April 18, 2015

Australian Naval Shipbuilding 30-40% pricier. Submarines Unmentionable.

A Virginia SSN being completed in a massive Newport News shed. Will Australia ever build such submarines efficiently?
On April 16, 2015 Australia's Minister for Defence [Media Released] a RAND Corporation Report Australia’s Naval Shipbuilding Enterprise – preparing for the 21st centuryProbably the most significant finding is that “The cost of building naval ships in Australia is 30-40 per cent greater than United States benchmarks,…”. In contrast to South Korea's shipbuilding success Australia's shipbuilding industry has long been afflicted with the higly unionised British disease. Responsibility averse government and private sector management is another major failing.

Even with this defacto 40% tariff protection Australia cannot compete because ships and submarines  routinely completed 1 or 2 years late - often with subsequent modifications necessary. 

For Submarine Matters the absence of any discussion of Australia’s future submarine build in the Report compromises the whole report. It is akin to taking Future Frigates out of the equation.

The RAND Report, in part, found that:

·     "Australia could sustain a naval ship building industrial base by carefully managing a continuous ship building strategy in the longer–term, with a regular pace of delivering the new ships. But this would need to be premised on reform of the Australian naval ship building industry and significant improvement in productivity.

·       Australian naval ship builders can sustain an 18-24 month pace of large ship construction starts if Defence carefully manages its acquisition program and keeps the Future Frigates operational for 25 to 30 years [ie. needlessly shorter period than usual].

·       The gap between the completion of the Air Warfare Destroyer project and the start of the Future Frigate – Labor’s valley of death – cannot be overcome, but the impact could be lessened.

·       The cost of building naval ships in Australia is 30-40 per cent greater than United States benchmarks, and even greater against some other naval ship building nations. Australia is currently one the most expensive places to build naval vessels. This premium can be reduced by improved productivity through:

o  -  Establishing a consistent production and build demand.
o  -  Selecting a mature design at the start of the build and limiting the amount of changes once production begins.
o  -  The necessity of ensuring a well-integrated designer, builder and supplier team.
o  -  Matching the industrial base structure to demand.
o  -  Ensuring there is visionary leadership provided by company management.

The RAND report is a critical input into the Defence White Paper and the Naval Shipbuilding Plan. The Government will now carefully consider the report’s analysis and findings in preparation for the release of these documents later this year."


“But the report strikingly left the future submarine project out of its calculations, concentrating instead on surface warship such as new frigates and patrol boats.

When asked why, lead researcher John Birkler told reporters submarines had been "specifically excluded" from RAND's terms of reference by the Abbott government. "We were asked not to include submarines," he said.

Mr Birkler went on to indicate that RAND had been told by the government last year that Australia planned to build its submarines offshore.” His remarks, backed up by a table in the report that places the future submarine project in the "build offshore" column, is clearly at odds with the government's repeated insistence that it had at no point decided to have Japan build the new fleet of up to 12 submarines.

[In unconvincing contradiction] “A spokesman for Mr Andrews said that at "no stage were RAND Corporation informed by the government or the Department of Defence that an offshore submarine build was the only option being considered".” See WHOLE SMH ARTICLE


The Report's productivity improvement recommendations are US best practice. This is understandable given the US authorship. The recommendations, however, appear to be technologically and economically unsustainable for Australia. Australia cannot cover all the design and development functions unlike the output of Soryus at the MHI-KHI shipyards and unlike output of the Virginia class at Newport News and General Dynamics Electric Boat.



Anonymous said...

Hi Pete

Why can Sweden build submarines? She is much smaller than Australia.


Peter Coates said...

Hi S

Many reasons Sweden can build submarines but not Australia:

- Sweden's close location on the Baltic to its customers is probably its major advantage compared to Australia. This gives Sweden closer liaison with customer needs, low transport costs, close proximity for spare parts
- Sweden has built up a continuously productive and comprehensive arms industry (air, land and sea weapons) for over a century
- Sweden has had a developed shipbuilding industry for over 1,000 years (since the Vikings), sail and wood ships and iron warships. Australia relied on a monopoly controlled British industry from Australia's late beginning in 1788-1970s, then from 1980s Australia immediately relied on buying US, Swedish and Spanish assistance
- as a neutral Sweden can sell to both sides of conflicts hence no disruption to its arms industy
- Sweden is close to the countries that will naturally protect it. Therefore Sweden doesn't need to support US/NATO overseas ventures. Instead Sweden is right on the northern flank of US?NATO nuclear umbrella against Russia
- Australia's comparitive isolation makes it a dependent ally, leading to a burden and distortion of defence industry

More specifically:
- all this allows Sweden to concentrate on building and selling submarines
- submarines are a natural asymmetric weapon for Sweden and for neighbors with similar problems (over the years Denmark, Norway and even to Singapore far away etc)
- Sweden has perfected the art of trade barrier and political protection of its arms industry (although Kockums sale to HDW http://en.wikipedia.org/wiki/Kockums_Naval_Solutions#The_submarine_conflict ) was a rare and major lapse that Sweden/Kockums is still recovering from
- Sweden's/Kockums labour force is more highly skilled/better organised and much more productive than Australia's ASC



Anonymous said...

Hi Pete

Thank you. I understand well that situation of Australia is quite different from that of Sweden. By the way, was my expression rude? If some one feels bad, I will apologize. I am sorry.


Peter Coates said...

Hi S (April 20, 2015 at 8:29 PM comment)

Your expression was not rude at all.

Kind Regards