On projects and performance
30 May 2013|

Every year I get to watch Mark Thomson pull off a remarkable feat of ‘extreme analysis’, as he cranks out 260 pages of the annual Cost of Defence report in the couple of weeks after the federal budget is released. (It’s a bit like extreme ironing, but with fewer shirts and more graphs.) You’ll be able to read the executive summary of the report on The Strategist from 12:30 today, and download the entire report from ASPI’s home page a little later.

Until then, here’s a potted summary of the chapter of the budget brief that I have responsibility for—the ‘Selected Defence Projects’ chapter. The idea of the chapter is very simple—to provide a ‘one-stop’ look at selected defence projects that provides a compendium of facts and figures, along with a short commentary. There’s a tendency for some revisionism to sneak into the reporting of defence projects, such as reporting progress against a rebaselined schedule, or measuring achieved expenditure against additional estimates only a couple of months old at budget time instead of against the projections from a year previous. Since we think that transparency is a fine thing, we’ve included as much original data as we can.

This year saw the addition of a couple of significant new projects to our list—the first explicitly funded work on the future submarine project, and the acquisition of 12 new EA-18G Growler aircraft. Both of those were announced when the Defence white paper was released earlier in the month. They seem to be the only major procurement announcements made in the twelve months since the last budget brief. But that doesn’t mean that there hasn’t been more work done in getting projects approved—Chapter 3 of the Cost of Defence report records 21 approvals in total (five first pass and 11 second pass) and examines the progress made in delivering the Defence Capability Plan.

We’ve included all three phases of the Bridging Air Combat Capability project—the first 24 Super Hornets announced in 2006 and now in service, a suite of weapons and sensor systems for them, and the 12 new Growlers. We did that for two reasons. First, as of the announcement of the 12 Growlers earlier in the month, there’s nothing especially ‘bridging’ about the capability—the Super Hornets will be with us to around 2030 at least. Second, we wanted to capture the cost of the delay in F-35 deliveries. The total approved cost of Phases 1, 2 and 3 is $6.28 billion for acquisition alone. As well, the RAAF will now have to run three sophisticated combat aircraft platforms for the entire 2020s, which will greatly add to through-life costs. The rationale for a single type combat air force and the savings that would result was a compelling one, and delays in the delivery of the F-35 have resulted in significant additional expenditure to maintain a continuous capability.

Also new in the report this year are the C-27J battlefield airlifters and MH-60 ‘Romeo’ naval combat helicopters. As befits the recent trend towards off-the-shelf purchasing for major ADF capabilities, three of our four new additions are being acquired through the US Government Foreign Military Sales program. But even FMS purchases can tell an interesting story about defence planning. The Romeo purchase, for example, while eminently sensible in capability terms, will leave the ADF (and the Navy) with two completely distinct combat helicopter types from different suppliers—the other being the European sourced MRH90 multi-role helicopter. That will mean two sets of fixed costs for training, support and spares, increasing the overall cost of the helicopter fleet. And it’s at odds with the plan to rationalise the ADF’s helicopter fleet advanced in the mid-2000s.

And that’s not the end of additional expenses—the American MK 54 lightweight anti-submarine torpedo that comes integrated onto the Romeos (and the ADF’s likely future maritime patrol aircraft, the P-8 Poseidon) is not the one integrated into the combat systems of the frigates the Romeos will fly off. The story of the other torpedo (the MU90, another European product and also in our report) can also be tracked in Chapter 8 of the report, and was reported on by the ANAO in 2013.

The MRH90s themselves haven’t set the world on fire either. The project to deliver them has been on the government’s ‘projects of concern’ list since November 2011. We’re told that progress is being made on fixing the problems with the aircraft, and that they’re set to come off the list in the future. It’s true that the projects of concern process has generally been a success—either by remediating problems or, in some cases, putting the project concerned to a humane end. But the 2011-12 ANAO Major Projects Report (itself an excellent source of project information) shows how much work remained to be done at the end of the last financial year. Figure 15 from the report (reproduced below) shows that less than 40% of the helicopter’s capability performance was assessed as deliverable with high confidence—hence the projects of concern listing. That said, two of our selected projects, the Wedgetail Airborne Early Warning and Control Aircraft and Project Vigilare (air defence command and control system) were also on the list at various stages, but are now listed as ‘remediated’—when in the ANAO’s figure below, Wedgetail’s assessed performance wasn’t much different from the MRH90 this time last year.

Projects’ measures of materiel capability performance—the DMO level of confidence in their delivery as at June 2012 (percentages: Green, Amber and Red). Source: ANAO Major Projects Report 2011-12.

There’s a broader lesson to be drawn from the projects of concern process—pulling together a group of the right stakeholders and experts and giving them the authority to make decisions can produce good outcomes. Mark and I will return to this notion in the context of the planning part of the capability development process in a future publication. (And Senator David Fawcett has been thinking along those lines as well.)

Finally, this year’s report says vale to a number of projects as well. Vigilare, for example, is now finished and the project is closing. That’s also the case with the upgrade of the Army’s M113 armoured personnel carriers. Both projects had a long and difficult gestation. But the end results are quite different. Vigilare has produced a high quality system that’s become an important part of the RAAF’s air defence network. As for the M113s, I’ll let the ANAO have the last word on this two decade long $768 million project:

… the upgraded M113 does represent an improvement on the older, unextended vehicle. However, a vehicle that was considered fit‐for purpose when the minor upgrade was first proposed 20 years ago now lags behind armoured infantry vehicles in use with other armed forces, and is vulnerable in many current threat environments, leaving Defence with an acknowledged capability gap.

Andrew Davies is a senior analyst for defence capability at ASPI and executive editor of The Strategist