In October 1993, the MoD announced its decision to privatize the Royal Dockyards at Devonport and Rosyth.163 The Royal Navy spends approximately £400 million per year on its refit and repair program, of which 42 percent is submarine work and 36 percent is surface ship refitting; the remainder involves Royal Fleet Auxiliaries and other vessels. Since 1987, the dockyards had been managed by Devonport Management Limited and Babcock Rosyth Defence Limited as Government Owned Contractor Operated facilities. Under the GOCO arrangements, the MoD allocated most of its refit and repair workload to the dockyards without competition: 66 percent by volume and 76 percent by value over the three fiscal years from FY94–95 to FY96–97. The remainder of the workload was let competitively between the dockyards and private shipyards. Although the MoD wanted to increase the proportion of competed workload, it was concerned that it would pay for underutilized dockyard capacity through higher overhead rates if the dockyards' capacity were not fully utilized.
One of the purposes of the privatization was therefore to promote competition for surface ship refitting, in addition to generating cost savings on future refitting work, transferring liabilities to the new owners, and maintaining the Royal Navy's capability to refit nuclear submarines. Due to reductions in forces after the end of the Cold War, the MoD decided to concentrate all submarine work at one dockyard. In 1991, it was estimated that this decision, combined with competition for all surface ship work, would save £300 million to £700 million over 10 years.164 Devonport Management and Babcock Rosyth were both asked to submit proposals for future nuclear refitting work in 1991. Although a decision had been made in 1984 to locate Trident submarine work at Rosyth and construction of new facilities had already begun there, the MoD decided to locate all submarine work at Devonport, based on an estimated £64 million savings relative to Rosyth. This decision was finalized in September 1993, immediately before the privatization plan was announced. The MoD determined that the new owner of Devonport should also be the project manager for the necessary major upgrade work on its submarine refitting facilities, based on MoD's experience with cost and schedule overruns on the Trident Works Programme.165____________________