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14,000 sounds like a lot—down to the docks again

Posted By on July 17, 2014 @ 06:00

All four blocks have been lifted onto the LHD01 hull at the BAE Systems Williamstown Dockyard. [1]

Earlier this week, The Australian ran a story about delays in the construction of the Navy’s new amphibious ships [2]. At first blush, it looked like a familiar story of poor shipyard performance, with 14,000 defects found in the HMAS Canberra, the first of the two new LHDs, resulting in a delivery delay of seven months. As the newspaper pointed out, the problems come at a bad time for the Australian shipbuilding industry, after a critical report on the air warfare destroyer project [3] and a government decision to outsource the construction of two new replenishment ships [4] to overseas companies:

They come at a time when the Abbott government appears to be paralysed with indecision about how to proceed with the country’s largest def­ence project, the $36bn construction of up to 12 submarines in ­Adelaide.

The delay in the completion of HMAS Canberra at Melbourne’s Williamstown shipyards has disappointed Defence, which says low productivity, poor skills and a shortage of trained supervisors has combined to delay the delivery of the ship until later this year.

To be sure, the government is running hard on shipyard productivity. As the Defence Minister recently told the ABC [5] in the context of the AWD program:

If we can’t get the program back on the rails then it will be very, very difficult for me or anyone else to advocate a long-term naval shipbuilding enterprise in Australia.

That’s the context for the Oz piece—another poorly performing naval shipbuilding program imperilling the future of the local industry.  But I think a closer look at the (limited) data in the story tells another tale—or at least allows another interpretation. It’s routine for large industrial projects to have a long list of defects identified for remediation. Collectively those defects form what’s called a ‘punch list [6]‘, a list of items to be completed before delivery can be accepted. Some of the defects can be substantial—the article mentions electrical failures, leaking seals, unaligned pods and corrosion in propellers—or nothing more than a rivet that needs replacing or minor repainting.

For a project delivering multiple items, one measure of contractor performance is how many of the punch list entries are avoided in subsequent builds. To assess that, at the bottom of the story we find:

The second LHD ship, HMAS Adelaide, which arrived in Melbourne in February, has far fewer problems and Defence says it is ahead of schedule to be delivered to the navy in 2016.

The fact that the first ship is late while the second ahead of schedule suggests that the shipyard workers are actually working on a pretty steep learning curve, which—despite common usage to the contrary—is a good thing because it means that mistakes are learnt from efficiently. If there were systemic problems we’d expect both ships to be running behind schedule.

That suggests the initial estimates of how long it should take to do the first of class weren’t accurate. In other words, the preliminary project work and due diligence on the behalf of the Commonwealth and/or the estimates from the contractors involved (in this case Navantia in Spain as suppliers of the hulls and the drawings for the fit out and BAE as the local shipyard) were overly optimistic.

That wouldn’t be a new story either. In the AWD project, the difficulties of bringing together a first-time exporter of a warship design and a start-up shipyard were significantly underestimated [7]. In that case, the problem was probably exacerbated by shipyard productivity falling short as well—but perhaps not as far short as a cursory glance at the outcomes might suggest.

In the case of a two-ship build, as is the case here, it’s almost academic where the fault lies, because the outcome is the same—delayed delivery of capability. (In this case the problems don’t result in a direct cost to the Commonwealth because of a fixed price contract.) But it matters much more if the government is going to commission further builds of larger numbers of ships (such as eight future frigates or 12 submarines). There’s a big difference between an underestimation of the start-up difficulties and costs (which get amortised over the whole fleet and add proportionally less in unit cost the larger the production run) and a systemically poorly performing yard, which potentially adds costs and delays to all of the hulls. It’s important to be able to tell the difference—not least because it also tells you where effort has to be applied to get better results the next time.

Andrew Davies is senior analyst for defence capability and director of research at ASPI. Image courtesy of Defence Materiel Organisation [8].



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URL to article: https://www.aspistrategist.org.au/14000-sounds-like-a-lot-down-to-the-docks-again/

URLs in this post:

[1] Image: http://www.aspistrategist.org.au/wp-content/uploads/2014/07/Picture-7.png

[2] delays in the construction of the Navy’s new amphibious ships: http://www.theaustralian.com.au/national-affairs/policy/new-warships-14000-defects/story-e6frg8yo-1226989024660

[3] critical report on the air warfare destroyer project: http://www.aspistrategist.org.au/the-awds-and-the-auditors-round-two/

[4] government decision to outsource the construction of two new replenishment ships: http://www.minister.defence.gov.au/2014/06/06/minister-for-defence-boosting-australias-maritime-capabilities/

[5] recently told the ABC: http://www.abc.net.au/news/2014-07-16/defence-industry-worried-for-future-sa-prospects/5600400

[6] punch list: http://www.wisegeek.org/what-is-a-punch-list.htm#didyouknowout

[7] were significantly underestimated: http://www.aspistrategist.org.au/what-do-the-awd-problems-tell-us-about-the-future-submarine/

[8] Defence Materiel Organisation: http://www.defence.gov.au/dmo/adas/jp2048ph4/

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