Babcock and UK MoD in dispute over rising costs for Type 31 frigate programme

UK shipbuilder Babcock is engaged in a dispute resolution process (DRP) with the UK Ministry of Defence (MoD) over who should pay for unforeseen cost increases regarding the Type 31 frigate programme.

In a fiscal year (FY) 2023 pre-results statement to investors on 20 April, Babcock said that unforeseen “material macroeconomic changes” had led to an increase in both actual and projected programme costs for the Type 31 programme that, if not recovered, would become loss-making for the shipbuilder. If the two parties were unable to reach an agreement over who should pay the extra costs, the DPR may lead to arbitration, it said.

The UK MoD said it does not comment on contract discussions.

Babcock, leading the ‘Team 31' consortium, was awarded a contract by the MoD in November 2019 to deliver five Type 31 Inspiration-class general-purpose frigates for the Royal Navy (RN) at an average production cost of around GBP250 million (USD311 million) per ship. The class is based on the Arrowhead 140 design – an evolution of the Royal Danish Navy's Iver Huitfeldt-class frigates, which were designed by OMT and adapted for UK requirements by Babcock and BMT. Construction on the first two ships in class is already under way at Babcock's shipyard in Rosyth, Scotland, and all five are expected to be completed by 2028.

Babcock said it had recognised over GBP600 million in revenue to date, but made no profit on the programme.