donald_of_tokyo wrote: ↑19 Nov 2022, 11:06
pko100 wrote: ↑19 Nov 2022, 10:15
Donald, thanks. I have not read the NAO report so dont know the rationale for the programme cost quoted. It is probably based on the approved cost in the Main or Full Business Case depending which approvals regime was in place at the time. This will include risk within costing,initial in service support a typical figure being 2 to 5 years per ship and other costs to mature the other DLODs.
So the point is yes, the approved programme could be £2b with cost changes deemed sensible by the NAO. The contract with Babcock remains £1.25b fixed price.
Lots of people seem to be suggesting that some dodgy dealing has been going on between MoD, Treasury and the NAO to obscure the costs on the Type 31. I don't believe this to be true in this case.
Thanks.
Total purchase cost: It is clearly stated in the NAO report that T31 program cost is £2Bn. So, that's it. Details are not known, as is the case with "£3.7Bn" of 3 T26s, or all the other programs. There is no number of T26, which can be equated with "£1.25b to Babock" on T31.
In summary, I understand the following two must be compared;
- "8 T26s for "£3.7+0.26+4.2 = £8.16Bn"
- "5 T31 for £2Bn"
Unit cost: First of all, let's define the "unit cost" as the "cost needed to
add one more hull". Of course,
this is different from "average cost", which includes initial cost divided by the hull number.
I understand "initial" cost of brand-new design ship is 2 unit-cost equivalent or more (see FREMM case on wiki), while that of T31 I have no good idea because there are already a good detailed design to build it, but changing the shipyard to Babcock Rosyth, as well as changing the boat alcove and armaments, sensors shall cost to some extent. Adopting RN compatible equipment shall also require some design and initial costs. But, for simplicity, let's assume it is 1 unit-cost equivalent.
Then
- T26's "unit cost" can be roughly estimated as £8.2/(2+8) = £820M (which is not much different from the £4.2Bn divided by 5 = £840M).
- T31's "unit cost" can be roughly estimated as £2/(1+5) = £330M.
Considering their size, capability, armament's scale, I think this number is not so bad. A T26 unit-cost being 2.5 times costy than a T31.
Operational cost: We shall note that T26 needs a crew size of "150+flight", and T31 needs "110+flight". If "flight" is 14, it is 164 vs 124. A T26 crew-size being 4/3 times larger than a T31. Hull size is also not much different, so the fuel cost shall be similar. Equipment maintenance cost shall be roughly proportional to the procurement cost (written elsewhere), so the "total" operation cost will differ a lot, but not as much as "x2.5".
These are my "personal" assessment based on public information.
Firstly, in the Bae CEO interview in the DT that I've quoted before, he said Batch 1 T26's cost about 800 million to build. That supports your calculations very well. He went on the say that he predicted a 20% decrease in that cost for Batch 2's. Which would result in about B2 being about 640 million each. But of course that would be in the original year pounds so inflation would mess that up somewhat.
I think in your note, you've deviated from your definitions of unit cost vs average cost.
T26 unit cost (the cost to build an additional ship) would start above 800m at the beginning of batch 1, decrease to below 800m at the end of batch 1, in order to give an average cost of 800m. The for batch 2, it would start about 640m and decrease to under 640m.
If my math & financial calculations are approx correct, the cost of increasing the batch 2 contract from 5 ships to 6, would be about 600m.
Secondly, you can play a lot of games on how you amortize fixed costs like research, design, infrastructure across a production run. Folks on this board end up spreading (amortizing) it across the entire run then claiming an extra ship built would carry the same amortized amount which is clearly nonsense.
Gordon Brown did this (either deliberately or through stupidity) when he announce the cancellation of T45's. He said they cost 1 billion each, clearly excessive being the impression he was meaning to give, so he was saving the country 2 billion by cancelling 2 ships. Actually they were being built at an average cost of about 650 million each, the rest of the one billion was money already spent and was being amortized by him over the 6 unit class so in reality he would only be saving 1.3 billion. Actually less than that because the cost was still decreasing. So he mislead parliament.. But not for the first or last time. The myth of the one billion pound T45's linger to this day.