Submarine Institute of Australia

Address at the

Submarine Institute of Australia 3rd Technology Conference 2015: “The Role of Australian Industry in the Future Submarine Program”

**CHECK AGAINST DELIVERY**

Adelaide Convention Centre, North Terrace, Adelaide, South Australia 5000

9.30 am Wednesday 18 November 2015

Introduction

Thank you Steve for that introduction [CDRE Steve Davies, MC].

I’d like to acknowledge:

Mr Andy Keough CSC—President, Submarine Institute of Australia

RADM Peter Briggs AO, CSC, RAN Rtd—Chairman, Find AE1 Ltd

Mr Kevin Gaylor, Acting Chief, Maritime Div, Defence Science & Technology Group

RADM Greg Sammut—Program manager, Future Submarine Program

It’s my pleasure to address this conference.

My topic for today is the role of Australian industry in the Future Submarine Program.

The Competitive Evaluation Process for the Future Submarine Program is at a critical stage, so I’m limited in what I can say. I will come back to this in a moment.

But first, I’d like to put things into perspective by looking at the broader issue of the interface between Royal Australian Navy programs and Australian industry.

In particular, industry’s crucial role in supporting Australia's naval capability and the implications for Australia’s innovation and advanced manufacturing future.

An interconnected industry

The Australian shipbuilding and repair industry, which includes the submarine sustainment sector, makes a significant contribution to the national economy.

IBIS World estimates that the industry will contribute $3.8 billion to the economy in 2015–16 and that 76.4 per cent of the industry’s output comes from Defence.

As a high value, advanced manufacturing and services sector, the industry is characterised by high-skill, high-wage jobs.

The shipbuilding and repair industry has deep roots in the broader advanced manufacturing sectors, including:

professional science and technical services

specialised and other machinery and equipment manufacturing, and

professional, scientific, computer and electronic equipment manufacturing.

The industry also has tight links with the aerospace manufacturing sector.

Developing industry capability through Collins Class remediation

These linkages have been critical to supporting the remediation of the Collins Class program.

Navy, Defence and DSTO have all worked tirelessly with industry to transform the sustainment of the Collins Class submarinecapability in response to the Coles review.

This collaboration was instrumental in the recent successful rollout of HMAS Waller at ASC.

Significant expertise has been developed at all levels of the Collins Class sustainment program.

There’s, for example, the platform integration work undertaken by ASC.

Then there’s the high level system work done by companies such as Raytheon, Saab Systems, and Lockheed Martin in Australia.

Not to mention the critical technical expertise that resides in companies such as Sonartech Atlas and the sonar acoustic windows built by RPC Composites.

Companies like AW Bell in Melbourne and Levett Engineering in Adelaide have manufactured important components using exotic materials.

It is worth noting that in some of these cases manufacturing capabilities are the same as those used in aerospace programmes such as the Joint Strike Fighter program.

These companies, by necessity, have been innovative to help support the availability of the strategic Collins Class submarine capability.

In effect, the innovation that is delivered by Defence programs is an important enabler for the broader Australian industry.

This innovation will be critical for the growth of the shipbuilding and submarine sector, as well as the manufacturing and services industries as a whole.

Boosting innovation
The Government is determined to build a 21st century economy based on innovation.

The future of Australian manufacturing lies in innovation-intensive, high value-add, manufacturing that competes on quality and creates high-skill jobs.

In the decades ahead, innovation will play a key role in lifting Australian productivity and economic growth and supporting living standards.

It will create new jobs and help position Australians to take advantage of new technologies and seize new opportunities.

The good thing is that Australia has a strong foundation in our excellent science and research resources and infrastructure to support an innovative economy.

We’ve got world-class universities and research institutions that produce leading-edge, internationally recognised research, year in, year out.

The problem, however, is that this significant effort is not translating into the commercial outcomes that our $9.7 billion annual investment in science and research can potentially generate.

A key reason is inadequate collaboration between industry and our researchers.

Australia lags well behind other OECD countries in the proportion of businesses that collaborate with research institutions on innovation.

Consequently, not enough knowledge is being transferred between our researchers and business.

For our industries to be globally competitive, Australia will have to improve its ability to secure greater economic payoffs from publicly funded research.

The key to doing that is to foster greater collaboration between the two sectors.

The Government’s $225 million Industry Growth Centres initiative will help increase collaboration between industry and research to boost innovation.

The Advanced Manufacturing Growth Centre will provide opportunities for manufacturing companies to forge stronger links with our science and research agencies to aid innovation and commercialisation and to lower cost.

Other initiatives like Cooperative Research Centres, the R&D Tax Incentive and the Entrepreneurs Programme will all continue to support our innovation efforts.

At the same time, the Government recognises the need to provide a comprehensive policy framework for all our innovation efforts.

Accordingly, I’m leading a cross-portfolio taskforce to develop an innovation agenda that will provide a blueprint for maximising Australia’s innovation potential.

Defence Industry Policy Statement

The work of the innovation taskforce is being undertaken with reference to the Defence White Paper given the links between Defence programs and innovation.

The Government is currently considering the Defence White Paper, as Defence Minister Marise Payne recently pointed out.

The White Paper will lay out the Government's vision for Australia's security over the next 20 years.

Along with a 10-year investment plan for investment in Defence capability and sustainment, the White Paper will include anew Defence Industry Policy Statement.

Together, these documents will lay the foundation for a close relationship between Defence and industry to deliver the military capabilities set out in the White Paper.

The Government strongly supports the principle to maximise opportunities for Australian industry to participate in Defence acquisition and sustainment.

We are also strongly committed to an Australian industry that can deliver capability to Defence and remain globally competitive.

The new Defence Industry Policy will offer greater opportunity for Australian industry to innovate, build industry capability and boost international competitiveness, all of which are vital to Australia's national interests.

Developing new shipbuilding capabilities

It is a time of massive transformation for Australia's naval fleet.

Over the next 20 years, the Government will invest about $90 billion [over $89b] in acquiring new capabilities.

This will include investment in the future submarines, as well as new frigates and offshore patrol vessels.

To deliver these new capabilities, the Government is reforming the way in which Australia acquires naval vessels.

Critical to the security of our nation is the assured availability of workers with the right skills and expertise to deliver critical naval capabilities for Australia's defence.

To ensure that these industrial capabilities exist in Australia, the Government will build our new surface warships in Australia on a continuous-build basis, starting with the Offshore Patrol Vessels, and then the new Frigates.

I expect much of this work to be done right here in Adelaide, leveraging the deep local expertise delivered through the Government's investment in the Air Warfare Destroyer Program and sustainment of the Collins boats.

Building warships in Australia as part of a continuous-building program will consolidate and capitalise upon our long history of shipbuilding success.

With work on the Offshore Patrol Vessels starting in 2018 and continuing with the Future Frigates from 2020, the foundation will be laid for a truly sustainable naval shipbuilding industry.

From this point on, a stable production schedule will make for a sound basis for industry investment and enhanced productivity.

By building naval vessels in this way, we can take advantage of development, experience and capabilities that have been developed within the workforce.

There will also be flow-on benefits for Australia's ship and submarine refit and sustainment industries, further building on the expertise that exists today.

A sustainable shipbuilding industry will also generate significant benefits for the wider Australian economy, including through knowledge transfer and innovation.

The Government will make announcements about the Future Frigate and Offshore Patrol Vessel programs in due course.

Future Submarine Program

That brings me to the Future Submarine Program.

This is a $50 billion investment in Australia’s security.

The Future Submarine will be a unique design for Australia because there are no off-the-shelf solutions that meet our requirements.

Our goal is regionally superior conventional Future Submarines built to our needs and providing us with sovereign control over their operation and sustainment.

The Government is committed to maximising opportunity for Australian industry to participate in the Future Submarine Program.

The Competitive Evaluation Process provides a way for Australian industry to be involved in the program without compromising capability, cost, schedule or risk.

An Expert Advisory Panel has been appointed to provide assurance that:

the Competitive Evaluation Process is sound

its conduct is defensible from a probity and accountability perspective, and

the participants have been treated fairly and equitably.

DCNS of France, TKMS of Germany and the Government of Japan have been invited to participate in the Competitive Evaluation Process.

They will present proposals for construction overseas, in Australia, or a hybrid approach to ensure they have the flexibility to offer the best capability possible.

They will also have to provide plans detailing how they will maximise Australian industry opportunities.

The participants have been encouraged to engage with Australian industry.

I welcome the opportunities they’ve taken throughout the evaluation process to liaise with and explore the capabilities of companies throughout Australia.

I understand Defence Department has also been providing briefings in all major capital cities on the process and how industry can engage with potential partners.

The Future Submarine Program Office has established an Industry Consultative Group comprising industry associations and state government organisations to communicate with, and share feedback from, industry across Australia.

My department is a member of the consultative group and appreciates the opportunity to actively engage with Defence to develop future industry engagement strategies.

Additionally, Australian private sector industry experts have been seconded to the Future Submarine Technical Organisation where they are working 'above the line' to support the Competitive Evaluation Process and later stages of the program.

A communication program, including a website to ensure industry is informed about the program opportunities and schedule, has also been established.

I encourage interested companies to register their interest at SEA1000.gov.au if they haven’t done so already.

I’d also urge you to make the most of the opportunities provided through the Competitive Evaluation Process and engage with the participants.

If the participants don't know about your capabilities, they won't be able to include you in their plans.

Concluding remarks

The Royal Australian Navy’s submarine fleet form a critical part of Australia's maritime security.

As an island nation, it is essential the best possible military capability, underpinned by the best possible industry capability, is available to maintain our security.

This consideration informs the development of all of our submarine capabilities, including the Future Submarine Program.

The program’s Competitive Evaluation Process is robust and will ensure Australia selects the right partner to design and build our fleet of Future Submarines.

It will ensure careful and methodical consideration of capability, cost, schedule and key strategic issues, along with Australian industry involvement.

Yes, we don’t yet know the outcome of the process; a decision is yet to be made.

But the Government expects there will be significant opportunities for Australian workers and Australian companies to contribute to the program.

Similar to Collins, we expect the Future Submarine program to deliver significant benefits not just to the shipbuilding and defence sectors, but also to the broader Australian industry and the community as a whole

Thank you.

Ends