BAE warns Thales: Don't expect much on carrier contract

BAE Systems warned yesterday there was no guarantee that the French company Thales would get a fixed amount of work on the Royal Navy's two new aircraft carriers after the Ministry of Defence announced it was sharing the £10bn contract between the two bidders.

The Defence Procurement Minister, Lord Bach, said that although BAE had been selected for the crucial role of prime contractor, the two ships would be built to a French design and Thales, as a key supplier, would get about a third of the work.

However, BAE's chief operating officer, Chris Geoghan, said there was no question of guaranteed workshares. "None of the proportions and none of the values on the contract have been guaranteed for anybody, including BAE Systems," he added.

Mr Geoghan said he was "proud" that BAE had been selected as the prime contractor after one of the fiercest battles ever witnessed for a defence order and denied it was an insult that the biggest warships ever made in the UK were being built to a French design. The carriers are scheduled to enter service in 2012 and 2015 and will be three times the size of the ships they replace, HMS Ark Royal, HMS Illustrious and HMS Invincible.

The construction order is worth £3bn and will secure 10,000 jobs at BAE's yard on the Clyde, Rosyth in Scotland, Vosper Thornycroft at Portsmouth and Swan Hunter on the Tyne. The through-life support programme will be worth a further £7bn.

Industry experts described the decision to split the order as a "political fudge" that increased the risks of the two carriers being over-budget and late. But Lord Bach rejected this, saying: "We want to get the best possible carriers for the best possible value and on time. This solution gives us the best chance of getting those things. This is in the real spirit of smart acquisition."

Alex Dorrian, chief executive of Thales UK, described the decision as a "huge success" and said it would clearly mean "substantial work" for the company.

In an unprecedented move, the MoD will also take a "modest stake" of up to10 per cent in the programme, meaning it will share in any cost overruns but also benefit if the contract comes in below budget. Sir Robert Walmsley, the chief of defence procurement, said, however, he did not expect this to become a regular feature of procurement contracts.

It is unclear how the work will be shared. Thales designed the ships to be built in five sections at different yards but BAE only planned to build them in three sections. Sir Robert said that although the design came from Thales, BAE, as prime contractor, would be responsible for running the design team.