An extract from JDW. Could someone please explain the logic given that there are aspirations to regenerate the maritime capability in 4-5 years?
The arguments that so many have stated with regard to, not being able to afford it, holds no water.
Ambitious plans by the UK Ministry of Defence (MoD) to save more than GBP3 billion (USD4.8 billion) over the next decade by cancelling equipment procurement projects are under threat from termination charges.
A month on from the publication of the UK coalition government's Strategic Defence and Security Review (SDSR), MoD officials are still locked in negotiations with major defence companies over compensation for terminating their contracts. These include cancelling the manufacturing and support contracts for the BAE Systems Nimrod MRA.4 maritime patrol aircraft, as well as ending support contracts for the BAE Systems Harrier GR.9 attack aircraft and its engines eight years early and reducing the number of Panavia Tornado GR.4 strike aircraft and engines to be serviced under the Availability Transformation: Tornado Aircraft Contract (ATTAC) and RB199 Operational Contract for Engine Transformation (ROCET2) support contract with BAE Systems and Rolls-Royce.
An MoD spokesman told Jane's that it was hoped that GBP2 billion would be saved over the next decade by not taking the Nimrod MRA.4 into service, while taking Harrier out of service would save about GBP450 million over the next four years and around GBP900 million in total. A further GBP500 million is expected to be saved by withdrawing the Raytheon Sentinel R.1 Airborne Stand-Off Radar aircraft.
Like the ministry, the defence companies contacted by Jane's refused to comment in detail on the progress of talks. "We can confirm that the company has received a letter from the UK Ministry of Defence terminating the contract for the provision of nine Nimrod MRA.4 aircraft," a spokesman for BAE Systems told Jane's . "We are now considering the implications of the letter for the company, our employees and our suppliers."
An MoD source said that achieving the savings targets were dependent on securing beneficial terms with suppliers, some of whom might now be slow to co-operate with the coalition government. "The financial saving targets set in the SDSR were very much 'big hand', 'ballpark' or 'in the region of' figures and we will not know the final cost until our negotiations with the contractors are complete," said the source.
The Harrier GR.9 and Nimrod MRA.4 projects carry the biggest risk to the MoD, he said. BAE Systems and Rolls-Royce signed support contracts worth GBP574 million and GBP198 million respectively for the RAF/Royal Navy Harrier force only last year. Both contracts have eight years left to run, so the MoD will likely face a substantial bill to compensate the companies for their termination.
Sources close to the ministry's Nimrod integrated project team have told Jane's that the cost of winding up the MRA.4 programme could well run to "several hundred million pounds" over the next five years, making it unlikely that the ministry will achieve any savings from the cancellation in the first half of the decade. In October the UK National Audit Office in its annual MoD major projects report revealed that BAE Systems was still due to be paid GBP254 million on the MRA.4 development and production contract.
Significant additional sums will be required to wind up MRA.4 activities, including cancelling contracts to run simulators, electronic warfare test rigs, stress test rigs, design authority operations and operational test and evaluation activity. The ministry will also have to fund storage of the sole Nimrod MRA.4 that has been delivered, three aircraft over 90 per cent complete and the remaining five aircraft that are more than 40 per cent complete, as well as an extensive spares pool held at BAE Systems' Woodford site, and the dismantling of a simulator complex at RAF Kinloss in Moray.