{"id":39389,"date":"2018-05-18T06:00:56","date_gmt":"2018-05-17T20:00:56","guid":{"rendered":"https:\/\/www.aspistrategist.ru\/?p=39389"},"modified":"2018-05-17T16:39:19","modified_gmt":"2018-05-17T06:39:19","slug":"shipbuilding-making-it-up-as-we-go-along","status":"publish","type":"post","link":"https:\/\/www.aspistrategist.ru\/shipbuilding-making-it-up-as-we-go-along\/","title":{"rendered":"Shipbuilding\u2014making it up as we go along"},"content":{"rendered":"
<\/figure>\n

In its 50\u2011page review of the implementation of Australia\u2019s naval shipbuilding program, the Australian National Audit Office managed to avoid using the word \u2018shambles\u2019. That\u2019s more than I can manage. We\u2019re only at the starting line of a multi-decade undertaking, but there are already plenty of reasons to worry.<\/p>\n

The auditors are generous in saying that the Defence Department is \u2018on track to deliver the Offshore Patrol Vessel, Future Frigate and Future Submarine programs\u2019, though they note that it\u2019s still early days. But when we look at the first of the programs to kick off\u2014the building of 12\u00a0offshore patrol vessels (OPVs)\u2014it\u2019s hard to see a lot of positives. For a start, we\u2019re saddled with a plan that builds the first two vessels in one state, and then moves to another state, with another builder in another yard, for the remaining\u00a010. That\u2019s not something shipbuilders would normally choose to do.<\/p>\n

The \u2018split build\u2019 approach is a government-mandated decision, and is a legacy of the gap between the construction of three air warfare destroyers and nine future frigates for the navy. The rationale for what\u2019s described as a \u2018medium risk\u2019 approach is keeping part of the workforce in the government-owned shipyards in Adelaide skilled up.<\/p>\n

Meanwhile, Austal, the nation\u2019s most efficient shipbuilder\u2014the only company to export a naval vessel from Australia in the past 20\u00a0years\u2014is now absent from the build altogether after failing to reach an agreement with the prime contractor. That development leaves Austal without any domestic government work. Unless it\u2019s successful in winning some work in the future frigate program, business planning will likely see the future of the company\u2019s Australian assets come under scrutiny, given that it also has shipyards in the\u00a0US and the Philippines. Presumably there were commercial reasons for the company to miss out on the OPVs but, given that the whole program is already driven by maintaining skills in the sector rather than economic rationality, a little extra skewing wouldn\u2019t have been a surprise.<\/p>\n

The auditors also note that the governance arrangements for the expenditure of some $90\u00a0billion aren\u2019t yet clear. That\u2019s alarming, given that recent and imminent decisions will lock in effective monopolies for decades. The worst-case scenario is that we end up with less diversity in our shipbuilding sector, and with huge contracts over which the Commonwealth has little future leverage.<\/p>\n

Insufficient thought has gone into planning such a colossal enterprise and we\u2019re rushing ahead without the right structures in place. The following passage in the audit report is extraordinary:<\/p>\n

Defence has advised the Government of its assessment that the naval construction programs carry high to extreme risk [related] to the delivery of expected capability, program cost, ability to meet program schedules, and management of the industrial base. The Naval Shipbuilding Plan <\/em>did not address the management of these risks in any detail. However, Defence advised the ANAO that these risks will be managed by the individual shipbuilding programs.<\/p><\/blockquote>\n

The notion that enterprise-wide risks can be managed piecemeal within contracted build projects is just plain wrong. The whole rationale for the expansion of the domestic naval shipbuilding sector and continuous building was the holistic management of workflows and capability delivery. It looks a lot like we\u2019re making this up as we go along.<\/p>\n

The audit\u2019s main recommendation concerns establishing the affordability of the shipbuilding enterprise, and identifying capability trade-offs elsewhere in defence investment required to fund shipbuilding. In other words, they think that the funding envelope remains underdeveloped in current plans, and that the cost of building ships here in Australia could crowd out other investment in our defence forces in the decades to come.<\/p>\n

It\u2019s not surprising that costs aren\u2019t firm yet, when the design for the future submarine hasn\u2019t been finalised and the government is yet to choose a designer\/builder for the future frigates. But the auditors are right to worry about the potential impact on the rest of the force. By establishing shipbuilding as a perpetual national enterprise, which necessarily requires continuous funding, we\u2019re essentially making warships a higher priority than other defence capabilities. That\u2019s a big strategic bet in light of developments in anti-ship missiles in recent years.<\/p>\n

It\u2019s not clear that the government is fully aware of the squeeze that its long-term commitment to shipbuilding could place on future force structures. And it\u2019s not clear that it\u2019s getting advice along those lines from the Defence Department. In its response to the audit report, the department said that it:<\/p>\n

takes an enterprise approach for Naval Construction Programs. The shipbuilding provisions identified in the Integrated Investment Program are consolidated for Government to consider the Naval Construction Program affordability as each project is presented to Government.<\/p><\/blockquote>\n

And that:<\/p>\n

Offsets are recommended to Government if there is a shortfall between the funding requirement and existing provision.<\/p><\/blockquote>\n

That\u2019s at best a partial solution to what\u2019s likely to be a perpetual problem. If I read that correctly, each time a shipbuilding project goes to government, Defence provides a running total for the overall bill, and offers up cuts elsewhere in Defence\u2019s investment program. That\u2019s sustainable as long as the opportunity costs aren\u2019t too high, but what happens when shipbuilding starts to really bite into other ADF capability?<\/p>\n

In summary, we\u2019ve embarked on a \u2018high to extreme\u2019 risk enterprise with inadequate governance and a piecemeal approach to the management of risk. It\u2019s intended to deliver a specific capability to the defence forces in perpetuity, crowding out other capabilities as it grows, independent of external strategic or technical developments. This is a shambles.<\/p>\n","protected":false},"excerpt":{"rendered":"

In its 50\u2011page review of the implementation of Australia\u2019s naval shipbuilding program, the Australian National Audit Office managed to avoid using the word \u2018shambles\u2019. That\u2019s more than I can manage. We\u2019re only at the starting …<\/p>\n","protected":false},"author":6,"featured_media":39392,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"footnotes":""},"categories":[1],"tags":[126,26,579],"class_list":["post-39389","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-defence-industry","tag-defence-spending","tag-shipbuilding"],"acf":[],"yoast_head":"\nShipbuilding\u2014making it up as we go along | The Strategist<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.aspistrategist.ru\/shipbuilding-making-it-up-as-we-go-along\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Shipbuilding\u2014making it up as we go along | The Strategist\" \/>\n<meta property=\"og:description\" content=\"In its 50\u2011page review of the implementation of Australia\u2019s naval shipbuilding program, the Australian National Audit Office managed to avoid using the word \u2018shambles\u2019. 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