TNAG-0758-FCO40-962-Strength-of-UK-armed-forces-stationed-in-Hong-Kong-1978 — Page 201

CONFIDENTIAL

It may be helpful, in estimating any escalation of these costs, to look at the currently falling level of inflation:

11.

1974/5 to 75/6

22.9%

1975/6 to 76/7

23.4%

1976/7 to 77/8 1977/78 to 78/79

16.2%

10.1%

An average of the last 2 year's rates ie 13% over the programme year by year at least ought therefore to represent a "worst case",

12.

In the course of the craft study one also looked at the relationship between speed and cost to see whether it was possible to derive a mathematical relationship. No smooth progression was evident, largely because much depends on the engine type involved: for a given craft, a speed of 10-25 knots may be practical with one type of engine, but to achieve a slow cruise speed of under 10 knots an additional 'single drive' engine may be required, while a completely different engine may be needed for speeds greater than 25 knots. As a rough guide:

for a vessel of 230 tonnes, a speed of 30 kts and a cost of £3.2m every kt increase or decrease would represent a price variation of £0.12m.

In practice however there would be little price variation for speeds up to 25/27 kts whereas speeds in excess of 30/32 kts could as much as double the craft cost.

Location of Construction

13. It is proposed that, based on an overall buy of 5 vessels, the initial two should be built in the UK. This has advantages in that the MOD Ship Department remains the design authority and oversight is much easier in this country.

A further tender would be invited for the remainder of the vessels which would cover a wider field and include Hong Kong firms.

The Way Ahead

14. Now that the studies called for under the Naval Staff Target (NST) have been completed, the next step is to write a Naval Staff Requirement (NSR). This is a more specific document than the NST and forms the "blue print" to which the craft will be designed and built.

15.

In anticipation of the Hong Kong Government's acceptance of the proposed solution, the Naval Staffs will begin work on a NSR which it is hoped to submit to MOD committees for clearance early next year. It would therefore be greatly appreciated if the Hong Kong Government could agree in principle to the solution by the end of the year.

JME

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CONFIDENTIAL