Our guest blog today, comes from Justin Hedges OBE, Executive Chairman at Prevail Partners . . .
Rishi Sunak is undoubtedly in a tough spot, balancing the competing interests of the Covid fiscal drain and the demands of a comprehensive spending review; however, there is one way the Chancellor could navigate these choppy waters and deliver not just a capital stimulus for domestic industry, but also provide the country with a talismanic presence for a post-Brexit Britain. The Prevail Partners Multi-Role Vessel, or MRV, presents a sea-change in approach.
Different by Design
Prevail’s Multi-Role Vessel has been purposely conceived to provide a capability that breaks with many conventional maritime constraints capable of providing the nation with a talismanic seaborne humanitarian relief platform. The MRV, by virtue of being both adapted from existing fleets and adaptable for multifarious purposes, is by orders of magnitude quicker to deliver and deploy and can be configured for an array of applications.
With a civilian crew, privately financed and wet-leased to government, the MRV breaks through many usual paradigms that confront naval procurement and vessel lifecycle management. First and foremost, the capital cost is borne by private, not public finance. As an adapted vessel, it has the capacity to deliver targeted and much-needed economic stimulus and can be ready to operate in short order. And with a civilian crew, the operational stamina reaches 300 days per year, far higher than an equivalent military crew. As such, MRV allows the Chancellor to deliver high-profile capability, instant economic stimulus and benefit from low operating costs. Moreover, MRV fits squarely within the five HM Treasury business case criteria.
Strategic Context for the MRV
Over the past decade, a palpable and growing chasm has emerged for the UK, as well as many other nations, in the space between the demand for rapid interventions in humanitarian crises around the world and the paucity of military capability that is over-committed in higher priority defence roles. The almost limitless demand for Humanitarian Assistance and Disaster Relief (HADR) interventions following health crises such as the Ebola pandemic, or extreme weather events such as Hurricane Irma which devastated the Caribbean in 2017, show no sign of abating.
The UK’s Integrated Defence and Security Review is likely to conclude that, as a relatively wealthy nation with economic and industrial capacity, the UK is expected to play its part in responding to humanitarian disasters, both altruistically and indeed to reinstate diminished soft power following Brexit. However, the same review will also conclude that the Navy’s fleet of expensive warships are increasingly required to counter military threats from peer enemies including Russia and China and ensuring freedom of navigation in disputed waters.
The continued practice of diverting expensive warships from contested waters and priority defence tasks to natural disasters every year makes little military sense and is also significantly more expensive; MRV provides a strategic answer to this conundrum by meeting the HADR role with a ring-fenced asset for the FCDO.
A UK MRV managed by the FCDO would also represent a highly visible commitment to the Sendai Framework of the UN Office for Disaster Risk Reduction (UNDRR) in a post-Trumpian political landscape where international treaties and commitments will reassert their validity. The Sendai Framework emphasises the time-critical requirement for solutions to disasters, the acknowledgement that global problems belong to everybody and that new paradigms must be embraced to have any meaningful impact on the escalating frequency of risk events. MRV provides substance to the notion of Global Britain in a post-Brexit world.
The Economic Case – UK Shipbuilding
Shipbuilding in the United Kingdom has struggled to find its competitive place in the world economy for decades. Sir John Parker’s National Shipbuilding Strategy, and the appointment of a Shipbuilding Tsar has been intended to provide both direction and opportunity to shipyards and supporting heavy industries; however, above all, these shipyards require projects now, rather than a future commitment which risks further degradation of domestic capacity and capability.
The MRV provides just such an immediate opportunity for UK shipyards, thereby creating prospects for apprentices, expertise and local jobs to contribute to a reinvigorated UK shipbuilding powerhouse. Baked into the MRV proposition is the objective to cut steel within 6 months as part of an 18-month conversion project. But the benefits to UK industry go far beyond the actual period of work and act as an essential bridge between current orders in Babcock’s and BAE’s shipyards and the Navy’s notably delayed Fleet Solid Support Ship programme that may offer prospects for other yards. The Prevail MRV Task Force is shipyard-agnostic, allowing the work to go where it is most needed as an integral element of the post-Covid recovery planning for 2021.
Furthermore, a chartered MRV with its civilian crew brings a far higher productivity quotient allowing the vessel to be deployable on operations for over 300 days a year – normal for a commercial vessel, but unheard of in military applications. This ‘stamina’ would allow a limited quantity of MRVs to contend with more operations in more locations at a lower cost, unshackled from the logistical limitations of a standing crew.
The Commercial and Financial Case
The MRV can be brought into service as a charter which is the most usual practice in the global maritime industry; one party owns and operates the ship, while the customer charters it for a service. Prevail’s consortium of industrial heavyweights who design, build, own and operate over 100 ships worldwide will raise the finance, build, crew and manage the vessel. Chartering de-risks the project from a government perspective, passing the responsibility to deliver a ship capable of operations to the consortium; this practice is what fixes oil tankers, car-carriers, container ships and all other commercial vessels at sea on time and on budget. The FCDO have full strategic oversight and control of the vessel’s operations, direct its activities and deploy suitable personnel to oversee operations by the contractor crew. Vessel chartering is a mature and dependable model that removes the capital burden from the state while also warranting a dependable service provision.
Raising finance for a project of this nature is straightforward and inexpensive with the UK Government as the counterparty to the charter. The charter fee would pay down this structured finance in the same way that a mortgage is paid off. The charter fee should come from the well-funded foreign aid budget which is set at 0.7% of UK GDP. Although the voluntary code for foreign aid budgets set out by the OECD precludes the financing of assets, like the MRV, there is a strong argument that the MRV for HADR purposes should be an exception owing to its mobile role in providing relief from the most significant natural disasters providing aid where it is needed most acutely.
The financial case is also compelling for the Treasury. RUSI’s 2012 report into the ultimate destinations of the defence pound concluded that 36% of money spent in UK industry was returned to the Exchequer through one form of taxation or another. As a result, the MRV’s commissioning as a privately financed initiative will provide a taxation return as well as a vital and timely stimulus economic for UK industry. Moreover, the taxation returns will continue throughout the life of the charter.
Using private finance to capitalise ships for the government is not new. In fact, the Bank of England itself owes its very establishment creation to just such a requirement in the late 17th century. re-purposing a ship to a different use through conversion is commonplace, with the Navy's RFA ARGUS just such an example.
The Management Case
The Prevail MRV Task Force brings together user expertise with world-class ship design, building and operating track record. The whole Prevail MRV concept has been conceived and led by an expert company founded by ex-Royal Marines. It brings together three partners of global stature. Siem Industries own and operate a commercial fleet of over 100 vessels with applications spanning offshore support and construction, rolling cargo, bulk and perishables transportation. With a history dating back to 1856, Houlder Naval Architects are an MoD approved supplier and a member of the Royal Institution of Naval Architects with an enviable track record in new vessel and conversion design.
The MRV is a rapidly-realisable and low risk solution owing to its underlying architecture being based on the conversion of an existing and globally validated RoRo vessel; this stands in contrast to the lengthy ground-up design and build approach which takes a minimum of 4 years longer to realise, frequently results in cost over-runs, and is often plagued with first-of-class vessels delivered with baked-in design flaws.
MRV - Why Now?
The MRV dividend can be summarised as underpinning the UK’s contribution to disaster relief while also providing a valuable domestic economic stimulus at zero cost to the taxpayer. In addition, MRV frees the Royal Navy to use existing resources in the defence of the country while providing the FCDO with freedom of action. As a result, the chancellor can have his jam today and realise the benefits long before the next election.
Learn more about Prevail Partners here.