Defence Minister doesn’t get Defence timescales

In the course of an interview between ABC chief political correspondent Sabra Lane and Defence Minister Stephen Smith on Radio National’s PM program yesterday afternoon, the following exchange took place:

SABRA LANE: The Government says its spending on Defence will be increased to 2 per cent of GDP when the financial circumstances allow, got any rough idea as to when that might be?

STEPHEN SMITH: I'm not putting a timetable on it.

SABRA LANE: But you've got respected analysts like Peter Jennings who say it just shouldn't be left to chance you should be able to give people an idea of when that might be.

STEPHEN SMITH: Well I don't want to shop Peter, but Peter was intricately involved in a former life with the detailed working of the 2009 white paper, he was one of the people who thought that you could map out for Defence a guaranteed share of spending with dedicated growth paths from 2009 through to 2030 - over 21 years. Well life is not like that and the global financial crisis taught everyone that life is not like that.

I have news for the Defence Minister. When you are dealing with defence procurement and capability development, life is exactly like that, or at least it needs to be, because acquisition of a complex defence platform takes twenty years or more. In order to manage such projects and be in a position to enter legally binding contracts between the Commonwealth of Australia and the supplier, the Department of Defence needs to know how much money it is likely to have over the relevant timescale:

-  Planning for a replacement for the Oberon Class submarines began in the late 1970s, the winning design was announce in 1987, and the submarines were built between 1990 and 2003: major capital investment over a quarter of a century.

-  Planning for the replacement for Collins began not later than 2007. These boats will enter service in the 2030s.

-  Australia signed up to the Joint Strike Fighter program in 2002.  The first tranche of 14 aircraft will be delivered no earlier than about 2017-19, and it will be well into the 2020s by the time we have full capability. Meanwhile we will have to make a stop-gap purchase of Super Hornets.

All of these procurement projects require very substantial complementary expenditure on facilities, crews and crew training.

The fact is that if Governments want Defence to manage its procurement, facilities investment, through life support and training programs efficiently and effectively, it needs to give the Department reasonable predictability of funding. This is not a year-by-year business.

See the full interview at Sabra Lane - Stephen Smith interview, 3 May 2013.

A fourth Air Warfare Destroyer?

According to this online piece from News Limited,

Adelaide is in line to secure a fourth $2 billion air warfare destroyer because the Federal Government wants a major shipbuilding project in its defence program.

The project will be included in next year's Defence White Paper.

The Government wants to help bridge the national skills gap and a fourth air warfare destroyer is the likely choice.

Leaving aside any question of whether we needed the first three Air Warfare Destroyers, let alone a fourth, and leaving aside that this represents a Government that is highly unlikely to be elected at the next election thinking aloud about what it will do following the election after that, this seems a curious way to shape the Royal Australian Navy.

Let us leave aside also the fact that if the Government had conducted itself with any meaningful sense of purpose in relation to the future submarine we would have been cutting metal by 2016 in order for the first of the new submarines to go into service as the Collins Class submarines reach the end of their planned service life from 2025.  That didn’t happen; instead, the Government presided over a charade in which the Defence Materiel Organisation ran around the world trying to drum up a design competition when it has been clear from the start (including, apparently, to the European submarine builders) that the only way for Australia to procure a submarine that is fit for purpose is to have the Government’s very own ASC Pty Ltd build a submarine that takes HMAS Collins as its starting point, evolves the design both to build on what we have learned from designing, building and operating the Collins Class and to take account of perceived changes of requirement. We must be the only country in the world in which the Government owns a submarine builder and yet agonises for years over who should build its submarines.

I would be the first to agree that continuity of work for Australian defence industry and the preservation of its very high skills is important, and if any Government were to start to talk seriously about a “continuous build” approach to both its surface ships and its submarines (there is talk of this for the future submarine build) I for one would raise a cheer.

Meanwhile, I would have thought that an adequate maintenance and refit budget to keep Australia’s six submarines and 48 commissioned surface vessels in fighting trim would be more than adequate to maintain all the shipbuilding and maintenance skills we would need to support the RAN – especially as the Government’s antics in relation to the future submarine mean that it has inadvertently committed us to cutting up and refitting some number of Collins Class boats – a major shipbuilding task in itself, the end result of which will be a 1980s submarine for the 2020s-30s.

Whatever the case for the Air Warfare Destroyer, I think the certainty of being able to deploy two vessels in fighting trim, while a third undergoes maintenance or refit, would be preferable to having four in various states of disrepair. Given that the Navy could not muster a single seaworthy amphibious ship to assist in disaster relief during last year’s cyclone season, there is plenty of work to be done. What is required is the money and the political will to do it.

Defence Force Structure - Looking in the wrong direction again!

Guest post by Andrew Farran

The Lowy Institute's blog, The Interpreter, is running a debate on future defence policy with particular attention to force structure. It is a polite wrestle among those representing entrenched military prerogatives and like-minded academics and bureaucrats. Very little lateral thinking is revealed in these courteous exchanges.

The starting point is the view that defence policy is again at a watershed, as in the 1970s. That may have been the case then but the opportunity was not taken to leap a generation and anticipate the 21st century when that was quite possible. There were voices then that could have provided the intellectual basis required to skip decades of wasted expenditure on large capital items that did not even accord with the agreed strategic basis at the time. That basis was that Australia was unlikely to be invaded within the next generation or two as has proven to be the case. The outlook is much the same today but the Lowy discussion regresses to the same old issues as listed by defence planners in the 1970s - how many strike aircraft, how many submarines, how many tanks, etc. to defend a country that would not be attacked - at a steady cost of some 3% of GDP.

Former deputy secretary of defence, Alan Wrigley seeks now to revive the 1970s 'core force’ concept which “would provide an expansion base of military and technical skills that would greatly reduce the time to build a more capable force as any credible threat began to emerge”. The trouble with that was it presupposed that the military skills required necessitated the acquisition of expensive platforms in numbers beyond what the strategic basis could justify. Spread across the services, as it had to do so that each service got its “fair share”, the country acquired a force structure that was over equipped for action that never took place and under equipped for the low-level but lethal campaigns (Iraq and Afghanistan) respective governments got our forces into. The exceptional campaign was East Timor for which the forces lacked critical capability, especially in logistics. 

A later defence deputy secretary, now Lowy and ANU, Hugh White, doubts that the 'core force’ concept remains a sound basis for defence planning today as it was developed in the 1970s in response to big shifts in Australia's strategic environment in the later 1960s and 1970s. As now, there had then been big shifts in Australia's external environment. But defence planning misread the implications of those shifts and the 'core force' concept was largely a rationalisation for getting what the services wanted, not what was needed. There was no "new world" for the forces.

Overlooked in their recall of the 1970s were two significant developments, neither of which fully achieved their potential. First were the reforms introduced by defence secretary Arthur Tange designed to lay down clear lines of authority as between the defence department and the services vis-à-vis the Minister, and minimise turf wars and obstructionism in these areas. The second was the Dibb Report which sought to tailor force structure to a realistic assessment of defence needs in that changing strategic environment. The Report itself was far sighted but its implementation fell foul of the very issues Tange had tried to overcome - and the 'core force’ concept was introduced to placate all parties even if it became an expensive anachronism.  

Lowy readers are being regaled with mind-numbing numbers of required submarines (12), JSF aircraft (50 or 100), legions of tanks - with little or no explanation as to the whys and what-fors.

Hugh White however (to his credit) warned that Australia is in danger of repeating the same mistakes this time around when he wrote: "There is no plan for how the ADF will be used to achieve Australia’s strategic objectives. And that is because no one has decided what our strategic objectives are. In other words we do not know what the ADF is supposed to do. That is why there is no systemic way to decide how many of anything we need. But even worse, it means there is no systemic way to decide what we need at all”. So one can safely say that the services will seek the toys they want and rationalise their wish lists under some fancy new but vacuous strategic concept.

So how in outline might a defence force structure be shaped to reflect the realities of Australia's strategic environment over the coming decades?

Given that invasion is an unlikely contingency, and given the digital revolution in military technologies (especially with guided missiles), we need to refocus and adopt a force structure that takes advantage of area denial strategies because of the relative vulnerability of attack-mode platforms.  

The potentially 'big bad wolf' in the region is of course China. The issue here is how far China might go in enforcing its resources claims in the South China Sea or, if provoked, by further claims from Taiwan for independence. The former would concern most Southeast and East Asian states, the US and Australia; the latter, the US essentially alone (or do we have some undisclosed diplomatic understanding with the US about this?). The question for Australia would be how far to go in supporting those affected parties and with what resources? Any strategic 'commitment' to a US response should surely differentiate between the respective situations and require on our part a clear choice based on the perceived 'national interest' - not just another ‘alliance insurance' premium or token deployment. 

Conflict between the US and China would have negative consequences for both. As 'rival' powers they have an extraordinary degree of inter-dependence which is likely to be on-going. What might disturb that is a political breakdown internally in China when a foreign distraction (i.e. conflict) might suit a struggling regime. The international community should encourage China to stay on track and conform with the norms of global governance. Current trends in multilateral diplomacy and international law would reinforce this endeavour.

Closer to home there is the potentially (actually) unstable arc of Melanesian and Polynesian states around our northern periphery, which may call upon interventionist forces to restore order and maintain a peace (when there is a peace to keep) - or on humanitarian grounds. Specifically there may be problems with PNG but these would more likely be in the nature of police rather than military actions (e.g. Solomon Islands). Our best expenditure has been on SAS-type forces. We may need more of these along with their requisite materiel support (helicopters, amphibious craft, etc.) where versatility and rapid response is imperative.

Surely we will not again indulge in out of area Iraq/Afghan type operations - unless it be a peace-keeping exercise unequivocally sanctioned by the UN or in support of 'civil society'. The capabilities we have developed in East Timor and Afghanistan (the one positive from the latter) could prove useful, militarily and politically, and be very much in our interests to strengthen. Safeguarding our maritime approaches will remain a primary task for which we are presently poorly equipped. At a routine level, early warning surveillance (aerial and other) and high-sea state fast patrol craft are necessities. Then, to monitor, deter and resist less benign intrusions, there is a role for light frigates and submarines (also for intelligence operations). Currently we lack the necessary equipment and skilled manpower for reliable submarine deployments but a new generation to follow the troublesome, near obsolete Collins-class vessels might rectify this deficiency in time (a generation). A role for guided-missile carrying catamarans (as being developed by China) would be interesting!

Air surveillance and deterrence is another formidable issue, because of its expense, our dependence on the overseas supply of aircraft, and the uncertainty of their availability. Will the F35 Joint Strike Fighter ever be available, and at what cost and for what purpose? This question is not being honestly addressed.

There was no reason why similar requirements, and issues, could not have been foreseen back in the 1970s. The broad geo-political trend has long been apparent. All this time Australia's physical security has not been endangered. Yet we have spent billions of dollars on capabilities that either have not been required or would not have been operational had they been. Meanwhile we have lost too many good soldiers, killed or maimed, in conflicts that have lacked credibility and acceptability to the Australian public - or can be justified in terms of protecting the national interest. 

In short we should leave out-of-area conflicts of others to them; be clever and focussed in our diplomacy; clear headed about our national interests; and develop a force structure that is relevant to those interests with more attention than previously to cost efficiencies and effectiveness (administrative and military).

About the Author

Andrew Farran, is a former diplomat (Australian) and academic (Monash University Law School). Diplomatic postings included Pakistan (including two visits to Afghanistan), Indonesia, and the UN General Assembly. He was an adviser to the Australian Government during the GATT/WTO Uruguay Round and a former vice-president of the Australian Institute of International Affairs, a member of the Royal Institute of International Affairs and the International Institute for Strategic Studies, London. He is also a publicist and company director (Australia and UK).

Future submarine: informed debate needed.

An unhelpful and regrettably uninformed contribution to the debate about Australia’s future submarine capability, and indeed about the current Collins Class submarines, was made last week by a senior official who ought to know better, and upon whom we ought to be able to rely for public utterances underpinned by careful research and analysis.

In Australia’s mining boom: what’s the problem?, an address to The Melbourne Institute and The Australian Economic and Social Outlook Conference, 30 June 2011, Productivity Commission Chairman Gary Banks had this to say, in a section of his address which canvassed areas which might contribute to fiscal consolidation:

But no doubt there is more low-hanging fruit waiting to be picked. For example, the case for Australia spending $36 billion or so on another dozen homemade submarines, when imported alternatives could be purchased for a fraction of the cost (and risk) has never been adequately explained publicly — notwithstanding the generally acknowledged failure of the Collins Class precedent. The whole area of defence procurement seems ripe for a thorough independent review.

While I would agree with Mr Banks about the need to review defence procurement, his comments about the availability from an overseas supplier of an acceptable future submarine are remarkably ill-informed.  He appears to believe that a submarine is a commodity, like sand or cement – as long as the article travels under the label “submarine” it will do the job.

In fact a submarine is one of the most complex pieces of military equipment in existence, the design of which involves wicked trade-offs between range, capability and stealth. Because of these trade-offs, submarines are carefully designed for the particular roles they are to perform, with equally careful regard to the geographical environment in which they are to serve.

To put it in a nutshell, European submarines are typically built for short patrols in deep cold water.  Australia needs long range submarines, to operate in warm shallow water.  All other navies which operate long-range submarines operate nuclear fleets, so if we want a long range fleet it is going to have to be purpose designed.

As long ago as 2008 a group of some of the nation’s leading experts on submarine design and operation advised the Government that there is no military off the shelf option which will provide the capabilities which Australia requires, and that this will of necessity be a developmental project. The nearest design which meets Australia’s capability requirements is the Collins Class submarine, and accordingly this represents the lowest risk starting point for the development of a new design for the mid-21st century. 

In addition, there is good reason to believe that the United States will refuse to release certain critical technologies for incorporation into a European designed and/or built submarine, for fear of technology leakage.

This advice of these experts informed the Government’s thinking about the requirements for Australia’s future submarine capability and was reflected in the 2009 Defence White Paper. The case which was made and accepted had nothing to do with “skilled job creation or technological spillovers” as suggested by Mr Banks in his presentation – it was purely and simply a clear case of there being no off the shelf option that goes even close to meeting the need.

As for his claim about “the generally acknowledged failure of the Collins Class precedent”, I know of no-one in the submarine world who thinks that the Collins Class was a failure. The Defence Materiel Organisation has never provided enough budget to maintain them properly, but that is another story.

And just for the record, there was no significant cost over-run with the Collins project, notwithstanding the Howard Government’s beat-up to the contrary, which as far as I can discern was intended to demonstrate that the then Leader of the Opposition, Kym Beazley, had made a foolish decision when, as Defence Minister in the Hawke Government, he had opted to have the submarines built in Australia. Of the $1.7 billion allocated to “fix” the submarines following the 1998 McIntosh-Prescott Report, only $143 was for areas where the submarines failed to meet the requirements of a contract well in excess of $5 billion (in other words, to fix the submarines); $300 million was for changed operational requirements and $727 for technological obsolescence (i.e., technological developments which had taken place during the build).

These remarks by Mr Banks were a reprise of a comment he made in his keynote address to the Annual Forecasting Conference of Australian Business Economists in December 2010 (see here), at which he referred to “submarines costing multiples of equivalent imported models”.  The key word there is “equivalent” – the best advice available to the Government that Mr Banks serves is that there is no equivalent imported model. Who told Mr Banks that there was?

Comments by senior commentators like Mr Banks matter.  His recent remarks were enthusiastically quoted by Australian Financial Review Economics Editor Allan Mitchell in an opinion piece on Wednesday 6 July, and by columnist Brian Toohey in a piece posted on Inside Story on 7 July (see Luxury vessels here). And so the notion that building the submarines is an unnecessary indulgence receives further confirmation in the public mind.

There is a debate to be had about Australia’s future submarine, an important debate – so let’s hope that it can be a better informed debate than it seems to be at the moment.

Note: The information cited above about the budget allocations for completion of the Collins Class project was drawn from Peter Yule and Derek Woolner, The Collins Class Submarine Story: Steel, Spies and Spin, Cambridge University Press, 2008, p. 324.  

What about Defence?

One week into the election campaign it is clear that both pretenders to the highest public office in the land consider that the only national security issue worth discussing is how best to deal with the trickle of lost souls arriving in our north-western waters. There are some other national security issues that I would like to hear from them about in order to be able to exercise an informed choice:

-  What is their position on the 2009 Defence White Paper and the Defence Capability Plan that was derived from it? Do they remain the basis for Australia’s defence policy and our defence force development?

-  In particular, do they agree that the principal task for the ADF is to deter and defeat armed attacks on Australia by conducting independent military operations without relying on the combat or combat support forces of other countries?

-  Do they agree, as the White Paper states, that this means that the ADF has to be able to control our air and sea approaches against credible adversaries in the defence of Australia, to the extent required to safeguard our territory, critical sea lanes, population and infrastructure?

-  Do they agree with the priorities contained in the White Paper, which prescribe that the future force of 2030 will be a more potent force in certain areas, particularly in undersea warfare and anti-submarine warfare (ASW), surface maritime warfare (including air defence at sea), air superiority, strategic strike, special forces, ISR and cyber warfare?

-  Will there be 12 boats in the next generation submarine fleet that will replace the Collins class?

-  Will they be designed and built in Australia?

-  Do they think that the enhancement of the Australian Defence Force that is contemplated in the Defence White Paper can be substantially financed by savings? (I do not – see Defence savings: the impossible dream).

-  The Rudd Government’s planning guidance for Defence is that its budget will be increased in real terms by 3% per annum until 2018, after which it will be increased by 2.2%.  Will this planning guidance remain after the election?

-  What do they have to say about the war in Afghanistan? What is the future role of Australian forces there? Please explain the connection of the war in Afghanistan to Australia’s national security, and set your answer in the context of a grotesquely under-resource war in which most of the ISAF (NATO) participants are determined to avoid conflict, a war which we seem to be in the process of losing.

There are many more questions to which I would like the answers, but the above would do for a start.  There is much more to national security policy than offshore processing of asylum seekers or “stopping the boats”. Please explain.

Renegotiating the Long Term Ammunition Agreement

There is an article, Thales contracts in Combet’s sights, by John Kerin in the 15 March 2010 edition of The Australian Financial Review, which can only be described as an ill-informed beatup.

After informing us that:

Defence Materiel Minister Greg Combet has ordered a review of all “poor value for money” long-term Defence contracts with industry as part of a $20 billion drive to cut wasteful spending.

Kerin goes on to tell us that:

Government sources have told The Australian Financial Review that the Defence Materiel Organisation has had the Thales arrangements in its sights since at least 2006, suggesting the contracts were drawn up in the “bad old days” when the plants were transferred from government to private ownership (ADI) and before regular performance-base contracting.

Having been directly involved as Secretary to the Department of Defence in the closing stages of the privatisation of Australian Defence Industries (ADI) I can attest that the form of the contract had nothing to do with the bad old days before Dr Gumley took up the reins at the Defence Materiel Organisation, and everything to do with the Howard Government’s objectives in privatising ADI, namely, to maximise the proceeds of the sale.

By way of background, Australian Defence Industries was the corporate vehicle into which the Hawke Government had gathered up all of the assorted manufacturing and service-providing activities that had been directly owned by the Department of Defence.  Until its privatisation it was a government corporation with its own CEO and Board, but a wholly owned entity of the Department of Defence. Its assets included the Captain Cook Graving Dock at Garden Island, the contract to build six modern minehunters, the ammunition factory at Benalla and the propellant plant at Mulwala, the so-called Long-Term Ammunition Agreement with Defence, and an assortment of smaller plants and businesses.

In one of the first conversations I had with then Defence Minister Ian McLachlan on taking up duty in February 1998, he told me that the Department of Finance (Office of Asset Sales) was complaining that Defence was dragging the chain on completing the provision of the due diligence data required for the privatisation. He told me that I was to have the process completed in four weeks. I told him that I would look into it and get back to him.

On looking into the matter I quickly ascertained that the jewel in ADI’s crown was the Long Term Ammunition Agreement, under which ADI had a contract to provide Defence with certain ammunition natures for a twenty-year period from the date that the munitions factory at Benalla commenced operations in 1995. It was that agreement that put the value into the factories at Mulwala and Benalla. I read the 250-odd pages of the agreement from cover to cover, and came upon the clause that said in effect that Defence could give its wholly owned entity one-month’s notice to terminate the Long Term Ammunition Agreement, would meet all the costs of winding up the relevant operations of ADI, but would not be liable for any other costs.

I went back to Mr McLachlan and said that without a renegotiation of the LTAA, to give the buyer contractual certainty, the Commonwealth would have virtually nothing to sell. Who would pay for a contract that had 17 years to run, but could be wound up without compensation at one month’s notice? He agreed, I said we would complete the matter without delay, and would have all outstanding matters dealt with in weeks, not months, and we did.

The point of this tale is to make the point that the Howard Government’s privatisation strategy for ADI was shaped by its desire to get as much money as it could for the business, as quickly as possible.  It was sold by public tender, and the Transfield-Thomson CSF Joint Venture (the original purchaser) paid a price that reflected what they perceived the LTAA was worth to them. For its part, the Commonwealth capitalised that expected profit stream. If the Commonwealth had placed more stringent performance conditions or less certainty on the contract, that would have been reflected in a reduced price. The Joint Venture got what it paid for, and the Commonwealth was paid the best price it could obtain for what it chose to sell.

Over ten years on, it is entirely appropriate that Defence consider what arrangements it wants to make for the acquisition of the hundreds of ammunition types that it purchases. Everyone has always known that the LTAA was a fixed term arrangement, and that there were no understandings, explicit or implicit, about what would happen after it expired. This is the ordinary course of business and is not a reflection on either Defence or Thales, the current owner of the ammunition facilities and the LTAA.

It is interesting that the only other one of the “older poor value long term contracts” that rates a specific mention relates to the Collins-class submarines:

Another long-term contract under renegotiation is Adelaide-based submarine builder ASC’s $3 billion, 15-year maintenance contract on the troubled Collins-class submarines.

There seems to be a bit of a pattern emerging from this and other reports by Kerin. It seems that nothing that happened in the defence acquisition world prior to the advent of Dr Gumley was quite up to scratch, and similarly, ASC’s performance since he ceased to be the CEO there has been distinctly below par. I wonder where Kerin gets those impressions from?

Defence Procurement: the ‘Jesus sights’

In the 23 January edition of The Australian, Brendan Nicholson reported that the Minister for Defence, Senator Faulkner, had ordered the removal of biblical messages etched into US-manufactured gunsights in use by Australian special forces in Afghanistan (see article here).  The ADF has several hundred of the gunsights, which are also in use by US, British and New Zealand forces.

The previous day, Nicholson had broken the story that the American manufacturer Trijicon had undertaken to stop adding the references to gunsights for Australian use (see here).

According to Nicholson’s report, the gunsights

… triggered an international uproar when US soldiers in Afghanistan discovered that letters and figures they thought were simply stock or model numbers referred to passages from the Bible.

One example was JN8:12 which turned out to be a reference to chapter eight, verse 12 in the Book of John: “When Jesus spoke again to the people he said ‘I am the light of the world’.”

According to the family-owned, Michigan-based company that manufactures the sights:

As part of our faith and our belief in service to our country, Trijicon has put scripture references on our products for more than two decades.

As long as we have men and women in danger, we will continue to do everything we can to provide them with both state-of-the-art technology and the never-ending support and prayers of a grateful nation.

Nicholson reports that the ADF had stated on 21 January that it had been unaware of the meaning of the inscription when the sights were issued to the troops.

Some observations, comments and questions:

(1)  From the moment it was decided to invade Afghanistan in 2001, in response to a jihadist attack on the World Trade Centre, there was a danger that the so-called War on Terror could be represented as a war against Islam. Representing it in this way is of course of enormous benefit to al-Qaeda and jihadists generally. It is unfortunate, therefore, that the Howard Government did not take adequate steps to ensure that there was no flavour of this in relation to any aspect of Australia’s participation in the invasion of Afghanistan and Iraq.

(2)  We are invited to believe that in as faith-based a society as the United States, even after the practice had been going on for more than two decades, no-one had any idea what the inscriptions meant until US troops in Afghanistan “discovered” what they meant. I don’t believe a word of it. Are we really expected to believe that after more than twenty years no-one in the US Army had any idea? Are we really expected to believe that the family that manufactures the sights has been protecting US troops with the power of prayer all this time, but never thought to mention it to anyone? The Christian Science Monitor reported here on 22 January that the Biblical references have been an open secret among US soldiers, some of whom refer to their weapon as a ‘Jesus gun’.

(3)  Given that the matter was an ‘open secret’ (surely a euphemism for generally known) amongst US soldiers, it is reasonable to suppose that it was also generally known within the Australian Army, which is in constant contact with the US Army at every level (including joint exercises and joint operations).

(4) This leads me to believe that we have something of a procurement problem. Did the Defence Materiel Organisation not know about the inscriptions, or did it not realise their significance, or didn’t it care?

(5)  By what means and when did this information first become known to Senator Faulkner?

(6)  Why don’t we manufacture our own high-tech gunsights?

ASC Board: changes ill-advised

On 15 December 2009 the Minister for Finance announced the retirement (completion of term) of two directors of ASC, and the appointment of four new directors.

The retiring directors are:

(1) Dr Bill Schofield AM, a lifetime defence scientist, having served in various positions in the Defence Science and Technology Organisation (DSTO) from 1965 to 1991. From 1995 to 2001 he was Director of the Aeronautical and Maritime Research Laboratory at Fisherman’s Bend. In my time as Secretary, Department of Defence, he played a key role in the resolution of outstanding technical issues with the Collins Class submarine. As a member of the Kinnaird Review of defence acquisition which reported in 2003, he was instrumental in the recognition by government of the role which DSTO can play in minimising and managing technical risk in major defence projects. At the time of his retirement from the ASC board he was chairman of its risk committee, a function in which domain knowledge would appear to be critical.

(2) Mr Michael Terlet AM, who spent twenty years in defence industry before retiring in 1992 and becoming a professional company director. He was Chief Executive Officer and Deputy Chairman of AWA Defence Industries, prior to which he was Managing Director of Fairey Australasia Pty Ltd at the time of its merger with AWA.

The new directors are Ms Sally Pitkin, Mr John (Jack) O’Connell AO, Mr Bruce Carter and Mr David Miles AM. So we have replaced two engineers with four professional company directors, two of whom are lawyers and two of whom have an accounting background. None, as far as I can see, have any domain knowledge concerning the building and sustainment of submarines.  In his media release announcing their appointment (see here), Finance Minister Lindsay Tanner said:

... the appointees bring a range of skills and experience in legal and financial matters to the board, and will enhance the board’s high level of expertise and standards of governance.

The new appointees on the ASC board join its Chairman, Vice Admiral Chris Ritchie AO RANR (who has a background  in surface ships), Director Mr Geoff Phillips (a company director with a background in finance and management), and newly appointed Chief Executive Officer and Managing Director, Mr Stephen Ludlam (formerly President – Submarines for Rolls Royce (UK)), bringing the total Board membership from five to seven.

This means that the only person on the board as reconstituted who has a deep background in submarines is the Chief Executive Officer.

Several questions arise. None of what follows is to be taken as questioning the suitability of any single member to serve on the ASC board – each person individually clearly has the background and qualifications to make a contribution to the governance of ASC. My questions relate to balance of skills, where the Government thinks it is heading, and what is really going on here.

In no particular order my questions are:

(1)  Why was it considered necessary to increase the size of the ASC board at this time?

(2)  Given that the board was being increased in size, why was it decided to narrow the range of skills available? Why not, for example, retain Dr Schofield and Mr Terlet, and simply appoint someone with a legal and someone with an accounting background?

(3)  What does this change signify regarding the Government’s approach to ASC?  Does it see this wholly owned entity as a fundamental element of Australia’s defence capability, or is it just another company which the government still hopes to sell one day? Is the Government more interested in the sale price it will one day receive than it is in the defence value of the last remaining Australian-owned prime defence contractor? The Government’s ongoing refusal to commit to ASC as the designer and builder of the future submarine, the only sensible game in town, suggests that the defence value of ASC is seen to be of small moment.

(4)  The key risks faced by ASC are technical risks, not the normal range of commercial risks. Now that the only person on the Board with domain knowledge of submarines is the CEO, who will ask management the hard questions? Who will evaluate the answers it receives? How will the board know what risks it is taking on? Who will chair the risk committee?

Given that the Government shows no sign of moving with the alacrity required to bring the future submarine into service by 2025, this is a more important question than it might appear. My guess is that we will be lucky to introduce the new submarines into service before 2030, by which time we will be managing Collins class submarines as aging platforms, managing a whole new suite of emerging risks.

(5)  Where did the idea of letting Dr Schofield and Mr Terlet go actually come from – who recommended this to the Minister for Finance and why?

(6)  Is this reconstitution of the ASC Board just another step in the Defence Materiel Organisation’s ongoing warfare against ASC?

(7)  If so, why is the Government so cheerfully tolerant of, let alone complicit in, bureaucratic warfare between two wholly taxpayer-owned entities? Is it in on the game, or simply asleep at this particular wheel? Read Combet captured? before you answer that.

(9)  Why is such a key defence asset as ASC run as an asset of the Department of Finance rather than an asset of the Department of Defence?

(10) Why is there no-one in the mainstream media with the wit to ask these questions?

Future submarine: long lead-time items

In Future submarine: no time to waste I suggested that the project to design and build a submarine to replace the Collins class from 2025 is starting to bump into some very stringent timelines.

Fifteen years might seem like a leisurely timetable for building a 4,500 tonne boat, but consider the following major contributors to the leadtime:

(1) Time to design and build

- The Collins class took 6 million man hours to design and 2 million man hours to build.

- The new United States Virginia class attack submarines took 18 million man hours to design and 10 million man hours to build.

- From cutting steel to delivery of the first of class was 6 years in both cases.

- There is a limit to the number of people than can be engaged productively at the one time on design or build, even if there were no limit to the number of people with the appropriate skills. We cannot halve the design or the build time by putting twice as many people to work.

(2) Research and development

Aside from the R&D task that will flow from the evolution of a whole range of technologies relevant to submarine and anti-submarine warfare, there is a huge R&D agenda directed to more prosaic matters which will drive the design and performance of the new submarines.

There will be a need to find a large production diesel and generator which can be utilised with minimum modification, suitable batteries, and a snort induction system from head valve to exhaust.  These will all be new, because no-one else in the diesel electric submarine world has our requirement for power, and they are all critical to the submarine’s noise signature.

These basic technical issues will take time to resolve, and until we resolve them we cannot design the submarine.  The laws of physics as they apply to submarines impose very rigorous constraints. The length to beam ratio must be in the range 1:7-10. Anything which adds weight must be offset either by removing an equivalent weight or by increasing the internal volume, which in turn requires an increase in the diameter of the pressure hull to maintain the required length:beam ratio.

Until we know the size, weight and performance of the main elements of the onboard equipment, we cannot begin to design the submarine.

This work must commence as a matter of urgency. It must be undertaken by the Defence Science and Technology Organisation (DSTO) and it must be funded in 2010-11. In order to set the scene, we must have the decisions outlined in Future submarine: no time to waste.

(3) Qualified submariners

While the size of the submarine workforce might have little direct impact on the time required to deliver the first of class, the size and skills of the submarine workforce are critical to the future submarines becoming a military capability – if we cannot crew the submarine fleet with submariners who have the skills and training to take it into harm’s way, why have it?

The history of the crewing of the Collins Class is not a good story. We have never been willing or able to crew the fleet, and the lack of available sea time has had a critical impact on our capacity to train additional crew – we are in a downward spiral in which we cannot put more than two out of six submarines to sea because of lack of crew, and we have trouble expanding the submarine workforce because we cannot put enough submarines to sea.

In Managing the submarine workforce, I described the measures being taken to address this problem and provided a link to the Submarine Workforce Sustainability Review which was undertaken by Rear Admiral Rowan Moffitt, now Project Director for SEA 1000, the future submarine project.

The Chief of Navy is addressing the problem, but I am not convinced we are doing enough to put ourselves in a position to crew twelve new submarines as they are delivered from 2025. On current plans, five years from now crew limitations mean we will still be operating only three out of six submarines, of which we could expect to put a maximum of two to sea at any one time. We will have to learn to do better at matching manpower to platforms than that, and we really need to accelerate the program to redress the crewing problem.

Future submarine: no time to waste

The Government has some very important decisions to make regarding the submarines that are to replace the Collins Class submarines currently in service, and it is starting to bump up against some stringent timelines.

The current stated objective is to begin introducing the new submarines into service in 2025, a mere 15 years away. This means that we will need to see contractor sea trials commence in about 2022.

The experience with the Collins Class submarine was that the time from concept development to the delivery of the first of class was 13 years. The time from the cutting of the first steel to delivery of the first of class was six years.

These are respectable timelines. For its latest Virginia Class attack submarines the United States took 15 years from concept development to delivery of the first of class, and six years from the cutting of the first steel.

This means that if we wish to allow ourselves, for the development of a much larger and more capable boat, at least as long as we had for Collins, we will need to be at work on concept development by 2012, and start cutting steel by 2016. These are the latest acceptable dates – even if we meet them, we will be depending upon just about everything going according to plan if we want to avoid the situation we faced in 1998, when acceptance of the Collins Class into naval service was delayed and the Oberon Class submarines were reaching the end of their permissible dive life.

Much has to happen before 2012. We have to settle our acquisition strategy, and then select the team that is to design, build and maintain our next generation submarine.

This means that some threshold decisions need to be made, and fast. Much time has been wasted in the futile pursuit of an off-the-shelf option and strange ideas like running a design competition between European designers who do not build boats anything like the ones we need, and who would not be permitted to build boats incorporating United States technology that we know we will need.

My suggestions for some decisions that the Government should take now in order to cut to the chase:

(1)  Recognise that there is no European military off-the-shelf (MOTS) option that goes anywhere near complying with the requirements specified in the Defence White Paper.

Apart from the fact that there is nothing close to what we need, the laws of physics as they relate to submarine design mean that “near enough” is not good enough. Once it is necessary to adapt a submarine design the requirements for the shape of the pressure hull and the distribution of payload dictate that the “modification” task is essentially a new design.

(2) Accordingly, recognise from the outset that this is going to be a developmental project.

(3)  Abandon the notion of a design competition. 

A design competition between two European designers makes no sense. Why would we want to select a design house on the basis of a choice between two conceptual submarines, neither of which will meet our needs? And why would any European design house commit serious resources to developing the best design when it must know that it is simply a stalking horse for what will ultimately be an Australian project?

We have in this country the resources to design a submarine, but these are scarce resources and we cannot afford to divide them between two competing groups. Nor do we have the resources in the Defence Science and Technology Organisation (DSTO) to provide scientific and technical support to two competing groups.

Design represents less than 5% of total cost, so this is the wrong phase at which to compete the project. Spreading our scarce resources between two teams that are not permitted to communicate with each other runs the risk that we will end up with a choice between two inferior designs. There is plenty of room to compete aspects of the project between subcontractors and equipment suppliers.

(4)  Agree that the future submarine can only be designed and built in an Australian environment.

This will give us optimum access to European and United States technology, which only we will be permitted by either to integrate.

The Collins Class is the appropriate starting point for the future submarine, and ASC Pty Ltd has been the design authority since 2001. ASC must be selected to design and build the future submarine.

An Australian design and build means that we must bear all of the schedule, cost and performance risk, and will become the parent navy. We must recognise this from the outset, and plan and budget accordingly.

(5)  Benefit from US experience by emulating the Integrated Product Process Development (IPPD) model that was used to build the Virginia Class.

This means including designer, builder, major equipment and sub-systems suppliers, combat system integrator, through-life support agencies and key Defence stakeholders into the process from the outset.

The virtue of this system is that it avoids stop-start decision making, and enables resolution of issues where ease of building conflicts with ease of maintenance.

(6)  Select from the outset the combat system pedigree and integrator.

Integration of the combat system was one of the most problematic aspects of the Collins project. The lowest risk approach for the future submarine will almost inevitably be to derive a system from a proven US Navy system.

The wheel-spinning that has taken place over the last twelve to eighteen months means that the project is already hard up against its timelines.

It is now time to develop an appropriate sense of urgency, make the necessary threshold decisions, ensure that adequate funding for commencement of the program is in the budget for 2010-11, and get on with it.