by Peter Yule
was now an extensive change of personnel. On 4 August 1986
Oscar Hughes was promoted to Rear Admiral and his position
renamed submarine project director. Graham White’s replace-
ment, Captain Geoff Rose, an experienced submarine engineer,
took the position of project manager, reporting to Hughes.
Control of price remained a central concern during the project
definition phase. Kim Beazley had an extensive program for buy-
ing military equipment. The government was not prepared to
spend proportionately more on defence, so Beazley refined defence
policy, focusing on the defence of Australia and its closer region,
and ensured this was reflected in the priority given equipment
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programs. He was strongly supported by the Labor Party,
although some questioned the place in this strategy of large sub-
marines capable of deploying to the north Pacific. Beazley later
said that a box called ‘deterrence’ had to be attached to the policy
to accommodate the submarines as well as F-111 bombers and the
army’s special forces. But there was always the Australian building
program to keep caucus firmly behind the submarines.
The groundwork for the policy was Paul Dibb’s Review of
Australia’s Defence Capabilities, released in early 1986. Although
Beazley told him the submarine project was the one area he could
not touch, Dibb nonetheless looked at the project’s finances, with
the estimated price now at about $2.6 billion. Dibb noted that the
six proposed new submarines would be the equivalent of nine or
10 Oberons and would allow three separate areas to be patrolled
simultaneously. Since Australia’s submarine fleet was already the
most powerful in the region, the additional capability provided a
margin available for trade-off if project costs increased: ‘Should
there be predictions of a substantial cost escalation in the sub-
marine project due to local construction problems, then options
involving some lesser capabilities could be considered.’20
In the event, the financial situation for military spending wors-
ened drastically. In May 1986 the Treasurer, Paul Keating, made
his famous comment that Australia’s balance of payments situa-
tion was threatening to turn the country into a ‘banana republic’.
Viewed at first as a political gaffe, it was in reality the beginning
of his campaign to force the government to tighten fiscal policy
by reducing expenditure across all portfolios. The result for the
military was that the projected increases for future budgets were
halved, with little real growth for the foreseeable future.
As the definition study drew to a close, Beazley told Oscar
Hughes that he could not get the submarine project through the
cabinet if the price started with a ‘4’. Hughes argued that any
reduction in capability should be the last option, and sought sav-
ings in other areas. For this reason the contingency funding against
future problems was limited to $50 million whereas, on a par with
similar projects, it should have been around 15 to 20 per cent of
the estimated price – about $600 million.
In mid-1986 Hughes visited Anaheim and talked with Rick
Neilson about Rockwell’s work on the combat system. When
Neilson spoke of his efforts to improve the combat system design,
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Hughes told him: ‘That’s all very well but I can’t afford any more
money.’21 The directive was authoritative and, for the remainder
of the definition study, Neilson and his colleague John Dikkenberg
told Rockwell to cut costs. They were so persistent that Rockwell
reduced the number of control consoles in its design to reach a bid
price of around $460 million. Nonetheless, Neilson and Dikken-
berg remained impressed by the development of the Rockwell
system and the full-scale control room mock-ups, which allowed
them to see how the system would function.
From August 1985 Neilson’s colleague from SWSC, Andrew
Johnson, was also in Anaheim representing Computer Sciences in
Rockwell’s consortium. Having been one of the leaders in devel-
oping the combat system concept, Johnson had a good idea of
how it was supposed to work. However, he found that Rockwell
knew little about submarine combat systems and that it had
entered the Australian competition to gain an entry into this mar-
ket. That was all too apparent to another consortium member,
Singer Librascope, which owned the expertise and had no desire
to create a competitor. Rockwell also had difficulty working with
Thomson CSF, the French sonar makers, which also feared for
its intellectual property. Well into the project the problem of link-
ing the components together with software written for Rockwell’s
data bus was looking no closer to solution.
Singer Librascope had expected to build and integrate the
system and write the system software but not to reveal source
codes as this would threaten its market position. This undermined
Rockwell’s strategy, so it proposed to Johnson that CSA should
write the software, thus creating a system that Rockwell could
market. CSA had entered the consortium to perform a compara-
tively modest $40 million task of assembling the Australian end
of the project and producing things such as land-based training
systems. Writing all the software would be worth around $100
million and placed CSA at the centre of the system’s development,
but at the cost of reducing or removing access to Singer Libra-
scope’s expertise. Johnson agreed and, he says, ‘within that deci-
sion the Greek tragedy starts’.22
Oscar Hughes also visited Signaal in mid-1986 and Mick
Millington recalls him reinforcing the line of financial discipline,
telling the Dutch company’s executives: ‘If you come in at one dol-
lar over $500 million we’re not going to talk to you any more.’23
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Signaal’s financial manager was absent from the meeting and was
unimpressed by the imposition of a cost ceiling. Unlike their coun-
terparts in the US, the liaison team was unable to convince Signaal
to heed the warning and the company continued a single-
minded pursuit of the specifications, designing a system it priced
at $520 million. Then, over lunch with senior defence bureaucrat
Malcolm McIntosh, Signaal’s Canberra representative, Altingh
von Geuzau, learned that Rockwell had reduced the quality and
cost of its bid. The Dutch followed suit, tendering their bid a week
late at a more modest cost of $480 million.24
Having changed its early conservative course, Signaal devel-
oped the combat system of Millington’s aspirations. Further,
Millington had come to respect Signaal’s abilities and had no
doubt that it could deliver the system it promised. ‘With the Dutch
and Germans a handshake is
a firm commitment, it is solid stuff,
while my experience with American companies is that the hand-
shake is only the beginning of negotiations for contract amend-
ments.’ However, Signaal’s late change of direction meant that it
was unable to adequately document its new system so that when
the evaluation began it was difficult to match the documentation
with the specifications.
In Sweden, Kockums continued to develop its design appar-
ently uninhibited by costs. Greg Stuart noted that the company
had little commercial sense, as it had only designed for the Swedish
navy in an arrangement that was closely consultative. He found
that Kockums’ approach was very different to any in his experi-
ence, as it was forced to constantly evolve its own designs because
of Sweden’s isolation from NATO. Stuart, who has the reputation
of being an engineering perfectionist, concluded that in subma-
rine building there was ‘the right way, the wrong way and the
Swedish way – the Swedish way is not necessarily wrong, but it is
different’.25
Olle Holmdahl headed the massive design effort by Kockums,
where the company contained its costs within the $10 million
provided by the Commonwealth only by discounting the design-
hour rate. The effort of the 50-strong design team was focused on
the central design issues by allowing them to select the best for-
eign equipment in specialist areas. This was familiar practice for
Kockums but generally unusual in submarine design, where most
builders preferred their own nation’s components. The Swedish
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design featured Italian masts and hydraulic systems, British hull
valves, air compressors and torpedo discharge system, the French
Jeumont Schneider electric motor and German Varta batteries.
Having left the preliminary design review convinced the cheap-
est bid compliant with the navy’s requirements would win, the
AMS team saw no benefit in offering more than was outlined in the
ship’s characteristics.26 The German submarine was redesigned to
reduce battery capacity by 10 per cent. Further savings of about
$150 million were found by adopting German weapons-handling
arrangements, with the bow being designed around the new MAK
weapons discharge system.
The Germans were confident that their research into fuel cells
for air-independent propulsion would provide their future subma-
rine designs with superior submerged performance. It is possible,
however, that their enthusiasm for fuel cell propulsion led them to
underestimate the Australian navy’s desire for a large conventional
battery capacity.
The two combat system tenders were submitted in October
1986. The submarine bids were to be submitted on 11 November,
but ASC decided to pre-empt the opposition and lodged its bid
with great fanfare a day earlier. Geoff Davis contributed to the
stunt by having the massive volume of documents delivered in
metal containers by Wormald security vans. The result was that
the Swedish bid received favourable press coverage, while the
German submission the next day was virtually ignored. It was
a little thing but it set the psychological atmosphere for the events
that followed.
C H A P T E R 10
Debating the laws of physics: picking
winners 1987
In early 1987 conservative politics in Australia was splintered by
maverick Queensland Premier, Joh Bjelke Petersen, and his bizarre
attempt to enter federal politics. With the opposition in disarray
and a federal election due by the end of the year, there was obvious
temptation for the Labor Party to go to the polls sooner rather
than later. The project team was under great pressure to meet Kim
Beazley’s wish and have a contract signed before the election.
The assessment of the four bids involved over 300 people in
more than 40 specialist teams, with literally tonnes of documents
to be assessed. The documents supplied with the Signaal bid alone
made a pile seven metres high.
By early January 1987 the individual working groups had
concluded their evaluations of the submarine design and these
were consolidated in the report of the submarine evaluation
team. Harry Dalrymple, one of the principal signatories of the
report, found the assessment a challenge. His team had devel-
oped expertise in submarine design principles while supporting
and improving the Oberons, but had no experience of origi-
nal design. BHP Engineering was contracted to provide gen-
eral guidance through to the contracting stage and, somewhat
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ironically, the British Admiralty Research Establishment and the
Netherlands Ship Model Basin were both approached to provide
modelling research to assess the propulsion performance of the
designs.
The results of the evaluation were startling – the German pro-
posal now barely came up to scratch. Their design, though the
clear winner of the earlier contest, was now rated as only a ‘fair’
response ‘which would seriously jeopardise the ability of this sub-
marine to fulfil the specified mission requirements’. It had ‘an
assessed inability to fulfil major performance requirements with-
out significant redesign’, a condition that ‘borders on a CRITICAL
[ sic] deficiency’.1
The German boat was more than three metres shorter than the
Swedish design and displaced 275 tonnes less on the surface. The
evaluation team considered that the smaller pressure hull, with
reduced battery capacity and fuel load, limited its capability. The
Australian evaluators considered the Type 2000 could stay sub-
merged for only two-thirds of the time required, would have a
covert transit range 15 per cent less than asked for, and be able
to stay on station for less than half the specified time. While the
Swedish boat could not quite meet some of the navy’s criteria it
failed only narrowly, being three per cent down on the covert tran-
sit range and seven per cent short of the time required submerged
on batteries. It fully complied with the required patrol length.2
Surprising as they were, these results became controversial
when the way they were calculated became public. To measure
the competing designs against a common baseline, the evaluation
team recalculated much of the data submitted by the two design-
ers. The result of this process was that many of the German figures
were revised downwards, while the Swedish figures were revised
upwards.
The estimated covert transit range of the IKL design was
reduced by about 25 per cent while that for the Kockums design
was increased by five per cent. The long-range and short-range
patrol endurance figures claimed for the German boat were
decreased by around 70 and 55 per cent respectively, while the
Swedish figures were increase
d by five and 10 per cent respec-
tively. The indiscretion ratio for the German boat in transit was
reduced by 16 per cent, while the Kockums design increased eight
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103
per cent. On patrol, the indiscretion ratio claimed by the Germans
was reduced by 50 per cent, while the Swedes were penalised only
14 per cent. The only area in which the German boat benefited
from the recalculations was that its claimed submerged endurance
at a speed of 21 knots was increased by 33 per cent while that of
the Swedish boat went up some 20 per cent.3
Mark Gairey explained the reasoning of the evaluation team
that led to these results:
Bearing in mind that both companies are designing to meet
the same requirements, you would expect them to come up
with a fairly similar solution, which in many ways they did.
The designs were similar in dimensions . . . yet the
performance they were offering was different. The Germans
were claiming that they were meeting or exceeding everything
we asked for, while the Swedes said, ‘We meet most of the
requirements, but not all of them . . .’ But when you sat
down and looked at the fact that the Swedes had more fuel, a
bigger battery, a bigger engine, a bigger motor, but they said
they were offering less performance, something didn’t make
sense. The laws of physics say that if the bodies you are
pushing through the water are more or less the same then if
you put more power and everything else, you should get
more performance and not less. That made us go away and
do a whole bunch of work to try to understand why. And
basically it boiled down to the assumptions being made by
the designers. Basically the Germans were taking the most
optimistic approach they could, even to the extent of saying
things like, you can’t actually operate the galley and you
can’t do this and you can’t do that, or you’d be using too
much power, while the Swedes assumed normal operating
conditions.4
As Greg Stuart put it: ‘With the German submarine, if the crew
were in bed, the combat system turned off, the lights off, etc then
it could do what it claimed – but it could not do it in a real-
istic operational mode.’ This was because, at speeds less than
seven knots, propulsion demanded only a low drain on the bat-
