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Newsroom

Australia's maritime pipeline & supply chain

Gabby Costigan speaking at UK Chamber of Commerce
Reflecting the commitment of the past, and the challenges the region faces today, helps define Australia’s focus on the future.

Gabby Costigan, Chief Executive Officer, BAE Systems Australia

 
The Chamber have asked me to provide an update on the Hunter Frigate Program. Instead I’d like to talk about something far bigger and much more exciting. And that’s how we are going about building a continuous naval shipbuilding industry in Australia.
 
One that will endure for decades and strengthen partnerships with defence, with industry and also importantly underpin the already strong strategic links between Australia and the UK.
 
In order to do this we must first develop almost all aspects of the sovereign capability required to deliver continuous naval shipbuilding in Australia.
 
But before I get into the detail of how we build a nation it's worth recapping why we are doing this.
 

 

The Defence environment in Australia

 
The strategic environment that the Australian Defence Force is being asked to respond to is constantly evolving. On both a regional and global level, the Australian government is looking closely at this ever changing environment and this in turn is being reflected in Defence capability programs.
 
Today we are facing an unprecedented rate of military modernisation in the region amid ongoing territorial disputes. The South China Sea probably gets the most global attention. But it is not the only one.
 
Closer to home, concerns of influence and misalignment of interests in the South Pacific has led to a “step-up” in engagement with neighbouring countries with ongoing activities becoming one of the highest foreign policy priorities for the Australian Government.
 
These priorities include:
  • Economic; Security and People
 
It is an all-encompassing policy and as described by Foreign Minister Payne, “the step-up responds to the significant long-term challenges faced by our partners in the Pacific”. A key aspect of the Pacific step-up will be an increased focus on maritime operations in the region to support our broader national interests.
 
In what I think is an overwhelmingly positive advancement for society, we exist in a world that’s becoming rapidly more connected. But disturbingly we are also seeing the increased utilisation of this advancement for a new, modernised version of warfare. One which mixes the old with the new, with activities ranging from offensive cyber operations to overt coercion and propaganda.
 
In this battlefield the enemy is less visible and the weapons in the digital domain – potentially more powerful, and capable of having greater impact than traditional kinetic weapons or “boots on the ground”.
 
Australia has responded, like the majority of countries, in enhancing existing and developing new capabilities to defend and fight in this dynamic digital domain. The development of cyber capabilities is no longer a secondary requirement but now forms a critical component of our national security strategy.
 
The global and all pervasive extent of the digital domain makes global cooperation and partnerships between governments - and I will also include industry partners - critical in effectively combating this rapidly changing threat environment.
 
Throughout all of this – Australia – however remote geographically – has always played a vital role in committing troops, equipment and technology in the pursuit of just causes and the preservation of peace.
 
Over the course of its history there is no doubt that the ADF, and the individuals that have served, have made enormous sacrifices for the country – and have demonstrated time and again – that it takes a truly collaborative effort between all our armed forces – and our defence industries – to protect us all in the face of hostility.
 
Reflecting the commitment of the past, and the challenges the region faces today, helps define Australia’s focus on the future.
 
Australia is today in the middle of the largest recapitalisation of its defence force since the Second World War. More than 200 billion dollars over ten years is being invested in replacing, rejuvenating, and integrating a modern defence force.
 
A sizeable challenge indeed. And one that BAE Systems is working hand in glove with the Commonwealth Government to support.
 
Today we work across over 200 Defence programs for the Department of Defence.
 
We have a presence in almost every state and territory. From Western Australia where we upgrade the ANZAC class frigates; To Williamtown in New South Wales where we sustain Australia’s Hawk Lead-In Fighters and support Australia and the region’s F-35 aircraft.
 
And I can’t leave out Adelaide in South Australia where we conduct some of the most advanced manufacturing for the global F-35 aircraft and will produce the Hunter Class Frigates.
 
Each and every one of these programs sees our industry, and the people within those companies, working to help protect our nation.
 
And, today we employ around 4,100 incredibly skilled Australians working across 40 sites in Australia.
 
But as a company in Australia we had to have a beginning. That beginning was 65 years ago in a dusty paddock in Woomera in 1954 when as a company we started working with the ADF.
 
Let’s fast forward now to about a year ago. To the 29th of June in 2018.
On that day, BAE Systems was selected by the Australian Government as the preferred tenderer for the SEA 5000 program. We were selected to deliver nine Hunter Class Frigates for the Royal Australian Navy.
 
This selection of BAE Systems, represents the largest defence export program from the UK to Australia.
 
The program as announced is expected to be in the region of 35 billion Australian Dollars for the design, build and support of the ships.
 
There are many reasons why Australia chose BAE Systems to partner with on this critical program. And I thought it would be worth touching on some of them.
 
One of the reasons, certainly the dominating reason, and the most resounding one, is that the Type 26 is the most advanced antisubmarine warfare frigate in the world.
 
Without peer.
 
In fact the Australian Prime Minister said just that when I stood next to him as he made the announcement to the nation.
 
Former Prime Minister Turnbull was backed up by the then Chief of Navy Tim Barrett who said that the Commonwealth Government had made the decision based on the significant capability that it would present the Royal Australian Navy.
 
Another benefit in the selection of BAE Systems is the strategic naval advantage Australia would gain by selecting a design now used by three of the Five-Eye Partners.
 
And the opportunity certainly exists to grow this beyond the existing three navies.
 
Supported by the global enterprise, BAE Systems Australia in partnership with the Australian Government is uniquely positioned to deliver a sovereign shipbuilding industry for the nation.
 
It is a partnership that will span generations:
  • that will employ people who are still today in primary school;
  • that will rely on companies that don’t yet exist;
  • and will employ technologies that have not yet been developed or proven on-board our ships.
 
And to put things in perspective, it will probably conclude under a Chief of the Australian Defence Force who hasn’t yet joined the ADF.
 
To successfully deliver and support the capabilities required by defence, this program must be built on the continued cooperation and collaboration between our Governments and our Defence Forces to the benefit of both nations.
 
Now is probably a good time to give you an update on the Hunter program.
Today we are seeing the Hunter program make great progress. Our workforce for the program alone has grown to almost 500 employees across Australia and the UK since contract signature in December last year.
 
The number of Australian employees in Glasgow as part of a knowledge transfer program is growing and today numbers at around 40 Aussies. Our BAE Glasgow offices now have quite the international feel with blow-up Kangaroos, vegemite, thongs and a splattering of maple leafs. In the west-end of Glasgow we now have quite an established Aussie expat community.
 
The prototyping will begin in December 2020, with first steel cut for Batch 1 in 2022.
 
The Hunter-Class Program will contribute more than 6,300 jobs and just under $18 billion in Gross Domestic Product (GDP) to the Australian economy split across all States in Australia. Importantly, for every 10 jobs created directly on the Hunter program – 27 jobs are created in the wider supply chain.
 
There will be over 15,000 professional engineering positions over the life of the program and 1,000 graduate roles and apprenticeships in steelwork, mechanical, electrical and technical fields.
 
The program also strengthens the long-term strategic relationship between Australia, Canada and the UK.
 
The Global Combat Ship has already established a strong user group community of Navy, Government and Industry involved in the examination of interoperability, training, mission systems roles, supply chain and Nation building sovereign capability.
 
The GCS is the first BAE platform to be fully developed using digital twin technology. The benefits are already being realised in common configuration and supply chain management. All future upgrades are now able to be developed through virtual reality and provide a modelling capability for de-risking program integration but also providing a test-bed for defect analysis.
 
We have a group of experienced and skilled engineers here in the UK that are working with our Australian team to determine, develop and realise the modifications to the base design required for the Hunter Class.
 
We are also promoting research and technology collaboration between UK and Australian Universities. An example of this is the close working relationship developed between Flinders University in SA and the Advance Manufacturing Research Centre in Sheffield in the UK to support future research and development programs.
 
This collaboration is a direct result of the Government’s investment in digital strategies to support the Continuous Naval Shipbuilding strategy.
 
In Adelaide, the construction of what will be the most modern, technologically advanced shipyard in the world is well under way and as I said before, we are on track for prototyping to commence in December in 2020.
 
The purpose of prototyping is to bring this new shipyard to life, not to practice or teach us how to build ships. We are working closely with researchers and innovators to bring the latest in Industry 4.0 from adjacent industries to the Defence Industry.
 
The role of people in digitisation cannot be understated – a key area of our research is in the human factors not just the technology. Having an effective training curriculum addressing the human machine interface and safety focus are critical to our success.
 
Importantly, we will be sharing this knowledge across industry so that everyone can learn along with us on this digital journey.
 
Probably of most interest to this audience and one of our key goals in partnership with the Government is the opportunities for the Defence SME community.
 
There is no doubt in Australia that the pendulum has now swung back with a real focus on the development of Australian Industry Capabilities in the defence sector with industry now formally recognised as a fundamental input into defence’s capability.
 
To quote the Minister for Defence Industry, the Honourable Melissa Price, “I’m focussed on growing the number of small businesses in our Defence Industry, and providing practical support to companies looking to work with Defence. By prioritising key capabilities and supporting Australian businesses who are contributing to them, we’re developing a strong, sovereign industrial base.”
 
So what does the future look like for the Australian defence industry?
 
Firstly, what got us to here will not get us where we need to be in the future.
Greater levels of connectivity are required to drive the evolution for industry 4.0. New technologies and new ways of working are transforming the nature of work and reshaping the Defence Industry.
 
Businesses need to stay informed and respond to the opportunities and challenges that this transformation will bring. My job is to position both BAE Systems Australia and our partners to be able to embrace these new ways of working.
 
On the Hunter program, our supplier engagement is extraordinarily active with over 900 suppliers pre-approved with the first Expressions of Interest released just in the last few months.
 
There are approximately 200 South Australian companies, 161 from WA and the rest come from across the other States and Territories in Australia, as well as New Zealand. $20M will be released into the Australian supply chain in support of the prototyping phase. Expressions of interest are being released in the last quarter of this year.
 
This program has also created opportunities for the many UK companies that are suppliers today for the Type 26 program. Many of these companies have Australian subsidiaries or have developed relationships with Australian companies.
 
Events such as DSEi that many of us will attend this week provide an important venue for industry to industry introductions. My team and our UK Naval ships team will be hosting a series of meetings throughout DSEi to facilitate a common understanding of the opportunities on the program and the global supply chain.
 
I would like to share a great example of one of the 7 Australian companies working on the Type 26 program that by extension will also provide the opportunity to supply the Hunter program and potentially also the Canadian program. This small Australian company, Airspeed is designing and manufacturing composite materials for aerospace, maritime and energy-related projects. Their Defence pedigree has been successfully supporting the Navy on the Collins Class Submarines.
 
On the Type 26 they are doing the design and manufacture of the composite removable mast which is to support replenishment at sea for the Navy. This is one example of Australian leading capability that is successfully competing on a global stage.
 
The opportunities and examples of success will continue to grow and evolve as we move from the first ship through to the ninth, as the design evolves to meet the needs of the Royal Australian Navy.
 
The Hunter program is also a deviation from the typical firm, fixed price contract between the Department and Industry allowing a strategic partnering framework where both partners have adopted a wholly integrated team approach. This approach has real benefits as the Hunter ship is being delivered using a BAE Systems design process rather than the traditional AUSDEFCON contracting structure.
 
An example of the close working relationship between the UK and Australia is the common approach taken by both navies in supporting design review principals and naval acceptance standards.
 
I hope you are all starting to realise that a program of the scale of the Hunter Class can be transformative for nations and industries.
 
We now have three programs and that creates a different type of scale, and for the Global Combat Ship – that scale brings a global partnership and collaboration across the BAE Systems Enterprise. And it also brings a new collaboration between Governments, Defence Forces and Partner Navies.
 

 

Partnership

 
The partnership between the UK and Australia is built on mutual benefit.
 
It is also very natural. We share a culture that has created common values. And these natural ties have led to the UK and Australia working together to provide for our own security, as well as ensuring global stability where and when it has been required.
 
This history through good times and bad, through conflict and peace-time, has created a deep sense of trust between our nations. One that despite distance, time-zones and bodyline has stood the test of time.
 
It is trust that has led to our nations becoming natural trade and investment partners. In a global economy where today, trade is too often threatened.
 
There are many statistics available to prove this point. So let me just give you three:
  1. The UK is Australia’s equal 7th largest two-way trading partner with trade between our nations fast approaching 30 billion Australian dollars.
  2. The UK is Australia’s second largest source of foreign investment with a stock of investment at 575 billion Australian dollars at the end of last year
  3. Today there are over 500 Australian businesses operating in the UK, and over 1,000 UK companies operating in Australia.
 
What these points demonstrate is that we matter to each other, and we matter to each other’s economies. Our relationship has provided a real sense of stability in recent times of uncertainty.
 
Programs like the Global combat ship provide an opportunity to strengthen trade and make it easier for companies in both countries to work more efficiently and effectively.  
 
I’ve covered this morning the changing threat environment and the rationale behind the Governments force modernization program and specifically an update on the Hunter Class program and the associated opportunities across the global supply chain.
 
To wrap things up, I just want to ensure that everyone is clear on the objectives of the Australian Governments Continuous naval shipbuilding plan. The Plan sets out how our Government is delivering on the commitment to build a strong, sustainable and innovative Australian naval shipbuilding industry.
 
As I said earlier, it provides the foundation for implementing the Government’s commitment to the greatest regeneration of our country’s naval capability. At the same time it will create a long-term, sustainable naval shipbuilding and ship sustainment capability that will serve our strategic and economic interests for many decades.
 
Critical to achieving this is recognition that industry is absolutely necessary to delivering the capability that the ADF needs, and therefore something that needed to be strategically managed.
 
No one company or one sector can strategically deliver defence industry capability.
And this is the point I want to make today – that defence industry capability is made up of very many parts, with numerous stakeholders all playing a role.
 
Because of this, defence industry capability has to be a strategic consideration for the Australian Defence Force. And also for every single player, every single member of the defence industry.
 

 

Conclusion

 
So, Ladies and Gentleman.
 
Thank you for your time this morning. My final message to you all, is that whether you are from Australia or the UK; Whether you are from the Defence Force or industry. Whether you are from big business or small.
 
Now is the time to get involved.
 
We must continue to grow the partnership between our nations. And if we do this our nations will be more secure, better protected, and more prosperous as a result.
 
Thank you