Shipbuilding Industry Adjournment

I rise in the adjournment debate—just in case people have not heard enough about submarines—to talk about submarines and shipbuilding in Australia. Today originally we had an urgency motion, which was subsequently pulled because pretty much the whole day’s productivity of both the House and the Senate was lost in a political debate around shipbuilding, particularly of submarines. The problem with political debates is that people tend to take sides and get entrenched in positions. There is plenty of ammunition on my side, and I am not going to throw it now—you have heard my colleagues speak on that—and the other side, I am sure, feel as though they have ammunition, but the Australian public actually expect us to be here to chart a path for the future that makes our industries sustainable and makes our Defence Force the best equipped in the world in that a manner that is sustainable and affordable. That is what the taxpayers expect. So I would like to talk a little about some of the substantive issues that get lost in political debates like the one we have had today.

What is fascinating in both the contributions here and the views of the public—and you see articles published, lots of comments on them and emails people send you—is there are a whole range of perceptions. There are perceptions in the political world, in the public and in the media about what has or has not happened that should shape the future. I would like to touch on a few of those. Firstly I want to talk about the history of shipbuilding, particularly of submarines here in Australia.

Everyone loves to talk about dud subs, but I can tell you that, when it comes to the Collins class submarine, that is a really inappropriate and unfair title. Yes, they had some problems. On the manufacturing side, the vast majority of the problems were with equipment that came from overseas or with work that was done overseas. The major welding reworks that delayed the entry into service of the first two submarines was done in Sweden. The welding problem was from there. The welds here in the four main sections of the boat never had a problem and still have not had a problem. The original combat system was an American combat system from Rockwell. There were some other inputs—Computer Sciences of Australia and a few other people who were involved in partnerships—but essentially it was a Rockwell system. And it did not deliver. In fact, it took an Australian company, Acacia, to bell the cat. A gentleman called Ted Huber in South Australia was engaged to look at the system and assess it, and he said: ‘You know what? It’s not going to work.’ So it was actually Australian expertise who belled the cat and said, ‘This system is not actually going to be fit for purpose.’ So when people love to look at the major things that delayed Collins, when it comes to the fundamentals of the design, and particularly to the Australian contribution, there is not too much that you can put your finger on and say: ‘This is a unique Australian problem. Therefore, we should never build a submarine in Australia again.’

A lot of the problems in fact come down to the contracting arrangements in terms of split responsibilities. I compare and contrast, just like a school essay. I look at what happens with Toyota, who are making vehicles here in Australia. We do not have an Australian government owned factory making a car that is designed by someone else. No, they come here, they employ Australians and they make the car, but it is a Toyota factory. If we are going to learn anything from the Collins it would be that a future build should be a fixed priced contract with a company who are going to be responsible for actually building and delivering the submarine to the agreed standard. That could mean that they take over on a temporary or permanent basis facilities in Adelaide at ASC. They would employ much if not all of the workforce from there. But this split responsibility was a huge factor in Collins as to why many things went off the rails.

Interestingly, the Coles report which was done recently—and credit to the former government for commissioning the Coles report—identified, and I will read from key findings here:

The study found that the Collins Class submarines are capable submarines which are competently designed and operated by the Royal Australian Navy, however, many of the problems with the Collins fleet stemmed from a failure to put in adequate sustainment arrangements on entry into service (from 1996), and subsequently to adopt adequate processes for reliability. This has lead to maintenance backlogs, inefficient practices and reduced submarine availability.

Given my own background in aerospace and looking at what the forces have had to do to keep our aircraft airworthy, serviceable, mission ready, is part of the reason I am so adamant that we approach defence procurement from the point of view of making sure we develop in defence and in industry the kinds of sovereign competence we need in engineering and fabrication skills that we can actually have design assurance for the equipment that we have. What the Coles report clearly shows is that the Collins is a very capable submarine, and experience on operations or exercises with the US has shown that. What it was let down by was a poor logistics system.

So the current situation: ASC, yes they have some problems. Even the AMWU admitted in the Senate inquiry that has been recently held that there are problems with productivity. But they are getting better. I have been down there many times, being a South Australian senator, and I have watched the progress of ship 1, NUSHIP Hobart, and also ship 2, NUSHIP Brisbane, and what I see as a stark difference between ship 1 and ship 2 in terms of how they are approaching the work. The innovation they have brought in in terms of how to put the ship together—how to integrate each module, fit it out, paint it, put the looms in so that the final connection is going to be so much quicker—says that that productivity is increasing rapidly. I have no doubt that by the time they get to ship 3 they will have reached the benchmark that was set of 80 man-hours per tonne.

The other important thing to remember is that there is a learning curve. It is not just Australia—overseas as well. The US congress and their Government Accountability Office and the UK parliament is full of inquiries into shipbuilding productivity, because people get scared when they look at the first or second ship in a class and they go, ‘Oh, my goodness, it is late and over budget.’ A lot of people loved to say that the Virginia class is what Australia should be looking at. The first two boats were $1 billion over budget. The Astute class, built by the UK, was £2 billion over budget for the first three boats and four years late. There is the LPD-17 class of ship in the US. There were 6,000 defects found on the first vessel, and over subsequent vessels it has decreased.

What we saw here in Australia with the Anzac project was that, allowing for that learning curve, over time the productivity gets better, the quality gets better, the cost per vessel comes down and it is a successful project. So over time we will get better. Which means in the future we can look with confidence to things like the Future Frigate, which is why the government has invested the $78.2 million to do the early engineering work so that we can look at putting the Australian CEA radar and the Saab 9LV combat system, which is designed and built in South Australia, into an air warfare destroyer hull which will give us not only the learning curve and the efficiencies from those first three boats but a further eight, which starts giving us for the first time a sustainable footing for the Australian shipbuilding industry.

That is the only option that we have. If you look at the air warfare destroyer and the LHD, the decisions for both of those programs were made by the Howard government. So that is at least seven years ago. We are just reaching the point where we are approaching the ‘valley of death’. If we are going to address that valley of death now, decisions would have had to be made for a complete new build six or so years ago. So the only option to move forward is to find a way to use that learning that we have held in the AWD to carry that forward into a project. So this is the best way to (a) address a need and to (b) to continue to build Australia’s sovereign capabilities in radar and combat systems and shipbuilding and to avoid that valley of death.

In terms of submarines, ASC at the moment is doing significant work on Collins. They are actually cutting hulls open, remediating issues, doing overhauls to then put them back together. Those are the level of skills that you need to build submarines. So Australian workers have not completely lost that. I see no reason why in an appropriate partnership, as we always do these things—whether it be with the Swedes, the Germans, the Japanese or even the French—Australian industry cannot be involved in the final design phases and construction of a submarine, which, as I have argued consistently, is the best way to assure the sovereignty that we need. These are the issues we should be discussing; not the cheap politics that we have seen for so much of today.