BAE holed below waterline as US firms get signal for £3bn Royal Navy project

Relations between defence giant and MoD to hit new low after secret talks over aircraft carriers deal. Clayton Hirst reports
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The Independent Online

The Ministry of Defence has held secret talks with some of America's largest defence companies about a role on the troubled £3bn project to build two aircraft carriers for the Royal Navy.

The revelation looks set to plunge relations between the Government and Britain's BAE Systems to new depths after the pair have spent months wrangling over the project.

MoD officials are understood to have sounded out Lockheed Martin, Raytheon, Northrop Grumman and Bechtel in the past few weeks, about joining the carriers project.

BAE Systems was selected as prime contractor to build the two carriers ahead of Thales last year, though BAE was told to work with the French defence giant on the design and construction of the ships. However, sources close to the project revealed that the MoD is now keen to bring in a third company to help manage the project and ensure that the various defence systems on the vessels are properly integrated.

The MoD refused to comment. But Lockheed Martin and Raytheon are thought to be the joint favourites to get the work.

The winning company will have to act on some of the recommendations made by Amec, which was commissioned by the MoD last year to devise a new way of managing the project. The construction and services company, run by BAE non-executive director Sir Peter Mason, had been tipped for the role itself, but the MoD is now thought to be in favour of bringing in a defence specialist.

BAE was said to be livid at Amec's original commission as it believed that the MoD was attempting to undermine its role as prime contractor. If the MoD decides to appoint one of its American rivals then this will further enrage BAE.

The MoD will announce next month how the carriers project will proceed. As well as saying which company will be brought in, the Government will reveal that BAE no longer holds prime contractor status.

Privately, BAE has warned that unless the MoD makes some eleventh-hour changes to the project then it will pull out. This would see Britain's largest arms company confined to the role of contractor beside shipbuilders VT Group and Swan Hunter.

However, selecting a new company to bring on to the project and keeping BAE onside aren't the only problems facing the MoD. The design of the ships is proving to be a headache for the contractors that have already started preliminary work.

The Royal Navy is understood to have changed its specifications several times, and one insider revealed that, under the current proposals, the project would be £1bn over budget. "Things keep going around in circles. The Government must make its mind up what it wants," said the insider.

The first aircraft carrier is due to enter service in 2012. Sources working on the project now estimate that it will be delayed by at least two years. "The longer the dilly-dallying, the more unrealistic the in-service date becomes," said one source.

Another problem is being caused by the programme to develop the Joint Strike Fighter (JSF) headed by Lockheed Martin and BAE. The Government plans to buy 150 of the jets to replace the Sea Harrier. The aircraft is being designed to handle vertical take-off and landing - achieved with a series of powerful fans. But it has emerged that the JSF is 3,300lb overweight.

One solution is to scrap the fans and opt for conventional take-off and landing. But this would have a knock-on effect on the carriers, which would have to increase in size to accommodate a longer runway.