Maintenance and Upgrades: Rolls-Royce explores new trends in naval support

1 July 2007

By Eric Hill

Navies are increasingly exploring the outsourcing of maintenance and logistics support, both to maintenance specialists and original equipment manufacturers. One OEM, Rolls-Royce, has already developed a model for this kind of business relationship.

Navies worldwide are re-thinking their operations as they seek to maintain the ability to project power and respond swiftly to crises.

The drive to maintain a leading-edge capability has resulted in ever more technology-intensive ship-borne communications and weapons systems - and in a shift towards naval staff with the relevant IT skills to manage those systems both on board and from land bases.

As a result, many blue water navies such as the Royal Navy, US, Royal Australian, Hellenic and Royal Norwegian navies, as well as others in South America, have taken a strategic decision to focus their budgets on their field of expertise - managing fleet deployment and ensuring ships have a technological edge.

But this focus also has implications for navies' traditional roles involving equipment and platform engineering support. Their commitments to deployment have to be met against increasingly stringent budget requirements, which must somehow be accommodated without affecting Availability, Reliability and Maintainability (ARM) and performance targets or, most importantly, safety.

In essence, navies increasingly wish to focus on the management role of "decider," but may not have the resources or desire to also be the "provider" - in terms of equipment supply and maintenance which remains vital to keeping ships at sea.

An increasingly popular solution is to seek an increasing involvement from private contractors to be more pro-active in helping to find cost-effective ways to support the fleet. Rolls-Royce is playing an active role in this support trend and is involved in innovative contracts both in Australia and in Europe.

The company has some of the basic requirements to carry out this role - with more than 50 years of gas turbine support, a wide product base which has resulted in support to half the world's navies, a global support network of 60 service centres in 34 countries, and more than 40 years of support for nuclear propulsion plant for Royal Navy submarines.

Committed to driving down its support costs, the Commonwealth of Australia (CoA) has now moved to performance based contracting for four large amphibious and afloat support ships for the next seven years.

Improving logistic support for a mix of naval vessels with various classification societies and a wide range of installed equipment is the challenge being undertaken by a Rolls-Royce led industry team that includes Kellogg Brown & Root (KBR) with the customer, the CoA's amphibious and afloat support systems program office (AASSPO) and the Royal Australian Navy (RAN) at the centre.

The innovative support solution was developed by Rolls-Royce and KBR to suit the CoA and RAN requirement for the vessels, some of which were originally commissioned over 30 years ago and operate only a small amount of Rolls-Royce equipment.

The prime objective of the partnering arrangement is to reduce the logistical cost of ownership and improve the quality of service delivered to the four vessels; replenishment tanker HMAS Success, heavy lift ship HMAS Tobruk and the amphibious transports HMAS Kanimbla and HMAS Manoora, while at the same time reducing the risk to the Commonwealth.

As the contract is for seven years with options for a further five, it allows the team to take an integrated and coherent approach to all the integrated logistic support elements that provide materiel support to the ships within a fixed price structure. The focus will be the key systems and equipment, faster response to day-to-day engineering issues, identifying and removing the key cost drivers and managing equipment obsolescence. It will deliver immediate and long-term improvements throughout the ship life cycle and enable accurate budgeting.

"This is not a new way of working for us," explains Eric Hill, project manager. "Similar support services have been provided for Royal Navy surface ships and submarines and more recently to the RAN Collins-class submarines. To effectively meet the requirements for these four ships we are operating in a performance based contract framework. Our profitability is linked to a range of key performance indicators which focus on cost estimation, customer satisfaction, quality of product or service and schedule adherence."

As experienced marine equipment support specialists the team will, for example, be making decisions on what maintenance is truly necessary, what can be safely undertaken at sea and what must be undertaken during a docking period, thereby reducing costs. Maintenance regimes will be developed to match the vessels operating profile to ensure availability targets can be achieved.

The Rolls-Royce team, which comprises over 20 project, logistic, maintenance, and design engineering experience professionals is now co-located alongside the customer at CoA premises at Garden Island and Defence Plaza in Sydney, and will augment the AASSPO's own resources. Co-location also ensures ease of access to design information, in-service support data and RAN personnel, significantly simplifying day-to-day communications.

"Another key part of the contract is the dedicated application of a risk treatment plan process that will identify, evaluate and seek to mitigate risk across the four platforms," adds Eric Hill. "We understand those risks and are dedicated to effectively managing them to the benefit of the customer."
All parties are incentivised and working to a common goal. There is also a commitment to ongoing efficiency improvements that will reflect in a reduction of annual contract operating costs. Success could see the contract scope expanded to cover other management services and ultimately future amphibious vessels planned to enter service around 2011.

One key concept behind Rolls-Royce service support is that of TotalCare, which moves the focus from the traditional repair and overhaul model based on time and materials to an agreement focuses on guaranteed availability, with fixed costs that offer a clear incentive to both sides to meet agreed service levels.

The idea is long-established in the civil aerospace industry, where Rolls-Royce has now has almost 4,500 engines under TotalCare services. By 2010 it anticipates a fleet of 15,500 engines with 80 per cent TotalCare coverage.

As with the gas turbine technology flow that originates in civil aerospace and transfers to marine, so has there been the introduction of the civil aerospace support model into the marine market.

The most significant naval marine development for Rolls-Royce took place in 2005 with the signing of a $137 million TotalCare contract with the UK Ministry of Defence for Olympus and Tyne gas turbines covering 27 ships for the Royal Navy, and French, Belgian and Royal Netherlands navies.

The company will support Olympus and Tyne gas turbines for the next 12 years, when the ships are due to go out of service.

The deal covers:

* Three Royal Navy carriers: HMS Ark Royal, HMS Illustrious and HMS Invincible, each powered by four Olympus gas turbines

* Nine Royal Navy Type 42 destroyers (two Olympus and two Tyne each)

* Four Type 22 frigates (two Tyne and two Spey each, the Spey being covered by a separate agreement)

* Seven French Navy Georges Leygues-class destroyers (two Olympus each)

* Three Belgian Navy Wielingen-class frigates (one Olympus each)

* One Royal Netherlands L-class frigate (two Olympus and two Tyne)

The then-UK Minister for Defence Procurement Lord Bach, summed up the customer advantages on a visit to Rolls-Royce to sign the contract saying: "I am very pleased that this new Contractor Logistics Support contract has been agreed. It will save taxpayers some ?14 million over conventional support arrangements.

TotalCare also changes the overall contractual environment, moving the focus from contracting for support, under enabling terms, to contracting for availability, for a fixed monthly fee, with Rolls-Royce providing 24/7 technical support, naval base spares and engine availability (including repair and overhaul). The cost, based on an agreed number of annual engine operating hours, ensures accurate budgeting for the customer and is incentivised to encourage savings year on year.

Rolls-Royce and MoD have jointly reviewed the programme and identified three areas of improvement to be targeted: reducing repairs by extending engine and component life; reducing repair costs by improving repair performance and reducing stock through improved supply chain management. Both parties have also agreed a series of key performance indicators requiring close customer co-operation for maximum benefit, therefore three MoD personnel are now permanently seconded to the Bristol-based TotalCare team.

A key feature of the contract is the transfer from MoD of those risks best managed by Rolls-Royce, like component obsolescence and reliability. As the original equipment manufacturer, the company has unique product knowledge and benefits from a fleet wide view and is better placed to manage the navies' engines as engine numbers reduce, due to existing agreements with other Olympus and Tyne users that include the Pakistani, Chilean and Hellenic Navies.

The transfer of more responsibility to Rolls-Royce will mean the company can get intimately involved in daily operations and take a 12-year view of engine operation. This means plans can be made to introduce engine health monitoring, to give an accurate view of engine life and the data used to enable predictive maintenance. Engine life can be extended, where appropriate, and engine changes planned to coincide with fleet-time maintenance periods. It also means the accurate prediction of the number of engine overhauls required each year providing an enhanced level of service.

The target cost incentive fee arrangement features an annual maximum price limit based on current costs and planned deployments. Should the TotalCare cost exceed the target cost, but fall within the annual price ceiling, Rolls-Royce profit reduces correspondingly. Cost under-runs, or savings, achieved below the target cost will generate a profit sharing formula, a win-win situation where MoD and Rolls-Royce share the savings.

In South America, Rolls-Royce is also developing long-term contracting which moves towards the TotalCare model. An innovative new support agreement has been signed with Chilean shipyard ASMAR, covering all Rolls-Royce surface ship markets.

ASMAR, based in Valparaiso, will provide local service, spares, training and technical support for the entire Kamewa product range, available to all naval and commercial shipping in the area. The agreement covers an initial period of five years.

It is expected the agreement will cover work on up to 60 ships a year and is another building block in a Naval support strategy in South America which brings benefits to the Naval, Merchant and Offshore businesses.

Rolls-Royce also recently signed orders with the Chilean Navy to service gas turbines on five new ships in its fleet for the next 20 years - a key element of Chile's transformation of its fleet to gas turbine technology.

Eric Hill is th Rolls-Royce Amphibious & Afloat Support Integrated Materiel Support (AASIMS) Project Manager, based at Garden Island, Sydney.