Department of the INFORMATION AND RESEARCH SERVICES Parliamentary Library Research Paper No. 3 2001–02 Getting in Early: Lessons of the Collins Submarine Program for Improved Oversight of Defence Procurement ISSN 1328-7478 Copyright Commonwealth of Australia 2001 Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means including information storage and retrieval systems, without the prior written consent of the Department of the Parliamentary Library, other than by Senators and Members of the Australian Parliament in the course of their official duties. This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document. IRS staff are available to discuss the paper's contents with Senators and Members and their staff but not with members of the public. Published by the Department of the Parliamentary Library, 2001 I NFORMATION AND R ESEARCH S ERVICES Research Paper No. 3 2001–02 Getting in Early: Lessons of the Collins Submarine Program for Improved Oversight of Defence Procurement Derek Woolner Foreign Affairs, Defence and Trade Group 18 September 2001 Acknowledgments This is to acknowledge the help given in producing a paper, Laura Rayner, Dr Ravi Tomar, Gary Brown, Ian Ireland, Dr John Carter and Dr Ross Babbage. Enquiries Information and Research Services publications are available on the ParlInfo database. On the Internet the Department of the Parliamentary Library can be found at: http://www.aph.gov.au/library/ IRS Publications Office Telephone: (02) 6277 2778 Contents Major Issues ......................................................... i Unresolved Issue: The Future of the Submarine Building Industry ............... i Unresolved Issue: The Need for a Workable Combat System ...................ii What Really Went Wrong with the Collins Program......................... iii Only One Amongst Many: Ongoing Problems in Defence Procurement .......... iv The Need for New Processes of Parliamentary Oversight ......................v Introduction .........................................................1 Background .........................................................3 Early Days ........................................................3 Experience With the Oberon Submarines..................................3 The High Cost and Limitations of the Oberons ...........................4 Why the Collins Turned Out as it Did: Trends Set During Early Development .........4 The Dominating Influence of the Decision to Build in Australia .................5 Bi-Partisan Political Support.........................................6 Consequences .....................................................6 The Contract a Result of the 1980s Procurement Environment ................6 The Influence of a Succession of Disasters ............................7 Fixed-price Contracting as an Apparent Solution........................7 Industrial Credibility as a Selection Imperative ...........................7 A Search for a Break from the Past..................................8 Lobbying in Favour of Industrial Capability ...........................8 Combat Data System ................................................9 Origins of the CDS Concept .........................................9 Difficulties in Selecting a Supplier ................................... 10 Early Assumptions and Subsequent Failure ............................. 10 The Critical Point—Failing to Change the Procurement Strategy................11 Original Low Risk Approach .......................................11 Opting for the Ideal Rather Than the Available ..........................11 Cost Escalation and Program Delay .....................................12 Failure to Acknowledge Higher Risk..................................13 Achievements and Problems: Pointers to Decision Making? .....................13 A Significant Achievement: Building the Submarines in Australia ..............13 Performance of World Standard .....................................14 Unusually High Self Reliance.....................................14 Fostering Australian Industrial Expertise.............................14 Some Disasters Avoided: How the Other Competitors Fared ................15 Past Glory; Present Problem? .......................................16 The Threat of Declining Workload .................................16 The Government Decides to Award Ongoing Refit Work.................17 A Future with the US? ............................................17 The Buy Out of Kockums........................................17 The American Option...........................................18 Risks in the Tension Between US and European Suppliers ................18 Does Australian Have Access to Sufficient Intellectual Capital?............19 Performance ......................................................19 The Performance Advantages of Size .................................19 Range and Endurance...........................................20 Submerged Endurance and Indiscretion Ratio .........................20 Noise Control and Stealth ..........................................21 Impressing the Americans .......................................22 Problems, Deficiencies and Failures: Shortcomings in Performance ...........22 Component Failures ..............................................23 Uniquely Specified Sub-Systems ..................................23 The Diesel Engines ............................................24 The Nature of Diesel Engine Problems ..............................24 Deficiencies a Consequence of Overall Design Objectives ................25 Hull Generated Noise............................................. 25 Why Submarines Usually Proceed Slowly............................ 25 Sources of Noise at High-Speed ................................... 26 An Outcome Influenced by Other Objectives ......................... 27 The Combat System .............................................. 27 Failure of the Original System .................................... 27 Agreement on Need for a New System .............................. 28 Selection of a Preferred New System ............................... 28 Back to Square One—Replacement Combat System Program Abandoned......... 29 The US Influence................................................ 29 Moving Against the Trends ........................................ 30 Growth of Multinational Approaches in Defence Systems ................ 30 Consequences for Australian Industry............................... 31 Issues of Wider Strategic Concern ................................... 31 The American Need for More Submarines ........................... 31 Submarine Operations with the US ................................. 32 Risks to the Defence White Paper Structure .......................... 32 Return to the Challenges of the Past—High Risk with Lock-in............... 33 Areas of Risk ................................................ 33 Differences Between Nuclear and Conventional Submarines .............. 33 The Critical Importance of Local Support .............................. 34 The Primary Importance of Intellectual Capital ........................ 34 The Atlas Proposal for Building Intellectual Capital .................... 35 The American Route Not Guaranteed ................................. 35 Where the Problem of the Collins Submarines Lies ........................... 36 An Inappropriate Procurement Strategy .................................. 36 Problems That Could Have Been Ameliorated ............................. 36 Consequences of Mistakes ........................................... 37 An Excellent Potential Yet to Be Realised ................................ 37 Why the Collins is Important—Australia's Declining Surface Navy................ 38 Reduced Planning Objectives ......................................... 38 Declining Fleet Numbers.............................................39 Implications for Policy and Naval Doctrine ...............................39 Why the Collins is Important—The Collins Syndrome and Australian Defence Procurement .......................................................40 The Worst Defence Procurement Programs ...............................40 Poor Management and the 'Orphan Systems' Syndrome ....................40 A Recent Example—The ANZAC Helicopter Program ....................41 The Implications for the White Paper of Poor Acquisitions Management..........41 Identifying High Risk Programs-the Example of the AEW&C Program ........42 Cost Increases in the AEW&C Project ..............................42 Risk Factors in the AEW&C Program...............................42 Internal Criticisms of Defence Procurement Management.....................43 Too Many Uniquely Australian Systems ...............................43 Government Changes to Procurement Procedures...........................44 Early Involvement