2012 CAPABILITY PLAN – THE URGE TO SPEND UP BIG REMAINS

In July the Ministers of Defence and Defence Materiel announced that they had listened to industry seeking more certainty in information about planned key defence projects.

30th Aug 2012


 Defence spending

2012 CAPABILITY PLAN – THE URGE TO SPEND UP BIG REMAINS

Byline: Geoff Slocombe / Victoria


In July the Ministers of Defence and Defence Materiel announced that they had listened to industry seeking more certainty in information about planned key defence projects. The Ministers said that Defence’s planned projects will in future be described in two documents – a Defence Capability Plan (DCP) and a longer term Defence Capability Guide (DCG).

A week later the 2012 DCP was released and there is an expectation that the 2012 DCG will be available by the end of September.

The 2012 DCP contains 111 projects, or phases of projects, worth approximately $153 billion. The full Public DCP and an explanation of its format and entries can be found on the DMO website www.defence.gov.au/dmo/DMO/nodes.cfm then click on ‘Latest News - Defence Capability Plan 2012’. It does not include details on sensitive, classified or previously approved projects.

It is made up of priority projects planned for either first or second pass approval over the four year Forward Estimates period 2012-2016. For detailed information about the top spending projects in the Forward Estimates see ‘Government takes the axe to Defence’ APDR June 2012. The DCG will provide general guidance for industry, with less certainty, over the six year period following the four years of the DCP.

The DCP text provide information to industry on project scope, likely cost band, time schedules and local industry content. As always it is delivered with a caveat that the DCP may change as strategic circumstances evolve, new technologies emerge and priorities are updated to reflect the changing needs of the ADF.

Sometimes defence purchases, which were not previously in any DCP, are made at relatively short notice. Recent high spending examples include ordering two extra C-17A Globemaster IIIs in 2011 and purchasing the Offshore Support Vessel ADV OCEAN SHIELD in 2012, both excellent acquisitions.

PROJECT RISKS AND INDUSTRY OPPORTUNITIES

Virtually every defence project contains a range of risks of varying impact. The DCP format provides an assessment of the project’s complexity, which gives rise to risks, through use of acquisition category (ACAT) ratings, measured in four levels I – IV, where I is the highest category.

For example ACAT I is described as ‘projects that are major capital equipment acquisitions and are normally the ADF’s most strategically significant. They are characterised by extensive project and schedule management complexity and very high levels of technical, operating, or support difficulties, and highly complex commercial arrangements.’

The DCP information is broken down into a number of subsets which start with background details on how each specific project phase relates to the overall capability requirement.

A section targeted at Australian industry provides an indication of requirements for an Australian Industry Capability (AIC) Plan, Priority Industry Capabilities (PIC), Strategic Industry Capabilities (SIC), and Global Supply Chain (GSC) potential for each phase of the project in tabular format. Further detail on the AIC, PIC, and SIC aspects is generally provided under the Australian Industry Opportunities section of the project phase entry. These identify potential opportunities for Australian industry involvement in the acquisition and through-life support stages of the proposal, and in related infrastructure aspects.

 

The Phase Scope describes what is to be acquired under the indicated phases of the project. Where appropriate, it also includes descriptions of Initial Materiel Release (IMR), Initial Operational Capability (IOC), Final Operational Capability (FOC), and Life of Type (LOT) for the phase.

Detail of the Planned Schedule provides indicative timings for significant milestones including First Pass approval (if applicable), Market Solicitation, Year of Decision (YOD) or Second Pass approval, Initial Material Release, and Initial Operational Capability. All of these dates provided in the Public DCP are financial year dates, normally covering a range of two years.

Points of Contact are provided for both the proposal sponsor, usually within the Capability Development Group (CDG), and the acquisition agent, usually the DMO.

In the sections below, comparisons are made with the 2011 DCP and the recent 2012-13 Defence Budget.

SOME BIG PROJECTS ARE NOT IN THE 2012 DCP

The 2012-13 Defence Budget document is the best guide to what expenditure is planned by project over the Forward Estimates 2012-16.

However one can look in vain at both the 2012 DCP and the Budget to try to find details of the announced plan to purchase 10 C-27J Spartan aircraft. AIR 8000 Phase 2 does not appear on the DMO’s current website list of Top 30 projects, nor in the list of ‘minor projects not in the Top 30’. The acquisition of the 10 C-27J aircraft with associated support equipment will be conducted through a Foreign Military Sales (FMS) arrangement with the United States (US) at a cost of around $1.4 billion. At Budget time it was hidden in a table of Unapproved Capability Investment Programs. The first aircraft are expected to be delivered in 2015 with the Initial Operating Capability scheduled for the end of 2016. How can observers figure out what is going on with this level of obfuscation? For more on this see ‘Difficulty with numbers’ APDR June 2012. It is understood that the Auditor-General will scrutinize this planned purchase.

Other big projects which have moved beyond planning and into acquisition for initial material release do not get included in the DCP but are in the Defence Budget. Examples of new capability arriving include the LHDs, AWDs, extra C-17s, KC-30A MRTT, final elements of the Super Hornet systems, Shadow TUAS, extra Satellite bandwidth, lightweight torpedo replacement, MRH-90, MH-60R, Wedgetail, etc.

BUT BIG FUTURE PROJECTS REMAIN

In the detail of the 2012 DCP there are a number of large projects at the planning stage. The list which follows considers only those which are expected to cost $1 billion or more.

The Armed Reconnaissance Helicopter Capability Assurance Program AIR 87 Phase 3 is expected to cost $1b; the EA-18G Growler AIR 5349 Phase 3 Electronic Attack Capability about $1.5b; Pilot Training System AIR 5428 Phase 1 has received its first pass approval with likely expenditure of around $1.5b. The 3 squadrons of JSFs being procured under AIR 6000 Phases 2A/2B will cost more than $10b; while the 4th JSF squadron is in the DCP to cost $5b-$10b.

AIR 7000 Phase 1B Multi-mission Unmanned Aircraft System (MUAS) for high altitude, long endurance (HALE) unmanned aircraft is projected to cost $2b. AIR 7000 Phase 2B Maritime Patrol Aircraft Replacement, for eight MOTS P-8A (Increment 2) Maritime Patrol and Response Aircraft (MPRA) through a government-to-government cooperative program with the US Navy (USN), may cost $5b.

HATS, the Helicopter Aircrew Training System, AIR 9000 Phase 7 is planned to cost $1b.

About $1b will be spent on Explosive Ordnance Warstock; Battlefield Command Systems supplied by LAND 75 Phases 4 and 5 could cost $2b; while LAND 121 Protected Mobility Vehicles – Light may cost $1.5b and Medium and Heavy Tactical Training Vehicles a further $1b. The new Land Combat Vehicle System to be delivered by LAND 400 Phase 2 will cost more than $10b.

Future submarines to be provided by SEA 1000 are still at the ‘think of a number’ stage with estimates as high as $30b - $40b being tossed around by the commentariat. Obviously a lot more work has to go into defining the realistic capabilities required of the future submarines before there can be any meaningful discussion on the best way to procure them. A lot of the present discussion is the wrong way around, discussing acquisition and build options then suggesting the mission to fit the proffered capabilities.

The Offshore Combatant Vessels of SEA 1180 could cost $7.5b; while the Evolved Sea Sparrow Missile (ESSM) Upgrade and Inventory Replenishment could consume $1.5b. $1b has been earmarked for the Collins Sonar Replacement.

Replacing supply ships HMAS SUCCESS and HMAS SIRIUS through SEA 1654 Phase 3 might cost $1.5b. For a possible construction program see ‘BAE Systems concerned about naval sector future’ APDR July-August 2012.

These numbers induce a certain torpor because of their sheer size. In each case the $ billion figure given is based on the DCP estimate of what the project is likely to cost within a fairly wide band.

NEW IN THE 2012 DCP

New projects in the 2012 DCP, but not in the 2011 DCP, include AIR 5349 Phase 2 to give EA-18G Growler Airborne Electronic Attack Capability (about $1.5b with decision 2012-14 and IOC 2018-20); AIR 7000 Phase 3 Maritime Patrol Aircraft Replacement – P-8 Increment 3 (about $300m with decision 2015-18 and IOC 2018-21); JP 2025 Phase 7 Over the Horizon Radar Priority Industry Capability (less than $100m with decision 2012-14 and multiple delivery dates); JP 2077 Phase 3 Operational Logistics Enhancements ($100m with decision 2015-18 and IOC 2017-20); JP 3029 Phase 1 Space Surveillance (less than $100m with decision 2012-14 and IOC 2014-16); LAND 116 Phase 3.2 PMV Production – extra Bushmasters ($200m with order placed and IOC 2015-17); and SEA 4000 Phase 3.3 Air Warfare Destroyer (AWD) Operational Test and Evaluation (less than $100m with decision 2013-16 and IOC 2015-17.)

Many of the 23 other projects in the 10 year 2011 DCP, but not in the 4 year 2012 DCP, which are still awaiting first pass approval or decision beyond the Forward Estimates, will be delivered, dropped, changed and renamed, or continued into the 2012 DCG.

WHAT HAPPENS NEXT?

Clearly a lot of work needs to go into the 2013 Defence White Paper (DWP) to review Australia’s strategic position, priorities, Government expectations and the capabilities required to meet them. Certainly some project priorities will change to take account of new geo-political realities since the 2009 DWP and project affordability being dependent on the likely future state of the economy.

Will we see Defence’s planned expenditure and future budget growth to a higher proportion of GDP heavily impacted by political considerations, as it has been this year?

There will be harder questions asked about affordability of such a large fleet of JSFs, given program rescheduling and the possibility of air superiority gaps opening even wider and requiring further Super Hornet purchases, even though this possibility is currently denied by the Government.

Expect continuing controversy over the future submarines, about what roles they should perform, their survivability, numbers, required capabilities, and how they should be sourced. For example, should these submarines be capable of cruise missile attack, which has very serious implications for overall displacement, weapons load, hull depth and speed away from a revealed position arrived at stealthily? Or should they be planned for roles like ISR, attacking surface ships, mining critical choke points in sea lanes and harbour entrances, landing and recovering lodged forces, which can all be accomplished with smaller submarines? The lead-time to provide these technically advanced craft means some serious capability needs analysis is already well overdue. In the meantime, what should be done about the Collins Class? For more information see ‘A future submarine capability blueprint‘ APDR July-August 2012.

One of the biggest challenges will be the level to which Australia will seek to complement or supplement the forces of its greatest ally, the United States.

Although the target for a lot of criticism, the DMO and its project teams have put in an enormous amount of effort to get projects to the stage where they can be published in the 2012 DCP. Despite well-documented delivery delays arising from over optimistic views of technology risks, from specification revisions, or simply problems at the prime contractor’s end, a lot of projects do get delivered on time and at or under budget.

Still a fundamental question remains. Is Defence too much in love with ‘big ticket’ projects which the country may not need at full desired capability or cannot afford?
 

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