Mr Merv Davis, AM, Managing Director, Saab Systems Pty Ltd

Merv Davis is Managing Director of Saab's Australian operation, Saab Systems Pty. Ltd., and Vice President of Saab's global naval operations in the Saab Systems business unit. He assumed his current position in 2003 after a distinguished career in the Royal Australian Navy which included several sea-going appointments and the roles of Combat Systems Manager of the ANZAC Ship Project, Project Director of the Minehunter Coastal project, and inaugural Commander of the Australian Navy Systems Command. He spoke to ADM's Senior Correspondent, Julian Kerr, in April.
Profile - Merv Davis
1991 ANZAC Ship Project Combat Systems Manager
1994 Project Director, Minehunter Coastal
1999 Commodore; Defence Reform Program review manager
1999 Commander, Navy Systems Command
2003 Managing Director, Saab Systems Pty Ltd

ADM: How and in what directions has the Australian company grown since its establishment in 1988?

Davis: Saab Systems Pty. Ltd. was established on the back of the ANZAC ship project and Saab's contribution of the Command and Control system for those ships as well as combat system integration services with Tenix. It was a great beginning for the company; it established a foothold and a reputation for us as a clever company, very proficient in the command and control business. We've been able to move on from a large engineering program like that into command support systems for Army, tactical systems in support of short-range air defence for Army, and the provision of in-service support to Navy. We've also brought on some new and innovative contracting arrangements with the customer, looking to provide mechanisms where there's a stronger sense of partnership and commitment to program or project goals. So we've diversified both in style and content to a company that last year turned over about $140 million and has the best part of 300 people on the books. We envisage a steady growth in that number over the next year or so.

ADM: What's the commercial relationship with the Swedish parent corporation? Do you have access to parent company IP? How is this accounted for?

Davis: We're a wholly-owned subsidiary of Saab. We're technically part of the Saab Systems business unit, and so we're part of Saab's greater Systems capability. In that sense, it's as if we're one company. We contribute to the intellectual pool and benefit from it, it's a resource for use within the company, to the customer's benefit.

ADM: You have managerial responsibilities beyond Saab Systems in Australia. What are these, and how do you handle the workload?

Davis: First and foremost I'm the Managing Director of Saab Systems Pty in Australia and responsible for Saab's activities in Australia and New Zealand. I'm also Vice-President of Naval Systems within the Saab Systems business unit so I have operational responsibility for naval systems division business activities in Sweden, Australia, New Zealand, South Africa, and Finland. All those countries we refer to as home countries. So with the business unit management team I set the strategic direction for the Naval Division, exercise operational oversight, and am responsible for ensuring that the organisations develop in a way consistent with the overall business unit strategy while contributing to the development of the Saab Systems business unit strategy.

I also have a role as part of the Saab AB management team, looking at and considering issues of overall Saab strategy. So it's a strategic and operational role, with P&L responsibilities, for all naval systems activities in the countries I cover. I've got a great team, people in each country who know their business, so you can handle things with a light touch. There's still an awful lot of travel and commitment to time overseas, but it's a worthwhile endeavour. It's a good company, good values, good relationships and commitment to customers.

ADM: Saab has a strong reputation for R&D. What percentage of turnover is spent on R&D by the Australian operation, and in what areas?

Davis: At the business unit level it's about 2.5 per cent of independent R&D. If you dig inside the projects and look at what's being done as part of that, including investment by the customer, the number grows quite quickly into the high teens, approaching 20 per cent. Across the Saab group now there are increased levels of funding for collaborative activity. In Australia we're always keen to take the product forward and we're developing further the current Combat Management System (CMS) aboard the ANZACs. That's always a key focus for us; how can we more cleverly provide additional functionality to the warfighter, how can we reduce costs of ownership, how do we integrate it with air and land systems to provide the ubiquitous network that we seek? We've put a lot of effort into our relationship with DSTO, looking at simulation and modelling, and that's proved very useful for us.

ADM: What's the status of work being undertaken by Saab and DSTO under the Capability Technology Demonstrator contract on battlefield communications?

Davis: We have a very productive relationship with DSTO. The Land side is not as mature as Naval but it's growing. We did some work with them looking at communications across the battlefield, trying to address the challenge of widespread forces with limited bandwidth and connectivity having to move information around in a way that met the Command's requirements. We did some interesting work using Aerosonde to establish its capabilities for radio relay. We continue to work with DSTO to take further, things like BCSS (Battlefield Command Support System) and tactical support to Bolide missiles.

And on the naval side, it's a very rich relationship built around modelling and simulation. The simulated ANZAC Combat Management System within DSTO regularly contributes to any number of their experiments.

ADM: What role is Saab Systems playing in the ANZAC Ship Alliance and what work is currently being undertaken?

Davis: You can envisage the Alliance as a notional company with the Commonwealth, Tenix and Saab as the three members. It has a very definitive culture that heavily influences how it acts; there has to be unanimous agreement and a no-blame culture and an absolute commitment to delivering the projects in the interests of the owner, the Commonwealth. It's an interesting variation on traditional contracting and it's been extremely successful. We sit on the Board and oversee its management, we contribute people to the Alliance office where activities are managed, and it has delivered some outstanding results. Recently ADM recognised that in the context of the Harpoon project, seeing it as the best-managed project of its type.

We've very successfully put in place technical regulatory frameworks and generally delivered great value to the customer. Harpoon missile installation is being rolled out across the Class, the Mine and Obstacle Avoidance Sonar is also being installed and ANZAC Anti-Ship Missile Defence Upgrade Phase 2A is happening. Phase 2B with the CEA phased array radar is the next element of that project. We've just put a Combat Management System upgrade into Ship 10. There's an enormous amount of work going through this organisation; it's a success story and one which has only recently been recognised as such.

ADM: What work, if any, is being carried out by the Alliance on the two Royal New Zealand Navy ANZACs?

Davis: The Kiwis are always keen to understand how they can get best value for money. We're assisting them to understand what their capability development requirements are and either, potentially, through the Alliance or through some other delivery mechanism, I envisage they will upgrade their ships to overcome obsolescence on the one hand, and to give them the capability they require into the future on the other.

ADM: Saab supplied the integrated ship control management and monitoring systems for the Collins-class submarines. Do you hope to do the same for the Air Warfare Destroyers and the new LHDs?

Davis: Our prime interest is in supporting the Collins-class and ensuring the customer gets what it requires. We'll continue to work with the customer to develop upgrades to overcome obsolescence, or any additional capability required, and that's very much the subject of ongoing discussions with ASC about how the in-service support contract is going to be applied to us. It's premature to speculate quite how the AWD design will pan out, but if there's an opportunity to apply this technology there we'd be only too keen to do that.

With the LHDs, it's hard to tell at this stage what the real opportunity is but we're very keen to be involved. Our CMS is one of those to be considered by the Commonwealth in the offers of both primes, so we're working closely with Tenix and ADI to allow them to put the best bids forward. With the AWDs, we weren't successful in the combat systems engineering activity but we remain, as always, dead keen to contribute as best we can with Raytheon or whoever. The LHD is our real focus and the opportunity to put an ASMD (anti-ship missile defence) combat management system on the LHD would bring benefits to capabilities and commonality with the ANZACs. It would lower through-life costs etc and, I think, offers an extremely attractive solution to the Commonwealth.

ADM: Given your international experience and responsibilities, how do you envisage the rationalisation of Australia's naval shipbuilding industry playing out?

Davis: There's an inevitable rationalisation taking place internationally. Fewer and fewer platforms are being sought and more and more players are coming onto the market. The Australian position is clearly underpinned by a complex set of arguments ranging from a national determination to prove we can undertake large, complex programs and meet issues of technology transfer, right through to the dry economic argument about the costs and benefits of construction and subsequent through life support activities.

My personal view is that on balance, there's been enough evidence with the minehunter and ANZAC programs to suggest there's a very strong argument to continue local production. It is in many ways a question of demand management so that you can sustain this [naval shipbuilding capability] and the benefits that accrue to it. And I also think there is real benefit for the customer in having shipbuilding undertaken right alongside system development.

ADM: Turning to Land matters, what's happening with the Battlefield Command Support System (BCSS)?

Davis: BCSS is at a very exciting point in its evolution. We're developing quite a good relationship with Northrop Grumman in the context of Projects Land 75 and Land 125 and we see ourselves strongly supporting the Chief of Army in his pursuit of a hardened and networked army, building on our experience while bringing forward Northrop Grumman's great products. Our customer's knowledge of us and their product as used operationally in the Middle East make the collaboration very attractive.

It really does offer "best of breed" out of the United States and Australia, and I'm looking forward to that competition and being able to roll that out.

ADM: Software V.9 of the BCSS is reportedly going to tender instead of being rolled over to Saab as a matter of course. Why?

Davis: This could be seen to be largely philosophical on the one hand, and practical on the other. It's a reasonable action on the part of the customer to say, "Look, every now and then I need to market test this to make sure I'm getting value for money". We're about to embark on the road map for addressing the hardened and networked army challenge that Chief of Army has put out and we want to make sure we're in the best position to do that. I'm not concerned by the competition. I think the nature and the scale and the significance of this type of the business has increased significantly and this is sensible for the Commonwealth to do.

ADM: What work is Saab Australia undertaking on the Soldier Combat System?

Davis: We've been very interested in this for a long time. We've been involved in Land 125 experimentation with the Commonwealth over recent years and we've got a plan to develop the capability which, when combined with BCSS and BMS, again addresses the total requirement for command and control across the battlefield. So we've always seen it as the soldier's end of the system that connects through vehicles, through command headquarters, ultimately to joint command and national levels. In many ways, you can see this as an ever-increasing core capability; the simpler end with the soldier - where am I, where's the enemy - and making sure that friendly forces know where he is, right through to much more sophisticated military appreciation processes supported by messaging and greater situational awareness at various headquarters.

ADM: What's happening with your Battle Management System R&D project? You appear to have some heavyweight competition.

Davis: That's the core of Land 75 Phase 3.4. In effect we can think of it as a tactical subset of BCSS. As I mentioned, we've now developed a very good and professional relationship with Northrop Grumman and we're able to draw, not only on each other's product and systems and integrate them to the best effect for the customer, but more importantly, to draw on each other's intellectual property - thinking and innovation - to put together a solution which will please the customer. The competition is stiff, but we can pull together the best from Northrop Grumman and Saab and combine it in such a way that it does exactly what the customer is asking for.

ADM: On the same issue, Saab's alliance with Northrop Grumman does not include exclusive access to some of their excellent battlefield communication products. This being the case, what's the benefit of entering into such a relationship?

Davis: That's true, in the same way that Northrop Grumman doesn't have exclusive access to our BCSS IP. What we're trying to do here is that regardless of the outcome, the customer has access to those elements that are essential to the selected solution. We've agreed - and Northrop Grumman are very happy - that if they need to provide product in support of other bids, that's fine. But as I mentioned earlier, I think the value in our bid is our intellectual contribution to the solution that sits over and above a particular product. It enables a solution to be developed from soldier right back to joint command.

ADM: What's the state of play with the $30 milllion Bolide missile/RBS70 project?

Davis: Deliveries of Bolide are now underway and we expect the first customer firing early in the third quarter of this year. That'll be a world first. In fact there's some talk about an international shoot-out between the users of this weapon.

With Bolide and Land 19, Army will get a very effective short range air defence system, and one that can be integrated into the broader network.

ADM: Given the increasing concentration of defence industry in South Australia and the anticipated demands of the Air Warfare Destroyer program, what difficulties are you having or do you forecast, in retaining and recruiting appropriately qualified staff?

Davis: That's one of the subjects close to everyone's hearts at the moment. There is a view that there is a skills shortage, largely driven by a very upbeat minerals sector. We've noticed that it's getting tight in the West. In Adelaide we're forever watchful. The AWD systems centre is coming here and that will demand something in excess of 200 people. That's something on which industry and the Commonwealth are going to have work together to ensure we don't get unwanted outcomes in terms of spiralling increases in wages while "Peter robs Paul" for no overall gain. On the other hand under the SADI (Skilling Australia's Defence Industry) program, with ASC and BAE Systems and the University of South Australia we've put together a Masters degree in military systems integration as one of the many measures that will be necessary to counter the shortfall and we'll looking to do other things in the future to contribute to skills development.

ADM: Could Saab Australia be shut out of certain US-linked programs because it's owned by a European and non-NATO parent?

Davis: To be frank, the answer is both yes and no. The no answer is that in the course of tendering for the combat systems engineering for AWD, we were assured that we could have undertaken that role. So there was no notion that because we were Swedish-owned we could not compete for that role. The broader issue of competition between European and American industry introduces a whole range of other complex issues - including issues of strategic influences driven by high-level international relations that express a preference based on interoperability or the need to reduce risk. But I think that the real point here is that our contribution gives the customer choice. In that case I'm comfortable to compete, knowing that in some cases, for example the Aegis system in the AWD, we don't have the capabilities that our customers seek.

ADM: What will Saab Systems Pty Ltd be doing in 10 years time?

Davis: We'll be here, we'll be larger, we'll be a lot more diverse, we'll have a larger presence in the air domain and we'll have a presence in the civil security market - I think that's an area of great opportunity for us. We'll have broadened Land and Naval business into adjoining sectors, and we will continue to develop strong relationships with the likes of Northrop Grumman and our customer to ensure that, above all else, we pull together those elements that give us good solutions.