Europe’s rearmament meets reality: the story of a failed frigate project
The fate of the €10bn F126 is a cautionary tale for an agency that buys everything from flip-flops to fighter jets
Laura Pitel in Berlin
© FT montageGermany’s hulking F126 frigate has always been billed in superlatives.
The country’s largest warship since the second world war.
The biggest ever contract for Damen Naval, the Dutch shipyard that won the tender to build four of them in 2020.
Now, it has become one of Germany’s biggest defence procurement disasters at a time when Berlin is seeking to lead Europe’s rearmament.
After a series of software problems, delays and cost increases, officials are set in the coming weeks to strip Damen of its role as the lead contractor.
They must decide whether to replace it with a German rival or mothball the project altogether and accept €2bn in sunk costs.
The problems have triggered deep tensions between Berlin and Damen, while threatening to leave a gap in Europe’s naval capabilities as Nato steps up its defence of the Baltic.
“For Russia, it’s like their birthday and Christmas coming all at once,” says Johannes Peters, head of the Center for Maritime Strategy and Security at Kiel University.
“We need these ships.
But whatever we opt for will cause a significant delay.”
Defence minister Boris Pistorius places the blame squarely on Damen.
German officials point to an ill-fated decision by the company to adopt new shipbuilding software while taking on a big and ambitious project.
As the company struggled with the new system, according to people familiar with the project, designers found cables and ducts were assigned to the wrong places.
Later, bits of steel came out of shipyards in the wrong shape.
But industry figures familiar with the thinking of the Dutch naval yard say that, while it has made mistakes, it is being scapegoated for the failings of an unworkable German system.
Bureaucrats, they say, had labyrinthine requirements and were painfully slow.
They demanded paper documents and rejected submissions in English.
The project serves as a cautionary tale as officials in Berlin plan an overhaul of its military procurement agency, which must cope with a vastly expanded defence budget of €650bn from 2025 to 2030 — double the previous five years.
It also reveals the thorny reality of pan-European defence co-operation at a time when European Commission president Ursula von der Leyen, who launched the F126 tender as German defence minister 11 years ago, is pushing for more joint procurement.
She is not the only one.
Nato chief Mark Rutte has called for Europe to not just spend more but “spend better” through joint projects.
The chief executive of Italian shipbuilder Fincantieri, Pierroberto Folgiero, told the FT in December that Europe must harmonise design specifications if its shipbuilding industry was to remain competitive.
Yet even between Germany and the Netherlands — which have the most closely integrated militaries in Europe — it has not been possible to make a cross-border frigate plan work.
Meanwhile, the Franco-German fighter jet programme FCAS stands on the brink of collapse.
Interviews with more than a dozen industry executives, engineers, officials and politicians portray the F126 project as victim of a giant “culture clash” between Dutch and German shipbuilding.
One executive describes the debacle as “a great Wagnerian drama”.
“Damen is a good shipyard that has built good ships,” says Bastian Ernst, a member of the Bundestag’s defence committee and a rapporteur for the navy.
“But I think they might have underestimated what it means to build a frigate of such size and complexity with a German client.”
In 2015, von der Leyen shocked Germany’s struggling naval yards by announcing a Europe-wide competition to build a multirole combat ship.
At the time the defence minister was angry at the consortium of German shipbuilders, led by Thyssenkrupp Marine Systems (TKMS), for bungling the construction of another frigate, the F125.
The handover of that vessel to the navy was delayed by many years after it ended up overweight and had a 1.3-degree list to starboard.
The new warships would be 166 metres long, weigh 10,000 tonnes and be designed to stay at sea for long stints, according to the German navy’s specifications.
A key task would be anti-submarine warfare, but they would have a flexible design to enable different types of missions.
In keeping with the exacting standards of German procurement, the requirements contained more than 7,000 specifications.
The tender process alone took five years.
Von der Leyen left the defence ministry for Brussels in July 2019, six months before it concluded.
By that time, two of the four main bidders had dropped out or been eliminated.
The two that were left were Damen, a family-owned Dutch company that traces its history back to 1875, and German Naval Yards, owned by a French-Lebanese businessman.
The Dutch were the clear frontrunners.
Still, that did not damp the shock when Damen was publicly announced as the lead contractor in the €5.3bn deal to build four MKS 180 frigates — later rebranded the F126 — in January 2020.
Politicians from Germany’s northern coast were outraged, as were the region’s shipbuilders and trade unions.
The decision “almost caused a revolution”, says one person involved.
But Damen, which had previously built frigates for the Dutch navy as well as Belgium, Greece and Portugal, had made what seemed to officials like a good offer — with the best price.
It had also made a commitment to ensure most of the construction work would take place in German shipyards, with 80 per cent of the project funds to be spent in the country.
Damen set to work. It formalised an agreement with its main German partner, the Hamburg-based Blohm + Voss, which famously built the Bismarck battleship that sank a British battlecruiser in May 1941.
It also signed deals with German Naval Yards, the runner-up in the contest, and several dozen other smaller German businesses.
But early on, the company made what would turn out to be a fateful decision.
Executives were worried about the lifespan of their Finnish shipbuilding software.
With the F126 due to be in service well into the 2050s, they did not want to use a product that might be discontinued in the years ahead.
Instead, they turned to a design program called 3DEXPERIENCE (3DX), made by the French group Dassault Systèmes.
Though it is widely used by the automotive and aerospace sectors, Damen’s naval engineers struggled to get to grips with the platform.
So did the company’s overloaded servers.
As designers started drawing up the plans for the ship, some of their screens went blank, according to one of the people familiar with Damen’s work.
Then they found that cables, ducts and piping in the models were going awry.
Damen’s German partners also had problems receiving the designs.
When the first pieces of steel started being produced in the shipyards of Germany’s northern coast, some came out the wrong size, according to three people familiar with the project.
Workers were forced to manually correct them.
The challenges were compounded by the need to work with German subcontractors hundreds of kilometres away from Damen’s Vlissingen headquarters, many of whom had resented the Dutch company from the start.
Some at Damen suspected their German partners were not always “doing their best”, according to one Dutch industry executive.
Dassault Systèmes said in a statement that “challenges did arise” during the early stages of the 3DX deployment by Damen, including “some reduced system performance and service disruptions”.
It said the company had “no specific recollection” of issues such as blank screens, problems with cable design or misshapen steel parts.
Damen said it was unable to comment on the technical details of the project but added that software problems had “led to a chain reaction in the construction process”.
As the software challenges wreaked havoc with the build, the F126 programme crept along at just 20 or 30 per cent of its planned speed.
The delivery date for the first frigate was pushed back from 2028 to 2032.
The Dutch industry executive says that the Netherlands’ largest shipbuilder must ask itself whether it should have integrated the new platform more cautiously.
Yet he and others familiar with Damen’s experience say that it is unfair for the company to shoulder all of the blame for the fiasco.
A large part of the problem, they say, is the sprawling Bundeswehr procurement agency headquartered in Koblenz, which has 13,000 staff nationwide.
It purchases every single item needed by German soldiers, from bath towels and flip-flops to tanks and fighter jets.
It is also responsible for managing big custom projects, including the F126 frigates.
The problems, according to two people familiar with Damen’s experiences, began from the first progress meeting.
Officials initially wanted to launch a tender to build a land-based testing centre for the F126, a process expected to take years, before Damen’s partners from the French defence technology group Thales proposed using an existing site of theirs instead.
But the challenges for Damen ran much deeper, according to the people familiar with the shipbuilder’s thinking.
The Dutch company was used to a process of staged approvals, tinkering with the design along the way.
But German officials would only allow each part of the plan to be signed off when it was fully finalised.
For each approval or rejection, officials had an internal 20-day deadline, but they “never” met that, one of the people familiar with the company’s experience says, as decisions were sent up and down a complex internal hierarchy.
One consignment of gearboxes made for the ships had been waiting for about 12 months for sign-off, the person added — and last autumn began to show signs of rust.
German military procurement is also famous for its punctilious specifications.
One engineer involved in the project says that the thousands of pages of instructions included “what door handle to use and what light switch to use and how it has to be positioned”.
“I’m not exaggerating,” he says.
“They are really like that.”
A more sympathetic German official says there is a tendency to “shoot the messenger”.
He says that procurement officials “have a lot of rules — and they have to follow them”.
Further complicating the build process was the fact that procurement officials insisted on paper, rather than digital, documents.
They routinely rejected drawings submitted in English.
“Nobody else works like this — only the Germans do,” says one of the people familiar with the Dutch frustrations.
“And this is why only the Germans have these national catastrophes on their hands.”
Government officials and industry executives alike say that procurement processes have improved since Russia’s 2022 full-scale invasion of Ukraine under a drive for speed led by Pistorius.
The number of big projects approved rose from 46 in 2021 to a record 103 last year.
But in a sign that problems remain, Pistorius last year asked one of his ministers to draw up proposals for an overhaul of the defence procurement agency, with a deadline of next month.
Critics also point to shortcomings in its monitoring of big projects.
At the keel-laying ceremony for the F126 in the Baltic town of Wolgast in June 2024, Pistorius — who had taken office as defence minister 18 months earlier — announced a €3bn agreement to buy two more of the ships on top of the planned four.
A month later, a report on the state of procurement projects published by his own ministry flagged IT problems with the F126, which by then was already €800mn over budget.
Ernst, the rapporteur for the navy, says that procurement officials “simply did not communicate clearly, not even to politicians”.
The Koblenz procurement office told the FT that it could not comment on the individual allegations that were part of an ongoing project, but it said that shipbuilding projects were “highly complex”, often requiring joint solutions in response to challenges that arise.
It said that approval processes were vital to ensure contract compliance and protect the safety of military personnel.
Damen told the FT in a statement that, from the outset until the present day, the company had “been working in a spirit of mutual trust with our German client and the German authorities”.
One thing that German officials do appear to have got right is the contract for the ship.
With payments linked to clearly defined milestones, they were able to withhold funds from Damen as the problems came to light — a decision that pushed the Dutch company to the brink of bankruptcy in 2025.
It has since recovered financially.
But, to compound their woes, top Damen executives have been embroiled in accusations of bribery and violating Russian sanctions unrelated to the F126 project — accusations they deny.
Their trial began in November last year in the Dutch city of Zwolle.
Damen insists it has now overcome the software issues.
Production of the frigates, it says, is “currently in full swing”.
But it is too late for the naval group’s reputation in Germany.
German officials believe it was a mistake to pick the Dutch company in the first place.
“The contract was one or two billion euros too big for them,” says a senior German military official.
Damen declined to comment on that claim but said that it was a “sound” shipbuilder with “a long array of successful naval projects” under its belt.
This year it signed two deals to supply its designs for ships to the US and Australian navies.
Among the naval yard’s rivals in German industry, there is more than a hint of schadenfreude.
“The German specification for a naval vessel is crazy complex.
You don’t find it anywhere else in the world,” says a veteran executive from the shipbuilding industry.
“But if you sign a contract, you should not be astonished that the customer wants to receive what is contractually owed to them . . .
If Damen thought they did not have to fulfil contractual obligations, that’s naive and stupid.”
The Dutch company denied that accusation, saying it met “all requirements and demands with its F126 frigate design” that were set out during the tendering process.
Damen is now reaching the end of six months of talks about surrendering its role as lead contractor on the project.
Being lined up to take over is the Bremen-based shipbuilder Naval Vessels Lürssen and its sister company Blohm + Voss, the Dutch company’s original German partner — both of which were last month bought by the Düsseldorf-based arms giant Rheinmetall.
Rheinmetall chief executive Armin Papperger has said that he is ready and willing to assume full responsibility for the F126s, even as some industry figures question the wisdom of that idea.
The design data has already been successfully transferred to Rheinmetall and its new naval group.
Progress on construction has sped up.
One of the people familiar with the project sees it as no coincidence.
“The main team talking to the customer is now German.
They know what they want, how they work.”
Papperger will almost certainly ask for more money than the €10bn earmarked for the project.
He will also probably seek to absolve Rheinmetall of any liability for past mistakes.
If you look at all these complex programmes, you have so many sunk costs.
It’s not really about the F126 — it happened to many programmes
A provisional handover deal is expected to be finalised in the coming weeks, but it will still require approval by the Bundestag’s powerful budget committee.
In parallel, the German government has been pursuing a stopgap or even an escape route from the F126 should the price and conditions asked for by Rheinmetall be more than Berlin can bear.
But any decision to formally terminate the project would signify that the €2bn already spent on it would be lost for good.
Last month, the government announced plans to buy four off-the-shelf MEKO A-200 frigates, made by the German shipbuilder TKMS, with the first to be delivered in late 2029.
Costing about €1bn each, they are smaller and not tailor-made to German requirements like the planned F126s.
German officials have not ruled out having both.
Ernst estimates that the total cost of what the German defence ministry has called a “two-pronged approach” could reach €16bn to €18bn — more than triple the cost of the project announced back in 2020.
For its part, Damen is privately happy to be washing its hands of its lead role on the F126, according to the people familiar with its thinking.
“It minimises the financial risk for them,” one of them says.
German officials continue to insist that Damen bears the responsibility for the saga.
But deeper questions remain about how such a big project failed, why officials took so long to realise and whether Germany’s procurement system is up to its €650bn challenge.
During von der Leyen’s time, her minister responsible for armaments — a former McKinsey consultant called Katrin Suder — set up a special procurement unit to oversee the F126s and two other flagship projects.
The aim was to bypass the traditional procurement structures and create a leaner decision-making structure.
But, in an experience that serves as a warning for Pistorius, the unit was abolished by von der Leyen’s successor amid strong pushback from the agency’s staff.
Von der Leyen and Suder themselves were mired in controversy over their own procurement practices, with contracts worth tens of millions of euros awarded to external consultants.
The frigate is far from the only project to run aground in Germany.
Pistorius is also facing headaches over a €20bn effort to digitalise communications for the German land forces.
“If you look at all these complex programmes, you have so many sunk costs,” says one former senior government official.
“It’s not really about the F126 — it happened to many programmes.
Why is no one asking why these projects are imploding?”
Additional reporting by Henry Foy in Brussels
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