Introducing the Type 26 Frigate, Britain's new Global Combat Ship. Artist's rendering: BAE Systems.

Britain's new Global Combat Ship is a marvel of engineering. But does it cost too much?

Also known as the "Type 26 Frigate," this project of the British Ministry of Defence and marquee British defense contractor BAE Systems (NASDAQOTH:BAESY) aims to float the Royal Navy into the 21st century. Aboard its 6,900-ton, 492-foot-long hull, this warship boasts: 

  • Stealth characteristics including "an acoustically quiet design" to defeat detection by sonar.
  • A type of "3D" radar known as Advanced Radar Target Indication Situational Awareness and Navigation, or "Artisan."
  • Sea Ceptor anti-aircraft missiles.
  • A medium caliber cannon.
  • "Significant" anti-submarine warfare capabilities.
  • The ability to launch Merlin and Wildcat maritime helicopters, and even choppers as big as a CH-47 Chinook.
  • A "hold" capacious enough to carry and launch rigid inflatable boats for special operations missions.


Inside view of the Type 26 Frigate's assault boat-deploying hold. Artist's rendering: BAE image.

BAE expects to begin delivering GCSes sometime as early as 2020, and these warships will become a mainstay of the Royal Navy well past 2050. Over their lifetime, GCS's modular design will facilitate upgrades to the warship as new technologies are developed and incorporated into it.

All of this tech comes at a cost. Britain's MoD has awarded BAE a $1.3 billion contract to develop the GCS. And that's only to start with. In total, the Royal Navy expects to buy 13 of these boats to replace its current fleet of 13 Type 23 frigates. At estimated production costs of $379 million to $530 million, and factoring in development costs, that makes the GCS a potential $8.2 billion program for BAE.

What it means to investors
This program has the potential to grow even bigger than that. You see, BAE isn't just building the Type 26 Frigate for the Royal Navy. To the contrary, on its website, the company boasts of its "proven track-record in licensing warship designs and combat systems to international customers and partners." Put more plainly, GCS is a warship designed for export to the international arms market.

Potential buyers in Australia, Brazil, Canada, India, Malaysia, New Zealand, and Turkey have all expressed interest in BAE's design. And the broader arms market in Southeast Asia and the Pacific -- estimated at $200 billion in value over the next 20 years -- could drive the GCS program even higher.

To win in this market, though, the Type 26 Frigate must go head to head with competing frigate designs from America's Lockheed Martin (NYSE:LMT), Australia's Austal, and Austal's U.S. partner General Dynamics (NYSE:GD), the three companies currently building America's fleet of frigates (originally known as Littoral Combat Ships).


America's first new frigate, USS Freedom (LCS 1), may look a lot like its first Littoral Combat Ship. Image source: Lockheed Martin.

So, how does GCS measure up to the American boats? Let's set them up side by side:

 

Type 26 Frigate 

Freedom-Class Frigate *

Displacement

6,900 tons

3,200 tons

Length

492 feet

389 feet

Beam

68 feet

57 feet

Top Speed

26+ knots

40+ knots

Range

7,000 nautical miles

4,000 nautical miles

Cost

$379 million to $530 million

$430  million (Lockheed Martin estimates) to $554 million (Congressional and Navy estimates) 

*Austal's and General Dynamics' Independence-class frigate design differs from Lockheed's Freedom class in shape and design, being both longer and wider at its broadest point, but it offers similar capabilities for speed and range.

Both boats boast similar weapons capabilities -- anti-air, anti-ship, and anti-submarine missiles, machine guns, and a cannon. The 127mm caliber main gun on the Type 26 Frigate, however, will be more than twice as powerful as the 57mm peashooter on the Freedom-class frigate. GCS will also outclass the American frigate in size and endurance -- and cost.

Simply put, if BAE can produce the Type 26 Frigate at the cost it expects, GCS buyers may get a lot more for their money than shoppers for Freedom-class frigates. When you get right down to it, therefore, I'm afraid we're going to have to score this round for BAE. It has come up with a winner, and it's going to be very hard indeed for Lockheed Martin to beat the Type 26 Frigate.


USS Independence (LCS 2). General Dynamics' answer to LockMart's frigate design is similar in capability, and gives similarly bad bang for the buck. Image source: General Dynamics.

Fool contributor Rich Smith does not own shares of, nor is he short, any company named above. You can find him on Motley Fool CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 249 out of more than 75,000 rated members.

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