Australia's Naval Shipbuilding Enterprise
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AUSTRALIA’S NAVAL SHIPBUILDING ENTERPRISE Preparing for the 21st Century JOHN BIRKLER JOHN F. SCHANK MARK V. ARENA EDWARD G. KEATING JOEL B. PREDD JAMES BLACK IRINA DANESCU DAN JENKINS JAMES G. KALLIMANI GORDON T. LEE ROGER LOUGH ROBERT MURPHY DAVID NICHOLLS GIACOMO PERSI PAOLI DEBORAH PEETZ BRIAN PERKINSON JERRY M. SOLLINGER SHANE TIERNEY OBAID YOUNOSSI C O R P O R A T I O N For more information on this publication, visit www.rand.org/t/RR1093 Library of Congress Cataloging-in-Publication Data is available for this publication. ISBN: 978-0-8330-9029-4 Published by the RAND Corporation, Santa Monica, Calif. © Copyright 2015 RAND Corporation R® is a registered trademark. Limited Print and Electronic Distribution Rights This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited. Permission is given to duplicate this document for personal use only, as long as it is unaltered and complete. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial use. For information on reprint and linking permissions, please visit www.rand.org/pubs/permissions.html. The RAND Corporation is a research organization that develops solutions to public policy challenges to help make communities throughout the world safer and more secure, healthier and more prosperous. RAND is nonprofit, nonpartisan, and committed to the public interest. RAND’s publications do not necessarily reflect the opinions of its research clients and sponsors. Support RAND Make a tax-deductible charitable contribution at www.rand.org/giving/contribute www.rand.org Preface The Australian government will produce a new Defence White Paper in 2015 that will outline Australia’s strategic defense objectives and how those objectives will be achieved. It will consider future force struc- ture options for the Australian Defence Force that align strategy with capability and resources. Part of the process of producing the Defence White Paper is to examine an enterprise-level shipbuilding plan that brings together navy capability requirements, available resources, and the future composition of the Australian shipbuilding and ship repair industrial bases. To inform this process, it was necessary to conduct our analysis in parallel with the ongoing development of the Force Structure Review. The resulting demand profiles used in this report were therefore used as exemplars as the government considers its final force structure requirements through the White Paper process. Historically, Australia has acquired ships from overseas (e.g., the Charles F. Adams guided missile destroyer and the first four Oliver Hazard Perry guided missile frigates); more recently, the focus has shifted to acquiring ship designs from overseas and modifying those designs to meet Australian requirements. All or parts of these ships have then been built in Australia. Typically, ship support activi- ties for needed repairs and modernization have been accomplished in-country by Australian public- or private-sector organizations. How- ever, demands for Australia’s shipbuilding industrial base have been sporadic over the past 20 years, and the various peaks and troughs in demand have led to a decline in skill resources and an inefficient indus- trial base. Problems with the shipbuilding industrial base have been iii iv Australia’s Naval Shipbuilding Enterprise: Preparing for the 21st Century reflected in the recent difficulties experienced with constructing the new air warfare destroyer and have raised issues concerning the cost of building new ships in Australia versus having the ships built in a foreign shipyard. A major question facing the nation’s government is whether Aus- tralia should support a naval shipbuilding industry or buy ships from foreign shipbuilders. This is a complex matter with many facets and subsets. The issues often center on cost trade-offs, but there are also important national sovereign and strategic concerns. There should also be synergy between shipbuilding and the support of those ships once they enter service, although typically, shipyards tend to focus on either building new ships or supporting in-service ships. What is important both in building and in supporting ships is knowledge of the design of the ship so that construction, maintenance, and modernization can be conducted in a cost-effective manner. If the answer to the basic question is a desire for an Australian shipbuilding industry, subsequent questions involve what future demands are needed to permit the indus- trial base to operate effectively and efficiently and how the industrial base assets should be organized. RAND Support of the Australian Department of Defence In September 2014, RAND was engaged by the Australian Depart- ment of Defence to undertake a series of materiel studies and analysis activities. The Defence White Paper team tasked RAND to inform the development of an enterprise-level plan for naval shipbuilding for consideration by the government. To develop this plan, the authors focused on three important tasks: • Provide an understanding of the current Australian shipbuilding capability and gauge how alternative acquisition strategies might affect both the capacity of the industrial base and the total cost of the enterprise. • Compare the costs of Australia’s naval shipbuilding industry with overseas manufacturers that produce platforms of comparable size and scope. Preface v • Assess the economic costs and benefits of government investments in Australia’s naval shipbuilding industrial base under the various enterprise options. Between September and December 2014, RAND produced a series of interim studies to present insight into its ongoing analysis, to inform the research sponsor of early findings, and to provide a means to elicit feedback as the work continued. This report is intended for an audience that has some familiar- ity with naval shipbuilding. Comments or questions on this report should be addressed to either of the project leaders, John Birkler (email: [email protected]; telephone: +1-310-463-1924) or John Schank (email: [email protected]; telephone: +1-703-413-1100, extension 5304). Management Framework This research was sponsored by the Australian Department of Defence and conducted within the Acquisition and Technology Policy Center of the RAND National Security Research Division (NSRD). NSRD conducts research and analysis on defense and national security topics for the U.S. and allied defense, foreign policy, homeland security, and intelligence communities and foundations and other nongovernmental organizations that support defense and national security analysis. For more information on the Acquisition and Technology Policy Center, see http://www.rand.org/nsrd/ndri/centers/atp.html or contact the director (contact information is provided on the web page). For more general questions about RAND operations in Australia, please contact our RAND Australia director at [email protected]. Contents Preface ............................................................................. iii Figures ............................................................................ xi Tables ............................................................................ xvii Summary ......................................................................... xxi Acknowledgments ...............................................................xli Abbreviations ................................................................... xliii CHAPTER ONE Introduction ....................................................................... 1 RAND Research Objective ....................................................... 2 Structure of the Report ............................................................ 4 CHAPTER TWO Australia’s Naval Shipbuilding and Ship Repair Industrial Bases ...... 5 What Makes Naval Surface Ship Production and Sustainment Unique .... 6 Australia’s Naval Shipbuilding Industrial Base ................................. 8 Shipbuilding Workforce ........................................................11 Ship Support Industrial Base ....................................................13 Differences Between Shipbuilding and In-Service Ship Support .........13 Composition and Capabilities of the Current In-Service Ship Industrial Base..............................................................16 How the Fleet Places Demands on the Support Industrial Base ......... 20 Future Demands for Support ....................................................21 Ability to Meet Future Demands for Ship Repair ......................... 24 vii viii Australia’s Naval Shipbuilding Enterprise: Preparing for the 21st Century Observations on the Shipbuilding and Ship Support Industrial Bases .....25 Australia’s Unique Market Niches: Warship and Submarine Production and Support .................................................. 27 CHAPTER THREE Australian Department of Defence’s Planned and Projected Warship Acquisitions ......................................................31 Current Shipbuilding Programs .................................................31 Landing Helicopter Dock Project .............................................31 Air Warfare Destroyer Project .................................................32 Future Shipbuilding Programs ..................................................33 Future Submarine Project ......................................................33