Defence Committee demands answers from government on Fleet Solid Support Ship competition rules

Yesterday the chairman of the House of Commons Defence Committee (HCDC), Julian Lewis sent a strongly-worded letter to the Minister of State for Defence Procurement, Stuart Andrew demanding clarification as to why the Fleet Solid Support Ships (FSS) are being classified as “non-combatants”. Pressure is mounting on the government to build these ships, that will be vital to supporting RN global operations, in the UK.

On 30 November 2018, it was announced that five bidders had been accepted for the FSS competition. A British consortium including Babcock, BAE Systems, Cammell Laird and Rolls-Royce would be pitted against four foreign contractors; Fincantieri (Italy), Navantia (Spain), Japan Marine United Corporation, and Daewoo Shipbuilding (South Korea). We have argued, along with The HCDC, Unions, industry and many others that the FSS should be classified as warships and therefore only qualify for UK construction. Foreign bidders should be excluded as it in our national security and economic interests. The competition is likely to be unfair anyway because foreign companies receive state subsidies and bailouts from their governments, allowing them to undercut the UK consortium.

Government has chosen to classify the FSS as “non-combatant ships”. Like all RFAs, they will be civilian-manned and their weapons are primarily for self-defence but the HCDC notes the MoD’s own specification for the FSS which clearly shows it could be in the thick of combat operations: “It must integrate tactically with and contribute to a Naval task group. Its cargo is the lifeblood for the warships but, as a platform, it is also essential that it does not detract from the operational aims of the group. The primary role is to support war-fighting operations… survive against a capable and hostile enemy threat and continue to deliver its prime logistic service to ensure overall mission success… The FSS ships will need to support all tasks for the future Royal Navy, from full Carrier strike war-fighting through to Peacetime operations.”

The government also has a very weak case when they claim to be bound by EU rules. Not only are we leaving the European Union, but even if the Brexit deal eventually retains aspects of EU regulation, under Article 346 of the treaty, the FSS qualify for an exemption on national security grounds. Consideration should be given to how other EU nations have treated their support ship procurements. The HCDC point out that “if the UK believes that it is wrong to classify FSS ships as warships, the Government has the right to challenge Italy and France over their classification decisions and the consequent single-source procurement. We note that there has been no attempt to do so, which presumably means that you accept that it is legitimate to classify FSS ships as warships”.

There is a simple reason that Ministers continue to stick to the dogma that the FSS in non-warlike and maybe built abroad. Short-term budget considerations mean the MoD wants these two (or three?) ships to be built within a tight budget of around £1 Billion. The Commons Public Accounts Committee says there is a £14.8bn shortfall in the MoD 2018-28 equipment plan. If the FSS can be obtained more cheaply overseas then this is one less pressure on an already overheated budget. Unfortunately, this is evidence of a lack of joined-up thinking across departments. The Treasury should take the longer-term view that a very substantial part of any money spent in the UK is returned to the Exchequer through VAT, corporate taxes, income taxes and healthier local economies and may outweigh any savings made by foreign construction and if necessary, provide the extra in-year funding the MoD may need for UK construction. The Defence Committee suggests that the Type 31 project (of a similar value) is already recognised by the Treasury as having a 2% weighting benefiting the “prosperity agenda”.

Defence blogger Sir Humphrey argues eloquently, but wrongly, that UK shipbuilders lack the capacity to construct the FSS as it will have its hands full with other naval work. This is absolutely not the case, British industry and its representatives have made their case vehemently from the start about the allocation of this work and there is an obvious assembly site for the vessels in Rosyth. Sustaining Rosyth with the FSS could have an important role to play in the future maintenance of the aircraft carriers. He also says that misguided nationalism is no argument for buying British, it is far more important the navy gets the ships it needs at the right price. There is certainly truth in the argument that the frontline matters most, but if we follow this logic to its conclusion we might as well outsource all our defence manufacturing to the Far East where it could probably be done cheaper.

It would be a very poor strategic choice to rely purely on foreign suppliers for our defence needs. If we abandon UK defence industry entirely we weaken our economy and further damage the connection between the public and our armed forces. For those in government and Whitehall with secure public sector jobs, a laissez-faire approach to industrial policy may seem attractive, not a view shared by those in the provinces reliant on precarious manufacturing work. For a government keen to utilise naval vessels to promote ‘Global Britain’ and our trade and industry around the world, it is hardly an endorsement of a self-confident post-Brexit Britain if we place more major construction contracts abroad.

The Tide class tankers were built in South Korea (amidst a storm of controversy). This was an acceptable decision at the time as the aircraft carrier project was occupying much of UK shipbuilding. They were good value for money but until then, RFA vessels had always been built in the UK, their procurement should be seen as a special case and not set a precedent. Every contract lost by UK shipbuilding weakens the industry, reduces its workforce and skills base and makes it harder to build the next generation of vessels for the Navy.

Ministers may care to consider the considerable political storm that will erupt if the FSS contract is awarded overseas, especially to a European company. The HCDC has called this a “perverse decision” and noted that the National Shipbuilding Strategy, that is often cited in justification was itself an MoD strategy document approved by ministers. It is not too late for Mr Andrew to announce the FSS will be built in the UK, a decision that would be popular and place a minimal new burden on taxpayers.