MASS for Effect: The UK’s Long-Term Ammo Contract
A weapon without ammunition is useless, which is why ammunition is almost always a strategic national capability whose production must remain in-country. On the other hand, government demand has a tendency to swing up and down within narrow limits, and the demands of efficiency usually lead to a single supplier situation – often using equipment that dates back to World War 2. The USA has run into problems because of its reliance on a single small arms ammunition plant, for instance, and has moved to modernize and diversify its base. Its ally Australia is modernizing key ammunition facilities, and trying to modernize its industrial approach as well.
Then there’s Britain, whose long-term defense contracting practices are establishing world-class benchmarks. The UK MoD had been working on an arrangement that secures national supply needs from British sources, and ensures that modernization investments continues to improve industrial efficiency. Hence the new 15-year, GBP 2+ billion “Munitions Acquisition Supply Solution” (MASS) program, inaugurated in August 2008.
BAE and The MASS Program
BAE Systems bought Royal Ordnance in 1987, acquiring most of the factories that made explosives and ammunition for the British armed forces.
BAE Systems LSM now has factories at Glascoed in in Monmouthshire, South Wales; Radway Green in Cheshire, Crewe; and Birtley in County Durham. During the last few years, the company has stepped up production of small arms munitions in particular, with production growth of 300% that has their Radway Green factory producing 1,000,000 rounds of ammunition a day.
MASS is initially for a 15-year period, and will supply about 80% of the “general munitions” consumed by UK Armed Forces for training and front line operations. The set of munitions is very wide, encompassing small arms and medium-caliber ammunition, mortar bombs, tank ammunition, artillery shells, and naval gun shells. How to reconcile the contradictory demands of industrial efficiency, certain prices, and possible future demand swings?
MASS consists of 3 elements: (1) a “capability charge” to cover all fixed costs, insulating them from demand swings; (2) payment for products, priced at direct material and labour costs to compensate for commodity swings like the rapidly rising global price of steel; (3) and a further element to allow for flexibility, such as additional engineering tasks and “surge manufacture” to support operational deployments. It also guarantees the MOD a certain ceiling on ammunition prices for 10 years.
Performance under MASS will be enforced through a system of reward and penalty clauses, and investment commitments to improve industrial efficiency in key locations are part of the joint announcement. Veteran industry observers will not be surprised to find that some of the equipment these factories currently use dates from the Second World War. In response, BAE has committed to over GBP 120 million in new investment to improve its factories, making them safer, more automated, and more energy-efficient. Key investments include:
A GBP 40 million investment in new buildings and equipment at Radway Green, which aims to increase capacity by 50%. New buildings will be in place in early 2012.
A GBP 28 million investment at Birtley will improve its artillery ammunition facilities. New buildings in Washington (UK) will house a new forge, machining center, and heat and surface treatment plants for 155 and 105mm artillery ammunition casings, and 120mm mortar ammunition casings. The modernization is planned to be complete by 2011.
A GBP 34m investment at Glascoed will finance a variety of projects. New x-ray equipment, a medium-caliber assembly area, an insensitive munitions mortar filling plant, an engineering center, and bulk magazines are all on the agenda. Glascoed will be adding a new steam generation and distribution system, which is expected to be twice as efficient as the existing plant.
Efficiencies will be also contractually encouraged, via opportunities to share savings achieved through improved performance, innovation, overseas sales and/or expansion of the contract’s scope.
Contracts and Key Events
Jan 19/11: BAE Systems announces the turnover of its brand new GBP 75 million Washington (UK) munitions facility. Beginning in March 2011, BAE will transfer shell casing production and about 350 workers from the existing Birtley facility to the refurbished Dunlop plant in Washington.
A new high-tech 250 tonne forge has been installed, and much of the new plant and equipment is already up and running at Birtley, in order to ensure a smooth transition. The Washington plant will feature a modern forge run remotely from a control room, which machines and treatments for large-caliber tank (105/120mm), mortar (120mm) and artillery (155mm) ammunition using robotic machining cells and new, environmentally-friendlier paint and treatment processes.
Birtley is 1 of 3 plants being transferred. In 2002, it was losing money and facing closure. Instead, a new facility will be closer to many of the plant’s existing employees, modernize production, and add a number of employee welfare features like a gym, learning centre, etc. within the site’s “welfare block.” BAE attributes the current moves to the MASS contract, which it says made such long term investments possible.
June 6/10: Britain wants a better-performing 5.56mm bullet. They’re contracting with supplier BAE Systems under MASS to deliver 1 million rounds of a new ammunition to the UK Ministry of Defence for QinetiQ’s independent testing by year’s end. The new 5.56mm technology shifts from steel tip/ lead core to a single steel core in a gilding metal envelope.
Current annual production is around 200 million rounds split roughly 70/30 in favor of 5.56mm over 7.62mm. BAE tells Defense News that it will switch all of its 5.56mm production over to the new round, and may adapt it for 7.62mm as well, but they deny that the changes are related to operations in Afghanistan. American troops have complained that the NATO-standard SS109/ M855 5.56mm bullet is only effective at short range, and lacks penetrating power and lethality, in a theater where long range engagements are routine. Defense News.
Sept 30/09: BAE signs a 10-year, GBP 205 million (EUR 225M, $328M) agreement with Rheinmetall Nitrochemie of Germany and Switzerland, to supply supply propellant systems, powder, and combustible charge cases for use under the MASS program. Propellant and combustible charge cases for artillery, mortar and tank ammunition will be delivered to BAE’s Glascoed, South Wales facility, while propellant for small arms ammunition will be delivered to its Radway Green factory in Cheshire.
Rheinmetall Nitrochemie is jointly owned by Rheinmetall AG of Germany and RUAG of Switzerland., with locations in Aschau, Germany and Wimmis, Switzerland. The firm has worked closely with BAE Systems for 8 years now, supplying propellants and combustible cartridge components. The new 10 year supply agreement under MASS extends this relationship into the future, and allows longer-term planning and investments at BAE’s partner firm. BAE Systems release | Rheinmetall Defence release.
Aug 20/08: The MASS partnership agreement is signed by the MOD’s Defence Equipment & Support organisation and BAE Systems Land Systems Munitions.
Some 1,700 jobs will be directly sustained by MASS, including 230 specialist munitions engineer posts. BAE adds that the improved ammunition plants “will result in energy savings of 18,000 tonnes of CO2 emissions a year, equivalent to the carbon footprint of 1,500 UK citizens.”