{"id":21098,"date":"2015-06-19T06:00:05","date_gmt":"2015-06-18T20:00:05","guid":{"rendered":"http:\/\/www.aspistrategist.ru\/?p=21098"},"modified":"2015-06-19T10:56:51","modified_gmt":"2015-06-19T00:56:51","slug":"what-on-earth-is-going-on-with-the-air-warfare-destroyer-program","status":"publish","type":"post","link":"https:\/\/www.aspistrategist.ru\/what-on-earth-is-going-on-with-the-air-warfare-destroyer-program\/","title":{"rendered":"What on earth is going on with the Air Warfare Destroyer program?"},"content":{"rendered":"

\"The<\/a><\/p>\n

Three weeks ago, the finance minister announced the third delay, and the fourth get-well initiative, for the beleaguered Air Warfare Destroyer program. In case you\u2019ve lost track, delays and remediation initiatives were announced in 2011<\/a> and 2012<\/a>, and a \u2018reform strategy\u2019 was announced in 2014<\/a>. The vessels will now be delivered between 30 and 33 months late and cost \u2018at least\u2019 $1.2 billion more than planned.<\/p>\n

According to the finance minister, \u2018these ships are costing $3 billion a ship\u2019 which implies a total project cost of $9 billion. Looking at the budget papers released just prior to the announcement, the pre-existing cost of the project was $7.9 billion. Adding $1.2 billion to $7.9 billion yields $9.1 billion\u2014a 15% cost blow out. That\u2019s bad enough, but those aggregate figures conceal the true state of affairs.<\/p>\n

Under the alliance, Defence, Raytheon and ASC share the pain and gain relative to a Target Cost Estimate (TCE) for the alliance part of the project. If the target is met, industry participants receive a pre-determined \u2018fee\u2019 to cover profits and corporate overheads. If the project\u2019s under-budget, participants share the unspent funds up to the amount of twice the fee. If the project\u2019s over-budget, additional direct costs are shared by all three participants up to twice the fee. Thereafter, the Commonwealth pays all additional direct costs.<\/p>\n

Consistent with the alliance contract, the current approved cost of $7.9 billion has four components:<\/p>\n