Slippage of Schedules and Differences of Opinion Threaten Programme Stability
Delays to Australia’s SEA 1000 Future Submarine programme have drawn criticism from the Australian National Audit Office (ANAO).
The office examined the programme’s design phase and discovered a nine-month delay in achieving two of the main milestones anticipated under the original contract: the Concept Studies Review (CSR) and the Systems Requirements Review (SRR). In its report “Future Submarine Program – Transition to Design,” published on 14 January, ANAO concluded that, as a result, Australian Defence “cannot demonstrate that its expenditure of A$396 million [€245 million] on design of the Future Submarine has been fully effective in achieving the program’s two major design milestones to date.”
Future Submarine is set to provide the Royal Australian Navy (RAN) with 12 new boats – designated the ATTACK-class – at a cost of A$80 billion, built at a new construction facility at ASC North in Osborne, South Australia. It is the largest defence project in Australian history and the new boats will replace the existing six COLLINS-class submarines that will leave service from 2036.
The SHORTFIN BARRACUDA design from French shipbuilder Naval Group won the SEA 1000 competition: the company is prime contractor for the programme. In its report the ANAO explained that Defence had found differences in the commercial and engineering approaches of the department and Naval Group that it believes have “impacted progress to date” and that it is already in the process of resolving them.
The report noted that in September 2018, Defence decided not to begin the CSR because Naval Group’s work “did not meet Defence’s requirements.” Documents delivered in July 2018 included proposed design changes to improve submarine performance and Defence found that:
“…the proposed design changes did not sufficiently account for impacts on operational requirements, design risk, costings or other transverse engineering consequences […] a continuing lack of detailed information [as] required by the Commonwealth of Australia to assure design decision making.” A total of 63 studies had not been completed by the company.
The CSR was a significant milestone mandated under the programme’s Design and Mobilisation Contract (DMC), its completion marking transition to the next phase under a new Submarine Design Contract (SDC). The issues were resolved and the review progressed but, on completion in February 2019, Defence found incomplete study work again prevented it moving forward.
Delay to the signing of the SDC was resolved by extending the existing DMC to complete the work. It also moved some outstanding issues into the SDC, signed in March 2019, under which Naval Group requested a 15-month delay to the overall design schedule: Defence agreed to nine months.
Under the revised schedule, the SRR was to have started at the end of September, but Defence noted Naval Group was not ready to begin. The ANAO report states Defence expressed “a ‘deepening concern over a number of matters’ in the partnership, which in its view were a risk to the Future Submarine Program.” The SRR eventually started on 5 December, five weeks later than expected.
A strong relationship between Defence and Naval Group is essential for the success of the programme and the ANAO highlighted this as a “key risk mitigation”. The parties signed a Strategic Partnering Agreement (SPA) in February 2019 that manages the relationship for the duration of the programme.
Naval Group has welcomed the ANAO report, a company spokeswoman telling MON the SPA is “fit for purpose” and that it “addresses the Commonwealth’s objectives” for the programme. She insisted that despite the delays achieving the two design phase milestones, there has been “no change” in schedule for the delivery of the ATTACK-class boats.
“Previously advised dates to the ANAO were estimates at that point in time. Dates have been clarified and contracted in the [SDC]. At this point, the Future Submarine Program is five weeks behind in the contracted design schedule,” she explained.
Minister for Defence Linda Reynolds stated “The first ATTACK-class submarine is scheduled for delivery to the RAN in 2032. The ANAO report confirmed there has been no change to this delivery timeframe or budget,” adding that Defence and Naval Group are working together to recover this delay by the next major milestone – a Systems Functional Review (previously the Preliminary Design Review) – contracted for January 2021. She added that the schedule delay has been essential to get the submarine design right. “Doing so will reduce costly changes and uncertainties while the ATTACK-class submarines are built, and will reduce the need for larger construction contingencies.”
Under the DMC, the Preliminary Design Review was originally scheduled for March 2020. Under the new contract a Critical Design Review, expected in June 2022, is yet to be contracted.
The report also highlighted that any overall delay of more than three years in the programme could result a gap in the RAN’s submarine capability.
Future Submarine had considerable risk associated with it from the start and Defence has given it an overall risk assessment level of high. SHORTFIN BARRACUDA is a new design, an adaption of the BARRACUDA design that is the basis for the French Navy’s new SUFFREN-class. The new design also has to include Australian-specified systems and equipment. Furthermore, the decision to build the boats in Australia also offers considerable risk, since the required industrial skills need to be acquired.
During the Pacific 2019 exhibition last October, both the RAN and Naval Group highlighted progress in development of the Future Submarine local industrial supply chain. But it was also evident that there are large gaps in Australian current capability, especially considering that competing and awarding contracts for advanced work packages takes at least two years years to put in place.
Naval Group and Defence have not had a smooth relationship in the last two years. The SPA was supposed to be signed in October 2017, but the design had not been finalised and Naval Group blamed some of the lack of progress on political instability in Australia.
Confidence in the programme has been damaged, even to the extent that other options were considered. In September 2018 a Naval Shipbuilding Advisory Board meeting suggested that the government look at alternatives should the SPA not be finalised. This included extending the service life of the COLLINS boats, highlighting “the time this would allow to develop a new acquisition strategy for the Future Submarine if necessary.”
This could just be a temporary wobble in what is a very large and complex programme. Hopefully, Defence and Naval Group have a better idea of what is expected and both communication and oversight will be improved to reduce the impact of successive minor programmatic delays. Meanwhile, the design and industrial challenges remain huge: any further stumbles could prove costly to the Australian exchequer.
Tim Fish in Australia for MON