Minister for Defence - Release of the RAND Corporation report

Today the Government releases a comprehensive report into the Australian naval ship building industry, Australia’s Naval Shipbuilding Enterprise – preparing for the 21st century by the RAND Corporation, one of the world’s leading defence think-tanks.

In September last year, the Government commissioned RAND to conduct a detailed review of the Australian naval ship building industry. The report is one of the most detailed studies undertaken into the Australian naval shipbuilding industry.

Following the election of the Coalition Government, it was clear that the former Labor Government had no commitment and no plan for Australia’s naval shipbuilding industry. In six years Labor did not commission a single naval vessel from an Australian yard, resulting in the creation of Labor’s ‘valley of death’.

Indecision and inattention by the former government has left the Australian naval ship building industry in a precarious and uncertain state.

Although the report makes clear that Labor’s valley of death cannot be overcome, this Government is prepared to invest in the skills and knowledge base of the Australian naval ship building industry, and is prepared to commit to a long-term investment to make sure this important industry enjoys a future in Australia and these critical skills are maintained.

To this end, the naval shipbuilding industry must be prepared to work constructively with the Government. The sustainability and viability of naval shipbuilding in Australia must be predicated on major reform of the industry and significant productivity improvements, as well as improvements to Defence’s acquisition and sustainment processes.

The RAND report found that:

• Australia could sustain a naval ship building industrial base by carefully managing a continuous ship building strategy in the longer–term, with a regular pace of delivering the new ships. But this would need to be premised on reform of the Australian naval ship building industry and significant improvement in productivity.
• Australian naval ship builders can sustain an 18-24 month pace of large ship construction starts if Defence carefully manages its acquisition program and keeps the Future Frigates operational for 25 to 30 years.
• The gap between the completion of the Air Warfare Destroyer project and the start of the Future Frigate – Labor’s valley of death – cannot be overcome, but the impact could be lessened.
• The cost of building naval ships in Australia is 30-40 per cent greater than United States benchmarks, and even greater against some other naval ship building nations. Australia is currently one the most expensive places to build naval vessels. This premium can be reduced by improved productivity through:
  • Establishing a consistent production and build demand.
  • Selecting a mature design at the start of the build and limiting the amount of changes once production begins.
  • The necessity of ensuring a well-integrated designer, builder and supplier team.
  • Matching the industrial base structure to demand.
  • Ensuring there is visionary leadership provided by company management.

The RAND report is a critical input into the Defence White Paper and the Naval Shipbuilding Plan. The Government will now carefully consider the report’s analysis and findings in preparation for the release of these documents later this year.

The Government looks forward to engaging industry on the challenges and opportunities identified in the report, so as to ensure that naval ship building has a strong and sustainable future in Australia.

We encourage industry to review the RAND report and provide feedback on the findings via defencewhitepaper@defence.gov.au.

The RAND report is now available on the Department of Defence website (www.defence.gov.au/Whitepaper/Links.asp) and the RAND Corporation’s website (www.rand.org/pubs/research_reports/RR1093.html).

Media contacts:

Brad Rowswell (Minister Andrews’ Office) 0417 917 796

Defence Media Operations (02) 6127 1999