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Equip and Sustain the Australian Defence Force
Submarine Group David Gould
General Manager Submarines
Equip and Sustain the Australian Defence Force
• 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
Equip and Sustain the Australian Defence Force
Equip and Sustain the Australian Defence Force
Equip and Sustain the Australian Defence Force
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
Equip and Sustain the Australian Defence Force
• 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.
Equip and Sustain the Australian Defence Force
• 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
Equip and Sustain the Australian Defence Force
• 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
Equip and Sustain the Australian Defence Force
• 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.
Equip and Sustain the Australian Defence Force
Truth 3: Case Study: Nimrod MRA4
Equip and Sustain the Australian Defence Force
• 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”
Equip and Sustain the Australian Defence Force
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”
Equip and Sustain the Australian Defence Force
Truth 5: The Availability of both Project certainty
&Technological Advantage
Equip and Sustain the Australian Defence Force
• 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
Equip and Sustain the Australian Defence Force
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
Equip and Sustain the Australian Defence Force
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..
Equip and Sustain the Australian Defence Force
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.
Equip and Sustain the Australian Defence Force
– 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
Equip and Sustain the Australian Defence Force
• 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
Equip and Sustain the Australian Defence Force
• 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
Equip and Sustain the Australian Defence Force
• „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
Equip and Sustain the Australian Defence Force
• 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
Equip and Sustain the Australian Defence Force
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
Equip and Sustain the Australian Defence Force
QUESTION…..
If Defence business is
complicated, is it right
to apply a binary,
absolutist notion of
success or failure?