Since the Domestic Munitions Manufacturing Arrangements
(DMMA) was last covered in depth in ADM in October last year, a few
developments have occurred. The field of six has narrowed to four, the first
RFP was answered at the end of March and remaining contenders are now hoping
for a down select before the government goes into caretaker mode in August.
The Request for Proposals (RFP) from the four remaining
contenders for DMMA was due March 25. The RFP is understood to involve
suggestions for a preferred business model rather than detailed costings and
the wonders of due diligence.
Shortlisting of two or possibly three of the contenders is
expected to be announced in June or July prior to the issue of an RFT in October,
with a preferred tenderer to be named early in 2014 and contract signature by
late 2014. But this timeline seems somewhat optimistic since the Strategic
Agreement for Munitions Supply (SAMS) expires in mid 2015 and there may be a
transfer period should the Thales led bid not come together. This also does not
account for the caretaker period or election later this year. The equivalent of
a combined first and second pass approval was provided by government in June 12
for the program. Consequently, further government approval is not anticipated.
As an overview, DMMA aims to deliver new commercial
arrangements for the manufacture and supply of domestically produced munitions,
propellants and explosives, replacing SAMS and Mulwala Agreements, both of which
expire in June 2015.
Contenders comprise Alliant Techsystems (ATK) of the US
teaming with NIOA Nominees, an Australian-based SME (see From the Source this
month for more); BAE Systems Australia teaming with Expal Systems of Spain;
Rheinmetall Waffe Munitions of Germany teaming with Nitrochemie of Germany and
RUAG Ammotec of Switzerland; and Thales Australia, the current incumbent,
teaming with General Dynamics-OTS of the US, and NAMMO of Norway.
Thales Australia formed Australian Munitions as a separate
business with a focus on munitions and energetics. Only 20 per cent of the $1
billion global Thales ordnance business is in Australia, with other businesses
in the UK, France, Belgium and Germany.
BAE Systems Australia and Expal combined their individual
bids in November last. The Raytheon-led team of South Korea’s Poonsang Corp and
Chemring Australia withdrew early this year amid reports that Poonsang was
unhappy with the risk demonstrated by the Commonwealth’s abrupt decision last
May not to proceed with the purchase of 155mm self-propelled howitzers from a
Raytheon-Samsung Techwin team. There were also claims that not all was well
within the team politics.
Rheinmetall, together with its partners RUAG and
Nitrochemie, is the largest ammunition, propellant and weapons manufacturer in
Europe, third largest in the world.
The sites
Under DMMA, both Benalla (munitions) and Mulwala
(propellants and high explosives) are on the table. As mentioned in the October
edition, the history of SAMS has had its day and both the Commonwealth and
Thales will be glad to see the end of the arrangement in favour of a new model
that does not include capability payments. After touring both sites recently,
it is easy to see that there are large parts of both sites that parts are under
utilised for various reasons.
For example, a Meissner facility for the melt pour filling
of shells (anything from a small mortar up to a 155mm shell) sits unused at
Benalla. A screw extruding plant at Mulwala sits alone on a hill, mothballed,
but understandable given the inherent instability of the process that is barely
used globally any longer.
Benalla was built on a Greenfield site in 1993 and made its
first delivery to the ADF in 1996. It now comprises of 48 buildings across a
147-hectare site and employs roughly 250 people from the local area. It has the
capability to manufacture small arms ammunition, medium and large calibre
ammunition, grenades, demolition stores, pyrotechnics and aircraft bombs.
In 2009, the US Picatinny Arsenal Report named it in the top
5 per cent of facilities in the world. And indeed, many parts of the plant are
running at capacity. The workforce has been multi-skilled in many areas to move
around the plant as orders demand.
“About 80 per of the light ammunition work is for Defence
and other 20 per cent is for the local and international markets,” Daryl
Bennett, Australian Munitions’ development manager, explosive ordnance
manufacturing, said. “We have what I call a two speed economy at Benalla. The
small arms side of the business is going gangbusters and the high explosives
side is very much order driven.”
The company has also invested in the plant outside of the
ADF work with a new 7.62mm line for a new range of sporting shooter ammunition
for the US market.
It was interesting looking about the Benalla facility in
particular seeing the ‘Property of Thales’ stickers on various parts of the
plant. ADM understands that the DMO and Thales are negotiating about what
equipment and plant would be acquired by DMO or potentially leave the facility
should they not be successful in their DMMA bid. Lawyers have not been called
in at this stage. Other contenders at this stage do not have a firm idea what
plant situation they would walk into.
Mulwala is the home of explosives and propellants
manufacturing (see box for more on explosives). The plant, built in 1942,
currently produces:
- acid and nitrocellulose (NC, based on wood based cellulose rather than cotton)
- over 30 different types of propellant powders
- cast composites mainly for rocket motors and small scale PBX production
- high explosives such as TNT and nitro-glycerine.
Mulwala is going well, with Australian Ammunitions barely
able to keep up with their US orders (see next page for more). Less than 30 per
cent of the product produced at Mulwala is for the ADF.
Like any explosives facility found internationally, the site
is odd to the untrained eye; a collection of small buildings at various
distances with a maze of pipes between them. Safety circles mean that various
stages of the production process are separated from one another. There is a
faint smell of ethanol in most stages of the process and safety is the biggest
concern of everyone on site (Note: on the day of my Mulwala visit, there was a
burn incident in a propellant drying facility ie it looked like a fireball. No
one was hurt, the remote control process building vented as it was designed to do and all
safety procedures were followed correctly).
Whoever the winner is for DMMA, they will take over the
running of the new plant currently undergoing certification known as the
Mulwala Redevelopment Project (MRP). Approved in March 2007 at $337.9 million
(Jan 07 prices), the program is being managed as a Project of Concern (due to
schedule issues) and the budget is now $369 million of which $331 million has
been spent. The Budget papers have seen $24 million allocated for spending this
year (see P38 for more on the Budget). The program is primed by Lend Lease with
ATK responsible for most of the propellant manufacture and certification work
on site.
ADM understands that Australian Munitions is providing
operators for the plant but there are issues with the high level of automation
and consistency of output thus certification. ATK personnel that expected to
come over from the US for a year to 18 months have, in some cases, been here
for over three years.
The MRP uses the existing acid plant but has a new facility
for virtually every other step of the propellants process. In essence, the
plant is a giant chemistry set that introduces a lot of solvents and acid to
wood pulp and then takes it out again in various steps to end up with materials
that go ‘whoosh’ under certain conditions.
Conclusion
Munitions and explosives are more at the lethal front end of
Defence industry than perhaps any other part of manufacturing support to the
ADF. These are products that are designed and maximised for the most efficient
use of a warfighter at the end of the kill chain. And they are, by their very
nature, dangerous goods. Their production is a prime example of Defence
industry doing dangerous things safely. DMMA will provide a 10 year framework
for Defence and Industry to work together on what has been deemed a sovereign
capability. As mentioned, it will be up to the program office how to decide on
the best way forward to do dangerous things as safely as possible.
Disclaimer: The writer has travelled to the US, UK,
Switzerland, Germany, South Africa, Benalla and Mulwala in the last few months
as a guest of the contenders.