Download - Royal Australian Navy

NAVY ENGINEERING BULLETIN MARCH 2003
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not near the actual cost of the
requirement implementation.
Various committees approve
these costs and requirements
and the contracts are in the end
generally signed as "Fixed Price"
contracts. The Government then
transfers the risk of the project to
the successful contractor, who
more than likely has under-bid
their price, which was already
inaccurate in order for them to be
competitive. Whilst this may
appear to be a cynical view on
what happens, it is one of the
reasons as to why many projects
result in cost and time
overruns 11 . With a closer
relationship with industry in the
various consolidated sectors, firm
costings could be obtained
during the capability development
stage, and the ability for industry
to meet our requirements could
also be determined, which would
result in less schedule overruns.
Whilst the benefits detailed above
are in favour of such a strategy
there are risks needing to be
considered and carefully
managed by Defence. Defence
will need to implement new
procedures and performance
monitoring processes to ensure
that value-for-money outcomes
and delivery of the required
capability occur on cost and
time. 12
The sole source supplier
approach removes the
competitive tendering process,
which will potentially result in
inflated costs by the sole
supplier. The lack of competitors
may also result in a reduction in
innovative thinking and solutions.
A sole source supplier will have
no need to continually strive for
better solutions for them to
maintain a lead in their particular
market.
Due to their market power, some
unions may take advantage of
their monopolistic nature and
push for better conditions for
their members. Vertical integration
could also take place that will
result in sub-contractors not
being able to compete and
subsequently reduce the
innovation for that particular
sector. 13
Whilst the role of 'Parent Navy' is
still relatively new to the RAN, the
implications of the new
acquisition alliance may result in
minimal 'Australianisation' of
existing 'off-the-shelf' design. 14
This could result in the majority of
Defence capability requirements
being met by overseas industry,
with a shop front in Australia. As
the control of the Intellectual
Property associated with the
overseas solutions will be held by
the parent companies, Defence
will have little control over what
development path the capabilities
implemented under the new
acquisition arrangement will
follow. This will have implications
on what upgrades and tailoring
could be performed in order for
the future requirements of the
ADF to be met.
STRATEGIC IMPLICATIONS
The consolidation of Defence
Industry within Australia is more
than likely to result in a greater
influence of overseas Defence
conglomerates in the capability
transitioned into ADF service,
such conglomerates would
include BAE, Thales, TMS,
Raytheon etc. We are already
seeing a number of vigorous
mergers and takeovers in the
Defence Industry sector. The
greater their influence the more
locally developed solutions by
small to medium enterprises
(SME's) will be pushed out. This
could have an effect on
Australia’s ability to be “Defence
Self Reliant”. Whilst we will more
than likely able to maintain a
sound Defence Industry
capability within Australia for our
various platforms, it will be the
hearts of the platforms that will
be vital in ongoing support and
upgrades. These components will
be sourced and controlled by
overseas companies, and in the
future the RAN could encounter
difficulties in supporting certain
elements of the platforms as a
result of their origin and lack of in
country support. The concept of
repairs being carried out by the
Original Equipment Manufacturer
(OEM) often results in the items
having to go overseas for repair,
costing considerable time and
money. The consolidation of
Australian Defence Industry
should result in the ADF having
common platforms for its various
capabilities. This would provide
the ability to have a sustainable
in country support base that
would allow for the OEM related
function previously carried out
overseas to be performed in
country.
The merger and influence of such
large conglomerates within the
Australian Defence Industry will
have an impact on
interoperability. The political push
for a closer alliance with the
American Defence Forces will
result in American Defence
Industry having a major influence
in the Australian region. With such
an American influence in the
Australian Defence Industry,
interoperability will occur as part
of the course, however, will this
interoperability extend to our
regional neighbours and our allies
in the European region?
The reduction in the number of
docking ship repair facilities on
both the East and West coast
may not have any immediate
implications in a peacetime
environment, however in the event
of an outbreak in hostilities or
unexpected requirements where
multiple ships require repairs to
battle damage or upgrades, the
consolidated dockyard facilities
may not be sufficient. In order to
have the infrastructure in place
for such a scenario that would
involve docking related activities
outside the normal routine
maintenance, a third docking
facility would be required. 15 This
is further highlighted by the
requirement for all Major Fleet
Units to undergo a docking
availability every two years. With a
docking availability taking on