Home » Budget Industry » Industry Confirms Australia’s Hobart Class Destroyers $870 Million Over Budget, Lead Ship 30 Months Late

Industry Confirms Australia’s Hobart Class Destroyers $870 Million Over Budget, Lead Ship 30 Months Late

An artist's conception of the Hobart-class guided missile destroyer

An artist’s conception of the Hobart-class guided missile destroyer

SYDNEY, AUSTRALIA — The consortium building three air warfare destroyers (AWDs) for the Royal Australian Navy has provided an update on the construction of the ships, as well as an overview on the lessons learned from the delays and cost overruns that have plagued the program.

Speaking at a conference on the sidelines of the Pacific 2015 International Maritime Exposition in Sydney, Australia, Rod Equid, chief executive officer of the AWD Alliance, also touted steady progress on the remaining two ships even as the lead ship, HMAS Hobart nears completion.

The ships were ordered as part of Australia’s SEA 4000 program for a new class of AWDs to replace the Royal Australian Navy’s Adelaide-class (Oliver Hazard Perry) frigates and its stopgap air warfare capability with the Raytheon SM-2 surface-to-air missile as part of requirements outlined in the 2000 Australian Defense White Paper.

Australia’s Hobart-class AWDs are based on a Spanish Navantia F100 frigate hull modified to Australian requirements, chief of which is a Lockheed-Martin Aegis combat system. Navantia’s design won selection as the hull-form for the AWD in 2007, despite U.S naval company Gibbs and Cox having previously been considered the favorite with an offer of an evolved design based on scaled-down variant of the Arleigh-Burke Flight II-class design.

The AWD Alliance is a contract arrangement between the Commonwealth of Australia represented by the Capabilities and Sustainment Group (formerly the Defense Matériel Organization) as owner-participant, ASC and Raytheon Australia. Navantia, for its part, declined to be part of the alliance, instead opting to sign a platform system design contract with the Alliance.

Soon after construction on the AWDs began in 2010 with the fabrication of pre-fabricated hull blocks at three widely-distributed locations in Australia, reports began emerging of challenges facing the process. These reportedly were primarily related to workforce inexperience with Equid estimating that 95 percent of the workforce was new hires who needed to be trained in the specialized roles they were working in, but also because of issues with drawings available for the alliance to work with.

These resulted in construction delays from the block subcontractors at an early stage of the construction phase, which were exacerbated by the typical “Ship One” issues and the high level of concurrency, which had the effect delivering changes to production throughout construction. The level of engineering effort was underestimated from the start, with project schedules turning out to be too optimistic.

Overall, it was estimated that the construction schedule for the lead AWD, Hobart, has slipped by approximately 30 months, with Equid confirming that costs had overrun to the tune of $870 million. He also touted improvements as the alliance gains experience from ship to ship, citing a 30 percent improvement in second AWD (Brisbane) over the first, with a further 20 percent improvement seen in the construction in the third ship, Sydney.

The schedule was now more realistic and on plan, with the Hobart now in the water since May 2015 with the ship then 76 percent complete. Hobart will commence sea trials in Sept 2016, with delivery to the RAN scheduled for July 2017. Brisbane is now 68 percent complete and close to achieving the construction milestone of completing hull integration with a planned delivery date of September 2018.

Moving on to lessons learned, Equid cited the age-old points of having a realistic plan that matched the complexity of the undertaking and the need to better manage concurrency of design-design maturity issues. The problems with having a transactional relationship with Navantia, where the Spanish shipyard opted out of the alliance and instead signed a relatively low-value contract providing services was cited, but deemed “unavoidable” by Equid.

A 2014 Australian National Audit Office report explained this situation, saying that “there was limited incentive for Navantia to put its own profit share at risk by entering an alliance agreement with a new shipbuilder, and taking part in a pain-share gain-share regime it imposed on (its) potential profit,” with the result of this was that it detracted the ability of the alliance to collectively and collaboratively manage risk.

A recent plan to advance the schedule for building frigates and offshore patrol vessels under Projects SEA 5000 and SEA 1180 respectively and to emphasize domestic production effectively commits the government to a permanent naval shipbuilding industry in Australia, and would hopefully see the skilled labor issues that bedevilled the early construction stages of the AWD program not be repeated in future Australian naval shipbuilding programs.

However, although that decision was made before Australia’s recent prime ministerial changes, with current Prime Minister Malcolm Turnbull not having committed to the continuous-build plan since taking office in September.

  • sferrin

    Whoa. You mean American contractors aren’t the only ones that run into schedule problems? Say it ain’t so.

  • disqus_zommBwspv9

    Unions? Problems or just bad management

  • Hugh

    There were similar problems with cost and time over-runs in the early 1980s building HMAS SUCCESS, the replenishment ship – after several years break in shipbuilding and the loss of the skilled workers. Let’s hope an ongoing program will continue into the future, for surface ships and submarines – logically at the now established Adelaide facility.

    The new AWDs are actually replacements for the 3 long-paid-off Charles F Adams class DDGs. Four of the FFGs were upgraded but not as DDG replacements. The 2 oldest will pay off in order to provide crews and funding to operate the new ships.

    • Matthew

      HMAS Success and the AWD project actually have very similar issues, Foreign companies with no experience in building ships abroad, With the AWD project it has come to light from those involved that the Spanish knew of some the issues such as poor designs but chose not to speak up to avoid any embarrassment on there part.

      In regards to what ships are being replaced, Well while in past intention was to replace the Perths and Adelaides on a like for like basis numbers wise or close as possible end result has been to replace 3 for 1 (9 ships replaced by 3).

  • publius_maximus_III

    Nice looking ships, hope the Australians can get their schedules and costs back on track. Wish we were building some more Arleigh Burke DDG’s.

    • Urodoc

      We are building more Arleigh Burkes. The Flight IIA line was restarted with USS John Finn and contracts have been awarded for the initial 3 ships of the Flight III line with the first one commissioning around 2022-2023.

      • publius_maximus_III

        More destroyers, more destroyers, more Arleigh Burke DDG destroyers! Need to move that Flight III up about five years.

    • Wishing is wishing

      • publius_maximus_III

        How true, Grasshopper. Too bad we all can’t have land-locked carriers like you guys…

    • Matthew

      We are actually, 2nd ship is coming in at 70% cost of 1st and the 3rd ship is coming in at 50% cost of the 1st. Cost over runs in new ship calss builds is common in EVERY country.

      • publius_maximus_III

        Seems a shame, now that costs are under control, not to build three more while a trained workforce is still in place. Probably a non-starter, though, under your new PM? It’s also a shame the Spanish threw the hull design “over the wall” and more or less said you bought it, you fix it. Live and learn.

        • Matthew

          Oh the new PM isn’t that bad a person, He is less controlling and actually put in place our best defence minister we have had in over a decade and she is doing a bang up job.

          While we could order a further 3, The issue is long lead materials. They take time to procure and by the time they are in place the line will already be down.

          With the Australian destroyers there were a number of issues.

          1. Design acquired from a company that had never before built a ship outside of there home country (Navantia)
          2. We left to big a gap in ship building, There had been proposals put forth in the early naughts (2000’s) to start building some Burke flight II’s, This was ignored thus all the skills built up from the Anzac program dried up.
          3. The government wanted them built in such a short time span that companies such as TKMS, Bath and Ingalls all said that even they couldn’t build a new class ship in there existing yards in that time frame, Let alone build it in a new ship yard with a new untrained work force.
          4. Zero project leadership, Multiple high stake players but no single entity actually in charge thus zero accountability, More of a he said she said.
          5. Navantia hadn’t actually finished the designs on the ship when construction had started, Yet chose not to inform any one to save face.
          6. We ignored all the lessons learn in the Anzac program which proved to be our most successful ship building program in Australia’s history. When something is your most successful you don’t reinvent how to do it, You copy it exactly.

          Best we can hope for is that they get the future frigates right, and have them followed through directly behind with the future Hobart replacements, Get the ball rolling on continuous build.

      • publius_maximus_III

        Sea trials in fall 2016 (or would that be your spring?) Hoping everything goes well next Sept, and the restarted Australian naval shipbuilding continues.

  • John King

    Paying $290 million MORE for each off-the-shelf ship should result in more than few people being fired! The $870 million overrun would pay for a whole destroyer! Would have been cheaper to pay the Spanish to build them and then modify them once delivered to Aussies.

    • PolicyWonk

      Ummm… $870M only gets you two “mighty” Littoral Combat Ships. If a new Burke cost that, it would be a downright bargain (they go for ~$1.5B each).

    • Matthew

      1. These costs are in Australian dollars, Comparing ship prices when they are costed in different currencies makes zero sense.
      2. Australian costing actually includes through life support, usage an maintenance which other countries don’t include, By rule of thumb you should double the other nations acquisition cost to get an idea of what it is worth.
      3. $870m wouldn’t buy you a destroyer, Not unless it is built with cheap labor or of lower quality.

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