business is a nice carrot. However one source suggests that EADS may have to wait until BAE cements the missile requirements for the Saudi Typhoon requirement. Drayson should be wary of upsetting RSL; the company’s AMRAAM missile still remains a key feature of Typhoon and the software upgrade is required to equip the aircraft with the MBDA Meteor missile. Wind River told BATTLESPACE at Farnborough that software changes for closed architecture systems cost $1 per line of code; given the millions of lines of code in Typhoon, this will prove an expensive exercise, as has been proved by the Bowman software upgrade. Surprisingly Drayson did not mention Bowman; sources suggest that GD (UK) has received the £80m required for the next stage and the many millions more the enable ComBat will flow over the next few years. An NAO Report due out next week suggests that the MoD is as much to blame for Bowman price increases as GD (UK). However we understand that the TRW (now Northrop) offering included access to all these upgrades FOC, thus the GD route has proved to be more costly by at least £300m.

Drayson continued, "I congratulate the team in the missile sector for responding positively to the challenge set out in the Defence Industrial Strategy. Team CW will help to maintain the UK's key skills and technologies in missile development and will also bring business to the companies involved. I aim to sign a Strategic Partnering Agreement by the end of 2006.”

"Team CW will require dramatic changes to the way that industry and the MoD operate. We will make better informed through life decisions and adopt a more incremental approach to technology development. Team CW will be a long term, sustainable partnership, underpinned by binding contracts, to drive high performance and continuous improvement from both MOD and industry.” Team CW is made up of MBDA (UK), Thales UK, Qinetiq, and Roxel.

Future potential programmes in this sector are in the Research and Technology and risk reduction areas. Four contracts will be placed with MBDA (UK) for the development of technologies which could contribute to the enhancement of Storm Shadow. The Future Anti-Surface and Future Rapid Effects programmes may also offer significant opportunities for collaboration. In the support area the Ministry of Defence recently placed a Contract for Availability for air-launched weapons designed by MBDA (UK). We anticipate other similar contracts to follow for land and maritime weapons. The term 'Complex Weapons' refers to all missiles and torpedoes.

"The UK will benefit from a globally competitive industry that will deliver the technologically advanced missiles our Armed Forces will need in the future.

Team CW follows hard on the heels of the deal announced with AgustaWestland over helicopters. On June 22nd Lord Drayson, announced today that the UK MoD and AgustaWestland have signed a Strategic Partnering Arrangement (SPA). He also announced the award of the Future Lynx contract to AgustaWestland, the launch programme under this new Strategic Partnering Arrangement. This arrangement, along with the Future Lynx contract, will ensure that the critical design engineering and knowledge of UK military demands will be retained at AgustaWestland’s Yeovil facility to ensure that the support of the MoD’s current fleet of AgustaWestland helicopters can be effectively and efficiently sustained.

A source suggested surprise at this agreement as EADS had made a better offer with its products. The competitive element of EADS’s offer was confirmed with the U.S. Army’s choice of the company’s contract worth a potential $3bn to supply up to 352 helicopters to the US army over ten years. (See: BATTLESPACE ALERT Vol.8 ISSUE 14, 01 July 2006, EUROCOPTER WINS U.S. ARMY SELECTION). Although the EH-145 does not provide an identical footprint for the chosen Future Lynx, the EADS U.S. contract required 322 LUH helicopters to be supplied for $2.3bn whilst the AgustaWestland agreement only provide for 72 helicopters for £1.2bn? Another source questioned why the MoD did not buy the Lynx helicopter chosen by South Africa?

Alan Sharman, Robin Ashby and the Editor all questioned the effect that this new ‘closed shop’ would have on jobs and SME’s. Drayson would not be drawn but it is quite clear that a huge number of SME’s will shut up shop if they are not in the Club. Team CW may suit the Government in the short term but missiles, by their very nature either explode when used in war or degrade over time; both requiring replacements. Have the bean counters in Whitehall factored in the fact that missiles may be used at a greater rate in wartime and if Team CW’s manufacturing base is lost to Europe, UORs are going to continue to be more difficult to fulfil, but do they care? Quite clearly the formation of these Teams will effect R&D and exports and leave such companies as Lockheed Martin (UK) and Thales which have a broader reach into the industry wondering where they stand? They were encouraged into the U.K. to compete, as Primes, as RSL has done on ASTOR, LockMart on Merlin, EDS on DII, EADS on Skynet 5, GD with Bowman and Thales on Watchkeeper, to beat the evil BAE SYSTEMS. However it looks like that BAE has won the argument over the ‘devil you know principle’ leaving these companies strategies looking wanting. EADS demanded greater access to UK contracts at Farnborough, but it looks like if they are not member of the Club they will be shut out, hence the desire to buy MBDA to run the Club! This strategy also questions whether R&D and technology companies such as QinetiQ and EDS will continue to receive the patronage they have or will they have to join all the Clubs to ensure development funds?

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