Future Submarine Project—reduction of taxpayers’ risk


Recent postings on The Strategist by Mark Thomson (AWD Program) and by Charles Carnegie (Leadership Risk) cast a bright light on the present record of program management failure in Australian Naval Shipbuilding, and on the possibilities for a repeat performance. Carnegie’s paper asserts that, with the Future Submarine Project, ‘Australia will soon be exposed to a ‘leadership risk’ of approximately $15 billion’.

A survey by independent consultants Caravel for Infrastructure Australia (2013) found  that 48% of projects failed to meet their baseline time, cost and quality objectives.

The report concluded: ‘It appears that the delivery of Project Governance in Australia is generally highly dysfunctional’.

Edward Morrow was with RAND Corporation before he established Independent Project Analysis, Inc. in 1987. Morrow’s book Industrial Megaprojects (2011) cites the failure of 65% of global projects with value over $1 billion, from analysis of over 300 megaprojects. He found that about 30% of megaprojects fail due to errors in basic data, including engineering design, adding that projects derail long before contractors are engaged.

Although Morrow’s area of analysis is industrial, his experience and much of his work are directly relevant to the FSM megaproject.

In Morrow’s area of commercial developments, failure means financial loss that damages the sponsor company severely or lethally—for the FSM Project, economic failure means that Australian taxpayers must bear the unexpected additional cost. There’s an ethical as well as legal responsibility on Government to put in place all feasible systems to manage the risk of failure of the FSM Project.

Large and complex projects are fragile, requiring the most careful direction and management. They must be closely monitored and tightly integrated to achieve success, with a stable foundation for the best prospect of managing turbulence in the complex project environment. According to Morrow:

One essential element of planning how to control the project is to establish the project management Information Technology (IT) system and approach that will be used. Of highest importance is to plan for as much interoperability of IT systems as humanly possible. The IT systems requirements should be incorporated into the invitation to bid for the main design/construction contract and into the requests for quotation from all of the key vendors of equipment.

This is routinely done now in the global offshore oil and mining industries, including for megaprojects in Western Australia.

DMO’s approach to information management systems has failed to comprehend the criticality of this issue. It appears to see that topic as solely the responsibility of the selected shipbuilder, and does not seem to appreciate  that it would be prudent and wise to be an informed customer, and to insist on a modern information management system. In this context, the AWD saga is a sorry tale of information management failure from the beginning.

The recent briefing by the outgoing General Manager Submarines listed ten criteria for the FSM Competitive Evaluation Process. Information management was omitted from the list, despite being a critical foundation needed for the Future Submarine Project—as a lesson to be learned from the AWD Project, to avoid repetition.

At project start, it’s critical that the information strategy is clearly defined. This strategy is essential for the execution of the project over its entire life. Access to the digital resource is vital from the start to ensure that transparency is available to track actual progress achieved. For optimal results, the design house and the construction shipyard should use the same engineering software solution.

Many Australians (including DMO personnel) concerned with shipbuilding are unaware that Heavy Engineering IT software has changed enormously in the 15 years of this century—as our individual experiences with personal computing and mobile phones have shown.

What began with design office solutions to produce engineering drawings have now become Enterprise solutions covering all best-practice shipyard processes from concept to delivery, using a unified database that can then be readily used for ship operation and sustainment—unlike the AWD Project.

Engineering IT has now become a critical foundation for risk management of cost and schedule, including double figure percentage reductions in labour costs. Proven worldwide—notably in Korea—the world’s most successful shipbuilding country, at DSME including in its collaborations with BMT UK and NASSCO San Diego.

Intense attention is given to increased project control, capital discipline, eliminating project overruns, and delivering improved efficiency in operations.

Australia’s new naval shipbuilding industry should be established on a premium IT system foundation for best prospects of success and for maximum future-proofing. This should be a matter of considered direction by the Commonwealth, rather than simple acceptance of the choice of the design house and/or the shipbuilder.