Military Logistics: JSF - industry opportunities and challenges

1 June 2007

By Ken Peacock

With the JSF PSFD MoU signed and production just about to get under way, Australia's aerospace and defence industry is wondering what's in it for them in the production phase of the multi-billion dollar project.

When the Australian government signed up to the Production, Sustainment & Follow-On Development (PSFD) phase of the JSF Program in December 2006, it opened up opportunities for Australian industry potentially valued at billions of dollars.

These opportunities are outlined in industrial participation plans developed by the JSF prime contractors. The plans, based on their assessment of the capabilities of Australian industry, were submitted to government to encourage Australia's participation in the next phases of the Program.

While the focus has been on the potential headline value of the work earmarked for Australian industry, too little has been said about the positive impact it could have on Australia's aerospace and associated industry and the nation's economy for the next 30 years or more.

Australia's participation in the Systems Development and Demonstration (SDD) phase of the JSF Program has already provided unprecedented early opportunities for Australian industry, with 22 companies winning in international competition contracts valued in excess of $140 million, with additional significant follow-on opportunities in the production phase.

The work won to date and the work selected for Australian companies to bid for in the production phase, is high-quality work based on new technology and manufacturing processes, which will create new jobs for highly skilled Australians in the manufacturing industry.

The total output will be exported from Australia to the USA and UK as high value manufactured goods. If successful, Australia's participation in the global supply chains of the JSF primes and their major sub-contractors will shape the local aerospace industry for many years to come.

To date all of the contracts secured in international competition have been won on the basis of 'best value', a key principle behind maintaining JSF Program affordability. Successful participation by Australian industry in the JSF global supply chain for the life of the Program - on a 'best value' basis - was one of the considerations by government in signing the PSFD MoU.

The key words in the above paragraphs though are 'potential' and 'opportunities'. While we should welcome the millions of dollars worth of work won by Australian companies, the challenge ahead is to ensure that the 'potential' and 'opportunities' are converted into long term contracts, especially those that come with the billion dollar price tags.

The government is working with Lockheed Martin and its JSF partners, and Australian industry to help them realise the industrial participation opportunities in the JSF Program because it was one of the benefits promised by the primes for Australia's investment in the Program.

Government closely monitors the results and has made it clear that it expects to see more industry 'runs on the board' prior to Second Pass Approval, planned for late 2008.

To make this happen, government and industry are continuing to work together as JSF Team Australia to turn opportunities into contracts and to build upon the work and lessons learned from the SDD phase of the Program.

The JSF Team Australia approach has provided unparalleled support for Australian industry and is a model for other programs. Becoming part of the primes global supply chains helps ensure that Australia has the in-country capability to support its key defence assets, and opens up further opportunities in other US defence programs.

Both outcomes are consistent with government's 2007 Defence and Industry Policy Statement.

The JSF Industry Advisory Council (JIAC), a joint government and industry advisory body, encourages collaboration between Australian companies to secure the major opportunities detailed in the industrial participation plans.

It also recognises that substantial new capital investment will be required by local industry, including in new processing capability and capacity, which is critical to maximising local work share.

Government and the JIAC are working with Lockheed Martin to develop ways to improve the business case for capital investment by Australian companies. It is essential that Australian industry has confidence that it will see a satisfactory return on its investment, and this can be achieved through the development of long term partner relationships with the JSF primes and their major sub-contractors.

Our view of the capabilities of Australia's aerospace industry is relatively simple. We know that Australian companies can be internationally competitive when given a fair opportunity to compete. We are equally aware that there is still much to be done to ensure that Australian industry has the capabilities necessary to provide the in-country support for the JSF.

For the follow-on development phase, which will extend for the life of the JSF Program, Defence is working with leading Australian universities, other R&D organisations and industry to explore the opportunities for new technologies and processes for local industry to further participate in the next phase of the JSF Program.

It is important to recognise the considerable achievements to date by Australian companies in becoming qualified as suppliers to the JSF Program.

Australian aerospace design capacity is experiencing a significant 'brain gain' from local industry's involvement in high-value work on the JSF Program. With up to 200 engineers working on the JSF, Melbourne-based GKN Aerospace Engineering Services has designed a substantial part of the JSF airframe.

It is the largest airframe design engineering contributor to the program outside the three international prime contractors - Lockheed Martin, Northrop Grumman and BAE Systems.

Since its first JSF contract in June 2003 - the first awarded to an Australian company - GKN has designed some 3,000 JSF parts and provided over 1 million design man hours to the Program.

The 200 engineers, a mix of local graduates, experienced Australian expatriates and new migrants, represent an in-country support capability with an in-depth knowledge of the aircraft design and design philosophy, and access to the engineering toolset and engineering data unrivalled in recent Australian history.

Marand Precision Engineering, also located in Melbourne, was another of the local companies to win early contracts for the system design and development phase of the program.

In June 2003, Lockheed Martin announced that Marand was the first company in the world to receive a contract for the design and development of ground support equipment for the JSF Program.

It also played an important role in supporting Lockheed Martin in Fort Worth, Texas with its first flight of the JSF by designing and manufacturing the complex ground support equipment that is needed to remove and install the F-35 engine.

Marand is a good example of how Australian small to medium-sized enterprises (SMEs) with established links in non-aerospace sectors have been able to diversify into the manufacture of aircraft components as a result of the JSF Program.

In early 2004, Lockheed Martin contracted a senior automation consulting engineer from Marand into their Palmdale facility in California and remains interested in Marand's various unique robotic automation production solutions, similar to the equipment already in use by the Ford Motor Company in its two Australian plants.

Both GKN and Marand quite rightly say that the JSF Program has had a significant impact upon their business and is likely to continue to deliver benefits long after the direct association with the JSF Program is complete.

The JSF's weapons bay uplock actuators are being manufactured by Sydney-based Goodrich Control Systems (Aust). Goodrich has received a Letter of Intent to manufacture the actuators for the JSF's full production run, potentially involving more than 10,000 units.

This success has opened the way for GCS to bid for JSF downlock and retract landing gear actuators for each of the three JSF variants.

Some other Australian companies that have been successful in securing valuable contracts on the JSF Program or have major opportunities in the production phase include Production Parts, Lovitt, Ferra, Rosebank, Cablex, BAE Systems, Adacel, Micreo, Varley, Levett, Vipac, Hawker de Havilland, Broens and Metaltec.

Others will be added to the growing list of companies going from 'opportunity' to contract for the production phase of the program and many more included for the sustainment phase.

The ultimate success of Australian industry on the JSF Program will depend on the resolve of the JSF primes to implement their industrial participation plans for Australia, on the capability and capacity of individual Australian companies to actively pursue the opportunities and provide best value solutions, and on government continuing to provide support through its JSF Team Australia approach.

All parties will need to work together with the common goal of a long-term business relationship between Australian industry and the JSF primes to get some more runs on the board. A successful outcome will transform Australia's aerospace industry and provide high skill job opportunities and exports well into the future.

Ken Peacock is a former Chairman of Boeing Australia Ltd, and Chairman of JSF Industry Advisory Council.