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Maritime Logistics Community News : Summer 2011
27 NAVY SUPPLY NEWSLETTER SUMMER 2011 Tenders for Group 3 closed on 5 September 2011, and contract signature is expected by mid 2012 (Executive Date), with implementation in early 2013 (Operative Date, following Phase In). Key Extracts from the Rizzo Report Overarching Observations The need for the sustainment of assets is understood in Defence and DMO, but it is not given the same rigorous attention as asset acquisition. Sustainment costs can exceed those of the original procurement and the challenges can be more complex. The importance of operational objectives is clear to Navy—but the equal importance of the technical integrity of its assets, both for the short term operational task and for their operational life, is not. Decisions addressing the risk of deferring maintenance are sometimes made without considering the benefit to be gained from accepting that risk, without clear and contemporary risk settings and without complete information. Contracting Strategies The Review found that significant inefficiencies exist in the contracting methods employed by the Amphibious and Afloat Support SPO. When planning a ship’s maintenance availability, outstanding engineering tasks are described in a work package that is put out to tender as the Statement of Work. The subsequent tenders are evaluated and the contract awarded on a best value for money basis. Although this appears to be a sound strategy, it is inefficient when applied to frequently recurring maintenance work and has resourcing consequences in the SPO. In addition, it creates a short-term approach from Industry that does not encourage investment. Ship maintenance is a long-term need and warrants long-term partnerships with Industry, ideally for the life of the ship. As a general rule, ship maintenance contracts should be in place for five years, with a rolling extension option for successful delivery. The Team recognises that it will take some time to transition in an orderly manner from the current three or four year arrangements. These longer contracts will encourage Industry to build a knowledge-base of the ships, invest in workforce skills and infrastructure and, as a result of incentives to innovate and a greater level of certainty, assist with lowering the cost of ownership of Navy’s platforms. A difference in approach across DMO is demonstrated through analysis of the contracting data for Aerospace Systems Division compared to Maritime Systems Division since July 2008. The total contract value over the period for both organisations is similar. Aerospace Systems Division let a total of 965 contracts for 224 platforms across 13 types, whereas Maritime Systems Division let 2,829 contracts for 69 platforms across 11 types. This much greater number of contracts in Maritime would have required significantly more administrative effort.