John Howie, the chief executive of Babcock International’s marine business, discusses what’s next now that the Royal Navy has selected the company to develop and built the service’s Type 31 frigate program, investing in cutting-edge shipbuilding infrastructure in Scotland, delivering on a 250 million pound unit price target and export prospects with Defense & Aerospace Report Editor Vago Muradian at the DSEI conference and tradeshow in London. Our coverage is sponsored by L3Harris and Leonardo DRS and in partnership with Clarion Events — DSEI’s organizer — and working with the UK Department of International Trade’s Defence & Security Organisation to bring our audience the best in British defense.
Vago Muradian: Welcome to the Defense and Aerospace Report. I’m Vago Muradian here at the Excel Center in London to cover this 20th Anniversary edition of DSEI, one of the world’s truly great defense and security exhibitions.
Our sponsors here are L3Harris and Leonardo DRS, and we’re partnered with Clarion Events, the organizer of this great exhibition and many others all around the world, and we’re working with the UK Department of International Trade, Defence and Security Organization to bring you the very best of British defense.
And we were here at the stands of one of the best of British defense, Babcock, one of the truly great UK companies, to talk to John Howie, who is the Chief of the company’s marine business. Congratulations. Type 31 decision. You have a bouncing baby frigate, although I know you made the joke that if it’s bouncing you got the hydro dynamics of it wrong. [Laughter].
So talk to us a little bit, John, what are the next steps? This is a flagship program, very important to the Royal Navy. Type 26 has gotten a lot of export orders so this ship that once upon a time was the Type 31E, the E has since been dropped. Talk to us about what’s next because it’s a very, very ambitious schedule. This program was born at DSEI two years ago, and here we are now with the down-select decision.
John Howie: I would just start by saying one of the great things with this program is the MOD has run a very definite procurement process. They’ve hit every milestone. I think the MOD team has done a fabulous job to get us where we are.
The next steps, actually we’ve got to get in contract. That will take between now and the end of the year probably to do that. In reality we’ve already negotiated the contract, the specifications there. So it’s tidying up what we’ve got to do so we’re in really great shape. We will now start to place orders for the main equipment in this program. One of the great things about using, the Arrowhead 140 is based on a proven design, so wherever possible we’ve used equipment that’s proven in service, it’s already been integrated into the design.
So with the performance stress that you may have on a new program, we don’t have. We know it can meet the range requirement. We know it’s sea-keeping characteristics, we’ve packed a combat system that’s been sold to 25 different navies that’s proven in service. So that risk we think we can therefore manage.
The other thing we’re doing is under the National Shipbuilding Strategy, clearly one of the things that John Parker wanted to see was a different approach to ship acquisition and build. We’ve offered the MOD what we’ve termed the digital dockyards at new build facilities, a different approach to how these ships get put together, completely under cover, taking away a lot of the things that we know caused challenges for us in the aircraft carrier alliance. So between now and contract award we’ll be getting ourselves into a position where we can really hit the ground running.
Mr. Muradian: And tell us a little bit about the ship. It’s a modified Iver Huitfeldt which some of the people in our audience know, they’re the Danish frigates, they have an air defense capability, great sea keeping hull, very, very long range. Give us sort of the macro themes and capabilities that the ship’s going to have.
Mr. Howie: One of the things that was quite different about it, but we very deliberately chose to offer the Navy a ship that’s much bigger than the requirement needed. I worked on the type 23 program when I first joined the maritime industry, and there’s always that challenge that you build a ship that’s just slightly bigger than you need and then your requirements change. So we’ve very deliberately given the Navy a ship that’s nearly 6,000 tons, 138 meters. It has got bags of space in it to load and to adapt for future roles. This is a general-purpose frigate. It’s got to be flexible.
The beauty of it is, we have a ship whose performance characteristics are known. The Navy knew it well. The Flag Officer Sea Trainings Organization have been all over the ship when it’s been this part of operational sea training. So the customer knew the ship really well. We know it performs well in service.
What we have done is we’ve updated the design A, to meet the customer’s requirements; B, to make it compliant with the latest maritime pollution regs; and we’ve also made it compliant with the NATO standard. So this is a proper front-line frigate. It’s at a low cost, but it’s not a cheap frigate in capability terms. For that reason we think it’s highly exportable.
Mr. Muradian: And 250 million pounds is the target. Obviously you guys have to get there, and that’s once serial production starts. What are some of the other baseline capabilities? The propulsion plant is still going to be the four diesels, direct drive diesels, so that takes a little bit of the maintenance out of it. How do you make sure that you’re going to execute this ship at 250 million pounds? As you’ve seen, sometimes you can deliver a ship for low cost, like HMS Ocean. But one that just becomes a costly ship to operate over time. Very long pipe runs. Very hard to do maintenance on it. A lot of dissimilar components. How do you guys get this equation right? So that at 250 million pounds you’re delivering a ship that actually is not going to end up having downstream high cost, but is going to achieve that kind of ambitious requirement that you want at the end of the day?
Mr. Howie: I think the big thing is, people know Babcock as an engineering services business. We are a through-life support contractor. There is no way we’re going to supply a ship to the Navy that’s hard to maintain or expensive to maintain.
The other thing that we’ve done is, yesterday we launched I Support V60 which is a new digitally enabled asset management support strategy. We will build that to take 31 from build; and that will allow us to generate huge amounts of data on the performance of individual components and systems, allow us to optimize maintenance regimes, and to make sure the ship is constantly available. Because the Navy have big demands to use these ships in service, and clearly they don’t want ships that expensive to operate. And as a support contractor it’s sort of an [OPNE] to think that way.
Mr. Muradian: And you mentioned, First Sea Lord has talked about the fact that he wants these ships forward and underway as much as possible. Is there some day model you’re using, that it has to have an availability, say 300 days a year or something like that? Is there anything like that in the contract that puts some form of standard on how much underway time the Navy wants out of these ships? Because he’s looking at that forward deployed model. Their crews fall in on the ships a little bit like what we’ve seen in the Gulf from the Royal Navy.
Mr. Howie: The honest answer is I couldn’t tell you whether there’s something like that in the contract. What we do know is that the Navy has a demand for these ships to be at high levels of availability. And again, the great thing with using a proven platform is we have all of that data. The Danish have been really great. They’ve given us access to lots of background information on the core platform and we think it will perform really well in service. It’s got a really straight-forward set of systems. These should be highly reliable in service. As you say, it’s a diesel propulsion system. We’re using updated versions of the same engines, so the seating arrangements are all exactly as they were. So from that point of view, we should be getting a highly proven, highly reliable product.
Mr. Muradian: Anybody who’s been on those ships, whether the Absalon or whether the Iver Huitfeldt, it really is incredible that they have a beautiful hull form, two diesels will drive you up to 24 knots, four will take you up to 28 and you get something like 7,000 miles of range out of the ship. Great sea keeping capability. And you maintain those sort of the hatch access points that allow you to be able to take major components in and out of the ship as well. Just another brilliant design feature.
There is a little bit of a concern that some folks have voiced, that given that Babcock is such an important part of the UK nuclear enterprise, certainly on the shipbuilding side, whether for the ballistic missile submarines or for the nuclear attack submarines, there was a concern that this was going to take engineering capability away from that mission. What can you tell those who might raise that question and ask it? Whether or not in order to deliver on 31, there could be some shortfalls on the nuclear program?
Mr. Howie: I suppose the first thing I would say is right up at Babcock board level we absolutely understand that continuous at-sea deterrence is the number one defense output, and we will never do anything that prejudices our ability to deliver our commitments to the Navy on the submarine program. This program’s being delivered by a different team on a different site. It reports in through two different management teams. We’ve combined our naval nuclear business with our civil nuclear business, so what actually, we’re putting more resource into the nuclear business to make sure that the deterrent program is supported and the SSN availability is where it should be.
This program will be delivered by a completely different team who are currently working on the Queen Elizabeth Class aircraft carriers. They’ll come off that project when the ship leaves and roll straight into this. This is a dedicated team with shipbuilding experience. We are not taking resource away from the submarine program. Quite the reverse.
Mr. Muradian: You mentioned taking lessons from the carrier alliance. You guys were an integral piece of that with BAE Systems and virtually all of British industry that supplied various blocks and components that were assembled up in Scotland.
What are some of the lessons learned? You said you started your career on Type 23, which arguably is one of the world’s finest frigates, and certainly has evolved into just an extraordinary capability. I think there were some people in the Royal Navy after this refresh would like them to stay around even longer to augment the size of the fleet, but also because of its utility.
What are some of the lessons you’re incorporating into this program to get it right given the schedule is ambitious, the cost targets are ambitious, and the output that the service wants, the Royal Navy wants out of this is ambitious.
Mr. Howie: I think if you look at naval procurement programs, one of the things that naval builders have always struggled with is the maturity of the design before you transition into build. We’re starting with a mature, proven design yet it’s been modified and updated. But that’s relatively peripheral. So if you speak to people who have got scars on their back from shipbuilding programs, I’ve got a few, they’ll say do not cut any steel until you have a mature design. We will not start production without material design. We’ve learned through carrier that simple things like the amount of scaffolding you end up using around a ship build when you’re painting it, when you’re doing hot work, we’ve engineered all of that out of the process. We’re using a new build facility that’s optimized for undercover build. So you take the weather issue out of it.
The carrier has been such a phenomenal project and at its scale industry has to learn some new tricks. All we want to do is build on those tricks and make sure that we don’t lose that learning into the next project. And I’m sure BAE are doing the same thing on Type 26.
Mr. Muradian: And where exactly is it going to be built? Because they said Scotland, but I can’t believe, I don’t know the answer to it, so where are these ships going to be built exactly?
Mr. Howie: We’re planning to build them right in the middle of [inaudible]. [Laughter].
Mr. Muradian: It’s going to be an enormous engineering project.
Mr. Howie: We’re going to do this at the Rosyth Dockyards in Fife which, as I said, is just finishing HMS Prince of Wales. It’s a really flexible facility, and it will be great for this project. But we’re also going to look to engage a [weighted] supply chain around the country. Again, part of the Sir John parker repot was about how you utilize the weight of the supply chain, so that will be part of the process for us.
Mr. Muradian: But is there a concern, I mean something about my friend Sash Tusa of Equity Agency Partners, independent research analysts, one of the concerns he had is you know, if you do this distributed architecture that John Parker was asking for, that at the end of the day you’re actually going to drive costs up. So how do you do this balance of spreading work around while making sure that you get and harness all of those learning lessons in one place, given that it’s eight ships at this point, which is the first block buy. Right? I mean it’s five ships but total of eight is right now in the overall plan. Correct?
Mr. Howie: The way we chose to bid this, we bid it on the basis that 100 percent of the manufacturing and assembly work can be done at Rosyth, and that’s the baseline for a bid, so we know we can deliver this program ourselves. But the build, the lowest [bid] for the ships is really flexible, so we know that. We can go out to industry, we can get quotes. And what we’ll then do is we’ll look at the commercial viability of those quotes and critically we’ll look at the program risk and bring those bids lower to mitigate program risk and they’re consistent with the commercial deal that we signed up with MOD, we will more than happily put that [worker], but all the time knowing that we’ve got a baseline position that’s under our control, that we can deliver if we have to.
Mr. Muradian: Even though the E has been dropped from the program, it’s the Type 31 program at this point, talk to us about the export potential. Right? I mean we’ve seen export success with Type 26 with Canada, Australia and the United Kingdom at this point. If you look at the 31’s characteristics, it’s actually ideally suited for a lot of navies, and I know that from a UK shipbuilding strategy standpoint, the idea is to try to really take on the French and German ship builders and even Italian ship builders at this point, and have sort of a world leading product back in the market akin to the Leanders and the popularity they had in the ‘70s.
Mr. Howie: I think the really unique thing about this platform is you get a near 6,000-ton ship; 250 million pound [UBC], depending on the equipment an export customer would want. I don’t think there’s anybody else in the market who’s offering a ship that has that Royal Navy technical badge of approval. The Royal Navy is still seen as a world leading Navy in technology terms. I think their support for this platform makes it eminently exportable, and I don’t see anyone else out there who’s offering a platform of this size and your affordability. And if you’re a Navy who needs to get a lot of range and a lot of multi-mission flexibility of a ship, I think it’s a really fabulous platform.
Mr. Muradian: And do you have an estimate of how many numbers would be out there on the international market? I mean as you guys project it, five for the UK, but I think that the idea is to get eight into service, if memory serves correctly. But there’s also options from a variety of other people maybe, you know, exploring and getting the ship. Is there a number you guys have out there where there’s 25, 30, 40, 7?
Mr. Howie: To be honest, we’ve tried very hard to stay away from sales projections. The reality is we’re going to build ships for the UK. For the export market more often than not we’ll be selling the design, we’ll be selling systems and engineering capability. A lot of the people who are going to buy a ship this size are going to want to build it in their own shipyards. Not everyone, but most will. I think what the UK wanted in Type 31 was an exportable capability from the UK, and that wasn’t just about the steel box, it was about the combat system, propulsion and all the other systems that kind of add to the UK’s gross domestic product.
Mr. Muradian: And it is five ships, right? So I have that right? It’s five ships.
Mr. Howie: Yes.
Mr. Muradian: Is there an option for more? Or is it base five ships?
Mr. Howie: It’s a batch contract for five ships. There’s no options built into it. But clearly I think the Navy will look at this program and take a view on if we deliver on the expectation, the commitments, I would be really confident that around the world there will be a demand for more of these.
Mr. Muradian: And 250 is with full combat systems on it and everything, delivered out the door. Very ambitious.
Mr. Howie: That’s the drive off the [full court] price. This ship has been built for less than that before. One of the beauties is we have a fully detailed cost model for when these ships were built before. We absolutely understand what it takes to get to that price. And fundamentally our group board wouldn’t have signed up to it if we hadn’t gotten them evidence that this was doable.
Mr. Muradian: And it’s a full-up warship out of the box. It’s not some cut-rate system that’s going to be a box, that’s going to be grown out later. It’s going to be a real warship.
Mr. Howie: If you look at the source, the Iver Huitfeldt regularly takes part in NATO task forces. The ship has been updated and modernized because Iver Huitfeldt’s been around for a while. It’s fully NATO compliant. It will have a full combat system capability. It will have a gun in the front. It’s going to have other weapons and sensors on it. This is a ship that the Royal Navy can take into areas where they need work done without any fear that they’ve got some sort of cheap low-cost frigate.
Mr. Muradian: And it has that same modular [stan flex] design, doesn’t it? So you guys can plug cargo containers in and upgrade and update capability if necessary.
Mr. Howie: It’s one of the big things about this. We’ve built, and as we did with the Queen Elizabeth Class carriers, enough space for the design to adapt through life and as the Royal Navy’s mission changes. Inevitably things evolve over time.
Mr. Muradian: Let me ask you, you appear to be a Scot. [Laughter]. The question I have to ask you is, I think if you look at Scotland and you’re a fan of shipbuilding, you know how important Scottish shipbuilders have been for literally generations, and it’s an integral part of the people and the nation’s heritage, ultimately.
How important is it that British warships be built in Scotland? I mean how important of an emotional attachment is there for Scots and Scotland to be doing this kind of important work for the nation?
Mr. Howie: If I stay away from the politics of it, if I look at the Clyde and the [Forth] have been synonymous with naval shipbuilding for over a century. And although Rosyth is a diversified site that does a lot of commercial work, in our heart we love working for the Royal Navy. So for the workforce, particularly after the great job they’ve done on the carrier project, they are today really, really delighted that they’re going to get a chance to do the next generation of Royal Navy ships. So yes, it’s really important for us. It’s really important for the local community. And it’s really important for the Navy.
Mr. Muradian: John Howie, the Chief Executive of Babcock’s marine business. Congratulations. Fair winds, following seas. And hopefully we get up to sunny Scotland to get a chance to check out the facility once you guys start cutting steel.
Mr. Howie: Come and see the bouncy frigate. [Laughter].