Sustainment: Batching model moves ahead | ADM Sep 2010
As announced in the August edition of ADM, the Federal Government has named the industry teams that will be invited to tender for long-term contracts for the repair and maintenance of Navy’s major fleet units.
Katherine Ziesing & Gregor Ferguson | Canberra & Sydney
The new arrangement will affect the maintenance and repair of the Navy’s eight Anzac class frigates, four Adelaide class frigates (FFG), two Amphibious Landing Ships (LPA) and the Heavy Landing Ship (LSH); it will likely also include the Navy’s replenishment ship (AOR) HMAS Success once she returns from a planned refit.
Defence currently spends about $150 million a year on maintenance and repair for these ships and is seeking to harvest a significant saving over the nominal five-year life of the new contracts.
The intention is to seek rolling performance-based contracts in the longer-term.
ADM understands that the initial five-year performance-based contract is a nominal timeframe that may change as negotiations with contenders are pursued.
“These reforms will provide business with greater certainty, workers in the industry with greater job security and will play a key role in the delivery and support of naval capability,” minister for defence materiel and science Greg Combet said at the announcement.
The industry entities that will be invited to participate in the respective Request for Tender processes are:
• For the group comprising HMA Ships Success, Manoora, Kanimbla and Tobruk (homeported at Garden Island NSW): ASP Ship Management, BAE Systems, KBR/Rolls Royce, Babcock/UGL Infrastructure, Forgacs/Teekay, Thales, and DMS Maritime/Transfield.
• For the group comprising the four Adelaide class frigates (homeported at Garden Island NSW): BAE Systems, KBR/Rolls Royce, Thales, and DMS Maritime/Transfield.
• For the group comprising the eight Anzac class frigates (split between Fleet Base West and Garden Island NSW): BAE Systems, Babcock/UGL Infrastructure, Thales, and DMS Maritime/Transfield.
Combet said this initiative offered the opportunity to further transform Australia’s naval ship repair sector.
“It will provide industry with greater certainty of work effort, thereby providing incentive to develop the workforce and invest in necessary infrastructure,” Combet said.
“In so doing, Defence will realise lower costs in the repair and maintenance of its major fleet units.”
As readers can note from the list above, not all the short listed contenders have their own drydock or ship repair facilities.
These players no doubt will be making of Common User Facilities (CUF) where available (such as Techport’s CUF in Adelaide and Australian Marine Complex’s CUF at WA’s Henderson yard) or lease type arrangements.
Though how this CUF approach will fit in with the preference for work to be done near home ports, a concept that Navy has no plans to change at this time, remains to be seen.
Home advantage?
The new arrangement will lead to the ‘batching’ of Defence’s maritime sustainment requirements, based on ship class and/or the home port for the ship (currently Fleet Base East at Sydney’s HMAS Kuttabul and Fleet Base West at HMAS Stirling).
If implemented successfully, the new Major Fleet Unit Repair and Maintenance program could help Defence achieve a number of important goals: reduced costs (in line with Strategic Reform Program expectations), an up-skilling of Australia’s defence industry and the establishment of a robust and more efficient industry support base for the RAN.
Industry should benefit also - or at least, the successful bidders will benefit: bidding costs and the delays and inefficiencies associated with tender evaluation would be drastically reduced; start-up and wind-down costs for discrete tasks would be reduced; continuity of work would encourage greater investment in both skills and infrastructure; and better visibility of future workload enables greater efficiency in the allocation of resources, especially if the customer can afford to be flexible in some of his scheduling decisions.
Multi-year batched maintenance of these major surface ships under performance-based contracts is expected to deliver savings in the order of $12-$15 million a year, or up to 10 per cent of their current annual maintenance and repair costs.
The second issue bears directly upon national self-reliance: maintaining a cost-effective industry capability to sustain the RAN’s surface ships.
This has given rise to a Priority Industry Capability (PIC): Ship Dry Docking Facilities and CUFs.
Defence describes this PIC in the following terms: “These capabilities are required for ongoing support and maintenance of our naval capabilities, but more important is the need for these capabilities to be available in a conflict for battle damage repair.
“This includes the provision of ship dry docking facilities on both the east and west coast and for patrol boats in northern ports.
“It also includes the common user facilities for shipbuilding and repair.”
Support structure
Defence considers very carefully before paying any sort of premium for locally-produced equipment or for sustainment of local industry capabilities.
To the extent that the availability of efficient and proficient docking and repair facilities depends upon the financial health of the contractors operating them, a ship repair and maintenance program which maintains the health of this industry sector without requiring any direct or indirect financial support from Defence would seem to be a very positive outcome.
Defence sources have said it is too early to speculate on the future of the Garden Island dockyard in Sydney.
Thales’ lease on the yard and drydock there expires in 2013, after the current tender closes, which means it has an effective monopoly on naval support facilities around Fleet Base East and HMAS Kuttabul.
Industry thus far has been supportive of the approach that would see more certainty over time in the ship support sector.
Industry sources have said that the afore mentioned annual savings goal is achievable.
But it also means that the companies that fail to secure a batching contract that may have previously relied on Defence work will have to have to overhaul their business models to reflect the change.
ADM also understands that future fleets, such as the AWD and LHDS, will also be supported under a similar batching arrangement should the initial contract model prove successful.
The cost of corrosion
The high cost of corrosion continues to be a major challenge for mining, defence, manufacturing and general industry.
An extremely difficult issue to manage, corrosion continues to present a highly intrusive and disruptive cost impost to business and supply chain operations.
“Years of internal solutions and a reluctant but passive acceptance can lead to a culture that affects the entire business from morale through to company image - culminating in customer complaints,” Roger Till, managing director of Integra Packaging said.
“Traditional approaches have included some that would not meet current safety requirements and a perception of corrosion as an ‘inevitable cost of doing business’ have seen costs justified in financial accounts.”
Integra maintains that the effect of continuing with traditional high-cost-remedy protocols can be as much as 20 per cent of product cost.
An inherent knock-on effect can flow through supply chain, risk management, asset protection, warehousing/storage and ultimately, inefficiencies in attempts to refurbish affected products and materials.
Intercept Technology, developed by Lucent Technologies and Bell Laboratories in 1984, is patented world-wide.
Highly porous copper particles are permanently embedded in a plastic matrix (wrapping material) and react with all corrosive gases and elements.
The technology was designed to protect all materials under all environmental conditions equally. Anti-corrosion protection is effectively enhanced against moisture, mildew, static and UV effects.
In one particular case study, VW in South Africa will use Intercept 2 on engine blocks from 2010 onwards.
VW was able to avoid mineral oil coatings for corrosion protection, saving six litres of mineral oils and avoid carbon emissions of 15 tons annually by using Intercept 2 products.
The savings were proven during the implementation process and will be complemented by further savings in the countries where the engines and blocks are shipped.
Integra Packaging also points to critical protection tasks for highly sensitive projects including:
• Raytheon - in conjunction with CSIRO on behalf of NASA; packaging for a radio telescope
• Kaman Aerospace - 10 Super Seasprite military helicopters protected for voyage to from Australia to US
• Step Electronics - effective solution for the protection of deployable satellite antennae
• Bucyrus - a 90,000kilo mining machine packaged for travel by sea and rail to Siberia
• Herrenknecht - packaging for Brisbane Bypass Project tunnel borers shipped to Germany
• Siemens - electrical switchboards packaged to survive long-term storage in New Guinea
• Terex Jaques - gearboxes and guards protected for shipment and storage in Ghana