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A monopsonistic environment – we are the dominate customer

Major Fleet Units Ship Repair & Maintenance Reform Group Maintenance Contracts Strengthening Partnerships with the Maritime Industry.

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A monopsonistic environment – we are the dominate customer

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  1. Major Fleet UnitsShip Repair & Maintenance ReformGroup Maintenance ContractsStrengthening Partnerships with the Maritime Industry

  2. Williamstown Dockyard …………… sold 1985Cockatoo Dockyard ……………… closed 1992Garden Island Dockyard ………… privatised 1999Australian Submarine Corporation …….… to be sold ??From owning all the means to maintain our charges… to owning none … A monopsonistic environment – we are the dominate customer

  3. We had created …. An Industry that is dominated by a small number of primes (system integration and steel fabrication) supported by a large number of SME sub-contractors and a few sophisticated electronic system houses; all heavily reliant on OEMs

  4. By arms-length fixed-price induced competition within a highly restricted market we had created … A work-package preparation schedule that ensures an incomplete Statement of Work and … Project Management ‘shells’ having transient SME’s sub-contracting their services to the successful tenderer No longevity, No predictability, No stability An Industry more attuned to the preparation of tender responses than to the preparation of the repair and maintenance activity being tendered for

  5. Creating an Industry environment of ... false competition in which ‘primes’ are reliant on a common group of OEMs and agents short-term cost drivers = under-bidding, play-down risk, unachievable schedules, find profit in growth no security of tenure, no predictability of effort to plan against the shedding of permanent trades, subrogation of work-force training and skill sustainment

  6. Extract from the RIZZO REVIEW Short term, individual contracts for the conduct of External Maintenance are resource intensive and fail to foster Industry investment. (p 23) Strengthen Partnerships with Industry Whilst retaining competitive tension, the Defence Materiel Organisation should implement maritime contracts that are broader in scope and longer in term, to build deeper and continuing relationships with Industry. (Recommendation 5)

  7. While Navy was increasingly influenced by…. provision of greater-depth ‘Parent Navy’ support diminishing in-house and Navy skill base – Intermediate Level Maintenance no longer exists, organic maintenance deficits increasing Operational Tempo of Fleet Operations – higher-than-designed usage rates shorter technology life-cycles and rolling supportability management programs people & safety-centric initiatives (SKT, WHS) requiring a more mature relationship with Industry

  8. Major Fleet Units Ship Repair & Maintenance Reform Initiative • A new grouped asset long-term, performance-based contracting methodology for the repair and maintenance of the Navy’s major fleet units. • It was anticipated that this initiative will provide: • Industry with increased certainty of work (promoting stabilityand security of tenure), a commonality of contract/expectation, and a manageable and predictable level of effort that it can plan against and deliver efficiencies from; • Navy with better notice to ships’ crews of the planned location of maintenance and maintenance patterns.

  9. What we needed: • A move away from throughput-based profit making towards efficiency-based profit making (the learning organisation, increased innovation, creativity, conditioned-based maintenance, pre-refit assessment, and the challenging of norms – less is more) • Greater predictability of work-effort, refit location, and overall ship availability (challenging the current usage upkeep paradigms and practices, no compromise to safety/availability) • Greater certainty of maintenance duration/completion through programming flexibility, use of windows-of-opportunity • Greater stability to encourage the investment in strategic skill-sets, equipment and facilities (to be a partner rewarded through performance and efficiency)

  10. Groupings Group 1 Amphib & Afloat Support Ships (now only HMA Ships Tobruk and Success) Group 24 x Adelaide Class FFGs In contract 28 May 2014 with Thales Australia Group 38 x ANZAC Class FFHs In contract 23 May 2012 with Naval Ship Management (Australia) a joint venture between Babcock/UGL,

  11. OEMs& in-country agencies Type C Contracts MTU Diesels, Thales Underwater Systems etc … Analyse Design & Develop Implement Outcome Indicators Outcomes • URDEFs – Quantity • – Days • – Stores • EMA – Timeliness • – Quality • – Budget Achievement • – Post-Availability Report • – Feedback • – Trials • Type C Contract Feedback • Condition Monitoring Results • Condition Assessment Results • Inventory – Consumption • – Issues • – Repairs • – Procurement • – Obsolescence • – Demand Satisfaction • Support Costs GMC Contractor Engineering Support Perform Supportability Analysis Develop Engineering Changes Incorporate Engineering Changes Supportability Maintenance Support Perform Maintenance Develop Work Package WI / MWL / TML Availability Supply Support Invest in Inventory Develop Inventory Investment Plan Sustainability Integrated Material Support / ASIPA ANZAC Assumption Model

  12. Within the first 3 months • Reductions in Growth • Real Cost Savings • Rewarding Efficiency

  13. Over the proceeding 18 months • Better understanding of the maintenance liability • On time delivery of ships out of maintenance • Enhancement of work instructions • Data remediation and improved data integrity • Earlier ordering & staging of GFE / CFE • Better & more reliable scheduling and planning • Better responsiveness in meeting the unforeseen

  14. Base-level Benefits • Increased performance (productivity) • Priority adaptability and responsiveness • Customer environmental awareness and sensitivity • Higher Level Benefits • Investment in long-term planning • Workforce skill-set development / Infrastructure investment • Stability and predictability

  15. 12.18 Defence will build upon the success of …mutually beneficial contracting arrangements. This includes appropriate use of measures such as collaborative contracting structures for acquisition projects, …, performance incentives, rolling wave contracts and group maintenance arrangements for sustainment work. These will continue to form the basis of Defence’s commercial partnership with industry and deliver better value for money for the Commonwealth and industry.

  16. Questions ?

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