The True Cost of COTS - Should the UK Buy Warships 'Off the Shelf'?




The Sunday Times is reporting that tough questions are being asked of the MOD and BAE Systems about the continued reliance on ordering bespoke warship and other military designs. The question is whether, instead, the UK should ‘buy off the shelf’ from other countries instead and save money, and ensure delivery to cost and time.

‘Commercial Off The Shelf’ (COTS) is something that gets talked about a lot in defence social media channels. The usual line is ‘why don’t the MOD just buy Design X off the shelf and save a fortune in procurement costs’. The purpose of this article is to look at what COTS is, and some of the challenges it poses, and asks whether on balance it would be good, or bad for the UK to go down this route.

At its simplest the idea of COTS is that the MOD should look to buy a tank, plane or ship from an existing offer. After all if the manufacturer has the design good to go, why not buy it right away? On paper this is an excellent idea, and offers potentially huge savings – no complex design process, no worrying about fit, just buy the design, sign on the dotted line and wait for the product to enter service.

HMS IRON Duke at sea- Image by Ministry of Defence; © Crown copyright
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In reality COTS works very well when you are completely content with the design as standard and require zero changes to it. In other words the design does exactly what you want it to do, or you as a Government feel you can meet your operational requirements through it.

In these circumstances a lot of money could be saved, and potentially more ships/aircraft purchased as a result – if the design is proven, reliable and works, then the risk for delivery is pretty slim.
But, what happens if the design is good, but you as the Government like the idea of putting a weapon system designed by your own national company onboard (say replacing the anti-aircraft missiles)? 

What if you really like the weapon systems, but want a radar put on from your own nation that would help give a better overall capability in the environment you’ll use the ship, and also help drum up orders for that company too? Finally, what happens if you really like the design, but want to put your own nationally designed ‘soft kill’ electronic warfare systems onboard instead, but it turns out these don’t necessarily work the with combat system that controls the ships defensive capabilities?
Suddenly your cheap and cheerful design looks a lot more complicated and is going to require a lot more work. Its also no longer a ‘COTS’ design – its rapidly becoming a bespoke one for your national requirements alone.

In the case of the three examples above (SAMs, Radar and Soft Kill), adopting any of these measures means going back to the design and reworking it from first principles. For example, if you wanted to remove one missile system and put a new one in, you’d need to completely change the internal layout of the ship (missiles require a lot of plumbing, software, technical facilities and so on), and also look at how this works with the power requirements of the ship. You may also need to change the radars, amend the crew complements, work out how to get the different parts of the ship to work to best support the new missiles and so on.

In the case of the radar system, what happens if the radar as designed may be a far better product, and politically and economically a really good fit for the ship, and industry, but when the company does the work, it realises the radar draws too much power without decreasing demand elsewhere in the ship, or fitting new kit to improve this situation – at greater cost? What happens when people realise the radar as designed is too big for the mast that it will be mounted on, necessitating a new mast design that is suddenly too big for the hull without major design changes to ensure stability isn’t affected.

Finally with the combat system, what happens if the new combat system that’s required isn’t compatible with the ships other weapon systems without major integration and trials work? Who pays for this and are you prepared to take the risk of doing this? Are you comfortable letting a foreign company lead on the integration of some of your most sensitive defensive measures, potentially providing them with access to data that could be compromised, stolen or shared with our future enemies? If not, are you content to use the ship design ‘as is’ without fitting UK countermeasures, but in doing so dramatically increase the risk to British sailors lives if the kit the ship is equipped with is not fit for the operational environment its going to be used in?

All of these vignettes highlight that ship design is fundamentally about trade offs, compromises and cost increases. Using a COTs design is fantastic if, as a nation, you have limited military aspirations, don’t see yourself as doing much more than maybe patrolling economic zones, or possibly the odd limited coalition operation. If you cannot envisage fighting a high intensity war, then COTs is probably a really good answer for your requirements. But even then, some modifications will take place and the design will be in some way bespoke.

For the Royal Navy, buying COTS is a bigger challenge. It isn’t impossible, but it does present challenges. The sort of requirements the RN has for its larger vessels are for ships that can operate in the full spectrum of operations from maritime constabulary work (patrols, counter piracy etc), all the way through to working in a coalition to operate in very intense warfighting conditions against ‘peer rivals’ (e.g. countries with as good a capability as we possess) where the ability to share data and fight at the most complex levels is essential for victory.




Buying a COTS platform potentially generates a huge amount of risk to this, because the platform cannot necessarily do all of these tasks. If it is modified to do them, then suddenly the savings you’ve acquired by buying ‘off the shelf’ are wiped out by the complexities of integration trials to make sure all the kit that has been bolted on can actually work together as intended.

This may sound a minor issue but is actually one of the most time consuming parts of the process. Many years ago Humphrey was involved in UOR procurement (e.g. buying kit ‘off the shelf’ in a hurry) to support troops in Afghanistan and Iraq. Getting approval to buy the kit was easy, and the tendering process and getting it on contract was very straightforward – the civil servants and military staff at DE&S during this time deserve enormous praise for the work they did in getting a lot of requests processed in weeks, and at times days, to get a contract placed.

Where things slowed down was actually taking the superb piece of COTS equipment and then working out how to stick it onto a platform like a vehicle or aircraft and make it work without interrupting the other things the platform was doing. For instance, did the equipment work on frequencies that would suddenly jam the ESM measures to stop roadside IEDs? Did it draw too much power, thus making the vehicle unable to work? Did the device work in a manner that actually set off the aircrafts self defence mechanisms?

These sorts of challenging problems needed to be fixed before it could be sent out to theatre – making sure the stuff worked as planned, but also didn’t stop the rest of the equipment working as planned too was key. The integration challenge was one of the biggest parts of the UOR process, yet it was perhaps poorly understood. People thought that if something had been bought then the problem had been dealt with – often this was the start of the process, and it could take a long time to get kit never intended to work with other kit to start playing nicely together.

In the case of buying COTS ships (for example), the challenge is how much would it cost to integrate our user specific requirements and make sure they work on a design that we have no control over? If we’re buying from a foreign partner, our ability to request hull design changes is limited – the design is cheap because its finalised. So, what do we trade off to buy cheap – is it surrendering loss of control of the weapon systems and electronic systems we want to fit in favour of less capable designs we know will work on the final ship design?

Or, do you buy a design ‘off the shelf’ then spend a lot of time and money integrating the UK components of the design onto it to make sure it works? If you do this, you’ve got to work with a foreign designer that may not be willing or able to do these changes, and the price increases significantly with every change.

Buying COTS (or even second hand) often shows limitations in the design that were not anticipated. For example, some years ago there were suggestions that the UK should buy some second hand corvettes intended for Brunei – yet on viewing what, on paper, were superb vessels, it became clear that the accommodation was of a very poor standard and the ship too small and uncomfortable for the work the RN would use the design for.


Warship design is a lot like playing 3D chess – you move one part of the design and suddenly you need to consider multiple other dimensions around the platform that have been impacted by one simple move. Each move increases costs, complexity and risk and suddenly your cheap COTS platform is looking a lot less affordable.

The reason the UK is able to remain a highly successful warship builder is because it has invested heavily in the sovereign warship design capability. This is where the real challenge lies, ensuring the UK can design and build really complicated warships of its own accord, and not be tied into third party challenges. If you want to sacrifice this ability to do this work in order to save a few hundred million off a hull, the long term damage to our national capabilities would be enormous.

There are wider factors too, such as the question around the logistics and support chain for the ships. Buying COTS, say a foreign design means buying into another countries supply chain and defence industry. We’d suddenly find ourselves sacrificing dozens of tiny UK industries which provide subcomponents and minor parts of larger assemblies and who rely heavily on Royal Navy orders for work to survive in order to give money to another country to help their domestic industries survive.

The design we’d purchase would require new supply chains that would benefit the design country, not our own, and its domestic industry. It would also force us to accept significant trade offs on the sovereignty of the platform, as we’d be tied into working with the original equipment manufacturer (OEM) to work out upgrades, changes and through life support.

In other words, the UK would sacrifice an enormous amount of our operational sovereignty in order to request another countries companies work with us to do what we want – with no guarantee of long term success.

This of course assumes that we maintain strong long term relations with these countries too – a change of relations may find it more difficult to get help or support when needed. If we don’t have complete sovereignty over the design, what happens when Country X decides politically to pressure us by threatening to turn off support, unless we agree to less advantageous terms in a trade deal? 

Remember the case of the Russian ‘Mistral’ class helicopter carriers that were built in France for the Russian Navy, but were never delivered and instead sold to Egypt as part of a diplomatic fall out over the invasion of Ukraine.

More widely, what happens if the OEM is bought out by a third party country or company that the UK doesn’t agree with? If the UK has provided sensitive data to these companies around its ship designs, or the capabilities of its weapons, what happens if a Chinese company purchased the OEM? Suddenly British military data and technology would be in the hands of the Chinese Government and there is nothing that the British Government could do to stop this deal from occurring? Buying COTS removes your sovereign ability to stop deals happening that are inherently bad for your national security.



There are other considerations too – buying COTS means adopting entirely new systems that may not be in use with the Royal Navy already, and which need to be introduced to service. In the case of the US Navy, if the UK bought an existing US design, it would need to introduce entirely new kit, designed to be operated and maintained in completely different ways to that currently in use. It would place a very large training burden on the Royal Navy, and potentially require a lot more people in service too.

For example, US warships operate in a very different manner to UK ones – Humphrey has been at sea on the bridge of a US Navy warship and counted nearly 20 people on watch for normal cruising conditions. On an equivalent sized Royal Navy vessel he’s seen just 3. This means buying COTS involves adopting kit, procedures and processes that require more people and a very different way of working – in the medium term this generates a lot more cost as you have different supply chains, training pipelines and procedures and is not the best outcome for the taxpayer.

There is a question too about what sorts of designs the UK could go for if it were to go COTS? US Navy shipbuilding is currently in the middle of a slowmotion train crash, with the now elderly BURKE class (albeit heavily modified) still in unit production, while the LCS class has been at best a poor choice, and at worst an utter disaster for the US Navy.

The ZUMWALT class are not entering series production after the first 3 hulls (and by all accounts when you step behind the impressive external veneer, are also not as technically advanced as UK equivalent capabilities in some areas). The competition to provide a replacement frigate rumbles on without success, but it is telling that the US Navy has spent many years, without success trying to find a replacement frigate.

The wider problem of buying from the US is that while the headline price of the design (assuming one is ever chosen) may be cheap, the buyer is then tied into the Foreign Military Sales process (FMS) that ensures a lifetime of logistical purchases dicated by DOD to best serve the interests of the US defence industry. Much like a drug pusher, the first hit may be free, but the long term costs of buying US via FMS are often prohibitive.

In Europe the German Navy has experienced significant problems introducing their newest ships to service – the BADEN class were returned to the shipbuilders during trials as the problems were so bad. The Spanish yards are churning out excellent US derived F100 designs, but these are not optimised for UK needs.

Meanwhile the French are looking to introduce new ships, but as was found during the Project Horizon experience of the 1990s, they are very keen that any solution is about France, and not about allies. Buying French means subsidising the French defend industry for many years to come.



There is also the wider question of whether these designs actually meet the specific operational requirements of the Royal Navy. They are intended to be very good for their original customer (usually the host nations government), but this doesn’t mean that they are the right answer for anyone else – at least not without significant and expensive design changes.

A final consideration to make is the impact on domestic industry and jobs of buying COTS. One reason the UK invests so heavily in its aerospace industry is because the long term jobs it generates, particularly in the North of England, make a massive impact not just for defence and national security, but also for economic prosperity.

Firms like BAE Systems are supported in their efforts work with the US and others to develop aircraft as partners because while the upfront costs may be high, the long term benefits to workshare of orders is huge – for example the UK gets 15% of the value of each JSF built, which accounts for a very large economic opportunity, and a reason to sustain a highly skilled workforce in the UK.

Buying ‘COTS’ particularly in the aerospace field removes this opportunity and chance to benefit from export orders and instead makes the UK merely a recipient of others work. The long term impact of placing FMS orders or buying from the French is the loss of the skilled workforce and developers needed to create the next generation of aircraft, ships and tanks etc.

Already the UK has arguably lost the ability to design and develop another generation of main battle tanks – buying COTS in place of other UK designed capabilities would potentially destroy the UK defence aerospace and ship design and building industries too.

Defence is more than just being about the business of buying equipment to kill people with. Its about investing in long term designs that can be properly supported by UK industry, working with others where necessary, in order to properly defend the UK – both militarily and economically.

There are plenty of examples of where COTS has, to one form or another, been used with some success. For example the purchase of the C17 back in 1999, or the recent decision to buy the Type 31 frigate using an extant Danish design. But there needs to be a careful balancing act here because each of these decisions does have an impact.


What is probably needed is not cheaper COTS that ends up being as expensive, if not dearer, than designing and developing at home, but instead proper competition. The Type 31 project is a good example of this, relying on equipment that isn’t fitted to existing RN ships and which provides a good alternate platform to look at for future designs. For example using different guns, combat systems and the like to those currently in service means that the RN can look to run proper competitions in due course from different suppliers rather than rely on a monopoly.

This is a very delicate balancing act, and there are examples of where COTS can, and does, work. But it is not the magic answer to every problem and should be used with care – there are times when simple 90% solutions do the job, but there are equally times when what is right for the UK is not to just lazily buy a design, but to invest in the skills of our workforce and level up our economy by investing at home in the whole of the defence supply chain, and not assume that we can somehow do it more easily and cheaply by buying abroad.

The ultimate question that has to be asked is what do we want our national defence policies to look like? If we’re serious about being a global Britain, operating on a global basis as a peer partner of choice and being able to play a leading role in global operations and providing a meaningful contribution, then this requires us to invest heavily in defence and the defence industry.

If we want to play a lower key part, scale our ambitions back and focus on letting others do the heavy lifting, then buying COTS and not tweaking it makes sense – it does save money, but it comes at a potentially huge and terminal cost to our defence industry which in turn would cause huge damage to the wider UK economy for the long term.

The question is what matters more – cheap defence, or long term economic security? Until you know what you want your place in the world to be, that is a hard question to answer.


Comments

  1. And yet Babcock winning the T31 threatens that very monopoly ( in shipbuilding in any case). If the Rosyth investment proceeds as planned, there's a real possibility of competing the next T26 contract too.

    The US are struggling because they have forgotten how to design ships due to a mix of Navsea retirements and s hiatus in orders.

    ReplyDelete
  2. I'm critical on occasion, but honestly did not get that impression with reference to BAE in this instance, Ianeon. All the time it's viable, then national security on both the military and economic front trumps all, of course.
    I recall seeing those corvettes at Barrow and being left with the impression of how sad the situation seemed. Nice to know they ended up with a new home.
    Gavin Gordon

    ReplyDelete
  3. Absolutely spot on in everything you have said here. Everything is very simple but the simple things are always difficult. Wish I had had a similar amount of space as this in the piece I wrote for the Conversation last month on s very similar area.

    ReplyDelete
  4. Is this not a gap in the way we build warships? In most areas there's a move to modularity, standard interfaces and industry wide standards. The physics of the marine environment are universal, similarly there's a need to perform certain core tasks which are standard across western navies, so why do we build bespoke each time, rather than adapt from a NATO template?

    ReplyDelete
  5. Look up the NATO ship code. Various NATO STANAGS. Class Rules. All "standards" of one sort of another.

    What does differ are national requirements, many classified. An ASW ship from a first rate navy is not the same as one from another navy.

    ReplyDelete
    Replies
    1. I am familiar with STANAG, they're good, but they aren't extensive enough. If we think of a ship as made up of many systems, there are dependencies, a set of assumptions or parameters and a set of system behaviors. Standards get us some of the way to making things modular, they tell us about what a system should do, but they don't tell us about the other attributes. We need to go much further to codify how systems should interact and then tell manufacturers they need to document their products according to this methodology.

      Delete
    2. Try looking at the others. Think whether national requirements are worth keeping (they are IMO) and also think how much your manufacturer is going to charge you.

      Delete
  6. I think there’s an issue of definition and scale here. Where buying off the shelf once meant purchase of whole weapons systems, suitably modified at considerable expense to meet our own particular needs, the development of open architectures modifies the argument. Warship CMSs like Tacticos are designed to ease integration of third-party components. Saab claim a similar approach with Grippen. That’s not to say modularity is simple, rather that the increasing role of software in military systems integration is an opportunity to encourage diversification and the use of COTS components.

    ReplyDelete
  7. Well we have the T26 where we have sold that design to Canada and Australia. And as said, we are adapting a Dutch design for the T31.
    We will only need (if any) a few MTBs, so I don't see us designing a new one.

    ReplyDelete
  8. And no doubt you would be crying if we lost BAE to American or French competition. Be grateful we have such a successful sovereign defence company.

    ReplyDelete
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  10. I suspect few here object to the concept of procurement costs including a portion that is subsidising sovereign industrial (and thus operational) capability. However, with BAES and warships in particular, that margin is starting to look so large that it means that the UK can no longer afford to purchase and operate 19 top tier escorts, which partially negates the benefit of having sovereign industrial capability in the first place. Producing a large hull design, that is as modular as possible, from a source that is as sovereign as possible while still being non-BAES, that the RN can refit as easily as possible in the future, ie the Type 31, is looking rather favourable right now.

    ReplyDelete
    Replies
    1. This is right, the reason that the Danish design was cheaper was because they used commercial where possible. As the great Watson-Watt said
      'give me the third best technology. The second best won’t be ready in time. The best will never be ready.'
      This post relates to the previous one, the reason we had a capability holiday was that Nimrod, a sovereign design, failed and we have ended up spending that development money plus the money to buy American to end up with all the problems Sir H describes. We need to think very carefully about what is a must and what is a should.

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