SUBMARINES: A RISKY BUSINESS

f all goes well, SEA 1000 will deliver the RAN 12 reliable and high end submarines which will form the backbone of the most capable submarine force in our region and serve as a significant capability element of the ADF.

2nd Apr 2012



 SEA 1000
 

 SUBMARINES: A RISKY BUSINESS


Strapline: Rex Patrick / Sydney


Introduction
If all goes well, SEA 1000 will deliver the RAN 12 reliable and high end submarines which will form the backbone of the most capable submarine force in our region and serve as a significant capability element of the ADF.
However, this statement is contingent on the four words, “if all goes well”.
With every project comes the opportunity for success, but also the possibility of failure, and noting SEA 1000 has been described as “likely to be the largest defence procurement project in the nation's history”, the implications of project failure would be significant. With the wounded stated of the current submarine capability, failure might be terminal for the Australian submarine force and, noting the projected cost of some of the options on the table, could actually bankrupt the Navy. There is a lot at stake.
What brings projects down is “risk”. It eats away at performance, consumes resources and blows out schedule (note that project cost is determined by multiplying resources and time). Risk is the enemy of Project Managers and as such needs to be foremost in our minds as we move forward with SEA 1000.
Consequences
The Collins Class submarines serve as a relevant example on the consequences of risk.
As risks materialised on the Collins Project the RAN saw reduction in performance, consumption of additional resources and delays in schedule. Submarine war fighters saw interim Combat System software drops over time before it was finally acknowledged that this critical system would never meet the navy’s requirements. The platform suffered a broad range of reliability issues and noise problems. The RAN saw a delay of about 12 years before the boats were considered suitable to be placed ‘in harm’s way’. Additionally, demand on the resources required for the “fix-it” program hindered the upgrading of the submarines and placed constraints on spending in other parts of the Navy.
The problems with Collins have taxed submarine operators, submarine management and the sustainment organisation to the point where the programme is described by John Coles in his 2011 Phase One report to the Minister as “an unhappy story”.
Requirements Set the Risk Scene
Before delving into risks categories, it is worth highlighting up front that it is the setting of operational requirements for any capability that sets the risk scene.
“Experience shows that setting requirements beyond that of off-the-shelf equipment generates disproportionately large increases to the cost, schedule and risk of projects” said David Mortimer in his In 2008 Defence Procurement and Sustainment Review. Augustine’s 15th law suggests that the last ten percent of performance generates one-third of the cost and two-thirds of the problems. The cost schedule risk diagram shown in Figure 1 and supplied to Mortimer by the-then DMO General Manager of Programs and the-now DMO CEO, Warren King, suggests Augustine was an optimist.

Figure 1 – Cost Schedule Risk (Source: Mortimer Review)
Defence’s senior leadership team, in conjunction with the Submarine Project, need to carefully trade off future submarine unique mission sets against risk, particularly for those missions that are not related to the immediate Defence of Australia. Requirements should be objectively categorised as “essential”, “important” or “desirable”, such that those below essential can be appropriately traded to reduce the risk profile to an acceptable level.
Political requirements can also adversely alter the risk scene. Political leaders must be careful when imposing political constraints on projects that could in turn add risk; examples include the mandating of build locations or the setting of unreasonably arduous Australian content requirements.
Risk and its Many Forms
AS/NZS 4360:2004 defines risk as “the chance of something happening that will have an impact upon objectives” and states that it is “measured in terms of consequences and likelihood”.
Risk comes in many forms. Some forms are internal to a project, such as technical and management risk. Others, such as political, economic and commercial, are external.
Technical risks stem from novelty, uncertainty and complexity. Novelty is associated with attempting something for the first time, be it development of a new capability, the creation of a new design, the conduct of work by a new entity or the dangerous mix of two or all three. Uncertainly is related to novelty and encapsulates technical risks caused by a lack of data or information. Complexity is another technical risk caused by the fact that the some systems are so complex it is not possible for the project team to comprehend their structure.
This risk can be offset to some respect by a number of approaches. One is to honestly assess what is unknown and, where possible, test against it. Another is to approach change cautiously and formally embrace and include diverse/dissenting opinions in decision making and carefully assess and manage the risk versus reward associated with new technologies; deviations from proven technology solutions must be justified, with intended benefits astutely weighed against intrinsic and accumulated risk. If new technologies with long development cycles are to be brought within the project boundaries, off-ramp points should be identified along associated fallback solutions – with cascading fallbacks in certain circumstances.
Management risk is an internal risk that materialises when project staff lacks domain knowledge and the necessary experience. Only experienced Project Managers backed by an appropriate depth of knowledge within the project team, can effectively offset it.
All Defence projects are resourced by the Parliament. Those that have the highest cost and greatest technical risk will always be subjected to Parliamentary scrutiny. If bipartisan support is not achieved at initial project approval or some forms of political constraint have been applied this will be even more so. Scrutiny brings unwanted political risk for Defence Project Managers, which in turn can see critical projects resources dragged away to participate in enquiries, reviews and audits that often just worsen the situation. Alternatively, in response to pressure attempts to accelerate the project can occur, in breach of Augustine’s 24th law, “The only thing more costly than stretching the schedule of an established project is accelerating it, which is itself the most costly action known to man”.
Economic risk is an eternal risk that is by and large, outside the control of both Defence and Government, although materialised technical risk exacerbates the situation. Defence projects, on account of their longevity, can be subject to economic boom and bust cycles. Large and costly projects approved in bullish economic conditions can come under intense scrutiny in bearish times, resulting in a reduction of final platform numbers, which invariably raise per unit costs exposing the project further political risk, or platforms being delivered with significant capability deficiencies. A worst-case scenario is total project cancellation – something that has happened in Australia, with Super Seasprite helicopters being a case in point.
Major Defence projects can be subject to a number of external commercial risks including those where control of a major supplier is transferred from one major corporate entity to another. At the other end of the spectrum comes commercial risk associated with the vendors that are not commercially viable at the end of a build program. RAND cites the Hedemora diesels as a prime example on Collins. The Collins Hedemora diesel has 18 cylinders, modified at the request of Australia, from a 12-cylinder locomotive engine design to give the submarine more generating power.
According to RAND:
“As a result, the Collins Class is the only diesel submarine with this particular engine. An earlier class of Swedish submarines uses V-12 Hedemora diesel engines, but Sweden subsequently specified other engines for its submarines designed after Collins. In 1998 a liaison with ASC visited Hedemora to try to resolve some of the problems with the engines and was shocked to see that the company only had 35 employees and was up for sale. Hedemora’s ability to assist ASC was minimal, and Australia had to deal with the responsibilities of operating and supporting a unique engine that was a key to the submarines’ success”.
The project team must therefore, as responsible stewards of the taxpayers’ money, award contracts to companies that have demonstrated technical knowledge and experience necessary to perform the work, represent good value for money and have a balance sheet that suggests they will survive beyond the project specific work that will be allocated to them.
MOTS
The MOTS option, along with the benefit of larger economies of scale that offset political, economic and commercial risk, carry the least technical risk. It is noted that some of the MOTS submarines available offer superb capability, perhaps falling only 10 – 15% short of the Navy’s aspirational goals.
None the less, such a selection would provide a high level of certainty in what Navy would get in terms of capability and by when. Any capability gap would be known from the outset.
Modified MOTS
A modified MOTS solution, a MOTS with a selection of system of Australia’s choice, carries only medium technical risk provided no attempt is made to modify core components of the submarine. None the less, Mortimer suggested care in relation to cost associated with modified MOTS pointing out “the cost of modifying is invariably spread across a small production run”.
Too large a deviation from the MOTS baseline could see us converging on the prospect of being a parent navy again, something to be avoided noting we never came to grips with the magnitude of the responsibilities and demands of being one with Collins.
New Design
Whilst a new design was mentioned by RADM Rowan Moffitt at February Estimates, his comments with respect to a new Australian design were unequivocal:
“If we were to decide to design a submarine in Australia using the skills and resources we have in Australia today, the risk would be extreme. No one is saying that we should do that. In fact, the RAND study quite clearly suggests that if we are going to do this in a timely manner then we are going to need a great deal of assistance from overseas. I do not think there is any doubt about that. We do not have the resources and no one has suggested that we do this entirely within our existing national resources. It is not something that makes a lot of sense to do in terms of design.”
A new design led by ASC or its daughter company, Deep Blue Tech, is off the table.
A unique, presumably larger hulled, design by a reputable submarine design house is, however, still on the table. Likely candidates might include the conventional Barracuda design by DCNS, a company with a proven pedigree in both (small) conventional and large (nuclear) submarines, the Type 216 by HDW, based on components tried and tested at sea in a range of at sea designs, the Kockum’s 611 class, about which very little is publicly known and an equally unpublished design from Navantia. Each of these would attract varying levels of risk, but compared to MOTS or modified MOTS, would be somewhere in the medium-high to high-extreme category.
Whilst commercial risk could be avoided in a new design program, political and economic risk could probably not.
Evolved Collins
This leaves the final option; an evolved Collins. Prima facie, an evolved Collins might seem to be less risky than kicking off with a new design. However after a few brief moments of consideration, this initial reaction might not be reconcilable.
First and foremost is the question of whether Collins can be evolved. Would the design be the right starting point? Dr. Hans Ohff wrote in a Canberra Times article last month that an 'evolved Collins' would lock Australia into out-dated design principles. ''There is not sufficient flexibility in the Collins class design''. Noting Dr. Ohff was the Managing Director of ASC during the Collins delivery phase, due regard must be given to his comments.
And wouldn’t it make more sense to select a design that requires less evolution? Once a permanent magnet motor, new diesels, lithium ion batteries, AIP, bridge type hoistable masts, special forces facilities, AUV cradles or locks, new weapon discharge technologies, Multiple All Up Round Canisters, flexible payload technologies and the like are included, the only resemblance our future submarine would have to Collins would only be the steel hull, but there has been commentary suggesting that we should change the shape and pressure hull diameter. In effect, an evolved Collins would be a new design of submarine.
Who would plan the evolution? A submarine is not a collection of proprietary items or systems, rather a carefully integrated weapons platform. Does ASC have the requisite design experience? RAND and RADM Rowan Moffitt seem to be suggesting not. Recall that it was only a few short years ago that ASC had to go to US Industry to sort out some relatively small design issues with our boats.
In terms of technical capability, it is worth surveying the makeup of the various submarine design houses. France’s DCNS currently has 600 people working on submarine design activities, including combat system integration. The US company Electric Boat (retaining in the notion in this series that nuclear should be considered in the debate) has a workforce of over 3000 experienced engineers and technicians. About 600 engineers are working in the design department of HDW in Germany, half of which are design experts with at least 10-20 years’ experience in the game. Navantia has about 120 are designers engaged in works related to directly to submarine design. More than 50 of these design engineers are experts, each with at least 10-15 years’ experience.
Deep Blue Tech PTY, ASC’s submarine design house, has less than 50 employees.
It might also be suggested that an evolved Collins program would in some sense be viewed as a continuum of the current arrangements. However one might argue - from a management risk perspective - that this nexus needs to be broken. A continuum would also exist with respect to political risk. Economic risk would be high to very high.
It is fair to suggest that the aggregated risk of an evolved Collins would exceed that of a new design.
An Australian Build
Adopting a MOTS, modified MOT or a new design from an experienced design house should not prevent the submarine being built here in Australia.
Whilst RADM Moffitt placed an Australian designed submarine in the extreme risk category in Estimates hearings, he did not shy away from an Australian build:
“One would say, in terms of the manufacture of the submarine it is a very different problem and very much less of a problem in dimension. We have the necessary skills in broad terms to build a submarine in Australia: to assemble the various components and to fabricate the various components. Some of those skills may not today be at a level of currency, particularly the highly specialised pressure hull welding, but we have had those skills in the past and I do not think that there is any reason we should feel that we could not have them again if we approached building them as we did with Collins, recognising of course that we had no submarine building enterprise in Australia when we started Collins.”
This author agrees with his assessment.
Strategic Risk
The topic of strategic risk has not been broached and needs to be in order that the discussion can be concluded. It was not brought up in respect to the submarine designed on the grounds that strategic risk is not a program input, rather it’s an output. In the commercial sector this is often referred to as Business Risk, effectively is the risk to the business when the project fails to deliver the expected output on schedule and/or the output is insufficient to fulfil the business’ needs. In terms of the ADF or Navy this is often referred to as the Capability Gap, what would the impact to the ADF be with not having that capability for a period of time or in the worst case ever?
The reality is that the quest for a SEA 1000 submarine that meets unique requirements could ultimately result in the delivery of a solution that under performs otherwise proven but not fully compliant solutions – at significant strategic risk to Australia’s defence.
One’s attention is drawn to Volume Two of the RAND Corporations “Learning From Experience” submarine series which looks into the lessons of the Ohio, Seawolf and Virginia Class program. It noted that Seawolf was to be:
“….the most capable ASW platform built by the United States to date”.
It went on to suggest that:
“This factor, coupled with the loss of U.S. ASW advantage for the first time and a decision to aggressively regain it, was instrumental in setting the stage for a high risk program. Unlike previous submarine design efforts, the Seawolf program pushed several technology boundaries because of the desire to significantly increase the capabilities of U.S. submarines in response to the growing capabilities of Soviet submarines.”
In the end, concerns over the cost of the Seawolf forced the Navy and the shipbuilders to take a different approach leading to the Virginia program. All involved realised that designing and building a lower cost submarine that was responsive to the new threat environment was imperative for the survival of the program, and to a large extent, to the nuclear submarine industrial base.
Our situation is worse. We are living with the reality of a very expensive program encapsulated, if Coles is to be believed, in an environment of chaos. We should heed past lessons; Australian must proceed carefully down a relatively low risk path with respect to its future submarine program.
Proceed With Caution
Many people confuse enthusiasm for competence. They also believe the potential to conduct a given mission equals the capability to execute it properly.
Care must be taken with respect to SEA 1000 and risk. At the end of the day we need reliable, capable and, above all, deployable submarines, not a paper capability.
It’s worth concluding with Augustine’s 12th law – “It costs a lot to build bad products”.
 

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