submarine group - nsw business chamber · (with submarine design & build experience) and a...

Equip and Sustain the Australian Defence Force

Submarine Group David Gould

General Manager Submarines


• Defence acquisition process itself in industrial states is unavoidably

complicated – this should not be confused with inefficiency or

incompetence.

• It is an uncertain business where there should be wariness of any

simple guidance or conclusion.

• The absolutist notion of success or failure is problematic – as a

project that is late or over budget is not necessarily a failure in

terms of the capability delivered.

“..since the end of World War II, the US has conducted around 130

studies on acquisition reform. Despite this number of reviews that

have often echoed the same themes and highlighted the same

weaknesses in the acquisition process, acquisition reform efforts

have been unable to rein in cost and schedule growth”.

Business of Defence Acquisition


1. The benefits of competition.

2. The gains from outsourcing.

3. The centrality of project management metrics.

4. The utility of the idea of value for Money

5. The availability of both project certainty and technological advantage

6. The belief that defence acquisition projects are prone to failure

7. The (naive) endorsement of

partnering.

8. The optimism that change

management programmes

are transformative.

9. The assumption that

science and technology and

research and development

are identical.

10.The faith that SMEs will

help build a New Jerusalem

The dominant discourse that is applied to reform discussions on Defence acquisition

Orthodoxy’s Ten Sacred Truths


• Competition on Defence acquisition tends to be the default position for Government policy ~ best way to satisfy today’s requirements & tomorrow’s defence capabilities.

• Conspiracy of Optimism exists – often drives companies, at bid stage to offer highly hopeful performance, time, cost parameters – to generate competitive price.

• After a successful but artificially low bid, performance is evitable squeezed, costs grow and delays occur. To claw back profits – future contracts can become overpriced

Truth 1: The Benefits of Competition

PROJECT IMPACT

Competitive tendering is a

force for good and may ease

short term financial

pressures.

BUT

it can drive inappropriate

behaviours leaving a single

supplier within some parts of

the Defence sector

AND

generate an unrealistic

performance –time cost-

envelope stubbornly

immune to project

management interventions.


• Engineered competition was run between the shipyard

(with submarine design & build experience) and a

systems integrator (no submarine build experience).

• The system integrator won (more innovative, better

price) despite having little submarine design experience

and now had an unhappy shipyard as a sub contractor.

• Schedule and cost expectations were unrealistic: 85 months from cut steel to exit Barrow (same as later Trafalgar class), but submarine 50% bigger.

The Nuclear Submarine Procurement Programme : Case Study Truth 1: The Benefits of Competition – Case Study

Astute Programme


• Belief in the merits of outsourcing tied in part, to the quest for

value for money and efficiency.

• Knowns – the less risk perceived by the contractor, the better

the price that can be negotiated between the parties.

• Simple Message: if government is looking for flexibility

and to portfolio manage its defence investment – it must

be

– wary of continual outsourcing and;

– expect to be charged higher prices by the private sector if

it‟s contracts can be easily reduced in scale or abandoned.

Truth 2: The Gains from Outsourcing


• Departments and industry tend to be wedded to

project management techniques that often treat

defence equipments as stand alone entities.

• Techniques such as earned value management,

project costings and project risk and opportunity

management collude to lock thinking into desired

certainties associated with a specific project

rather than the broader defence acquisition

portfolio.

– Is the cancellation of a project due to it

being late and over budget – a gesture of

politics rather than good corporate or

project management?

– Will it be seen as a missing capability in the

years ahead?

Truth 3: The Centrality of Project Management Metrics

PROJECT IMPACT

Effective Project management

is important both for taxpayer

and shareholder.

Defence projects should be

seen as part of a coherent,

larger investment strategy

which puts the emphasis on

effective requirements

setting;

portfolio management;

and

financial planning

as the key government skills.


Truth 3: Case Study: Nimrod MRA4


• Certainty that all defence acquisition is essentially a search for value for money – but

the meaning is subjective.

• Known's – Governments know that the notion of “value for money” is difficult to properly

grasp and significantly, that competition does not of itself generate value for money

within Defence.

• Competition can have an adverse relationship to the generation of the “value for

money”, for:

“Procurement processes may place undue emphasis on short-run competition at

the expense of long-run non-price competition.

A short run costs saving may undermine investment and innovation incentives or

may even force unsuccessful bidders out of the market”.

Example: Competing refits not the most effective way of maintaining warships

Truth 4: The Utility of the idea of “Value for Money”


Class

Management

Force elements

@ Readiness

Fleet Level

DShips NCHQ

SCA

SEA

Alliance

Managamen

t Team

Performance Management

Technical Authority

Maintenance

IKM

Marine Equipment

Combat Systems Equipment

Supply Chain other

Other DLoD Contributors

12

Restricted

Commercial

Platform Level

Truth 4: The Utility of the idea of “Value for Money”


Truth 5: The Availability of both Project certainty

&Technological Advantage


• Belief that defence projects are somehow,

not like other complex governmental or

corporate activities but inherently prone to

failure – NOT TRUE

Truth 6: Belief that Defence Acquisition Projects are

particularly prone to failure

DMO

Average slippage has

reduced from 50% to 30%

over past decade.

Median DMO schedule

performance was superior to

Australian commercial

industry & comparable to

global industry.

Rare for DMO projects to

overrun their cost budgets

whereas overruns of 25% in

similar commercial projects

are common.

2011-12 MPR ANAO


Partnering with others is a good thing – pooling and sharing defence capabilities with other nations and developing joint requirements and matching programme/project solution.

Defence acquisition should be based on a level of commitment to the requirement to act nationally, to understand where a level of mutual dependence is acceptable and where the risks of dependence or whether they can be tolerated

Truth 7: The (naive) endorsement of international partnering


Truth 8: The optimism that change management programmes

are transformative

Optimism exists that a change management

programme will transform for the better . Known's –

the virtues of stability, continuity, organisational

learning and endurance must not be forgotten..


The Submarine Enterprise 1. Deliver required capability at

benchmark availability.

2. Sustainment costs reduce over

time through productivity

improvements.

3. Participants collaborate in a

successful Enterprise with aligned

objectives and interests; and

4. Build an enterprise workforce with

sustained submarine knowledge

embedded in a collaborative

working environment.


– Investment in science and technology AND research and development is a good and

smart! But they are not one and the same thing..

Truth 9: The assumption that science and technology AND

research and development are identical


• Defence capabilities should be seen as complex value chain whereby

prime contractors, other large businesses and SMES all combine to

generate effective defence solution.

• There exists a belief that SMEs possess enormous flexibility,

innovation and untapped capabilities that will somehow

transform the Defence acquisition process and development

capabilities.

• It is a mistake to consider just SMEs and to focus on the development

of policies for this one economic area. The role of larger companies

must be considered and how and what they can provide in bridging

the requirements of the Department to the skills of a niche, small

specialist provider.

Truth 10: The faith that SMEs will help to build a new Jerusalem


• Future Carrier uses alliancing with industry partners, the key features are:

– A single integrated high performance team – including MOD

– An uncompromising commitment to trust, collaboration, innovation and mutual support

– A collective ownership of risks and reward

– Incentivised to achieve outstanding performance in pre-aligned project objectives

– Full “Open-book” accounting

– Decisions taken on “Best for Project” basis

– A culture of No fault, No Blame and No dispute…But there are clear roles, responsibilities & accountabilities

Truth 10: Industry Partnering– Future Carrier


• „Put the Schedule at the Heart of the Programme and Manage it‟ - one Integrated Master Schedule.

• The Industrial Landscape - understand it and understand that it changes

– Have senior and regular engagement between Government and Industry leads – together in the same room.

– Ensure that key Industry partners are clear on their roles and responsibilities. No opportunity to grab market share from one another.

• Ensure that the Procurement Strategy recognise what the Government is trying to buy in each phase & who can best manage the risk.

• The Commercial Strategy must reflect the Government‟s intent and acknowledge where risk is best managed.

• Personnel Continuity & work towards Organisational & Management Stability

Lessons for SEA 1000


• Have a single pan programme set of Design Management Arrangements

• Make a substantial investment in Systems, Tools and Processes.

• Design Contract:

– Design the product against these design management arrangements

– Collaborate with partners

– Meet the schedule

– Work within this governance framework

– Government will make the big cost/risk/schedule calls

• Get Construction and commissioning experts involved early in the design process to ensure we can build and commission the submarine to schedule. The functional and spatial design maturity is managed together under a single process.

• Maintain political support

• Have US engagement and assistance

Lessons for SEA 1000


No, but large procurement programmes cannot succeed without most,

if not all, of these precursors in place.

Sea 1000 will come with uncertainty and risk due to complexity and scale.

The upfront planning, analysis, decision making and design choice

must be right.

Does this Guarantee Success


QUESTION…..

If Defence business is

complicated, is it right

to apply a binary,

absolutist notion of

success or failure?

submarine group - nsw business chamber · (with submarine design & build experience) and a...

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