One of the capability announcements ^[2] made along with the launch of the 2013 Defence White Paper was that ‘the Government will also bring forward the replacement of Australia’s Armidale Class Patrol Boats, with both Australia’s patrol boats and the Pacific Patrol Boats being replaced preferably by proven designs’.

The same day saw the launch of the Future Submarine Industry Skills Plan ^[3], which extols the virtues of rolling production programs for reducing overall costs and keeping shipyards working efficiently. There’s no doubt that when the total production run is large enough, rolling production provides economies of scale through the ‘learning effect ^[4]‘ as the workforce becomes more practised. And as I’ve noted in a previous post, a lot of that has to do with retention of experienced and thus more efficient labourers.

Mark Thomson pointed out ^[5] that there’s a lot in the skills plan that can be questioned—not least of which is whether the production rate required for the RAN’s surface combatant fleet is consistent with efficient production. But the business case conditions for rolling production might well exist in the case of the patrol boats. At the moment, West Australian shipbuilder Austal is about halfway through the production of eight Cape class patrol boats ^[6] for the Australian Customs and Border Protection Service. There’s at least a prima facie case for continuing the build run to produce the Navy’s next generation patrol boats. According to DMO’s own assessment in a case study presented in the skills plan, the Cape class boats represent a significant step forward in performance, comfort and design. (See below.)

I’m not in the habit of recommending sole-source contracting—there’s a lot to be said for the power of the market. Last year Mark Thomson, Henry Ergas and I published a paper critical of steering work towards Australian shipbuilders ^[7] with the primary intention of keeping shipyards working rather than as the most cost effective way of acquiring ADF capability. That’s, at best, a proposition that had to be tested against the economics of either buying elsewhere or simply building batches of vessels and letting the shipyards manage their work flows as best they can.

Similarly, in the case of the patrol boats, market testing wouldn’t be unreasonable. But it needs to be done quickly, as this opportunity won’t be around forever. As production of the Cape class gets towards the end of the run, expertise in the early parts of the build process will begin to dwindle, as will supply chains for the components first to be laid down. Stopping and restarting a production process almost invariably leads to higher costs being incurred. The business case for more Cape class boats being produced at a later date after production of the first batch winds down is certain to be less appealing than continuing the current run.

It’s hard to say exactly when the point will be reached where higher costs start to be inevitable but the ship building projects discussed in the submarine skills plan (and in other studies of shipyard efficiency ^[8]) all have a workforce numbers ‘bell curve’ which peaks about halfway through the production timetable. That’s likely to also be the case for the Cape class run, which began in March 2013 and is scheduled to run through to August 2015, in which case approval to continue the production run would be needed by the middle of 2014 for maximum efficiency.

That means that there wouldn’t be time to run a process that’s as detailed as the usual Defence project. The initial Cape class project ^[3] took over four years to go from government approval of funds to begin the selection process (May 2006) to second pass approval (May 2010) and another year until contract signature in late 2011. But it’s also not clear that such a methodical process is required in this case. After all, the Cape class has already been selected in a Commonwealth acquisition process which included Defence’s two-pass process and a subsequent tender process run by Customs.

Having a single class of vessels for Customs and Navy is likely to result in lower through-life costs for the Commonwealth. Finally, it’s hard to see how Navy’s requirements could be too different when Customs and Navy vessels work on the same operational tasks.

With the Defence Capability Plan probably oversubscribed by billions of dollars ^[9], it could be a missed opportunity to let process effectively add to the cost of a well-understood capability. Defence should be doing the business case sums now, and the incoming government should be looking to review the proposition later this year or early next year. There might be more to this decision than meets the eye, but the business case that beats it will have to be a strong one.

Andrew Davies is a senior analyst for defence capability at ASPI and executive editor of The Strategist. Image courtesy of Austal ^[10].

Disclosure: Austal is a corporate sponsor of ASPI

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Footnote (from Future Submarine Industry Skills Plan ^[3], page 49)

Case Study : Austal Cape class—A third generation Design

Drawing from the experience of designing, building and maintaining the Australian Customs and Border Protection Service’s Bay class patrol boats in the late 1990s, Austal created its 56 metre Armidale class patrol boat design for the Australian Navy in the early 2000s, with 14 boats built between 2004 and 2007. In 2011, Austal then developed its third generation of this design, the Cape class, for Customs. This design benefitted from the experience of building the Armidale vessels as well as feedback from navy crews and people who have been maintaining those ships for many years.

Cape class also benefited from experience with design and build of the Littoral Combat Ship ^[11] and Joint High Speed Vessel ^[12] ships. Some of the developments are listed below.

Comparative values between Armidale and Cape class patrol Boats (CCPB)

• CCPB has 20% more range
• CCPB has 30% more internal volume for only two metre increase in length
• CCPB can carry 40% more transportees in better comfort
• CCPB operates with 40% fewer crew
• CCPB crew accommodation is 7% quieter
• CCPB is 5% faster for same displacement
• CCPB garbage store is 500% larger.

From build lessons learned on Armidale, the Cape class design incorporates;

• Modified structural and equipment arrangements to improve installation efficiency by facilitating better access
• Changed build sequence to allow more access during hull assembly
• Manufacturing feedback improved control of weld shrinkage and material distortion
• Increased number of switchboards to simplify electrical system upgrades.

From operational lessons learned, the Cape class design incorporated;

• Increased internal volume of the ship to maximise crew comfort
• New arrangements for transportee accommodation on main deck improve access for persons with reduced mobility
• Changed boarding party room location to enhance operational efficiency and safety through improved access to the ships boats and proximity to the bridge
• Optimised ventilation in machinery and internal spaces by modelling air flow using Computational Fluid Dynamics
• Improved materials and detail design to simplify maintenance.

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