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Future defence capabilities. Presentation to the Defence and Industry Conference, Canberra, 26 June 2001



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FUTURE DEFENCE CAPABILITIES

RADM C.A. RITCHIE

 

  • Good afternoon.  

  • I have been asked to talk about future defence capabilities - not the platforms and systems we envisage but the changing nature of the capability development activity that precedes acquisition s.  Where I can I will highlight the part that industry plays and if I get it wrong, you can correct me later on.  

  • I have been in this job now for two, interesting years - two years of change.  So to start, at the risk of re-writing history and acknowledgi ng without identifying all those who have been involved, I would like to look at where we have been.  

  • In August 1999 we began exploring the whole of capability concept, notions of how to consider the depth, breadth and life of capability up front in order to comprehend the costs and implications to Government and Defence of what had previously been thought of as acquisition of Major Capital Equipment.  This remains a pursuit of major importance.  

  • We changed our name to capability systems to emphasise this a pproach.  We also split out the C4ISREW components of capability to underline their importance and subsequently discovered the need for different, more timely development and acquisitions process.  

     

    Two years ago, we were in the early, formative days, of th e capability development advisory forum and its environmental working group.  We were experimenting with up front industry involvement.  We were well aware of smart procurement in the UK and the importance of IPTS.  In the aftermath of the demise of the AN ZAC Weapons Improvement Programme we had some very high level Industry / Defence teams looking at alternative solutions to naval capabilities.  We have also conducted joint studies with Industry to consider the capabilities and requirements of the maritime industry in Australia.  From these exercises we learnt more about each other and more about what is practical and what, although theoretically desirable, is not really practical.   

  • In the same period of time, we have seen the formation and continued evol ution of the DMO, with its emphasis on through life support, the White Paper and the Defence Capability Plan, the increased involvement of Industry in policy advisory roles.  We have taken the first tentative steps in prioritising capability across competi ng domains and importantly, gained general acceptance of the outcomes.  

  • Of great significance, we have a much more detailed and certain government commitment to future capability than we have had in the past.  No longer can FDA sleight of hand in the Pink Book ruin the life work of sections of my staff or the business plans of industry sectors.  We have a degree of surety.  

  • But we cannot be complacent.  The DCP must roll on.  By the end of this year we must be prepared to recommend to Government what should be in the new year 10 (year 11 if you like) of the DCP.  Additionally, the White Paper at para 6.47 says that alternative, more cost effective means of achieving the desired capability will be considered by government, and at para 8.2 The Defence Capabil ity Plan will not remain immutable over the next decade.  It will be reviewed annually to take account of changing strategic circumstances, new technologies and changed priorities.   

  • So we need to account over time for changing strategic circumstances, t echnological advances, innovation, changes in our concepts of warfighting and plain old better ways of doing business .  

  • We also need to account for a changing relationship with Industry and the national support base.  Increased inter-dependence between D efence and Industry is inevitable.  For many reasons, not all of them within our control, the Industry / Defence partnership is central to our warfighting capability.  Industry will supply, it will maintain, it will adapt in some cases it will even provide , the assets we need to ensure our defence.  Private finance, leasing, partnership and other initiatives are and will continue to be, of vital interest to us.  

  • In two or three short years we have moved our thinking on the development of capability for the future from an equipment based, stove piped view of the world to one which recognises whole of life, whole of capability, with industrial input and team based, development, acquisition management and support.  I say that not as any reflection on those who managed the process before this time but rather to emphasise the organisational and process change that has impacted upon future capability development and acquisition in that time.  Indeed, in reality, the process has been evolutionary - not revolutionar y as some might think.  

  • We are now in the final throes of documenting these changes in a manner which will guide the uninitiated and convert those who have long followed other paths.  I am sure it is not a state secret that the extant agreed documentation of our procedures is 198 0s; based - and subsequent attempts at change have met with limited success and even less agreement.  

  • The bulk of the rest of this presentation is directed at describing those aspects of capability systems life cycle management that relate to the developme nt of future defence capabilities.  I draw heavily upon a body of work initiated and brought to conclusion by the VCDF LTGEN Des Mueller, and influenced by the thoughts and writings of AVM Norm Gray - both long serving practitioners in the field of capabil ity development.  

  • Firstly, some basic principles:  

  • SLIDE The capability system inputs are as shown in this slide.  They are not newly discovered.  You may hear reference to fundamental inputs to capability or you may be familiar with the army s posted acronym t o describe the elements of capability.  There are others.  The point is that all must be considered at the outset and those that will have a major influence on life cycle cost must be identified.  

  • SLIDEE SLIDEE The next slide shows the components of the process from i dentification of need to disposal and the next a view of the relationships between the major players.  Points to note are that accountability of integrated project teams and PMB is to the sponsor, VCDF, during the requirements phase and to the provider, US DM, during acquisition and in service.  

Strategic Basis for Future Capability

  • Dr Brabin-Smith has talked this morning about our strategic environment and Defence s strategic objectives.  The strategic basis for future capability is derived directly from Go vernment s endorsed strategic policy, especially the Defence White Paper and its complementary Defence Capability Plan.  It also derived indirectly through military strategies and complementary conceptual, analytical and experimental activities such as war fighting concepts, operations analysis, wargames, simulations and joint military experiments.  Two particular issues being pursued by the strategy staff are joint warfighting concepts that describe how joint forces might perform their tasks in the future a nd force options testing, operational analysis of the costs and benefits of different force structure options.  This latter process was initially facilitated by industry here in Australia but has now moved in house - in sourcing i think we might call it.   All of this feeds the process of capability analysis - identifying current or prospective capability gaps.  put simply, we are seeking answers to the following questions:  

  • what can we achieve?
  • what should we be able to achieve?
  • what are the risks of any gap between the two?
  • what are the options for reducing the gap, in order of costs and risks?  

  • There is of course another source of information in answering these questions, and that is the comparison of existing forces against the laid down preparedness di rectives and requirements.  

  • This diagram illustrates the overall process.  The Defence capability planning guidance near top left is a distillation of all capability analysis on an effects rather than platform basis.  This gives a context to the making o f priorities for capability and importantly the judgement of how resources are best allocated in accordance with those priorities.  

I will now move on to the central part of my business - The Requirements Phase for future capability. 

  • In this phase the nee d that has been established in the consideration of strategic factors is subject to requirements and functional analysis to better define the capability in, especially in terms of:

 

  • functions to be performed,
  • level of performance required, and
  • conditions u nder which these are to be achieved.

 

The baseline so established will be the foundation for acquisition and subsequent life cycle management of that capability.  It is often argued, with some justification, that we have not always done well in this area. 

  • Essentially we envisage working to two major milestones, both involving government approval.  Of course some projects because of their complexity, sensitivity or cost may require additional consideration by government during the process.  

  • The first approval seeks agreement to:

 

  • inclusion in the Defence Capability Plan and the Major Capital Investment Program,
  • the broad parameters of the proposal,
  • the options to be explored,
  • timing for development of options, and
  • any expenditure necessary to develop the options.  

  • This diagram shows the route that a need might take to get first approval.  Developing a capability requirements business case as we term it.  

  • We are talking here about a capability gap and the first thoughts on options to close that gap.  The industry input will be sought primarily through the environmental working groups of the CDAF, but there will be other avenues.  This process is akin to the development of the capability definition statement of old.  An important difference is th e involvement of government at an early stage.  

  • The second milestone is government approval to proceed to acquisition and the work leading up to that approval culminates in the presentation of an acquisition business case.  

  • Again a diagram best explains th e nature of the work that is going on in this phase.  

  • The operational concept describes how the capability is to be employed and is critical to a clear understanding of what is to be achieved, how, where and when.  

  • The functional performance specification decomposes the system level capability baseline into lower level statements of sub-system performance.  It describes the functional architecture of a capability system.  

  • The test and evaluation concept describes the DT and E and OT and E concepts that will ensure the capability meets its baseline and is fit for purpose.  

  • The COD is the principal document during the requirements phase and it brings everything together and addresses, not only the options, but every other input and activity that will impinge u pon the capability.  Of interest to this audience, the COD includes for each option:

 

  • a summary of opportunities for industry involvement by sector, during each phase of the capabilities life,
  • broad opportunities for international collaboration,
  • the role o f science and technology in all life phases and any foreseen need for CTD development,
  • a broad description of the ILS concept with particular reference to industry involvement in maintenance and infrastructure,
  • estimation of the necessity for reserve stock s, and
  • whether or not private finance is a feasible option.  

  • Clearly the opportunities for industry involvement in all of this are significant.  Indeed most of the OCD and study work that is out in industry at the moment is for projects in this requirement s phase of development.  

  • Industry involvement in the requirements phase will encourage its participation in the key process of trading-off capability, costs and timings and result in a requirement which is better tuned to industrial and technological reali ty.  Industry s improved understanding of the capability requirement we hope will reduce the number of iterations required to reach a satisfactory proposal, saving industry and defence both time and money.  

  • Teamwork with industry will also encourage a comb ined defence and industry approach to risk reduction before second pass (project) approval which should mean that the acquisition phase can proceed more quickly and with confidence that targets will be met.  Teamwork will also encourage critical examinatio n of current or proposed contract arrangements to see if they can be altered to provide benefits to both parties.  

  • The precise form of defence s relationship with industry will vary according to the stage that a project is in but it is essential to underst and that an improved relationship with industry and the continued use of competition must work together.  Experience of partnering in industry shows that there is no conflict between robust contracting and mutually beneficial teamwork.

 

Requirements Phase

  • Industry input of a general nature is provided during the early part of the requirements phase by a capability development advisory form.  This arrangement allows for:

 

  • early industry access to defence plans for capability development and the opportunity t o provide early feedback,
  • maximisation of Australian Industry participation in the requirements phase, and
  • early consideration of the capacity of Australian Industry for the provision of logistic support.  

  • As we move on there is the need for some caution.  

  • The way in which Industry is involved in the requirements phase, particularly during the development of PCOD and COD, needs careful consideration if the process is to withstand public scrutiny.  Perceptions, or indeed the reality, of influencing capability proposals to the benefit of Industry but to the detriment of the Commonwealth is a particular vulnerability that needs careful management.  While recognising the benefits of early engagement of Industry in the life cycle, it is important that probity and fair and equitable dealin g with Industry is maintained to ensure that no party gains an unfair competitive advantage.  

  • Nevertheless, industry input to particular capability proposals will be sought on the capability, LCC and timing implications of capability options. Of particular importance is industry advice on those elements of the capability requirement which are likely to have a major influence on costs.  Input will also be sought on the risks associated with each option and ways of managing them.  

  • The way in which industry in put will be provided will vary.  possible methods include, but are not limited to, the conduct of market surveys, funded PDS and, where appropriate, formal Defence and Industry integrated teams.   The method chosen will depend on project complexity and mus t be justified, when appropriate, in the capability requirements business case.  If the selection of industry sources involves a competitive process, it must be conducted in accordance with Defence procurement policies.   

  • That describes the conventional a pproach to capability development and acquisition.  Before I finish I would like to say something about alternative approaches, the first being evolutionary acquisition.  

  • The advantages of evolutionary acquisition are:

 

  • the sponsor, provider and the custom er can learn from experience with the initial capability and its subsequent increments;
  • a reduction of the risk inherent in introducing major technological improvements through a single step;
  • a capability can incorporate evolving technology as it becomes a vailable; and
  • by avoiding early commitment to the final capability system, the acquisition of obsolescent items can be avoided.  

  • Evolutionary acquisition is quite distinct from projects for the upgrading of major platforms and combat systems during their l ot.  These are usually conducted as projects in their own right.  

  • First and second pass approvals are sought in the same way as for traditional acquisition.  Where practical, second pass (project) approval is sought for both the acquisition of the total ca pability and the incremental acquisition for the subsequent phases, including funding approval for the whole project.  However, for projects where costs, timings and risks cannot be quantified, government approval will be required to implement subsequent p hases.  

  • If the second pass (project) approval is to cover the whole project, it is essential that business rules be established to provide Government with confidence that satisfactory progress under the delegated arrangements will be rigorously monitored. The approach should be one of imposing an overall cost limit for the project with target cost and performance envelopes for each incremental improvement.  

  • Evolutionary acquisition requires very tight project management and a particularly close relationshi p between all stakeholders, including Industry, to inform decisions as to the definition of subsequent increments of capability and the performance of the project in relation to its approved project envelope.  

  • The areas where these ideas might be developed further are in the die.  the development of defence information environment (die) capabilities poses three significant challenges, namely:

 

  • requirements for information systems usually evolve as they are developed,
  • combat capabilities require a much great er degree of information exchange than in the past, and
  • technologies are advancing so rapidly that there is a danger of purchasing obsolescent solutions.

 

To overcome these problems it is often necessary to resort to evolutionary acquisition.

 

  • In our field of expertise, the requirements phase, the evolutionary acquisition  process for a die capability has two main differences:

 

  • After first pass approval, it is often necessary to develop a limited pilot capability.  The experience gained with this initial capability informs the development of options for the seco nd pass.
  • At the second pass, the detailed scope of the initial capability would be approved as would the broad scope for subsequent increments.  Subsequent increments may or may not require second pass (project) approval before implementation.  

  • During the requirements phase the focus is on the operational view, which describes the information requirement, and the systems view which describes how various system options might fulfil that requirement. These operational and systems views are prepared as part of the cod.  During the acquisition phase the systems view will be further refined and developed.  

  • Architectural Compliance.   During the requirements phase assurance must be provided that the operational and systems architectural views of a project are consi stent with the EA .   Although compliance with the EA will be the aim, capability and cost trade-offs may make full compliance in all circumstances prohibitively expensive or operationally undesirable.  Waivers will normally be issued as a result of consider ation by the DIEC.  Compliance of the project architecture with the EA is monitored as it is further developed during the acquisition phase.  

  • Finally, I would like to say a few words on private financing arrangements for future capability.  

  • The Government has agreed policy guidance for the application of private financing.  Defence will take advantage of the opportunities thus presented in the implementation of the DCP and encourage innovation, particularly now that Government has considered and supported t he concept.  

  • Private financing will be considered during the requirements phase when there is:

 

  • a requirement for capital involvement, now or in the future;
  • a substantial element in the service can be configured as a service;
  • there is scope for innovation in the delivery of the service;
  • there are risks which could be better managed by the private sector; and
  • there is scope for long term contracts.  

  • Clearly, an overriding consideration will be that PF does not prejudice the ability to deploy and sustain ADF elements or to execute a military operation.  

  • In closing, I hope that the last half-hour has given you a good insight into our current thinking on the development of capability.  Much of what I have described is new to us and there is plenty of room for re finement.  I haven t talked about partnerships, joint ventures and other project management innovations.  I have not talked about the concept for national support and the recognition that much of our capability, now and in the future resides in the nationa l support base.  But I hope that what I have said convinces you that we in the requirements business are serious about the need for Industry to be alongside us as we define the future capability of the ADF.  We are always willing to listen and we look forw ard to hearing from you.