Poiuytrewq wrote: ↑03 May 2023, 17:50
Did anyone seriously expect Babcock to build five T31s for £1.25bn? It was never going to happen.
I did, BUT two points included, I do not, now.
1: £2bn and not £1.25bn is the total cost. There must be many other contracts to be held to actually deliver the T31 as we expect.
2: Cost impact of COVID19 and Ukraina war will be exceeding the Babcock's own "risk margin", and at least "half of it" shall be reasonable to be covered by MOD/HMG.
Anyway, building four Damen 10515 light frigate costs nearly £1.25Bn. Brazilian four Tamadare-class 3,500-ton MEKO A-100-class light frigate costs 2Bn Euro. There is no reason to assume Babcock can build 5 T31 with £1.25Bn. But, with £2Bn, it could be possible (but not easy),
See <detail> below.
The T31 project won’t be allowed to fail so the big question now is how much will the program REALLY cost?
It’s likely any overspend will eat into the T32 budget from 2026-2032 and reduce the likelihood of any upgrades in the interim so if HMT won’t provide more funds the ultimate result will be a dropped hull. So four T31s for £1.25bn or £312m per vessel plus GFE.
T31 average cost is
[EDIT, thanks Tempest414-san] "£400M per vessel including GFE". This is the only number we know. Other numbers are all "but without AAA, not including BBB" etc.
T32 budget is NOT yet assigned in any sense. So, for T32 to happen, RN already needs "HMT to provide more funds". In other words, I think T32 will come only with HMG's "defense budget increase" announcement.
If the T31 program budget remains to be £2Bn, and COVID19/Ukraina-war related impact is not covered, I think there are 2 options
- build some of the 5 T31 without CAMM = "with CAMM FTR". This is simply because I understand CAMM-fitting contract is not yet finalized (SeaCeptor system integration cost (with CMS) and some parts cost might be included in the contract with MBDA. But, for sure, its integration must be done by Backcock (and Thales UK) at Rosyth, not MBDA).
- if Babcock cannot cover the money shortfall of the contractual obligations included in "the £1.25Bn", they may ask for more investment from the market (actually, Cammel Laird did this, to cover the huge loss of delivering RV SD Attenborough). If Babcock fails to cover this loss, then HMG "may" share (take a half of) the shortfalls with renewed contract. Cutting the 5th hull may happen, but it will never give you "£250M". Establishing the build process costs a lot. Learning curve also comes in. In other words, there are many costs "already payed" before building the 5th hull. Diesel engines, 4D-radar, EO-FCS, guns and other parts are already ordered and canceling them will cost. So, I guess the 5th hull will be anyway built (but without CAMM and other assets).
<detail of the first half>
1: SURELY, the £1.25bn does not include everything. It is only a (large) fraction of the T31 program. Babcock did NOT know how many CAMM will be carried on T31 an year ago. Even after the hull build of T31-hull1 is in shape. This means, the CAMM integration will be covered under independent contract, yet to be finalized, I think. In other words, only "FTR CAMM" is within the £1.25bn contract. As Sea Ceptor is the main weapon of T31, this means not only the Sea Ceptor, but also many aspects (providing training of RN crew, 1st year maintenance support etc) are not yet fixed.
Note that there is NO good comparison of such cost for T26. T26 is always told with total cost. This is what we can know from the NAO report.
2: Surely, on September 2019, I did NOT expected the outbreak of COVID19 nor the Ukraina war. These two issues surely have big cost impact. To my understanding, the finance-exchange-rate risk was taken by HMG not Babcock, or at least "shared" (I'm not sure, but I remember there were discussions there, right before the £1.25bn contract). But, cost-inflation related to other issues (semiconductor parts shortfall, shipping slow down and cost increase etc.) cannot be easily justified to be covered by HMG, because it is Babcock who is selecting each and every parts, not HMG. Just guess.
As the parliamental question answer says everything is on discussion within the contract, I think we will see the end result soon. As an engineer, I can say, I cannot build anything I promised on late 2019 and to be delivered around 2025-2028, without 10-20% (or more) cost increase. I think 10% risk margin (which can be converted into profit, in optimistic case) shall be kept by Babcock (if it is a "normal" contract), but, I guess the cost overrun is exceeding that margin.