U. K. acquiring two new aircrafts carriers

U. K. Signs Deal for 2 Carriers July 09, 2008: LONDON - A deal to build two 65,000-ton aircraft carriers for the Royal Navy has been signed by the British government, but a price for the program will not be finalized until 2010. The contract has a target price of 3.2 billion pounds. (Royal Navy illustration) The contract, signed July 3 by the Ministry of Defence and shipbuilder BVT Surface Fleet on board the pocket carrier HMS Ark Royal at the Portsmouth naval base in southern England, has a target price of 3.2 billion pounds ($6.4 billion). The deal includes a 700 million pound contingency and risk fund and a clause allowing both sides to reassess the final cost after the first phase of the project is completed in 2010. "The MoD retains the right to renegotiate the program at the end of the first 30-month phase of the overall project. The final target price will be agreed at that point," a ministry spokesman here said. The British are undertaking a similar process in which final pricing is decided after construction gets under way on several of the Astute-class nuclear submarines being built by BAE Systems. An industry executive said, "There are incentives in the deal for the alliance to bring the program home in as close to the 3.2 billion-pound target price as possible, but you probably won't find many people who don't think we will be calling on the contingency fund at some stage." The potential for renegotiation will raise concerns about the vulnerability of the program to a future change of government. A general election is likely here in the next 20 months or so. The carrier program was pushed through by the Labour administration and the Royal Navy against strong opposition from some quarters as the MoD grapples with balancing program plans and a defense budget under pressure. Lee Willett, the head of maritime studies at the Royal United Services Institute, here, said the signing of the contract clearly puts the carrier program on a firmer footing than it has been for the last couple of years. "All bets are off, though, if a change of administration comes about at the next election. That would likely mean a defense review and ultimately a freeze or reduction in defense spending," he said. "It's been a good day for Royal Navy power projection and for the industry here, but a new government would bring the potential for a lot of change," he said. In a statement today, Conservative Party shadow defense secretary Dr. Liam Fox welcomed the carrier signing, saying they were vital in maintaining Britain's expeditionary capability. "However, a number of issues still remain," he said. "The government must give assurances that the next stage of the program will not suffer any further delays, and that a sufficient number of escort vessels will be provided to protect the carriers. The government must also ensure that the Joint Strike Fighter aircraft comes into service as soon as possible." Cutting the program partway through the build would be a highly expensive operation. BAE announced it had been awarded a 275 million pound order by the MoD to design and supply the carrier's mission systems. The deal brings spending to date on equipment and materials for the carrier to 389 million pounds. In addition, a further 35 million pounds also is being spent modifying the Rosyth dockyard in preparation for assembly of the aircraft carriers. If construction proceeds to schedule, the first of the new carriers, HMS Queen Elizabeth, should be in service in 2014, followed two years later by HMS Prince of Wales. Initially the warships, the biggest ever operated by the Navy here, will be equipped with Harrier GR9 strike aircraft, but eventually these will be replaced with the vertical takeoff variant of the F-35 Joint Strike Fighter. The MoD declined to give a date for when the F-35 would enter service on the carriers. The first carrier originally was due in service in 2012, but the project has been delayed by wrangling over costs and the need to mature design work to reduce risk. Aside from BVT, the other companies involved in the group known as the Aircraft Carrier Alliance are Babcock International and Thales UK. The carriers are being built in modules at yards around Britain and then floated up to the Rosyth facility of Babcock's for final assembly. BVT officially formed on July 1, bringing together the two surface warship yards of BAE on the Clyde in Scotland with the VT facility at Portsmouth. It will be responsible for just under half the value of the contract. The remainder will be subcontracted to other alliance members and subcontractors.