Warren King: Submarine Mythbuster

Every so often ADM has the rare urge to publish a speech as a whole, either online or in the print magazine. These times are few and far between.

However such a time is upon us in the wake of a dinner speech from DMO CEO Warren King to the Submarine Institute of Australia dinner last week.

The work ahead of Defence industry in regard to Future Submarine is wide and varied and there is a sense of disbelief that the effort is indeed possible.

But there were a swathe of presentations at the event that led me to believe that perhaps this massive nation building undertaking is indeed possible. It won’t be easy or without problems (such complexity is never a smooth journey) but it is eminently possible with the right people in place.

Without further ado, King’s speech is below.

You’ve heard already a very uplifting speech today from the Minister [for Defence Materiel, the Hon Jason Clare MP].

What I want to say tonight is something that I think most of you will understand agree with. But I think we are a little guilty of just talking to ourselves, so I want to encourage you if you hear any point from me that you think is worthwhile, you speak to others about it because in my opinion the perception of the nation is not positive when it comes to Defence or Defence projects, and in particular not about submarines.

I want to address some of those issues and myths tonight.

I’ve been in the Navy, in industry and of course now in Defence for 45 years. A lot of that time in and around shipyards.

That’s a lot of time to observe where we’ve been, what we are doing now and where we should be heading.

In the context of a Navy that has been proudly serving Australia for just a little over a century, 45 years is a significant period. It gives me a license, if not an obligation, to speak on the issues of submarines and naval shipbuilding in Australia.

In that time I have seen a lot of changes. Changes in the Navy, changes in Defence industry and changes in DMO and its predecessors.

You will have heard from the Minister and the Chief of Navy and others today that we are at a critical time in planning and defining Australia’s future submarine capability.

There is a risk of over-stating this, but I’m sure you’d agree that there are key moments in any nation’s history that you can look back on as an inflection point in a nation’s development.

For Defence and for naval shipbuilding and those with an interest in submarines in particular, we are at one of those times.

It will be a decision that not only impacts on the Defence capability of Australia, but more broadly on whether we aspire to be an advanced manufacturing nation.

There has arguably never been a better confluence of needs and circumstances, against which to make these key decisions.

As you’re all well aware my obligation is to provide to the Government:

• Advice on cost and schedule risks

• Advice on programmatic risks and commercial matters, and

• Advice on Australia’s industrial capacity to deliver, and I include DMO in this.

And an assurance on a more fundamental question: “Is Australia ready” to start the journey on whichever option the Government of the day will choose to take.

My view is clearly “Yes, we are.”

To support this conclusion I want to challenge some of the misconceptions about our preparedness as a nation to take on this task.

In no particular order, these myths are that:

• One, DMO and industry aren’t up to the job of competently managing a project of this scale

• Two, Collins has been a disaster - and still doesn’t work

• Three, we haven’t learned from Collins

• Four, that it will cost too much – and be too difficult – to undertake a project like this in Australia

And finally and perhaps most importantly,

• Five, that Australia doesn’t have the will to take on this challenge.

Let me take on Myth 1.

MYTH #1: DMO AND INDUSTRY ISN’T UP TO THE JOB

The DMO’s budget this year represents roughly two in every five dollars that Australia spends on Defence.

We spend approximately $38 million of taxpayers’ money every working day.

On a revenue basis we would be in the top 20 companies in Australia, presently sitting around 16th or 17th.

On average we execute our projects using only 98 per cent of the approved budget.

We are responsible financial managers. In the 2011-12 Financial Year DMO managed its overall budget to within 0.3%. To put this another way, with a full-year cash flow approaching the $10 billion mark last year, the DMO achieved a closing fiscal position to within less than half of a single day’s cash flow. I would challenge that there are not too many companies that could make a similar statement about their financial performance.

So in a financial sense although the submarine project will be very large it will not add a significant financial management strain on the DMO.

We recently had an independent company - Independent Project Analysis – benchmark the DMO’s performance against their extensive database of more than 14,000 projects representing over 200 companies, in Australia and internationally. These include some of the ‘mega-projects’ in oil and gas and extractive industries, but also manufacturing of chemicals, minerals and consumer products.

Again, in this context when I say DMO I am referring to the collective efforts of DMO and industry.

According to this research:

• Very few DMO projects overrun their budgets, whereas cost overruns of more than 25 per cent are common in industry. I just want to stress that – we do not have budget blowouts in our projects

• DMO project schedule performance is better than the broader Australian industry and on par with international mega-projects

• Defence delivers more of the intended capability than comparable industry projects

• Defence projects are more complex than the average industry project, even the Military Off the Shelf (MOTS) projects

• DMO’s delivery of projects has improved following the implementation of the Kinnaird Review.

While we will need to continue to improve, we are as good as, or better than, our broader industry counterparts.

The data is compelling.

My view? The myth is busted.

MYTH #2: COLLINS WAS A DISASTROUS PROJECT

I’m not here to deny the problems that we’ve had with Collins but I am always keen to stress that we have a very, very capable submarine that we use over long distances.

People are critical of the reliability of Collins, but when we put them to sea the distance they cover and the time they spend on tasks and the capability they deliver, is significantly greater than most other conventional submarines.

I won’t repeat it now, but you will have heard from the Chief of Navy and Commodore Sammut about RIMPAC and some of the other recent exercises that have provided opportunities to prove the capabilities of the class.

There were clear lessons from the build and design of Collins.

There were some issues with construction – interestingly, some of this was in relation to the quality of work done overseas, with most of the work done in Australia being of a very high quality. Those issues are now largely behind us.

There were project management lessons, about earlier and closer engagement with industry partners. This enables a shared view, mature commercial and management arrangements to be established prior to down-selection. In other words as we did with AWD – “training together before playing together”.

I think we also learned a lesson with equipment selection, in particular about bringing together the combat system selection and the platform design work early in the process. I think an earlier decision and strong consideration of proven systems are two key lessons for the combat system of the future fleet.

Intellectual Property was not adequately understood or addressed with Collins but this will not happen again – I assure you of that.

We are about to embark on one of the largest conventional continuous-build projects in the world. I will simply not allow us to end up as second-class participants in terms of IP rights for the future.

With Collins, we started with a Greenfield site and with no track record in submarine construction and we built – in Australia – one of the largest and most capable conventional submarines in the world today.

My view? The myth is busted.

MYTH #3: WE HAVEN’T LEARNED OUR LESSONS FROM COLLINS

This, if it were true, would be a most serious charge. It is one that I reject in the strongest possible terms.

There are clearly lessons from the design and construction phase of Collins, and from our experience with sustainment. On the latter front, the forensic review conducted by John Coles and his team, while it has not been a comfortable experience, will be pivotal for both Collins and ensuring the effective through-life support of its successor.

The work of Mr Coles and his team is not yet finalised, but what is clear is that it will provide a plan for a more mature, more efficient approach to sustainment. You will hear more on this tomorrow. We are confident that within three to four years we can have Collins sustainment on a much better footing.

And we will use this knowledge to inform our design selections for our future submarine.

The lesson we have learned is that we can construct world class submarines in Australia; we just have to get better at it and we can.

My view? The myth is busted.

MYTH #4: IT WON’T BE ACHIEVABLE IN AUSTRALIA

I don’t think we recognise how far our Australian Defence industry has come in the last one hundred years.

This is not the first time Australia has examined the question of “can we build submarines?”

In 1920, the Australian Government asked Admiral William Clarkson if Australia could build two submarines. Clarkson was concerned about both industrial capacity and skills. It seems that nothing much changes in a hundred years.

In early 1921 he wrote that: “The future of Cockatoo Island Dockyard being under review, and the chaotic conditions of labour and prices at the present time make it impossible to estimate the length of time it would take to construct two submarines and their total cost when ready for delivery."

It was several decades and many imported submarines later before Australia eventually took on the challenge of building its own submarine. That was the Collins program of the 1980s.

It’s instructive to look at what else was going on with naval shipbuilding in Australia at about the same time. In addition to Collins we had:

• Two Adelaide-class FFGs completing

• Six minehunters being built and

• 10 ANZACs [eight for the Royal Australian Navy]

Together, these projects did an enormous amount to build up Australia’s skills and create a strong maritime industry. This was also a period of change with privatisation of Government-owned facilities and rationalisation of our dockyards.

But what followed was a lull in naval shipbuilding, which saw many good, and skilled people leave our industry.

Of course now we’re building three AWDs with a displacement of some 7,000 tonnes and the most sophisticated combat system ever deployed in Australia. And not to forget completing the construction and fitout of our first LHD.

There has been one significant problem early on for the AWD with delays to block construction - and while there are a number of contributing factors I believe the main issue has been the rundown of expertise that was caused by a gap in the shipbuilding program.

We have had to do a lot to rebuild that capacity, to rebuild those shipbuilding skills in the last five years.

All the shipyards involved have brought on experienced people, and everyone in those yards has learnt an enormous amount. It would be a tragedy if these skills were again allowed to whither.

So the question stands, does Australia have the ability to build the future submarines, and all the other warships our Navy will need in the next twenty years?

Part of the work on the Future Submarine Industry Skills Plan has been to gauge the number, skills and experience of people directly working in the naval shipbuilding industry today.

Right now we have about 5,000 people directly employed.

The preliminary findings of our analysis of Australia’s capacity to deliver the ships in the DCP is that Australia’s shipbuilding workforce (blue and white collar) has the size and skills, and the demonstrated ability to grow., to build the ships in the Defence Capability Plan. In general we have more than enough shipyard facility capacity.

Of course there are challenges – one is improving shipyard productivity.

Productivity is not just about labour cost. A workforce operating efficiently is a very capable and experienced workforce. They know what problems lie ahead, they avoid problems, the whole project executes much more smoothly when good productivity levels are achieved. Ships are delivered on time, and to budget.

In the ANZAC ship project, Australia did achieve shipbuilding productivity levels comparable to world benchmarks. With practice – and that is what it takes – we can achieve world’s best practice in this regard.

Theoretically and practically the last boat in a 12 boat program could be half the cost of the first. In a nutshell, a look at the stats tells us that the most expensive thing you can do in shipbuilding is to stop.

My view? The myth is busted.

MYTH #5: AUSTRALIA DOESN’T HAVE THE WILL TO TAKE THIS ON

I mentioned earlier Sir William Clarkson, an Engineer in the Royal Australian Navy about a hundred years ago. His contemporary – Admiral Creswell – is often portrayed as the father of the Royal Australian Navy, but I, and many others, consider Clarkson deserves as much credit.

Perhaps that is the engineer in me talking.

I think Clarkson had a very clear view of the importance of technology and naval engineering, and the need for an industry that supported the emergence of this new Navy.

Around 50 years later, people, some of whom may be in this room, had the courage to start the ANZAC, Minehunter and Collins projects.

Today with the AWD and LHD projects nearing their zenith in labour force employment we once again face the prospect of losing these skills.

The good news is that the next generation of naval shipbuilding projects contemplated in the Defence Capability Plan includes submarines, surface combatants, support, amphibious and other ships. In fact it would not be practical to undertake all these projects in Australia. But by selectively committing to a few key projects with longevity and multiple hulls there is more than enough to sustain a viable naval shipbuilding industry in Australia.

Conclusion

Soon, like Clarkson was required to do nearly a century ago, I will report to Government. My report will be on the Future Submarine Industry Skills Program. In contrast to Clarkson’s more glum assessment, I will be able to report that industry and DMO have great potential built on past experience, well-developed project management systems and highly skilled white and blue collar workforces.

In this sector like shipbuilding which is still as much about tradecraft as it is about automation or mass production, and in a complex Defence environment where second-best is simply not good enough, we need to be ready to unleash this potential and get to work.

We’ve proven we can do it. We have a track record we can be proud of, and that we can build on.

Ships and submarines, despite the sophistication in the project planning, system integration and weapons systems, remain essentially hand-built. For this reason Australia can be as competitive a producer as any country. We simply need the right management approach and the flow of projects to enable it to happen.

In a global society where strategic stresses may arise that even confound or surprise the experts – where they may be an urgent requirement to grow our submarine or surface fleets and where ‘off the shelf’ vessels are unlikely to be available, an in-country capability and capacity might prove, literally, to be invaluable.

Will the myth be busted? I hope so, for our nation’s future.

Thanks very much.