David Johnston launches broadside at navy shipbuilders over delays and cost
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Version 0 of 1. The Abbott government has put Australia’s naval shipbuilding industry on notice, saying it can no longer tolerate the long delays and huge cost overruns that are plaguing the $8.5bn project to build new air warfare destroyers. “Everyone involved with this project is on notice … unless we can get this back on track we have problems for the shipbuilding industry in Australia,” said the finance minister, Mathias Cormann. “If we can’t get this right it doesn’t say a lot about our future capacity,” the defence minister, David Johnston, said, adding future projects “will be in jeopardy because the government won’t tolerate this”. The ministers said they would now “insert an experienced shipbuilding management team into the [shipbuilder] ASC” and look at reallocating work between shipyards. They are demanding an immediate improvement in productivity. The air warfare destroyers are being built by the government-owned shipbuilder ASC and defence contractor Raytheon Australia. The ASC subcontractors are BAE Systems, Newcastle shipbuilder Forgacs and Spanish shipbuilder Navantia. In November last year the project revealed a $300m cost blowout and in March the Australian National Audit Office released a critical report on the project, saying “the continuing detailed design, construction and productivity issues present a significant risk of further overruns in the cost of the project, as well as in the delivery schedule, and will require an ongoing management focus”. The government commissioned an emergency review headed by the former US secretary of the navy, Professor Don Winter, and the ministers released a precis of it on Wednesday, saying the full report could not be revealed while “commercial” discussions were being undertaken with contractors. The ministers said they would “immediately engage commercial and legal advisers to assist in implementing this reform strategy”. “We are going to take action … we are sending a clear message to the industry that we must do better … we are not about to tolerate another defence blowout,” Johnston said. Johnston said he had told the contractors there would be “no second chances to this … minister Cormann and I are going to wade into this”. The severity of the minister’s warnings comes as naval defence contractors are lobbying for the government to commission new projects to overcome a so-called “valley of death” in about three years, when existing contracts wind down. |