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Govt has no business in shipbuilding: former ASC boss


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Nationalisation of the ASC was a foolhardy decision and the government needs to return the shipbuilder to private hands, argues Hans Ohff.

The constant in naval warfare history remains that an effective naval force is one supported by highly skilled and responsive engineering capacity.

Thus, if the Royal Australian Navy is to effectively manage whole-of-life maintenance and systems upgrades for its fleet, then our government must again ensure that Australia produces and maintains world class maritime engineering capacity. And the simplest, most effective and cheapest way of establishing and embedding that capability is to confirm that the construction of the Future Submarine Program takes place here in Australia. By building the next submarine squadron in Australia we can ensure that we properly embed a deep organisational understanding of the boats – their structure, systems and the numerous interfaces that characterise vessels of this complexity.

In 1890, Captain Alfred Thayer Mahan published his influential geostrategic masterpiece, The Influence of Sea Power upon History: 1660 – 1783. There are many lessons in Mahan’s work that are as relevant today as they were 250 years ago.

In the event that the fleet is deployed in harm’s way, our Navy must ensure that the skills and capacity to support the ships and submarines are available at all times, at a minute’s notice.

Mahan refers to the ‘mechanical arts’—for the Future Submarines Project (FSP) those arts include boilermakers, welders and fitters; electrical and instrumentation trades; and drafting and other support classifications. These are all skills that have been allowed to dissipate following the steady elimination of heavy fabrication in Australia. If we are to ensure that we have the engineering capacity to properly support the FSP, we need to rebuild those engineering skills anew – and we need to do that in a way which produces tradesmen and women who are world class in quality and productivity.

As to the government’s Adelaide shipyard, the then Minister of Defence’s implied statement, “we — the owner of ASC — are not even capable of building a canoe”, had little to do with the performance of ASC’s workforce.

How do we build the training infrastructure necessary to create a new generation of mechanical and electrical trades together with the requisite supervisory and managerial capacities? History provides a guide.

When we set out to build the Collins class submarines, the Adelaide and ANZAC class frigates, and the Huon class mine hunters in the late 1980s, the government had the wisdom to get out of the business of building warships. Newcastle and Cockatoo Dockyards were closed down, and Garden Island and Williamstown Dockyards were sold to private enterprise. A brand new, state-of-the-art submarine building facility was built in South Australia, and a naval repair and maintenance yard was established at Henderson in Western Australia.

Experienced and proven skills found employment in these new naval ship building establishments. Importantly, a major contribution to this naval ship and submarine capability also came from the RAN.

But the Naval Engineering Division in Canberra has been closed for some time now. In its wisdom, or more the lack of it, the government no longer funds a Naval Design Directorate, and the corporate memory of vast numbers of civilian and government naval engineers is largely lost for ever. As to artificers, the RAN no longer schools apprentices. A 38-week basic technical training course will have to do since much of its skill-based requirements are outsourced to the private sector, which now rarely indentures new apprentices itself.

From the mid-1990s onwards the federal and state governments discontinued their campaigns for local manufacturing. Barriers to the importation of equipment and structures fell by the wayside. The mining and hydrocarbon sector encouraged offshore fabrication and modular construction while the heavy engineering and manufacturing industry did not need much encouragement to outsource its capabilities first to Japan, then Korea, Indonesia, Thailand and Malaysia, and now to China and India. And while the refiners no longer find it economical to own and operate refineries in Australia, and the car, bus, truck, tram, train and general manufacturing industries have all but transferred their capacities to low-cost countries, the Australian minerals producers are turning to temporary skilled class 457 visa programs to service and maintain their operating equipment.

And what of the country’s naval shipbuilders? The Forgacs and BAE-Systems yards at Newcastle and Melbourne respectively will soon run out of work. As to the government’s Adelaide shipyard, the then Minister of Defence’s implied statement, “we — the owner of ASC — are not even capable of building a canoe”, had little to do with the performance of ASC’s workforce. They were dedicated and highly skilled men and women when I was running the company, and presumably they remain as committed to this day. No, the minister’s outburst was probably a precursor to fulfilling an agreement between Prime Ministers Abbott and Abe to build the next generation of RAN submarines in Japan.

Clearly, if the Federal Government had not been so foolhardy as to nationalise ASC in 2000, assume responsibility for the Collins class Submarine Design Authority, buy from the Spanish government the design for the RAN’s new Air Warfare Destroyer program, and award itself a target-estimate — that is a cost-reimbursable — contract for the delivery of the three destroyers, the performance of ASC would almost certainly have been vastly more successful.

What led to the privatisation of the Australian naval shipyards in the 1980s still holds today: government has no business and no capability in the management and operation of a shipyard. A prerequisite for warships to be successfully built in Australia is that ASC is returned to private ownership.

Since Australia does not have indigenous, proven naval submarine design experience the government has decided correctly to procure this capability from overseas. But it is not only the intellectual property of the design, the calculations, modelling, tank testing and drawings that Australia requires in order to build the submarines in-country successfully. The submarine designer also needs to transfer its building technology to Australia, and, the Australian submarine yards need to acquaint the overseas submarine house with the local rules and regulations, management styles and systems and work practices. They must work together cooperatively from the first stroke of the pen, to enable cost-effective, reliable construction and through-life support in Australia.

Finally, I want to make an observation as to the expected cost of the FSP. If we accept a baseline cost of $20 billion for 12 submarines over a 20-year design and construction period and twice that value for a 30 year operating life, we are looking at an aggregated annual expenditure of $1.175 billion over a 51 year combined building and operating cycle. That is about 0.2 per cent of current federal budget outlay or just on 4 per cent of the 2014-15 defence budget.

Capital expenditure in the resources and energy sector continues to decline — from over $200 billion in 2014, to a forecast of less than $20 billion in 2017. We need to do everything we can to ensure that we have meaningful job opportunities for skilled workers, engineers and project personnel. The FSP represents an opportunity to enhance national security, develop a new standard of engineering, procurement and project management training, and embed naval shipbuilding firmly into the Australian economy.

It seems to me that the West is financially and psychologically exhausted by trying to install democracies in Afghanistan, the Middle East, Africa, and elsewhere. And notwithstanding binding treaties, bi-lateral agreements and an historical connection with the Anglosphere and NATO, our guarantor, the United States, may not be able or even prepared to rush to our aid at a moment’s notice. It is therefore prudent to plan for uncertainty, and to be sufficiently realistic in our planning to include scenarios that require us to be largely, if not wholly self-sufficient in our ability to maintain, repair, upgrade and, when required, rapidly expand the future submarine fleet.

Why, I ask, would anyone even contemplate anything other than building and maintaining the RAN’s next generation submarine squadron also in Australia?

Hans Ohff is the former CEO and Managing Director of the Australian Submarine Corporation. This is an edited extract of a speech he will give today to Australia’s Future Submarines Summit in Adelaide.

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