The shipbuilding industry is capital intensive requiring substantial equipment and installations that are expensive to build and maintain. A shipyard itself is a major industrial facility that occupies large tracts of land with access to water. Docks, slipways, piers, cranes, large covered workshops as well as supporting administrative buildings and amenities are needed. The age, condition and suitability of its facilities clearly influence a shipyard's capacity to build modern naval vessels.
Australia's naval shipbuilding history has witnessed the delivery of large, complex and technically difficult projects with varying degrees of success. HMAS Success was built in Australia but when finally commissioned in 1986, was well over budget and late. The Australian Frigate Project was also constructed locally and after initial difficulties succeeded in its prime objective of re-establishing a major warship capability in Australia during the early 1990s. The Collins-class submarines and the ANZAC class frigates, commissioned between March 1996 and June 2006, were also built in Australia. The latter project involved the design, construction, testing and trialling of ten vessels which were delivered on time and on budget with some frigates delivered ahead of schedule.
Overall, Defence's programs for the procurement of major capital equipment, including important naval acquisitions, have been dogged by delays and cost overruns and in some cases projects have been abandoned. Problem projects involving naval projects have involved acquisitions from overseas and from Australia.
- The Super Seasprite project was intended to acquire helicopters for the Navy's ANZAC ships. Having failed to deliver the required capability, the project was ultimately cancelled in March 2008 with a total expenditure of $1.4 billion.
- The LCM 2000 project was intended to purchase six landing watercraft that would transfer personnel and supplies from Navy's Landing Platform Ships (LPA) to shore. Originally approved in 1997, the watercraft project was placed on the projects of concern list in 2010 and eventually cancelled.
- The Guided Missile Frigate Upgrade project commenced in 1999 and was subsequently re-baselined in 2004 and 2006 due to delays. Also, the project scope was reduced from six to four ships. The operational release of the four ships was successfully completed in July 2011, representing delays of between 67 and 84 months. The Foreign Affairs, Defence and Trade References Committee suspected that 'the full story of incompetence on this project, including that of the contractor, will never be discovered'.
- The Lightweight Torpedo Replacement project had a long history of project management difficulties.
- The Collins Class Submarine Reliability and Sustainability project designed to upgrade the Collins Class platform systems has exposed problems, some of which can be traced back to the initial acquisition phase.
Much of ship building activity takes place in sites scattered around the country. Activities, such as steel fabrication, may also be capital intensive and require substantial infrastructure. Some shipyards in Australia have actively embraced modularisation technology. Indeed, a number of observers believe that Australia has gained a comparative advantage from modularisation and assembly in Australia. Keeping infrastructure up-to-date with the latest advances in shipbuilding is costly. ASC noted that it and other Australian shipbuilders have invested heavily in new up-to-date facilities to satisfy the requirements of success. These include 'undercover construction and land level transfer to allow highly efficient outfitting on the hard stand' and access to key warship intellectual property.
There are eight shipbuilding sites of particular relevance to the RAN - Henderson in Western Australia, Osborne in South Australia; Williamstown in Victoria; Newcastle (ADI), Newcastle (Forgacs) and Garden Island in New South Wales; and Cairncross and Cairns in Queensland. Some of these shipyards date back to the 19th century; others, however, have developed or are developing to accommodate the newest developments in technology particularly the construction of larger and more sophisticated modules. Australia's naval shipbuilding sector also has two innovative and successful commercial shipbuilders in Austal and Incat. Given their specialisation in lightweight, multi-hull aluminium vessels, Austal and Incat should be differentiated from builders of steel warships.
In December 2000 there were reports the Government was encouraging shipbuilders ADI and Tenix to buy the Adelaide-based Australian Submarine Corporation. The deal could see ADI and Tenix (formerly part of the Transfield group) move most of their businesses to the corporation's Osborne yard near Adelaide. ADI would close its Carrington and Garden Island yards, while Tenix would shut the Williamstown, Melbourne, facility used to build the ANZAC frigates. But nothing came of this plan.
Australian shipyards are not without problems. Rear Admiral (retired) Kevin Scarce from the Port Adelaide Maritime Authority and the South Australian government stated that analysis revealed 'a fragmented industry characterised by an oversupply of dated, uneconomic and competitive infrastructure.' The South Australian government stated that Australian shipbuilding infrastructure has 'evolved on a project-by-project basis rather than in response to a national plan'. It maintained that 'the myriads of facilities that are left are old, underutilised and not cost competitive'. In its view, further infrastructure investment beyond that already planned, can 'only add to the underutilisation of costly assets'.
Thiess also gave its assessment of the current state of infrastructure in Australia. It found: "In past naval shipbuilding programs, most infrastructures were built as part of the project. For instance, ASC built up the site in Osborne, SA from a green field. ADI did the same in Newcastle for the Mine Hunter. In most cases, the investment represented around 3% of the total value of the project. The ultimate use of the site after the end of the program was never fully optimized. The Newcastle site was returned to the landlord who is leasing it to a super yacht builder from New Zealand. The site in Williamstown used to build the ANZAC ships is probably underutilised at the present time."
Modern naval ships are complex systems that rely on a range of sub contractors specialising in particular aspects of naval shipbuilding to deliver the required capability on time and on budget. The supply chain is estimated to provide between 60 and 70 per cent of the net value of any new ship, naval or merchant. Thus, during a major naval shipbuilding project a significant part of the work is undertaken by a network of second and third level suppliers and subcontractors. The existence of an efficient and effective supply chain is critical to the naval shipbuilding and repair sector. An important consideration in determining the capability of Australia to build naval ships is the role of the many smaller companies that support the industry. These small to medium size enterprises (SMEs) provide specialist services and bring significant technology, innovation and skills to the maritime industry, particularly during upgrades and through-life support programs.
In Australia, suppliers tend to have niche capabilities and their contribution ranges from 'quite small nuts and bolts to systems and electronics'. There are well over 1000 small-to-medium domestic enterprises and a number of sophisticated systems houses that support Australia's naval shipbuilding projects. Some are subsidiaries of international companies.
Australia has shipyards that have a long history of shipbuilding. Williamstown, Garden Island and Cockatoo Island were designed in the 1880s to look after old seafarers. The cost of changing their infrastructure would be reflected in the cost of a construction program. Once the infrastructure on a greenfield site is in place it obviously would be to a higher standard and more tailored to currently and to the future than the existing ones, and therefore would be a standout in that regard. But, with investment, it is possible to improve old infrastructure to meet demand.
The Government has predicted a navy shipbuilding boom beyond 2018 - when it plans to spend tens of billions of dollars to equip the fleet with 50 new warships, including 12 submarines, a new class of frigate and 20 offshore combatant vessels. This would follow a looming production "gap" from 2014 and 2018.
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