Is the Ship-Building Deadline too Tight for WA?

How long will it take to build the navy a new set of ships? A fair bit longer than anybody expects, if previous form is any guide.

How long will it take to build the navy a new set of ships? A fair bit longer than anybody expects, if previous form is any guide.

It’s a question with looming importance to WA and in particular the shipbuilders and associated businesses in the Australian Marine Complex in Henderson, south of Perth.

There has long been a lingering suspicion that WA will get dudded on the promise of winning the lion’s share of a $3 billion to $4 billion contract to build the next generation of naval patrol vessels, and therefore on potential exports of clones of the ships to allies in the region.

And new figures released to a Senate estimates committee adds weight to suggestions that the navy’s time frame is too tight to be delivered.

In theory, Henderson will receive a big boost from the navy in 2020, when construction of the first of 10 offshore patrol vessels assigned to WA is scheduled to begin.

The ships — set to replace the ageing Armidale-class vessels — will be designed by Germany’s Lurssen, with first two built in Adelaide by ASC before work transfers to WA.

The entire time frame is tight. Defence says ASC needs to begin cutting steel by April to get the work on the first two vessels done by about 2020.

That’s when work will shift to WA, in theory, because the South Australian dockyards will be required for the start of work on the $35 billion Future Frigates program — the main game for South Australia’s shipbuilding industry (along with the even bigger program to replace the Collins-class submarines).

The time frame was further complicated when the Federal Government threw WA’s Austal into the shipbuilding mix for the OPV, despite the fact that Lurssen had originally partnered with ASC and Forgacs, a subsidiary of another WA operator Civmec.

It’s not quite clear whether the decision to shoehorn Austal into the process was a recommendation by Defence’s contracting arm, or one made by Government.

“Things will still go wrong, because they always do.”

South Australian senator Rex Patrick spent a testy 10 minutes in a Senate estimates session last month trying to get a straight answer on the subject from either the navy or Defence Minister Marise Payne, without noticeable success.

The companies are now locked down in complex negotiations about who gets what work in WA, with ASC likely to go it alone for the first two in Adelaide.

Those negotiations will be done by the end of this month, defence says, or mid-February at the latest — no easy task.

The department says it mostly uses fixed-price contracts and, while arguing about how to carve up the work and revenue is likely to take up a fair bit of time, that will be nothing compared with the inevitable punch-ups before reaching agreement on the rules about who ponies up when things go wrong.

The announcement that Lurssen will be at the helm was well received by almost all, both for the vessel’s capabilities and the Germans’ reputation for efficiency.

But things will still go wrong, because they always do.

And what does history say about how wrong things go in defence contracting?

Defence reports the status of its major projects each year to the Australian National Audit Office.

A summary of those reports, released in answer to questions from NSW senator David Leyonhjelm last month, suggests they are only rarely delivered on time.

Defence divides its acquisitions into three types.

The simplest is military off the shelf (MOTS) — we decide we like something somebody else is already using, and buy some of them.

Next hardest is Australianised military off the shelf (AMOTS) — we decide we like someone else’s kit, but it needs a few modifications to meet Australian needs. The navy’s new amphibious vessels fit into this category, as do its air warfare destroyers.

And the hardest is developmental projects — we think it up, we design it, and have it built just for us. The RAAF’s Wedgetail spy plane is an example of this, as is the army’s armoured patrol vehicle, the Hawkei — which got its first offshore deployment to a war zone last week, with two of the new vehicles sent off to Iraq to see how they run.

How do they all go?

According to the response to Senator Leyonhjelm, the average delay for the final operational capability (when everything ordered is fit for the field) of MOTS project is 14 months.

AMOTS projects have an average delay of 32 months, and developmental projects take an average 54 months (41/2 years) longer than planned to be fully deployed.

And, as with all figures provided by defence, there’s an important caveat on those figures.

Of the 42 projects on the ANAO list, only 23 have been completed.

So the slippage for the rest is what the builders project based on current progress.

(It is, to be fair, at least possible the time lines will tighten in Defence’s favour for some of those).

The OPVs are a MOTS project, at least according to defence evidence to the Senate (we did ask for confirmation, but the slippage times noted above pale into nothing compared with what the Defence Media unit can achieve when faced with a simple question and a deadline).

Most of the problems with major projects happen at start.

And this project will have two beginnings, given the decision to split construction across three builders and two shipyards.

The Federal Government has been at pains to assure WA its promise of 10 OPVs is set in stone.

The final contracts, due to be signed in the next month, will be the first test of that.

But the form book suggests it would be smart to bet on delayed delivery, and that is unlikely to work in the West’s favour.

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