An Industry Perspective on Australia's Naval Shipbuilding Debate
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TAP TO VIEW THE NEW AWD ALLIANCE VIDEO TAP TO READ ABOUT navantia’s PROJECTS IN AUSTRALIA The Future of Naval Shipbuilding An industry perspective on Australia’s naval shipbuilding debate 1 To be clear, defence industry should not succumb to the rent seeking approaches apparent in some other sectors, nor should it expect any free ride. After all, defence industry exists to support the nation’s defence requirements and not the other way around. However, the characteristics of a highly capable indigenous defence industry, and the need to sustain it in the national interest, should be a consideration in any strategic decision about defence posture, capability and expenditure. Australia currently has extant capabilities for the construction of major surface combatants such as the Air Warfare Destroyer (AWD) and Future Frigate as well as for submarine sustainment, including capability upgrades, and the sustainment of other classes of vessel. I should also include in that list extant capabilities for the construction of Patrol Boats. View the new AWD Alliance video But it is necessary to distinguish those projects which genuinely add to the industrial self-reliance In the current era, the indigenous defence necessary for our national security from those industry is a key component of national defence that don’t. Australia needs to have sovereign capability. The defence industry has moved on capabilities in submarines and major surface from simply being an arms length provider of combatants. This is particularly the case in commodity goods and services. Rather, it exists integrating and sustaining combat systems which Raytheon Australia as one of the fundamental elements of the are incredibly valuable to the nation. Managing Director, Michael Ward, national security infrastructure. By contrast, I believe that other classes of vessel shares his views on the future The type of industry capabilities needed can and should be built where it makes the most of naval ship building. to deliver against modern warfighting economic sense to do so because a sovereignty requirements take considerable time and argument can less likely attach to such industrial investment to establish and develop, just as capabilities. they deteriorate quickly and require a consistent throughput of work to maintain. Having come to the view that we should build surface combatants and submarines in Australia, What this means is that a strategic view and I believe we should capitalise on the investment the commitment is required of certain defence nation has already made in Australian shipbuilding industry capabilities and that such an approach – particularly on the back of the AWD program is fundamental to any consideration of the – and consider naval shipbuilding as a core future of Australia’s defence capability. component of Australia’s manufacturing sector. 2 The debate should never be about creating a valley of death in terms of timing, nor do they subsidised shipbuilding industry in Australia but sustain the right skills. For example, much has rather a path to a self-sustaining, competitive The most efficient way been said about the impact of the valley of death industry that manufactures in Australia with the to maintain the skills and on shipbuilding skills but equally important is the associated economic benefits that go along with productivity of the industry is impact on engineering skills. The same could be it. What we should not do is make a decision said of the idea of icebreakers. to embark upon a rolling build based on one or two individual projects but It is important to recognise that the valley of program for major surface resolve to embark upon a national shipbuilding death has already arrived. The ramp down of the strategy. combatants and submarines. AWD project has already begun and the pace of The most efficient way to maintain the skills job losses will only escalate over the course of the and productivity of the industry is to embark next two years. That is why a solution needs to be upon a rolling build program for major surface Paper. I was pleased to serve with other industry found now. combatants and submarines. The pace of such a colleagues on the expert industry panel and stand A proper consideration of our long term national rolling build program is something which should by the body of the report which provides a good security interest demonstrates solid strategic be considered carefully and set early. snapshot of the extent of Australia’s capability reasons why a fourth AWD would be valuable across the range of relevant skills. In particular, to Australia. Where I think the process has Such a build program should also allow Australia the report addresses the maturity of our systems fallen down is that the issue has wrongly been to better manage vessel life of type issues and integration capability which has been built on the considered in an opportunity cost sense that avoid excessive sustainment costs associated back of the Collins and AWD programs. somehow the fourth AWD would necessitate a with ageing platforms. And just as a rising delay in the Future Frigate program. This logic tide lifts all boats, the productivity benefits in What matters is that the FSISP report sets out clearly the rationale for establishing a rolling does not hold up because the Future Frigate terms of knowhow and efficiencies generated build program for major surface combatants and program must be commenced immediately from a rolling build program would provide a submarines as well as generating and maintaining anyway in order to ensure the design/ considerable lift in the competitiveness which the skills and knowhow required to support such development phase is completed in time for a Australian based shipbuilding offers for those a program. smooth transition to a construction phase that classes other than submarines and major surface dovetails into the end of the AWD construction combatants such as support vessels. In a perfect world we would have an AWD program. construction program that would roll directly Productivity and knowhow are the key to efficient into a Future Frigate construction program – I can only urge a reconsideration of the decision shipbuilding. It is often not properly understood ensuring benefits such as continuity of work and not to proceed with the fourth AWD. The option that labour factors contribute a relatively small maintaining the associated knowhow, productivity of a fourth ship is not new and has existed since proportion of the acquisition cost of a vessel. and skills. But what is missing at the moment is the second pass decision was made in 2007. By contrast, the cost of materials and major the will to bridge the “valley of death” and to Once the final destroyer is built we will build components may be considerable, particularly connect the two programs. This could be achieved, no more and we should consider very carefully when we are talking through Foreign Military and only achieved in my view, through a decision whether we want to limit the protection that is Sales acquisition, but generally this supply chain to acquire a fourth Air Warfare Destroyer. afforded to our Landing Helicopter Docks and can be sourced on a global value for money basis. limit future capability options to protect our sea From my own point of view, it is clear that lanes of communication in the years to come. One commendable document in the shipbuilding other options, including offshore builds of debate is the Future Submarine Industry Skills Plan specialised vessels such as oilers with an onshore I hold a similar view in regards to the Future (FSISP) released in conjunction with the White consolidation of such vessels do not address the Submarine project. Australia’s Future Submarine 3 program cannot be considered in isolation but in parallel with a rolling build program for major surface combatants. It is important that we draw upon the skills, knowhow and productivity benefits of a rolling Australia needs to have build program for major surface combatants for the purpose of a new submarine program but it sovereign capabilities in is essential that the rolling build programs run in submarines and major surface parallel, not as some hybrid single rolling build combatants. This is particularly program. the case in integrating and We must move quickly into detailed design/ sustaining combat systems development of the Future Submarine if we which are incredibly valuable are to ensure the construction phase can begin in sufficient time to provide a replacement for to the nation. Collins that avoids the excessive costs associated with maintaining ageing platforms or, worse, a capability gap. In considering this point it is also worth noting that the pace of the Future Submarine rolling build program needs to be set early. What we don’t want to be forced into is an early sprint – driven by an ageing Collins fleet. Rather we need to set a measured pace that allows sufficient time to appropriately manage the significant complexity of start up in a program of this nature. Today we have a highly capable defence industry that is focused on meeting the needs of the Australian warfighter. It is an industry that continues to mature, to develop its capabilities and to build a strong reputation for performance. Today’s defence industry is the product of two decades of government policy, where it has become a fundamental part of the national security fabric and infrastructure. What flows from this is that we need to properly understand the role and potential of industry and, in our national security interests, apply the correct policy settings to its future. Hull of the first destroyer Hobart AWD ship 4 Navantia and the RAN Navantia is playing a significant role in the design and construction of the Royal Australian Navy’s future naval fleet.