Editorial: The definition of success | ADM Nov 2010

Katherine Ziesing | Canberra

Success can be defined as “an event(s) that accomplishes its intended purpose”.

So by that definition of what success means, let’s examine some of the projects in the land domain, both past and present.

Abrams tank: Australia was looking for a tank capability and bought one off the shelf that was delivered on time and on budget though it has yet to see operational service.

Outcome: success on many fronts.

Bushmaster: a locally developed and produced protected vehicle that took many more years in development than planned, cost more than we bargained for but saves Australian Defence Force (ADF) lives every day.

Outcome: success, once operational.

Land 40: the acquisition of a 40mm grenade launcher, which has turned out to be a choice between two overseas off the shelf solutions.

Almost three years after tender responses were received, a decision has yet to be made.

Outcome: yet to be determined, but tending towards failure.

Land 121 Phase 3: Medium/heavy vehicles to replace the Unimog, Mack and S-line fleet - running late after a massive refresh in 2007.

Some estimates calculate that for every week the project is late, a vehicle is lost in overrun costs.

Outcome: failure on both cost and schedule measures.

ADM looks at a wide range of land projects in our massive Land Warfare edition.

These projects and the capability they deliver help support ADF men and women on operations around the globe.

The most visible work being done by the ADF at the present time is undoubtedly in Afghanistan.

In the wake of former defence minister Senator John Faulkner visiting troops in mid-2009, a range of Force Protection measures were put in place to support their work.

“Australian troops now have access to more artillery and mortar support than they did a year ago, and they have access to ISAF attack helicopters and close air support from fighter aircraft when necessary,” defence minister Stephen Smith told parliament as part of the recent debate over the purpose of Australian troops in Afghanistan.

“The Force Protection Review, commissioned by the Government in July 2009, has led to a further package of measures and seen over $1 billion in new measures to further protect our troops.

“These protection measures are kept under constant review, and I have made clear the Government continues to in particular examine further anti-improvised explosive device measures.”

As reported in previous editions of ADM, the Force Protection package contained very little new funding per se but did move some critical projects to the left to bring them into service a lot quicker.

It also begs the questions as to why it took the minister seeing conditions on the ground to force action on the acquisition front.

And there is scope here to see the Tiger Armed Reconnaissance Helicopter (ARH) squeeze into this category.

Imagine what would happen to the various teams working on the acceptance schedule of the ARH (the re-baselined schedule to deliver the first operational capability to Army was achieved in September 2009, 27 months later than originally contracted) if word came from government that they have six months to get the ARH ready for an Afghan deployment.

It’s truly amazing what can be done once a government lights a fire underneath the right people.

Much has been made of the Rapid Acquisition process that sees all parties working together with tight budgets and timelines to produce solutions for men and women in the field.

This sense of urgency that drives these teams however seems to be lacking when it comes to many Defence Capability Plan (DCP) projects.

Why is this?

Reform after reform and review after review have seen Defence and the Defence Materiel Organisation (DMO) face massive levels of reform fatigue over the past decade.

Talk to anyone in senior management at DMO and confirmation that all is going according to whatever implementation plan you care to name (Kinnaird, Mortimer, Strategic Reform Program et al) is going exceedingly well.

But it’s a different story further down the chain.

Project offices are concerned that if they don’t spend their allocated funds, they will be taken away with little notice, leaving them short should unexpected issues arise.

The workforce seems to be less worried about their future as the DMO is set to grow every year for the next four years if the Budget forecasts are on target but there is still a sense of uncertainty nonetheless.

The DMO rightly points to the fact that the majority of their contracts are on time and on budget.

But looking to their list of complex projects, it’s a slightly different picture.

At the ADM Congress earlier this year, DMO CEO Dr Stephen Gumley shared some of these figures.

Of the 239 projects that have been closed over the past 10 years worth $27 billion, the total expenditure has been 98 per cent of the total budget for that period.

Of the 239 projects 60 per cent were under budget, 23 per cent were on budget and 17 per cent were over budget.

A breakdown of which projects fell into the concerning category (and why) can be found in the latest ANAO Major Projects report and makes for illuminating reading.

There are successes to be found in Defence procurement and sustainment.

But there are also failures.

And rarely can the finger be pointed at a single moment or decision where it all went right or wrong but the moves to make Defence more accountable in this regard are very welcome.

The business case for doing defence business here

Gregor Ferguson | Sydney

Who’d want to be working in the British defence industry at this time?

Or, for that matter, in the American or French defence industries?

The eight per cent budget cuts announced last month by British defence secretary Liam Fox will see two entire capabilities – the RAF’s Harrier Force and its Nimrod maritime patrol aircraft – retired without a replacement.

Along with those aircraft will go the servicemen and women who operate and maintain them and a massive industry base providing engineering, training and maintenance support.

The US and France face a similar financial reckoning some time in the future.

With the new 10-year Defence Capability Plan (DCP) scheduled to appear before the end of this year, it’s clear that Defence in Australia still has a relatively coherent vision for its equipment and capability needs over the next 15-20 years (noting, of course, that the DCP is subject to change in response to unforeseen contingencies).

It’s worth putting some numbers on a few components of the DCP.

At the time of writing it was still the case that Navy will acquire up to 12 submarines, at least eight Future Frigates and up to 20 Offshore Combatant Vessels (OCV).

That amounts to 40 separate platforms with a total deadweight of 136,000 tonnes and a likely greater than $50 billion.

Given the OCV will likely consist of major variations on a common theme, the design effort must embrace three different platforms, one of which will cover two or three significantly different mission areas.

Similarly, Project Land 121 Phase 4 will acquire up to 1,300 Protected Mobility Vehicles-Light.

Coming soon after Land 121 Phase 4 will be Phase 5 and then Project Land 400.

Phase 5 aims to acquire up to 2,000 relatively soft-skinned vehicles of a similar performance and payload to the PMV-L; depending on who wins Phase 4, synergies between this and Phase 5 could create a vehicle program amounting to over 3,000 examples.

Meanwhile, Project Land 400 will see the replacement of around 1,300 M113s, ASLAVs and Bushmasters.

Aggregating all of these projects we see a potential domestic market for well over 4,000 specialist military vehicles of varying degrees of armour protection and mission payload sophistication.

Turning to the aerospace domain, the major program, which could transform the economics of Australian industry involvement in aerospace programs, is the Joint Strike Fighter (JSF) program.

The RAAF plans to acquire up to 100 of these aircraft (out of a possible global total of 5,000 plus), and the project’s industrial program is designed to provide participants with whole of program opportunities, though not unconditionally.

Australia’s level of commitment to the JSF – let’s be blunt – doesn’t command a massive share of the program in return.

But the nature of the manufacturing opportunities open to smart, cost-effective local companies could see contracts worth several billions of dollars coming this way, according to the prime contractor.

The JSF won’t be built in Australia, but it may not be possible to build it anywhere else to the price and levels of quality demanded by its customers without the contribution of smart Australian manufacturers.

What do these examples have in common?

Critical mass: between them they represent an aggregation of potential domestic and export customer demand which Australia’s defence industry hasn’t seen since the 1980s and 1990s.

Defence keeps a very close eye on its bottom line.

It is risk-averse and tries to spend its money carefully.

But the sheer volume of its demand for aircraft, military vehicles, ships and submarines provides economies of scale which haven’t been within reach of Australia’s defence industry for half a century or more.

Only a blind optimist would imagine for a moment that there’s an uncontestable business case for designing and building all of these ships, submarines, aircraft parts and vehicles in Australia, but there’s a unique, unrepeatable opportunity here for industry to argue a reasoned case based on value for money, capability and self-reliance.

A case, moreover, which satisfies the intent of the 2010 Defence Industry Policy Statement.

It is an argument to which Defence must listen carefully.