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Australia's Destroyers: Time for Plan B

By MarEx 2014-12-10 18:11:00

By Andrew Davies and Mark Thomson

This week the Australian government made two announcements about naval shipbuilding. The first was its plan to fix the ailing Air Warfare Destroyer (AWD) program. What emerged wasn’t the approach foreshadowed in the press a few months ago, in which a single commercial entity—BAE was the hot favourite—would take control. 

Putting the project under a single company would’ve resolved the distributed responsibility under the current alliance framework and removed the government from being on both sides of the contract. It certainly looked headed that way, with the government appointing merger and acquisition specialists as advisors on the project. But in the end that wasn’t the approach chosen. Instead, bets have been redoubled, in that the parties that collectively brought the AWD program to its current point will continue in a revamped management model. According to the media, the Finance department (owner of ASC) put the kybosh on bringing in outside management.

There are three components to the AWD remediation plan. First, the Spanish design house Navantia—which inexplicably was left out of the alliance when it was created—will take on an enlarged role. This ought to help streamline the communication between designers, production engineers and the shopfloor. The second component is insertion of more shipbuilding experience into the project by involving BAE, which was formerly only a subcontractor for modules, in project management. Third, existing alliance member Raytheon will take on an expanded role in supply chain and corporate management.

It’d be strictly inaccurate to describe the plan as simply rearranging the deckchairs, but it’s not far from it. If anything, this latest initiative further clouds the already diffuse governance arrangements inherent in the alliance. And there’s only a handful of new people being brought in: 20 from Raytheon, 11 from Navantia and only 8 from BAE.

The government describes this as an ‘interim arrangement’ and says ‘no decisions have yet been made about the long term arrangements for the Air Warfare Destroyer program’. A lot is at stake. Aside from the $8.5 billion project itself, further domestic naval shipbuilding projects depend upon improved performance. Basically, the government has said that if the project can’t get up to speed by the middle of next year, it won’t guarantee further work.

And although we noted earlier that there’s been apparent improvements to shipyard productivity (and to submarine support), yesterday’s announcement slipped the delivery dates for the vessels by another nine months. The first two vessels will now be 30 months late and the third a full three years. So while we’re told that productivity is improving, the AWD schedule is moving in the opposite direction.

The second of yesterday’s announcements was a plan for the creation of a ‘sustainable shipbuilding industry that supports shipbuilding jobs’. The plan has three parts, fix the AWD project, create a shipbuilding industry around the future frigate (contingent on productivity improvements), and create a ‘sovereign submarine industry’.

What’s a sovereign submarine industry? Not unreasonably, one might assume that it has something to do with building submarines in Australia. So the media asked the question—repeatedly—but to no avail. The exchange is available in transcript and on video. The best the fourth estate could get from the Minister was that specific announcements would be made in due course. It was left to the Prime Minister to clarify the matter later in the day (pay wall) in terms of submarine fit-out and maintenance being done in South Australia.

Yesterday’s confusion adds little to what we know about the government’s thinking about the way ahead. Rather, it continues a pattern whereby even the options under consideration are kept secret. While that’s perhaps understandable given the highly charged politics surrounding future naval acquisitions, it’s unlikely to deliver good policy.

There are many difficult policy choices ahead; choices that will shape the navy out to mid-century at a cost of tens of billions of dollars to the taxpayer, and we need to have an informed debate on those issues. At the moment, the policy debate is being overshadowed by parochial politics and handicapped by an acute absence of information. Yesterday’s announced ‘plan that will create a sustainable naval shipbuilding industry’ amounted to a mere 153 words.

Specific matters are easy to identify. Apart from fragmentary and unverified leaks, we don’t know what the White-Winter report recommended for fixing the AWD program, and we don’t know the range of options and acquisition strategies under consideration for either the future submarine or future frigate. Similarly, we don’t know the benchmark against which AWD productivity will be measured in deciding the future of local naval shipbuilding.

There’s not time for a green paper let alone an independent review to sort things out, but there’s no reason why next year couldn’t begin with a full ministerial statement on naval shipbuilding that fills in the many blanks.

Andrew Davies is senior analyst for defence capability and director of research, and Mark Thomson is senior analyst for defence economics at ASPI. Image courtesy of Flickr user Nick Herber.

Source: The Strategist