THE ROLE OF INDUSTRY IN SUPPORTING MARITIME SECURITY

Address to Industry at the Pacific 2010 International Maritime Exposition

Sydney

28 January 2010

Check against delivery

THE HON. GREG COMBET MP:

Thank you (Mark) for your warm welcome.  I am delighted to take this opportunity to address you this morning. 

It was just two years ago at Pacific 2008, at a breakfast similar to this, that I made my first public speech as the newly appointed Parliamentary Secretary for Defence Procurement.  It is fitting that I can return to this conference and update you on what has been occurring in the maritime domain since then.

Last year the Government released the Defence White Paper that sets out our plans for the Australian Defence Force structure out to 2030 and beyond.  The reassessment of our strategic circumstances and the capabilities required to meet the challenges ahead, was needed and overdue.

In a speech only last week at the opening of the ASC Air Warfare Destroyer shipyard, the Prime Minister, Kevin Rudd, stressed the importance of maritime security to an island nation – a major theme of the White Paper.

Yesterday while opening the DSTO symposium on maritime security, I discussed the contribution of defence science to maritime security.

Today I intend to discuss the efforts industry has been making in this area and how we the Government intend to support these efforts.

I’ll start by announcing the most significant reshaping of the naval ship repair business to occur in over a decade. I’ll then discuss a number of projects upon which the Royal Australian Navy will depend upon in the next decade and the role industry is playing. 

Naval Ship Repair and Maintenance Contract

When I entered this portfolio in 2007 I became aware that the Defence Materiel Organisation was completing every Major Fleet Unit repair and maintenance episode.

In my opinion this was not a good policy solution, because it disaggregated the maintenance program and placed the contractors in a stop-start routine with all the start-up and wind-down costs for both the contractor and the customer.  

By putting every individual ship repair contract out to tender, previous Governments failed to secure value for money because the lack of continuity prevented the naval ship repair companies from investing in the infrastructure and workforce to deliver the best price.

For example, if you’re a ship repair company, you are not going to invest one cent more than you have to in order to complete a six week docking of HMAS ANZAC if there is no guarantee that you will undertake the next overhaul of that ship or any other major surface ship for that matter. 

Nor will you be inclined to invest in the skills of your workforce beyond the bare minimum to complete the job.

In short by imposing competition at this level the Commonwealth did not receive value for money and companies were not able to invest in their workforces, infrastructure and capital equipment.

That is why I directed the DMO to work with the Navy and industry to examine alternate approaches.

I am happy to announce therefore that under the Smart Sustainment initiative, the DMO will reform the Navy’s Major Fleet Unit Repair and Maintenance program.

This will affect the maintenance and repair of the Major Fleet Units - the eight ANZAC class frigates, the four Adelaide class frigates, the two Amphibious Landing Ships and the Heavy Landing Ship. 

The principal element of the reform program is the establishment of long term performance based contracts for repair and maintenance activities in lieu of the current arrangement that is based on awarding a contract under a panel arrangement on each occasion. This will lead to the batching of our requirements.

The batching concept will be based on Ship Class – the ANZACs and other ships that I have just mentioned - and/or the Home Port for the ship; that is, the East or West Coasts. We also propose to extend the maintenance concept to new ship classes such as the Air Warfare Destroyers and the Landing Helicopter Dock Ships when they are introduced.

An Invitation to Register Interest was released by the DMO last December. The responses to the ITR will be used to gauge the level of interest in providing the services needed, down select the companies with the capacity, capability and understanding to undertake the contract, and inform potential primes about potential sub-contractors.

On average we spend $150 million per annum on major surface ship repair and maintenance. We would expect to see significant savings from this reform because the companies who win these three large, long term contracts will be able to invest in their infrastructure, capital equipment and their workforce.

This initiative will also provide better notice to Navy and ships’ crews of the planned location of maintenance and maintenance patterns. As Minister for Defence Personnel I am pleased that this will also have the added benefit of improving retention.

RPDE

A current initiative that Defence is running that is of great value to both the Government and industry is the Rapid Prototyping Development and Evaluation (RPDE) Program. RPDE, or ‘Rapid’, is a collaborative venture that was established to help Defence resolve difficult and challenging capability problems.

I am very proud to announce that this program has been recognised by the US-based Institute for Defense and Government Advancement in its annual Network Centric Warfare Awards.

RPDE is the winner of the ‘Outstanding Network Centric Program from a Coalition Partner’ award.

I know many of you in the audience are members of this program and would agree with me that this award recognises the unique structure and highly successful operation of the program. It reflects the outstanding commitment and contribution of the industry and academic participants in supporting Defence.

FFG Upgrade

I’d now like to discuss some of our high profile acquisition projects. The first of which is the FFG Upgrade.

I was very pleased to see my colleague and friend, the Minister for Defence, Senator Faulkner, announce yesterday that the FFG Upgrade has been removed from the Projects of Concern list.

This is a result of the contractual acceptance of all four FFGs and the decision by the Chief of Navy to approve Initial Operational Release of this capability and begin planning for its operational employment.

This has been a very problematic project, one that will be delivered over four and half years late. It was the subject of a very critical performance audit by the Australian National Audit Office just before the Rudd Labor Government was elected.

Upon entering Government and being appointed Parliamentary Secretary for Defence Procurement I worked with the CEO of the DMO, Dr. Gumley to establish the Projects of Concern list and a unit responsible for focusing on these projects and reporting to me monthly. The upgrade of the Adelaide class guided missile frigates was right at the top of the first list of projects of concern.

The FFG Upgrade became a Project of Concern because of substantial schedule delays and real uncertainty about whether the contracted capability could be delivered. These problems were due to significantly underestimating the complexity of the upgrade task at project inception in the late 1990s.

This problem was also exacerbated by not installing the upgrade on one prototype FFG to test it and resolve any issues before beginning to upgrade the other frigates.

As Senator Faulkner said yesterday a reduction in project scope from six to four ships, and other decisions in 2006 regarding the prime contract resulted in an agreed new program delivery schedule. This revised schedule has been achieved. Defence has now accepted the upgraded FFGs from Thales.

The Navy has made a preliminary assessment of the performance of the new capabilities provided by the upgraded FFGs. The FFGs have now entered a formal Naval Operation Test and Evaluation program as a result of these assessments. This program is designed to measure the ships and their performance in an operational environment.

The Navy, supported by the DMO where required, will evaluate, tune, and tailor the delivered systems against contemporary environments and operations. Defence will need to be able to configure these ships and their systems to ensure they can deploy for specific operations with the best possible capabilities to meet credible threats.

However, given the sharp turn around in this project I am proud  to say that after two years of concerted effort by a host of people, that the project has been sufficiently remediated to merit removal from the list.

As Senator Faulkner said yesterday, the upgraded FFG capability sets an international benchmark for what can be achieved with this class of ship.

The result of this project is that we have perhaps the most advanced Oliver Perry Class Frigates in the world.

An important complement to this phase of Project 1390 is Phase 4B, which is the replacement of the Standard Missile 1 with the SM-2 Block IIIA surface to air missile. Once this project is complete the upgraded FFGs with their modern Anti Ship Missile Defence system will be able to fire some of the most advanced surface to air missiles in the inventory of the western nations.

I am happy that the first successful firing of a SM2 missile was conducted last month on HMAS Melbourne. We are now one step closer to the Navy having a modern area air defence capability which will be further enhanced by the introduction of the Air Warfare Destroyers from the middle of the next decade.

This project has only succeeded due to the commitment and cooperation of the Navy, the DMO and Thales and its subcontractors. Without the leadership of the Chief of Navy, Vice Admiral Crane, the CEO of Thales, Chris Jenkins and General Manager Programs at the DMO, Warren King, this project would have failed.

I congratulate all involved on the outcomes achieved from this challenging upgrade project.

ANZAC Anti-Ship Missile Defence Project

Another major project in the maritime domain is the ANZAC Anti-Ship Missile Defence Project.

This project became a Project of Concern due to its high technical risk and the fact that the previous Government had underestimated the cost of the project.

This is an ambitious project that if delivered in full will result in the ANZACs having a great ASMD capability. However, to achieve this ambition requires a high level of technical risk.

Drawing upon the lessons of the FFG Upgrade the Government decided to remove as much risk as possible from this project, thereby maximising the chances of success.

This saw a revised acquisition strategy approved by Government in July last year. This will see the first upgraded ship trialled and the capabilities proven before agreement is given to upgrade the other ANZAC ships. That decision will also be subject to the required funding being available.

CEA Technologies, an Australian company, has successfully developed the higher-risk elements of the upgrade, specifically the leading-edge phased array radars. In addition there has just occurred the successful testing of the full combat systems management integration at land based test sites. This was the culmination of a series of land based testing that ensured coherency of the total system.

I’m very happy to announce that the results of developmental testing have been so successful that installation of the new radar and associated systems in the lead ship, HMAS Perth, commenced last week.

This upgrade, which will significantly alter not only the capability of the ship but its upper-decks configuration, will culminate in at-sea testing in early 2011. The results of testing will enable government to make a decision regarding the follow-on ships.

As with any highly complex leading edge development, this upgrade has involved considerable technical and integration risk. It is a credit to the developmental capabilities of Australian industry and to persistent management by Defence that we now have sufficient confidence to install these systems.

While I am not removing this project from the list of Projects of Concern just yet, I wanted to report on the achievement of this significant milestone.

Air Warfare Destroyer

I would like now to turn to the Air Warfare Destroyer project, which is the largest approved defence acquisition project in our nation’s history.

As you know this project will deliver at least three air-defence capable ships that will allow the provision of continuous area air defence of maritime or land forces deployed away from Australia. This area defence can operate in both the open ocean and littoral environments.

I’d like to report that this procurement is on track. The significant infrastructure required to complete these vessels is being built and sub–contracts have been signed by the AWD Alliance for almost all major equipment and materiel.

The Prime Minister opened the $120 million ASC shipyard in Adelaide last week. The new shipyard will construct nine blocks for each AWD. This work involves structural steel fabrication, block blast and painting, and block pre-outfitting prior to transportation to the Common User Facility (CUF) for consolidation. The shipyard will also take delivery of blocks being fabricated by BAE Systems and Forgacs, prepare them for final assembly and transport them to the CUF for consolidation.

I’d like to announce today that the AWD System Critical Design Review (CDR) was successfully conducted in December 2009. We expect formal closure of the CDR in February when the small number of outstanding actions are completed.

Furthermore, the AWD Alliance is on track to meet the budget target of over 50 per cent Australian industry content in this project.

This work is also being conducted all around Australia. For example, 70 per cent of the block fabrication work, worth around $450 million, is being done outside South Australia. Another example was the $25 million contract awarded to Tasmanian company Taylor Bros Slipway and Engineering for the provision of engineering and production services to the project and to deliver a range of accommodation products for the AWDs.

In addition to the local content, participation in the AWD project will see significant training benefits for Australia workers. The AWD Alliance is sponsoring an AWD Apprentice Development Program.

An important example of this was the 200^th Skilling Australia’s Defence Industry (SADI) Agreement signed with Hunter company Forgacs. This agreement represented a significant commitment to train an additional 25 apprentices to directly support the fabrication of AWD hull blocks.

While the AWD project is on track, we should not lose sight of the risks involved in building the most advanced surface warship ever attempted in Australia. There are several hurdles to pass and I will be keeping a close eye on this. Nevertheless, I am happy with progress in the acquisition of this important capability.

New Generation Navy

Of course the most important capability of the Navy is its people. The New Generation Navy strategy seeks to improve the Navy’s culture, leadership and structure.

A new initiative developed under this strategy is the Navy Women’s Leadership Program, run for the first time in 2009. This initiative provided the opportunity for female leaders, from the rank of Leading Seaman to Commander and APS equivalent, to participate in five Australian Women and Leadership Forum events.

Twenty eight women enrolled in the program and all provided glowing tributes, completing the program with strong enthusiasm and motivation to implement their new skills in the workplace. The success of the program has been highly encouraging and Navy have not only decided to continue to run the program but they are expanding it to include a Women’s Mentoring Program for an additional fifty Navy women.

This is a fantastic initiative that empowers women in the Navy to realise their leadership potential and help advance their careers. This is in line with the Chief of the Defence Force’s Action Plan on Women. The plan outlines the commitment of the CDF and Service Chiefs to increase the number of women recruited and retained by the ADF.

I am very pleased to see how well this initiative has been received, and that it will continue in 2010. I’d like to thank all those women involved, their participation will contribute to the future success of the Navy.

Conclusion

I would like to conclude by saying that Industry is and remains vital to the delivery of capability for our ADF.

Therefore I would like to thank you all for cooperation and work in your continuing efforts to support the ADF.

I am happy to take some questions.

Media contacts:

Rod Hilton (Greg Combet):                    02 6277 7620 or 0458 276 619

Defence Media Liaison:                         02 6127 1999 or 0408 498 664