A piece by defence writer John Kerin in The Australian Financial Review’s Thursday 3 December Special Report on Defence throws some interesting light on the current thinking within Defence concerning the acquisition strategy for the future submarine which is to replace the Collins Class from about 2025, with the build to commence in 2016.
The key paragraphs are:
The government weapons purchaser, the Defence Materiel Organisation, has already embarked on a global search for designs, propulsion, weapons and sensor systems, talking to Spanish submarine builder Navantia, German builder HDW, US builder Electric Boat, Swedish builder Kockums and British builder BAE Systems.
Adelaide-based government-owned submarine builder ASC has a head start in terms of the project given its existing expertise. But government sources suggest that how big a slice of the build ASC gets will depend upon whether it can improve the efficiency of its maintenance of the Collins-class submarines.
Only two Collins-class submarines are now available, although the Defence Materiel Organisation, the navy and ASC are now working jointly to try to improve submarine availability.
The South Australian and federal governments have ensured there is a common user facility and vacant land near ASC at Port Adelaide which could be made available to a private sector rival.
The DMO has not yet recommended to the government how the acquisition strategy for the submarines should be handled.
DMO chief executive Stephen Gumley has warned that the project is simply too big for any one prime contractor.
The project may follow the alliance approach used with the $8 billion air warfare destroyer project, in which Raytheon, the Defence Materiel Organisation and ASC have formed a partnership to build three vessels for the navy.
The destroyer project is at this stage running to budget and on schedule.
There is still vigorous debate within the federal government and the defence community about an Australian-built submarine as the better option or whether an off-the-shelf solution may provide better value for money for taxpayers.
Some observations about the above:
(1) The suggestion from “government sources” that how big a slice of the build ASC gets “will depend on whether it can improve the efficiency of its maintenance of the Collins-class submarines” betrays extraordinarily muddled thinking, and suggests ongoing failure in the relationship between the two Government-owned entities the Defence Materiel Organisation (DMO) and ASC Pty Ltd. The Government owns ASC: if it has a sustainable case for dissatisfaction with ASC’s performance on the through-life support of the Collins class submarines, then it should address that question directly and resolve it. The industrial support of our platforms is a fundamental component of our defence capability, and problems in that regard must be resolved promptly, not simply used as an excuse to withhold future work on other projects.
(2) The odium being heaped upon ASC in relation to the through-life support of the Collins class seems to be a good example of the ancient principle of bureaucratic warfare that propinquity is power. The George Pappas-led Defence Budget Audit makes it quite clear that there are three organisations, DMO, Navy and ASC contributing to the current low level of submarine availability and long maintenance turn-around times, and it is no coincidence that the organisation furthest from the Minister’s ear is taking almost all of the public flak.
On page 114 the recently-released Defence Budget Audit says:
There are substantial systemic issues across the support landscape for the Collins Class (including Defence, ASC and its suppliers)), which are interacting to drive increased observed cost and low levels of availability. Frequent design modifications and upgrades (including significant legacy issues arising from the build phase), along with overlapping docking periods, drive higher demands upon finite resources. In turn, this leads to further extension in docking periods and causes further instability in the master maintenance schedule (exacerbated by lack of contingency built into the schedules to absorb emergent work). Schedule instability makes the planning of spares provisioning inaccurate, which further exacerbates productivity issues, extends repair turnaround times and increases docking periods. This cycle is further compounded when low submarine availability compromises training of seamen, which exacerbates crew shortages. These crew shortages can lead to submarines docking early, further disrupting the schedule. It will be impossible to break this cycle without coherent action at all levels – to the commercial arrangements between Defence and the ASC; in the repair facilities themselves; and in the end-to-end enabling system, including Defence.
Later in the Audit (page 118):
Maintenance efficiency is exacerbated by: low spare parts availability, currently at a 66% demand satisfaction rate, mainly due to the lack of a pool of repairable items ‘on the shelf’; very long turnaround times from many industry suppliers; increasing obsolescence; and schedule instability. As a result of Defence budget constraints in fulfilling the current ‘bow wave’ of maintenance, there are continual changes to the master maintenance schedule. This reduces the available forward planning time which, in turn, exacerbates the issues of parts availability and low labour productivity.
So it is quite explicit: budget constraints, maintenance schedule instability and crew shortages all contribute to the current problems and it will take ASC, DMO and Navy working together to fix them. It is a pity that our conventional media do not take the trouble to join up these dots.
(3) The crew shortages reflect well on neither the Navy nor the civilian Defence establishment including a succession of Ministers and Secretaries. It is the responsibility of the Chief of Navy to raise, train and sustain the Navy (in plain English that means that he is required to have trained sailors available to man all platforms) and he is the Capability Manager for all naval platforms. It is the job of the Minister, advised by the Secretary, to ensure that the Chief of Navy gets the resources he needs to perform his statutory functions – or accept political responsibility for deciding that the capability should be unavailable. Ships without crews are not capability, they are very expensive pieces of rusting metal and deteriorating systems.
To his credit, the current CN (Vice Admiral Russ Crane) is attempting to rectify this situation (see Managing the submarine workforce), but it is not going to happen any time soon, and the shortage of crew is itself contributing to the inability to train sufficient crew to put submarine manning on a sustainable basis.
(4) It is extraordinary that the South Australian and Commonwealth Governments have invested taxpayers’ money to ensure that “there is a common user facility and vacant land near ASC at Port Adelaide which could be made available to a private sector rival”. Why would a government want to do that when it already owns the necessary facilities and a company which is the national repository of submarine design and building expertise? Is this to be yet another very Australian story of investing billions of dollars in establishing a national capability and then insouciantly shredding it?
(5) The suggestion attributed to DMO chief Stephen Gumley that the future submarine project “is simply too big for any one prime contractor” is ridiculous. Leaving aside ASC’s claims for the moment, too big for Navantia? Too big for HDW? Electric Boat? Kockum? BAE Systems? Why would it be too big for any of the above? Surely someone is to be in charge of this complex project, and able to be held to account by the Commonwealth as client? Or is this code for DMO setting itself up to be the effective prime for this massive project, or indicative of a desire on the part of DMO, as implied by the AFR piece quoted above, to tilt the playing field in favour of another excursion into alliance contracting.
(6) In relation to alliance contracting, the article notes approvingly that the Air Warfare Destroyer (AWD) project is at this stage running to budget and on schedule. They always do at this stage; the hard part is the systems integration phase that comes at the end, as the Airborne Early Warning and Control project (Wedgetail) has demonstrated so abundantly. Yesterday Defence Materiel Minister Greg Combet put out a media release marking the achievement of another milestone in this project, the completion of testing of the Aegis Combat System equipment destined for HMAS Hobart. This is a step along the road, to be sure, but it doesn’t tell us much about the virtues of alliance contracting: the Aegis system is in service on nearly 100 warships in a number of navies, so we should expect that step to be completed without great problems.
(7) On 28 November 2001 the Australian Government Solicitor published some Commercial Notes that identified some substantial issues to be considered by Government agencies in considering whether to enter into an alliance contract (see Alliance contracting in Defence). In short, the key problems identified include the facts that it is difficult to select alliance partners fairly, there can be no meaningful sense that costs are fixed, and most compellingly in my view, the Commonwealth could be estopped from holding the contractor responsible for decisions in which it (the Commonwealth) participates.
(8) An “off-the-shelf solution”, as proposed by some, is not a solution if it does not do what we need it to do. The future submarine will inevitably be an evolution of the Collins class submarine which we currently have in service. No-one starts designing a submarine with a clean sheet of paper, and neither will we.