March 29, 2015

Kevin Andrews' speech prompts questions of evaluation process fairness

 It is difficult to find a photograph of Australian Defence Minister, Kevin Andrews letting himself be filmed with a submarine. Here's the next best thing - reflections of what looks to be a submarine in Andrew's binoculars (Photo courtesy
The following are the portions of a speech most relevant to submarines made by Australian Defence Minister, Kevin Andrews on March 25, 2015 at Australia's Future Submarine Summit (“Sub Summit”) Adelaide, South Australia, March 24-26, 2015, :


The Andrews speech and other statements made by Australian government officers and officials at the Summit appeared to confirm a growing belief the evaluation process may not be truly competitive. This is due to what appears to be an unequal match between the official competitors, which are:

- the Government of Japan (including Prime Minister Abe and the Japanese Ministry of Defence (JMD) in part drawing advice from MHI and KHI). Significantly Japan is backed by overt US Government support *


- only companies: TKMS from Germany and DCNS from France. 

European company representatives at the Summit questioned this mismatch and many wondered how the evaluation process could possibly be fair when Japan was being dealt with on a government-to-government basis while the German and French builders were on a commercial level. “It looks to me like the decision might already have been made,” said one CEO who asked to remain anonymous. “This whole process clearly favours Japan.”

* US Support for Japan's Bid

The Japan Times reported: "Vice Adm. Robert Thomas, commander of the U.S. Navy’s 7th Fleet, reportedly said Oct. 24 [2014]  in Tokyo that then-Australian Defense Minister David Johnston was very interested in Japan’s Soryu-class subs.
“I talked to him about it four years ago and I said: ‘You want to find the finest diesel-electric submarine made on the planet — it’s made at Kobe works in Japan,’ Thomas was quoted as saying by Bloomberg News."

Minister for Defence – Speech – RUSI Submarine Summit – 25 March 2015

Submarines are the most complicated, sensitive and expensive Defence capability acquisition a Government can make in meeting that responsibility.
An effective submarine capability plays a critical role in Australia’s defence in conjunction with all Australian Defence Force elements.
I have previously stated – as a Government and as a nation, we have one chance to get this decision right.
Because of the previous government’s refusal for 6 years to make a decision on the replacement for the Collins class submarines, we had a looming security and capability gap arriving in about ten years.
The process that I recently announced is the best way forward to ensure that such a gap will not occur, simultaneously delivering the best possible capability to the ADF and value for money to Australian taxpayers.
Geographically we are an island continent, the world’s sixth largest country by area. This unique geography means we have special requirements for Australia’s future submarines.
Australia’s national security and our $1.6 trillion dollar economy rely on the unencumbered use of the sea.
Seventy per cent of Australia’s exported goods and services, by value, travel by sea, an export trade worth more than $220 billion in 2012-13. We are a maritime nation and we need maritime security.
By 2030, half of the world’s submarines will be in Australia’s broader strategic region. The Indo-Pacific region has some of the fastest growing economies in the world and the demand for defence technology to safeguard the region’s prosperity and security is ever increasing.
The future submarine programme represent a $50 billion investment in Australia’s safety and security – the largest Defence procurement in Australia’s history – with up to two thirds of this investment being spent in Australia during the lifetime of the future submarine.
To the average Australian taxpayer this may seem to be a huge price to be paid for a capability that may never be used in anger.
But that cost also needs to be measured against the major investment that would need to be made by any adversary to counter the effect of our submarines.
The complexity of Australia’s strategic environment means our defence planning has to cater for a range of possible contingencies, but particularly focussed on maintaining stability in our region and ensuring that conflict doesn’t have the chance to start. So submarines remain a logical and necessary investment in Australia’s wider defence capability.
And for this reason, Australia’s future submarine must give us a significant capability edge in our region as well as meet our needs in respect of geography and strategic outlook.
We need submarines capable of operations at long range over extended periods because they defend our interests far from our shores. The range and endurance must be similar to that of the Collins class submarine.
They are an essential part of our national security capability.
Another key strategic requirement for our Future Submarines includes sensor performance and characteristics that are superior to that of the Collins class submarine.
We need the sovereign ability to maintain the future submarine over coming decades, including repairs, modifications and certifying it as safe for use.
Now I acknowledge that – in recent times – there has been some anxiety about the future submarine programme.
This is why I announced the acquisition strategy in February – to provide a pathway for Australian industry to maximise its involvement in the program, whilst not compromising capability, cost, program schedule or risk.
The Government supports local industry and recognises how valuable it is to our nation. As Minister for Defence, I want to see a sustainable and viable industry better able to support Defence.
In 2014-15 financial year, Defence expects to spend $6.2 billion on equipment acquisition and support in Australia.
This equates to around 53 per cent of the military equipment acquisition and support expenditure this year, and is consistent with long-term averages of between 50 and 55 per cent being spent in Australia.
The Government does support local Defence industry.
When it comes to making decisions on Defence capability, the needs of the Australian Defence Force will – must – always come first.
The Government will acquire Defence capability that supports ADF requirements first and Australian industry can play a very significant role in this process.
Our sailors, soldiers or airmen and women need the right equipment and industry needs to demonstrate that they are world leaders, producing the best product at the best price.
When it comes to Future Submarines, Australian industry will play an important role in delivering the best possible equipment at the best value for money.  
There will be many new high-skill jobs in Australia for the life of the Submarine program, decades into the future.
Significant work will be undertaken in Australia during the build phase. At a minimum, this includes combat system integration, design assurance and land-based testing.
There will be significant opportunities arising from the support and maintenance of the submarine for decades. In dollar terms, this often accounts for two-thirds of the investment.
All three potential international partners will require significant redesign work to be undertaken on their existing submarines. There are opportunities here for Australia.  
I want to make it clear – that maintenance can occur in Australia, even if there is an overseas build. The important consideration, and a lesson from Collins, is to ensure that maintenance and knowledge transfer are planned from the early stages of design.
As I mentioned previously, this is a busy time for Defence acquisition – and there are many exciting opportunities ahead for industry.  
Here in South Australia alone – over the next four years – subject to the outcomes of the Defence White Paper – there will be up to $4.4 billion in Defence spending for building and sustaining Defence materiel.
As the competitive evaluation for the Future Submarine proceeds, Defence is engaging with a number of key industry representatives.
This includes engaging with Austrade and the Department of Industry and Science, along with engagement with State Governments, the Australian Industry Group, the Australian Industry Defence Network and the Australian Business Defence Industry Unit.
Here, in South Australia, Defence is consulting with Defence SA, the Defence Teaming Centre and, of course, ASC and other companies.
Importantly, the potential international partners that will deliver Australia’s Future Submarine fleet need to understand Australian industry’s capabilities and skill sets.
During a meeting yesterday between Defence and Department of Industry officials, State Government representatives, and defence industry groups, there was agreement to the SEA 1000 Industrial Engagement Strategy.  This included the formation of the State and Industry Association Consultative Group, comprising all attendees.
The SEA 1000 Industrial Engagement Strategy involves the members of this group working together with the common aim of providing competitive Australian companies with meaningful opportunities to demonstrate their capabilities and skills to international partners.
The strategy includes bimonthly meetings to monitor progress against planned activities that include preparation sessions for Australian industry, the development of company profiles to be provided to international partners, a schedule of interactions between the partners and state-based organisations, and visits by the partners to states across Australia to meet with company representatives and visit facilities.
These activities will commence in early April with briefings to major companies operating in Australia, and progress throughout the remainder of the year. 
The engagements between international partners and industry will be scheduled to complement the development their pre-concept designs, allowing timely judgments of how to best involve Australian capabilities and skills in their proposals.
Importantly, there is agreement on the need for a coordinated and consultative approach to the engagement, which offers international partners full visibility of how Australian industry can support the project and maximise Australian industrial involvement
As the Government has announced, France, Germany and Japan have emerged as potential international partners. All three countries have proven submarine design and build capabilities and are producing submarines.
The competitive evaluation process will ensure that capability, cost, schedule and key strategic considerations, along with Australian industry involvement, are carefully and methodically considered, and avoid unnecessary delays to Australia’s future Submarine program.
As part of the competitive evaluation, Defence will seek proposals from potential partners for:
  • Pre-concept designs based on meeting our capability criteria;
  • Options for design and build overseas, in Australia, and/or a hybrid approach;
  • Rough costs and schedule for each option; and
  • Positions on key commercial issues, for example intellectual property rights and the ability to use and disclose technical data.
The level of Australian industry involvement will be a fundamental consideration, as will interoperability with our alliance partner, the US.
The competitive evaluation will take at least ten months, after which time Defence will bring advice to Government for consideration.
The Government will continue to ensure that a careful, considered and methodical approach is taken in making decision on the future submarine.
The opportunity is now there for industry to engage with international partners and to demonstrate that maximum Australian involvement can deliver an affordable and quality submarine such that this vision can become a reality. 
As part of the Government’s commitment to a robust and transparent competitive evaluation, we will soon be announcing the appointments to an Expert Advisory Panel to oversee the competitive evaluation process.
This panel will oversee the conduct of the process, including ensuring its probity, managing any conflicts of interest, and ensuring that confidentiality is maintained in relation to all sensitive information received during the process.
This oversight will provide the Government and the public with confidence that the evaluation process not only is, but is seen to be, fair and defensible, and that the will robustly address all relevant factors, allowing Government to balance importance considerations, for acquisition and through life support, including capability, cost, schedule, and risk.
In closing, as you know, the first priority of government is the safety and security of its citizens.
As the newly appointed Defence Minister, I ask that we work together to bring this about." ENDS

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