Tyneside ship contract shifted to Scotland

Work at Swan Hunter's Tyneside shipbuilding facility has been shifted to a competing yard in Scotland.

The Ministry of Defence (MoD) and Swan Hunter have mutually agreed to close out the contract for the Landing Ship Dock (LSD) which has experienced "considerable cost growth" in a contract that no longer represented value for money.

The ship RFA Lyme Bay, which is a completed hull, will now be transferred to a Govan shipyard for final integration and commissioning.

The initial Swan Hunter contract was for two ships as part of a four ship LSD(A) programme. Royal Fleet Auxilliary (RFA) Largs Bay was accepted from Swan Hunter on 25 April 2006 in good condition. Swan Hunter has completed the majority of the physical construction for RFA Lyme Bay.

BAE Systems delivered RFA Mounts Bay last year and RFA Cardigan Bay remains under construction at Govan and is expected to be completed under the current contract with BAE Systems this autumn.

Lord Drayson, Minister for Defence Procurement, said "This has been a difficult decision for the MoD. Our priority has always been effective delivery of the required military capability, which we have attempted to achieve through successful completion of the contract with Swan Hunter. However, the cost growth and delays on this project have been unacceptable. The Ministry of Defence has reached the conclusion that the contract no longer represents value for money.

"We need to act to bring certainty to the programme and this decision is fully consistent with the principles of the Defence Industrial Strategy".

The MoD will make payment to Swan Hunter in full and final settlement for work done up to the date of closure in accordance with the terms of the settlement.

Swan Hunter Chairman, Jaap Kroese, said: "I am obviously disappointed with the outcome but the Ministry of Defence has taken this decision because it makes financial sense to finish the last two ships in the one shipyard."

Swan Hunter sees its future in new opportunities including ship breaking, for which it has now received a licence from the Environment Agency.

If successful, the transition may enable the company to sustain its current workforce of approximately 160 jobs.

The "significant cost escalation" on this programme has not been disclosed, as the commercial agreements currently remain confidential, but relevant cost data will be released when it is possible to do so, said an MoD spokesperson.


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