Defence has released a Request For Tender (RFT) to industry for the future sustainment of the Navy’s two Canberra-class LHDs and 12 LHD Landing Craft (LLC). The model is based around an asset management-based approach to maintaining the capability of the platforms.
From the Navy’s surface fleet perspective at least, this is also intended to align its support organisations across the fleet. It’s aiming to build on the experiences and lessons learned from other Defence and best-practice thinking, such as the Anzac-class Warship Alliance Management Agreement (WAMA), a strategic partnership between Defence and industry which has been in place for some time now.
The new sustainment model will take over from the existing contracts with Prime Contractor BAE Systems Australia for the LHD and UGL for the LLC, which was an interim arrangement negotiated as part of the project JP2048 Phase 3 & 4 acquisition programs.
The transfer of LHD sustainment to a long-term performance-based contract is leading the way in achieving the best realisation of Defence reform outcomes, seeking engagement with industry to plan, manage and undertake sustainment and support of the asset class in the long-term.
The new LHD sustainment contract will be for an initial five-year period, with two five-year extension options, based on the ongoing performance of the winning bidder.
Current status
The two LHDs are currently performing very well in service with the Navy and both have been at sea for significant periods in recent months.
One of the challenges with designing a long-term sustainment regime for the LHDs is that the RAN is unique in the manner they operate them, compared with that of the Spanish Navy’s Juan Carlos-class ships, from which they are derived.
“We are learning more every day through our engagement with Navantia, as the designer and other unique suppliers (original equipment manufacturers), but the Armada usage is very different to the RAN’s, and we are seeing things in the supply chain that they either haven’t seen, or didn’t impact on them operationally,” CDRE Elliott said to ADM. “Their usage upkeep cycle and support arrangements are also quite different to our own. We’re working with Navy to make sure we can match that against the government’s tasking requirements and Australian industry capabilities.”
The two ships are currently sustained by an industry consortium known as the LHD enterprise, with BAE Systems Australia as the prime contractor. In addition, BAE Systems provides maintenance and planning support, with most sustainment functions performed at Fleet Base East in Sydney, home port of the two LHDs.
While most of the LHD sustainment work is performed at Fleet Base East, there is some work performed around Australia from time to time as the ships are deployed away from Sydney. Both the current contract and the future document take this into account. BAE Systems were the acquisition agency for the two ships under JP2048 Phase 4 and the initial sustainment contract is due to expire in 2019.
“The current model was only ever intended to be a transitionary support arrangement and therefore it doesn’t include all of those things you would require for a long-term, enduring asset stewardship-type contract,” explained LHD System Program Office (LHD SPO) Director, Captain Brad Smith to ADM. “Elements such as asset management, continuous improvement, routine engineering tasks and long-term performance measures are not built into the original contract, because that was a transitionary contract out of the acquisition phase when the ships entered service.”
At the present time, LCC sustainment is performed in the Sydney region via a separate maintenance support contract between the Commonwealth and UGL.
“We’re transitioning that into the future LHD contract, which brings they two capabilities together,” CAPT Smith said. “The desired outcome for us is to bring capability together where it best suits and reduce overheads.”
Future model
With the current contract set to expire in 2019, Defence is undertaking an open-market contracting activity for future LHD sustainment. The desired outcome is to maximise the knowledge and expertise in industry, enabling Commonwealth resources to be focussed where they are most needed and creating clearer lines of accountability and responsibility between the participants.
By providing long-term certainty in the contract term, the idea is that industry will be better placed to invest in staff, infrastructure and specialist skills to support the National Maritime Enterprise objectives of Government. CAPT Smith says deep engagement between industry and Defence will enable greater knowledge transfer to Defence, supporting the Smart Buyer outcomes of CASG.
Ultimately, he says the future model is seeking to reduce costs over the life of the assets, deliver against performance targets and provide an agile support system that is able to rapidly adapt and adjust to a dynamic maritime support environment.
One of the overarching principles of this new arrangement will be to let industry take the lead in sustainment of Navy’s surface combatant fleet.
“The model was developed through the Smart Buyer process which the Commonwealth began in 2017 and is the result of workshop activities between different stakeholders to determine what the best model would be for the LHD assets moving forward,” CAPT Smith said.
Working through the Smart Buyer process, the team identified a number of high-level supplier engagement model requirements which has formed the basis of the future contract. Included in these were that the model was sufficiently resilient to provide ongoing and efficient sustainment over the life of type of the LHDs and that it aligned with the directions of major reform programs within Defence such as the First Principles Review.
“We also needed to deliver the outcomes of the existing Materiel Sustainment Agreements (MSAs), we needed to provide a structure that provides accountability and fosters a collaborative environment, to maximise efficient and effective sustainment and that the transition to the future model needs to occur with minimal risk to the availability, cost and performance of the assets,” CAPT Smith explained to ADM.
Given that the key performance indicator for the Navy is how many days a platform is available for sea over a given period, one measurement of the success of the new model will be assurance from the LHD SPO that the Fleet Commander’s required Material Ready Days (MRDs) can be met.
“There are a number of metrics that will be defined and industry is participating in this process. It will be a performance-based contract with its own measures of success, in terms of key performance indicators,” CDRE Elliott added. “Ultimately what we’re looking for is a long-term partner that’s vested in the asset, with a platform steward outcome focus. And of course we’re looking for a reduced total cost of ownership over the life of the platform.”
Request For Tender
The timeline for the introduction of the new sustainment contract is quite tight, with the transition period scheduled to begin early next year, however the team has been engaging with industry for some time, including an invitation to register interest (ITR), which was followed by an eight-week period of consultation to determine best practices within industry, and this has subsequently been used to inform the RFT.
The RFT itself was released to industry on August 2 and the successful bidder will be announced during the fourth quarter of this year.
“It is a tailored RFT phase, to make sure that it produces the best outcome for us and is the best use of both Commonwealth and industry resources to produce that outcome. It is written acknowledging that many of the traditional RFT artefacts need to be delivered collaboratively,” CDRE Elliott said. “Thus the volume of plans mandated in traditional RFTs has been removed and we’ve done some things in there in terms of trying to reduce the cost of going to tender.”
The contract has been written as a long-term document which is intended to drive efficiency, but also to add some certainty for industry. The initial contract will be for five years but, as noted earlier, there are two extension options – each of five years – which can be awarded subject to satisfactory performance.
This article first appeared in the October 2018 edition of ADM.