A recent RAND Europe study concluded that shipbuilders producing warships for the UK Ministry of Defence (MOD) should extend their current outsourcing practices as they build new warships to include using subcontractors to build and install modular crew cabins, accommodation facilities, galleys, and other ship segments. They also should take advantage of outfitting practices used by US, European, and Asian commercial shipbuilders to install a variety of equipment — pipes, electrical gear, and heating and ventilation systems — at the earliest possible ship production phases. The study suggests that by taking advantage of certain commercial production practices, the MOD will be able to produce the new aircraft carriers more effectively and efficiently, preserve the UK’s military ship industrial base, and maintain the production schedules of other warships being built for the Royal Navy.

The MOD is planning to produce two new aircraft carriers to replace the Royal Navy’s three existing Invincible-class carriers. These Future Aircraft Carriers (CVFs) are planned to enter the Royal Navy inventory in 2012 and 2015, respectively, and could be the largest warships ever constructed in the United Kingdom. The carriers’ anticipated size makes it unlikely that any single UK shipyard will be able to produce them, given current production capacities. Instead, the MOD’s plans call for major portions, or super blocks, of the carriers to be constructed in several shipyards, which upon completion would be transported to one shipyard for final assembly. Previous RAND research has noted that the near-simultaneous demands from several MOD programmes might seriously strain the available capacity of the UK shipbuilding industrial base.

RAND analysed production options open to the MOD that will allow it to acquire the CVF in the most efficient and effective manner. The study was focused on the costs and utility of using outsourcing (i.e., subcontracting certain construction work to other firms or hiring temporary workers to augment in-house labour) to expand the workforce needed for CVF production, and of advanced outfitting (i.e., installing equipment foundations, pipes, power distribution systems, heating and ventilation systems, modular cabins, and other components during the early stages of construction) to reduce the total workload demand of the programme. The survey found that shipyards employ two types of outsourcing:

• Total outsourcing, in which a shipbuilder subcontracts a complete functional task, such as electrical, HVAC, or painting, to an outside firm. The shipbuilder has no in-house labour capability to perform the function, although it may provide facilities (e.g., painting sheds) or materials and equipment to subcontractors.
• Peak outsourcing, in which a shipbuilder uses a subcontractor or temporary labour to augment in-house capabilities during peak demand periods.

UK and US shipbuilders rely on subcontractors very little, either for total functional areas or for meeting peak demands. The majority of the EU shipyards that were surveyed use total subcontracting extensively, maintaining in-house capabilities primarily in the structural areas. The survey also suggests that cost savings are not the primary reason shipbuilders use total or peak outsourcing. Although the cost of outsourcing may be slightly less than the cost of maintaining capabilities in-house, shipyards that use outsourcing do so mainly to control their workforce in the face of cyclical demands for certain skills. In addition to better workforce management, shipbuilders that use total outsourcing believe the quality of the end product is better with subcontractors who specialise in certain areas, such as accommodations.