Mar 6, 2012 By Angus Batey defense technology international
Washington, Tyne and Wear, U.K. - A ground-breaking deal between Britain’s Defense Ministry and BAE Systems has provided the financial foundation for the company’s new munitions factory. The £75 million ($120 million) plant is already producing a range of shell casings ahead of the final transfer in June of remaining staff and equipment from the 97-year-old factory at Birtley, 2 mi. away.
The investment follows the signing of the Munitions Acquisition-Supply Solution (MASS) agreement between BAE and the ministry in 2008. The £2 billion, 15-year deal gives the U.K. military a fixed-price, guaranteed supply for around 80% of its standard munitions. The ministry pays a strategic capability charge to BAE of around £100 million per year, which enables the company to invest in plant, staffing and other infrastructure.
Simon Miller, BAE’s transformation manager for the Washington site, who joined the Birtley factory workforce in 1987, says reliability was a major goal. “They didn’t [want] to have stockpiles of munitions just-in-case: [MASS gives them] a more robust supply chain, which can respond quicker to their needs.”
Orders are smoothed out over longer periods, enabling BAE to keep staff and production lines open and qualified, eliminating the delays and expense that would accrue if the same volume of munitions were delivered through different short-term contracts. The ministry has no compulsion to buy from BAE under MASS—all procurements have to be competed and a business case made—but its investment in the infrastructure creates an obvious incentive. The contract builds in penalties should BAE underperform; savings will be shared, and the government will claw back some of its investment in the form of a levy on sales to other customers.
“There are gain-share opportunities within the MASS contract, which mean it’s as much in our interests to promote certain aspects of it and reduce costs as it is for BAE to do the same,” says Col. Chris Anderson, deputy leader of the ministry’s Defense General Munitions team. “It is very much a partnership; certainly the best partnership, I think that I’ve seen in terms of the contracts that I’ve dealt with.”
Three sites are in varying stages of redevelopment to fulfill BAE’s side of the deal, at a total cost to the company of £206 million. Besides moving the Birtley operation to the purpose-built Washington plant —where production of 81-mm and 105-mm shells and Charm 3 training rounds for Challenger tanks is already under way—BAE also is building a facility at their Radway Green site near Crewe, where small arms munitions are produced, as well as upgrading the explosives plant at Glascoed, Wales.
Investment was overdue for Birtley, where some machinery has remained unchanged for decades, and parts of the draw press in the forge date to 1938. The new £13 million forge at Washington, from the German firm Schuler, uses state-of-the-art automation, is more energy-efficient and produces less waste.
“The transformation is not just about the contract, it’s about sustainable growth for the future,” says Miller. “We’ve been to a few plants around the world, and we believe that this is the best munitions manufacturing plant for metal parts we’ve seen. It will provide our troops with low-cost ammunition for years to come. But furthermore, it positions us to grow the business in the global market, and gives us the confidence to invest in new products.”
That investment is already bearing fruit. Testing took place in January at the U.S. Army’s Yuma, Ariz., Proving Ground, on a new 81-mm remote-control guided mortar round, in front of interested parties representing the militaries of six nations, including the U.S. and U.K. The round was accurate between two and five meters (6.5-16 ft.) on fires over a 3.7-km (2.3-mi.) distance.
Ironically, British withdrawal from Afghanistan should not significantly impact the munitions requirement, as rounds used in combat operations account for only around 5% of munitions purchased. But the overall downsizing of the British military under the Strategic Defense and Security Review of 2010, and the changing balance of munitions required, may still mean job losses despite the MASS contract. Nevertheless, the Washington workforce sees the deal in positive terms.
“There’s not many companies in the country that can say they’ve guaranteed 15 years work,” says Jimmy Dobby, a convenor for the GMB trade union. “In a year or 18 months time the work may tail off a bit, and the workforce could take a hit. But [MASS] is going to guarantee 15 years’ work for everyone that’s left.”