MoD recognises the £250M price cap for Royal Navy Type 31e Frigate is unworkable.

It has emerged that the MoD has accepted that it will have to provide additional funds to make the Type 31e a credible frigate that can defend itself in the face of modern threats. Here we take a brief look at the implications.

Yesterday the Daily Telegraph published an article with a very misleading headline “MoD to scrap cut-price frigates plan” but the rest of the piece then correctly went on to say that the price cap for the ships has effectively been abandoned. The Type 31e project is not being scrapped but the MoD will somehow have to find more cash.

Adjustments to the terms of the Type 31 contract will see the winning bidder build the platform for around £250M but the MoD will provide a greater part of the equipment fit. It had always been understood that some Government Furnished Equipment (GFE) could come directly from the Type 23 frigates as they are decommissioned. This could possibly include major items such as Sea Ceptor missile system, 4.5″ gun, Artisan radar, and hull-mounted sonar. This will require Type 23 frigates to be withdrawn to remove these systems, then time to install and integrate them on the new ships in time to avoid a reduction in frigate numbers. There are also many other modern weapons, sensors, communications, decoy systems and electronics that a credible Type 31 might need, the Type 23 is not a completely compatible donor and cannot provide everything.

Whatever might be transferred from the Type 23s, the MoD will have to purchase significant extra kit. It is also agreeing to underwrite more of the financial risk which could come from changes in FOREX rates and inflation. It would probably be more sensible and honest to accept the real price each Type 31 will be around £350M and this is becoming a more ‘normal’ procurement process.

Seen in the context of the National Shipbuilding Strategy, this development could be the death knell for attempts to stimulate exports with the offer of a “cheap frigate”. The UK was always going to have an uphill struggle to sell the Type 31e, competing in a crowded market with more established European warship exporters and cheap competition from China. Alternatively, a more honest offer for a low-mid range frigate might attract a few new customers who are looking for a warship with a realistic price tag. Unfortunately, many nations that can afford mid-range frigates may have their own, or want to develop, a sovereign construction capability and are not interested in buying from overseas.

Along with many others, we predicted the £250M price was not viable for a credible frigate as far back as 2015 so it seems extraordinary that this issue was not recognised and resolved a long time ago. It is also strange timing, given that the project is now well into the competitive design phase to start moving the goalposts. Either this was another ‘conspiracy of optimism’ to get Type 31 through the 2015 SDSR or a tactic to drive the price right down, with an unspoken acceptance that the figure would always rise in the long run. The Telegraph article suggests that the temporary suspension of the project in the Summer of 2018 was caused by industry concerns about the price rather than an intellectual property rights issue as many had thought.

The Type 31 has clearly blown its £1.25Bn budget and more funds will have to be found from somewhere. Everyone agrees the MoD’s future equipment plan is unaffordable to varying degrees and finding something in the region of £500M will be another problem lying in wait for the new Defence Secretary, Penny Mordaunt. The new minister is expected to be even more sympathetic to the needs of Navy than her predecessor and this will be an interesting examination of her priorities.

Sources inside the Navy say they remain “relaxed” about progress with the Type 31e project and still expect the project to deliver on time. The winning bid will be announced in December this year and the first steel will be cut in 2020.