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Sunday, July 09, 2006

BAE and MoD at war over destroyer costs


BAE Systems and the Ministry of Defence are squaring up over major cost overruns on the Royal Navy's £6bn flagship Type 45 destroyer programme.
BAE has put in a claim to recoup at least £250m in costs. The MoD is robustly contesting the level of the claims.

The overspend will be an embarrassment for BAE, which has a poor record in delivering major defence contracts on time and to budget. BAE is also entangled in a dispute with European aerospace and defence group EADS over the value of its 20 per cent stake in Airbus. Last week investment bank Rothschild valued the holding at £1.9bn, just over half what BAE considered it to be worth. The UK company has called in auditors to check the valuation and to investigate the cause of the downgrade.

BAE said that it was in talks with the MoD over cost over-runs of the Type 45 programme and that provision for negotiations over costs were included in the contract to build the six ships in its Clydeside yards.

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