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SHIFTING FROM A SHIPBUILDING STRATEGY TO A SHIP SUSTAINMENT STRATEGY: BALANCING ECONOMIC PROSPERITY AND TECHNICAL RISK LCdr B.W. Michalchuk JCSP 43 PCEMI 43 Master of Defence Studies Maîtrise en études de la défense Disclaimer Avertissement Opinions expressed remain those of the author and Les opinons exprimées n’engagent que leurs auteurs do not represent Department of National Defence or et ne reflètent aucunement des politiques du Canadian Forces policy. This paper may not be used Ministère de la Défense nationale ou des Forces without written permission. canadiennes. Ce papier ne peut être reproduit sans autorisation écrite. © Her Majesty the Queen in Right of Canada, as © Sa Majesté la Reine du Chef du Canada, représentée par represented by the Minister of National Defence, 2017. le ministre de la Défense nationale, 2017. CANADIAN FORCES COLLEGE – COLLÈGE DES FORCES CANADIENNES JCSP 43 – PCEMI 43 2016 – 2017 MASTER OF DEFENCE STUDIES – MAÎTRISE EN ÉTUDES DE LA DÉFENSE SHIFTING FROM A SHIPBUILDING STRATEGY TO A SHIP SUSTAINMENT STRATEGY: BALANCING ECONOMIC PROSPERITY AND TECHNICAL RISK LCdr B.W. Michalchuk “This paper was written by a student “La présente étude a été rédigée par un attending the Canadian Forces College stagiaire du Collège des Forces in fulfilment of one of the requirements canadiennes pour satisfaire à l'une des of the Course of Studies. The paper is a exigences du cours. L'étude est un scholastic document, and thus contains document qui se rapporte au cours et facts and opinions, which the author contient donc des faits et des opinions alone considered appropriate and que seul l'auteur considère appropriés et correct for the subject. It does not convenables au sujet. Elle ne reflète pas necessarily reflect the policy or the nécessairement la politique ou l'opinion opinion of any agency, including the d'un organisme quelconque, y compris le Government of Canada and the gouvernement du Canada et le ministère Canadian Department of National de la Défense nationale du Canada. Il est Defence. This paper may not be défendu de diffuser, de citer ou de released, quoted or copied, except with reproduire cette étude sans la permission the express permission of the Canadian expresse du ministère de la Défense Department of National Defence.” nationale.” Word Count: 14799 Compte de mots: 14799 iv Table of Contents TABLE OF CONTENTS ........................................................................................................................... III LIST OF FIGURES .................................................................................................................................... IV LIST OF TABLES ...................................................................................................................................... IV ABSTRACT .................................................................................................................................................. V CHAPTER 1: INTRODUCTION .......................................................................................................... 1 OUTLINE ................................................................................................................................................................... 2 CHAPTER 2: DEFENCE INDUSTRIAL POLICY ......................................................................... 4 OVERVIEW .............................................................................................................................................................. 4 CHAPTER 3: LITERATURE REVIEW ............................................................................................ 7 INDUSTRIAL POLICY OVERVIEWS ................................................................................................................... 7 General Trends ......................................................................................................................................................... 8 Australia ................................................................................................................................................................... 10 Netherlands.............................................................................................................................................................. 12 Norway ...................................................................................................................................................................... 13 United Kingdom ..................................................................................................................................................... 16 CHAPTER 4: CANADA’S DEFENCE INDUSTRIAL STRATEGY ....................................... 19 DEFENCE PROCUREMENT STRATEGY........................................................................................................... 19 NATIONAL SHIPBUILDING STRATEGY .......................................................................................................... 22 CHAPTER 5: NAVAL PROCUREMENT ...................................................................................... 24 CHAPTER 6: BALANCING TECHNOLOGY AND ECONOMICS ....................................... 27 ECONOMY OF SCALE ......................................................................................................................................... 27 EXPORTABILITY .................................................................................................................................................. 33 Maritime Technology Exports ........................................................................................................................ 36 RESEARCH AND DEVELOPMENT .................................................................................................................... 42 OBSOLESCENCE ................................................................................................................................................... 46 INTEGRATION AND COMPLEXITY .................................................................................................................. 47 CHAPTER 7: A MORE BALANCED APPROACH .................................................................... 51 CONTINUOUS BUILD NO LONGER VIABLE ......................................................................................................... 51 CONTINUOUS SUSTAIN FOCUS ............................................................................................................................. 5 3 WHAT WOULD A MORE BALANCED APPROACH LOOK LIKE? ....................................................................... 56 Collaborative Approach .................................................................................................................................... 58 Multi-Shipyard Approach ................................................................................................................................. 58 Technical Advantages of Preferred COA ................................................................................................... 59 KEYS TO SUCCESS .................................................................................................................................................. 61 Cluster Maritime Industry ................................................................................................................................ 61 Targeted Research and Development......................................................................................................... 64 FROM CONCEPT TO PRACTICE ............................................................................................................................ 65 CHAPTER 8: FUTURE WORK ............................................................................................................. 68 CHAPTER 9: CONCLUSION ................................................................................................................. 69 BIBLIOGRAPHY ...................................................................................................................................... VI v List of Figures Figure 1: Top Defence Exporters by Country in 2015 ..................................................... 34 Figure 2: Largest Weapon Importers, 2010-2015 ............................................................ 35 Figure 3: Global Defence Export Markets ............................................................................. 36 Figure 4: CPF Sail Away Cost Comparison ........................................................................... 39 Figure 5: Product Failure Model .............................................................................................. 5 4 Figure 6: Direct and Indirect GDP Multiplier by Sub-Sector ......................................... 55 Figure 7: Research and Development by Nation ............................................................... 64 List of Tables Table 1: Naval Ships Initially planned by Government Compared to Ship delivered or planned as of 2016 ............................................................................................................... 29 vi Abstract In the coming decades the range of maritime threats and challenges that Canada will face is expected to grow. The Arctic is steadily immerging as a greater maritime priority, the proliferation of globalization continues to occupy the world’s oceans and many of the actors involved in intrastate