The Thomas Perspective

Once upon a time there was a bad idea. It was called the ‘Lexcen’ (after famed yacht racer, the late Ben Lexcen). The idea was to convince car buyers they would gain better value if firms were able to ‘badge engineer’ their cars, thus theoretically building production runs for common designs, helping to lower production costs for manufacturers, and delivering more profit to car companies. The deal was cut between Holden and Toyota for Holden’s standard passenger sedan. Holden customers would get a Holden, and Toyota customers would get a Holden, albeit badged as a ‘Lexcen’. Guess what? The idea flopped.

A new report from the DefenceSA Advisory Board (see article page 7) has just come up with a new idea – let’s reincarnate the ‘Lexcen’. The proposal is a little different this time. Instead of being pitched to consumers – who can be relied upon to say if they don’t like one manufacturer’s product (ie: by buying someone else’s) – the ‘Lexcen’ brainwave this time around is recommended for those who generally don’t have much of a say in the products and services with which they are provided to carry out their jobs: the majority of the ADF.

Because Defence capability planners keep cramming in as much warfighting capability as they can into each and every platform, military equipment costs are on the up. DefenceSA thinks that to stem the risk of large cost blowouts on Kevin Rudd’s grand naval extension plans – new submarines, frigates, OPVs & support vessels – the Navy should rationalise the number of ship classes – let’s say to two: one that at all costs should not be allowed to sink; and second, one that if purposely sunk, can readily be refloated (generally, that’s called a submarine).

But there’s more. With sailors now serving in two ship types, DefenceSA says let’s also standardise equipment & subsystems aboard each vessel. Our good friends the taxpayers of Spain, are already helping us to do this with our new AWDs & amphibious ships. They are very thoughtfully exporting to Australia the two ship designs (and some hull elements), at very close to marginal cost, if not a little below.

An interventionist industry policy aided by broad-economy subsidies from the EC ensures there is high commonality of sub-systems in these ships. Products are manufactured under licence in Spain, due to offset policies Australia abandoned years ago. Those sailing in the future fleet will thus operate ‘Lexcen’ equipment, and at the end of the day, will sleep on a ‘Lexcen’ provided by the lowest cost tenderer.

Competition is a bit like democracy – it’s the worst way to organise yourself, except for all the other forms of political organisation. The DefenceSA report next draws on the conclusions of ‘hired guns’ (in this case the RAND Corporation) to recommend Australia consider the latest snake-oil sold to the bankrupt UK Government. That is, rationalise your naval shipbuilding industry down to one monopoly supplier, and things will be cheaper and produced more efficiently.

Just on 25 years ago, the then Labor Government sought to re-energise Australian naval shipbuilding by directing a contract to build two FFG frigates at the government’s own shipyard. Years later, the ships were rusting faster at the front end, than new steel was being added at the back. It took a major privatisation of the dockyard to recover the FFG build, but the gains went on to yield for the RAN one of its most successful equipment programs ever – the ‘Anzac’-class frigates.

Reflecting on those brief points of history, perhaps we should now think twice before seriously contemplating the ‘Lexcen’ solution for those who will inherit the ‘Force 2030’ future fleet. One size does not fit all – it never has – and the devil is always in the detail, which the DefenceSA report does not provide.

Trevor J Thomas
Editor-in-Chief