ANZAC - What did we get out of it?

The ANZAC Ship Project was of national significance, and its benefits have been felt at a national level also.
"The ANZAC Ship Project is a national achievement which has helped Australia build a worldwide reputation in naval shipbuilding, culminating in the award to Tenix Defence in 2004 of the NZ$500m Project Protector, against stiff international competition."

So said Tenix Defence's CEO, Mr Robert Salteri, at the handover to the Navy of NUSHIP Perth back in June.

The ANZAC Ship project didn't just deliver 10 warships, it helped shape an entire industry. And it demonstrated the benefits of building RAN warships in Australia: while it's the conventional wisdom that local construction carries a cost premium, former Transfield and Tenix Defence CEO Dr John White argued this certainly wasn't the case for the ANZAC Ships. He contended back during the 1990s that building the ships in Australia was cheaper than importing them from Germany.

And the broader operational, economic and industrial benefits, which would have foregone if the ships had been built overseas, were identified in a study published in 2000 by Denise Ironfield of Canberra-based economics consultancy Tasman Asia Pacific (now ACIL Tasman).

Ironfield's report, commissioned by the Australian Industry Group Defence Council and sponsored by the Victorian Government, the then-Defence Acquisition Organisation (now the DMO), ISONET and Tenix, stated that the project would see Australia's Gross Domestic Product grow by at least $3 billion and generate some 7,850 full time equivalent jobs among 1,300 Australian and New Zealand sub-contractors and suppliers.

The mechanism for delivering these benefits was the project's Australia and New Zealand Industry Participation (ANZIP) program which aimed to generate over 80 per cent local content, and actually exceeded this figure in some areas. This was based on a mix of 60.6 per cent Australian content, 11.7 per cent New Zealand content, 7 per cent Australian offsets and 1.5 per cent New Zealand offsets and amounted to $3.076 billion of the $3.807 billion prime contract value (at 1988 values).

The Australian program cost was $3.93 billion in 1988 values, or roughly $7 billion today. The total program cost, including the two New Zealand ships, was $4.366 billion at 1988 prices, the basis on which all costs and payments have been calculated throughout the duration of the project.

One of Tenix Defence's crowning achievements as a prime contractor and project manager was to identify and engage effectively 1,300 Australian and New Zealand suppliers and sub-contractors. The quality and schedule demands of the project ensured a level of self-selection: only those companies compliant with the necessary standards, or committed to meeting them, won work.

In return, they became more innovative, through their own R&D and access to foreign technology; they improved business and quality assurance processes; increased their competitiveness, and therefore export opportunities, as a result; and acquired skills and capabilities which opened the door to further defence opportunities in Australia.

The RAN benefited from the creation of a high-quality local support base which was estimated to save over $500 million in through-life support costs thanks to the proximity of local suppliers and contractors. Having a local supply chain also enhances readiness and sustainability - and it has made possible the various ANZAC Ship upgrades now being undertaken in-country by the ANZAC Alliance, providing a crucial measure of Australian control over the processes, costs and outcomes.

What other benefits from the ANZAC Ship Project are being captured and applied to future projects such as the Air Warfare Destroyer?

First, according to the CDRE Drew McKinnie, the DMO's DG Major Surface Combatants, the ANZAC Ship project built up confidence within defence, the Navy and the Government that Australia could handle and deliver major, complex defence projects.

Secondly, he told ADM, the project built up Defence's confidence that Australia's defence industry can adapt, build and support major, complex equipments. Hence, in part, the decision to build the AWDs in Australia.

Thirdly, within Defence and DMO, there has been a diffusion of explicit and tacit knowledge which is being applied to other projects such as the AWD. For example, CDRE Andrew Cawley, who heads the AWD Systems Centre, was formerly the ANZAC Ship combat system manager, while other ANZAC veterans are spread throughout the Navy, DMO, Capability Development Group and industry..

Tenix's turn-around of Williamstown dockyard has gone largely unreported: under Defence ownership the yard was a by-word for inefficiency and industrial unrest. Transfield bought the yard in the late-1980s and its transformation of the site and its workforce both strengthened for prime contractorship on the ANZAC project and helped it deliver on schedule and within budget.

As a result, Tenix is likely to be one of the most competitive bidders for module construction contracts for the AWD. And the design, construction and project management expertise built up during the ANZAC Ship Project have made it a competitive global player in the naval industry.

The company points proudly to its NZ$500 million Project Protector contract for the RNZN, which it won against global competition: it is building two offshore patrol vessels at Williamstown, three inshore patrol vessels at its Whangarei yard in New Zealand, and will fit out at Williamstown the RNZN's 7,500 tonne Multi-Role Vessel which has begun her sea trials in Holland. The first OPV will be launched at Williamstown in October or November this year, followed closely by the first IPV at Whangarei in November.

There was another benefit too, according to Peter Hatcher, CEO of ThyssenKrupp Marine Systems Australia. He told ADM: "As a direct result of the ANZAC Project, Blohm+Voss GmbH of Germany, the designer of the ANZAC Ships, established a ship design and engineering capability that is now operating successfully in Australia as the company Australian Marine Technologies, AMT. This company, which is owned 50 per cent by ThyssenKrupp Marine Systems Australia and 50 per cent by Tenix represents a significant increase in Australia's capability to develop and modify ship designs in country.

"For example AMT, as a subcontractor to Tenix, produced the complete design package for the modernisation of the RAN's new tanker, Sirius, and also provides design support to the DMO for a wide range of ship modification projects. In addition to supporting the Australian Department of Defence, AMT is exporting design and engineering support services to countries in the SE Asian region and regularly provides support to Blohm+Voss in Hamburg in the latter's larger projects for international customers."

There is no doubt the ANZAC Ship Project delivered benefits way beyond the military value of the 10 ships delivered to the RAN and RNZN. With a new defence industry policy review under way one of the hopes of Australia's naval and defence industry community is that these benefits will be acknowledged and will help shape the policy environment in which key decisions will be made in the future. Among these are the determination on where the Navy's new amphibious landing ships will be built, and by whom.

The ANZAC Ship Program is a gold mine of valuable data on the economic and industrial consequences of these decisions. It bears continuing and close study.

By Gregor Ferguson, Adelaide and Melbourne