Defence Air Warfare Destroyer project may need $1bn bailout

[MikeJames]

Defence project may need $1bn bailout

The nation’s largest defence project is facing a major budget blowout that could force a federal government bailout worth around $1 billion, according to The Australian.

The construction of three Air Warfare Destroyers for $8 billion is reportedly being hit by budget overruns of around $10 million a month, with an Australian National Audit Office report due out today to show the project was $106 million over its $618 million budget for 2012/13.

Emergency reserve funds are at risk of being tapped out, potentially leaving the government to fund a $1 billion rescue package to ensure all three warships get built, The Australian reported.

The report suggested the delivery date of the warships, which has previously been stretched by two years, will be pushed back again.

The news comes as the federal government prepares to hand down its Mid-Year Economic and Fiscal Outlook (MYEFO), which is expected to show a blowout in this year’s projected deficit to $50 billion. It also follows discussions of bailouts at Qantas Airways and Holden, with the budget position seen as part of the reason for the government deciding to keep a tight hold on the purse strings.

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Should have done the same deal we did with the amphibs and that Navantia is proposing for the tanker replacement project, build in Spain and fit out here. Faster, cheaper and a better option than the current debacle.

It's getting to the point that Australia's major warship builders can't build on time and on budget to save their lives.

[rritchie71]

Hi Mike, interesting article, I had not seen it before, I was over in Canberra in Nov, and the mood towards ASC, well let’s just say is not very good. Whoever is to blame for the documented mistakes so far, it is viewed that ASC has failed to sort them out.

Robert

[MikeJames]

Destroyers face delays, cost blowouts
BRENDAN NICHOLSON THE AUSTRALIAN MARCH 07, 2014 12:00AM

A DAMNING report on the construction of three powerful guided missile destroyers for the Royal Australian Navy has revealed an ambitious project wracked by problems including declining productivity, production delays and cost blowouts.

The $8.5 billion Air Warfare Destroyer program is the biggest defence project carried out in Australia and a highly critical report by the Australian National Audit Office will have a major impact on the shape of future projects, especially the building of 12 big new submarines for the navy, which are expected to cost up to $40bn.

The Air Warfare Destroyer Alliance reported late last year that the three ships would cost about $302 million more than planned.

But the ANAO said yesterday that in the light of concerns about more cost overruns the $302m estimate should be treated with caution. “The cost increase is likely to be significantly greater,” the audit office said.

Continuing detailed design, construction and productivity issues meant there was a significant risk of more cost overruns and delays as the project approached the complex stage when its sophisticated weapons and other systems would be built into it. The Australian has been told a cost blowout of about $800m is likely. The ships are to be delivered 15 to 21 months later than planned. And despite efforts to improve the situation, productivity on the project continued to decline.

“Going forward, it is clear that a rigorous focus will be required to address the underlying causes of low shipbuilding productivity so that construction cost overruns are contained over the remainder of the DDG build program,” the ANAO said.

The report revealed that many doorways throughout the ships had to be moved by about 150mm from their original positions so that they could be opened to a minimum 90 degrees in line with Australian safety regulations.

About 570 lengths of expensive copper piping had to be replaced on one ship because it was found to be of inferior quality and did not meet military standards. The Australian understands the cheap piping was bought from China.

The fact that the ship designer, the Spanish company Navantia, was not part of the alliance created to build the ships complicated the process and made it harder to resolve problems.

There have long been complaints about the quality of some of the partly computerised blueprints provided to the Australian shipyards by the Spanish designers and The Australian understands that because of variations in these blueprints, in some cases bulkheads, the “walls” within ships, were too wide or too narrow to fit between the two sides of the vessel’s hull.

Defence Minister David Johnston has appointed former US secretary of the navy Don Winter and Australian shipbuilding expert John White to investigate the issues with the program.

Built into the project was an ambitious effort to re-establish Australia’s capability to build warships. The ANAO noted that successive governments had accepted that building the ships locally would be more expensive than building them overseas.

The decision to build them locally was based on a desire to retain shipbuilding jobs and facilities, project management and design skills and experience with sophisticated naval combat systems so that they could be maintained and repaired at home.