The Collins Class Submarine Story

by Peter Yule

  project and the reform of the Williamstown Dockyard, before los-

  ing his company to a hostile takeover from Transfield.

  Hans Ohff began work at ASC in January 1994 and imme-

  diately made his mark on the company’s style. During the early

  years of the company, ASC was regarded by many of its employ-

  ees as a profligate company. There appeared to be no need for

  financial discipline as the company was awash with cash from the

  early contract payments.5 In stark contrast, Ohff brought a skin-

  flint contractor’s attitude to ASC, made essential by the growing

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  awareness that the larger part of the work on the contract lay in

  front of them, while the payments would steadily diminish. For

  Ohff every cent spent was a cent off the profit from the contract.

  At ASC the office lights were no longer left on at night, people

  wrote memos on the back of old envelopes and travel was cut

  back. The new managing director led by example, often driving

  interminably around city blocks hunting for a free car park.

  Hans Ohff brought an aggressive and often confrontational

  approach to the submarine project. It was said at ASC that the

  epitaph on his tombstone should be ‘Kick the door in first, you

  can always apologise later’. Many in the navy and defence found

  him an inflexible and belligerent negotiator and almost impos-

  sible to deal with. They felt that his policy was never to admit

  that any problems with the submarines were ASC’s responsibil-

  ity, causing even minor faults to become major issues between the

  parties.

  Hans Ohff admits that he was results-driven and used to deal-

  ing with profit-focused companies, and his personality was not

  good for dealing with an organisation like the navy, with its

  amorphous and continually changing group of people with little

  commercial acumen and greatly differing interests and agendas.

  Nonetheless he feels that his motives were often misunderstood –

  few remembered that he had been largely responsible for the deci-

  sion to build the submarines in Australia and he had an enormous

  personal commitment to making the project a success. He points

  out that as an experienced contractor he could have treated the

  navy like ‘lambs to the slaughterhouse’ because in a $5 billion

  project the client is captive as the contractor cannot be sacked –

  it would be politically and financially impossible to cancel the

  contract and start again. A contractor could always take advan-

  tage of the client in that sort of relationship because the client is

  so big and bureaucratic and unable to watch everything. How-

  ever, Ohff insists that he has ‘always been performance driven: a

  safe and speedy delivery of a project would deliver a satisfied cus-

  tomer and translate into increasing profits for the shareholders’.

  If the company performed well there were large profits to be made

  without ripping off the client.

  Hans Ohff came to ASC with the philosophy that ‘the rela-

  tionship between the customer and the contractor can never be

  too close’, and his efforts to put this into place illustrate one

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  of the more confusing aspects of the whole submarine project:

  who was the customer? Ever since the start of the project, the

  project directors had behaved as though they were the customer –

  telling the contractors what they wanted or did not want, check-

  ing on work and authorising payments. Hans Ohff thought the

  deputy secretary in charge of acquisitions, Garry Jones, was his

  customer, with the project director being his immediate counter-

  part. He developed a close relationship with Geoff Rose, while

  treating the other contenders for the customer’s role – the subma-

  rine squadron, the navy, and the Department of Defence – with

  barely disguised contempt. He believed that these organisations

  ‘created the problems with the submarines’, primarily by setting

  more and more conditions outside the original contract.

  Hans Ohff says that: ‘I was never afraid of arguing with the

  client, but I had fewer arguments with Geoff Rose than almost any

  other client, because both of us were concerned solely to deliver the

  best submarine.’ For Geoff Rose the primary focus was to ensure

  that ASC delivered the submarines according to the requirements

  of the contract and his belief was that this could be achieved by

  working closely with ASC rather than ‘beating them up’. The close

  relationship he had with Ohff and ASC was frequently criticised

  in the navy.

  For Hans Ohff and Geoff Rose the aim was clear – to build

  the submarines according to the contract. They do not deny that

  this was difficult and that the submarines had problems meeting

  some of the contract requirements. However, they argue that the

  greater number of problems arose from the navy and the sub-

  marine squadron realising in the mid-1990s that they no longer

  wanted exactly what had been contracted for in 1987. One of

  the major issues of the second half of the project is the extent to

  which the problems of the submarine project were due to changed

  requirements rather than a failure to meet the contracted specifi-

  cations.

  An almost unintelligible sentence in the submarine project’s

  quarterly report for September 1993 is the first official recognition

  that the goalposts might be moving:

  Approved ship characteristics: Director General Force

  Development (Sea) has submitted a draft approved ship’s

  characteristics for review against the baseline contract

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  specification to determine those requirements that have not

  been addressed in the contract and identify any future

  modifications needed to resolve these differences.

  Geoff Rose was perplexed. His view was that he had a job to do

  based on the contract, and if new requirements were introduced

  and the submarines ‘I produced to the requirements of the contract

  would not be acceptable to the navy; not only did the goal posts

  seem to be moving, the game being played had changed as well’.

  His confusion was never resolved.

  One of the central commandments of the project from the

  beginning had been to avoid changes to the contracted require-

  ments because changes cost time and money. In addition, many

  believe that submariners were kept away from the project to avoid

  ‘spec creep’, although the truth is that the submarine squadron

  was too short of sailors and too preoccupied with the Oberons

  to spare experienced operators for the new submarine project.

  Consequently, the project was run by engineers, not submariners.

  However, once Collins was handed over to its crew, the project

  was suddenly open to scrutiny from the submariners – and they

  were not entirely happy with what they found. The submariners

  judged the submarines b
y what they wanted and expected, not by

  the fine print of the contract, yet it was by the contract that ASC

  and the project insisted that the submarines be judged.

  Over the next few years contract interpretation and reinter-

  pretation became a major preoccupation. The contract prepared

  under pressure in early 1987 was subjected to minute scrutiny,

  and every weakness was glaringly exposed.

  Throughout 1993 ASC’s executives and shareholders were

  deeply divided over two major issues that had enormous ramifica-

  tions for the future of the whole project: what action should ASC

  as prime contractor take against Rockwell for failure to deliver

  the combat system, and what strategies could be used to sell

  Australian-made submarines overseas? The company remained

  divided on both issues and these divisions ensured that no effec-

  tive action took place on either.

  Wariness of Rockwell and the dangers of responsibility for the

  combat system was always a major concern of the ASC board,

  and this concern increased as the reports on the progress of the

  combat system became increasingly dismal. Tomy Hjorth recalls

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  that after he became chairman of ASC in 1990, ‘the Rockwell issue

  was discussed at every board meeting where the main concern was

  to stay away from Rockwell’. The project office did not discourage

  this approach, as it retained faith in Rockwell’s ability to deliver

  and did not want ASC interfering.

  In the early years of the project AIDC could be relied on to

  vote against any strong action against Rockwell, but this attitude

  had changed by 1992. Partly this was because its stake in ASC had

  greatly increased following the departure of CBI and Wormald,

  but another factor was that the large profits generated by ASC

  had excited AIDC about the possibilities of defence work and it

  wanted to become more actively involved in the area.

  Peter Horobin was working as a consultant for AIDC in 1992

  when the board asked him to explain the problems of the combat

  system in terms that merchant bankers could understand. They

  could see that Rockwell might fail to deliver the combat system

  and became increasingly concerned about the consequences for

  ASC if this happened.

  A critical date was fast approaching. ASC had full warranties

  and bank guarantees from Rockwell worth hundreds of millions of

  dollars that it would deliver the combat system before September

  1993. Under the contract a default notice would have to be issued

  to Rockwell by 9 September in order for ASC to be able to enforce

  its warranties. ASC was bitterly divided over whether or not to

  push for default. Ironically, two of the strongest voices for default-

  ing Rockwell were those of Peter Horobin and P är Bunke, who on

  most other issues differed strongly. Horobin believed that ‘the only

  way to control Rockwell was by using a dirty great sledgeham-

  mer’ and default was the most readily available sledgehammer. For

  Bunke, as ASC’s commercial manager, default was the only option

  that made commercial sense, and he was supported by ASC legal

  counsel Chris Gerrard, who wrote many memos pointing out the

  legal dangers ASC faced if it did not default Rockwell.

  For the first half of 1993 Don Williams and most of ASC’s man-

  agement opposed using the sledgehammer of default, preferring

  to rely on the reassurances of Rockwell and the project office that

  everything would work out in the end. However, as the deadline

  approached the ASC board listened to the fears of its two major

  shareholders and voted for default.6 As chairman, Tomy Hjorth

  had the task of telling Tony Ayers, Secretary of the Department

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  of Defence. The meeting has become the stuff of legend. Hjorth,

  a cultivated and sensitive Swedish gentleman, was confronted by

  an irate, blunt-talking Australian bureaucrat, who abused him for

  35 minutes and threw him out.

  Ayers told Hjorth that ASC should have come to him before

  defaulting Rockwell, but it is hard to believe that ASC’s decision

  really came as a surprise as it had been openly debated for months.

  Essentially, the Defence Department could not handle the political

  consequences of defaulting Rockwell. It would mean admitting

  that one of the major sub-contracts for the submarine had failed,

  with no readily available quick fix, and it would mean dealing with

  a large and angry American defence contractor, with the massive

  financial and political muscle of the American military-industrial

  complex behind it. Far easier for Ayers and his department to deal

  with a politically impotent company from neutral Sweden.

  On 1 September 1993 Geoff Rose wrote to ASC instructing it

  to accept incremental delivery of the combat system. There was

  to be no more talk of default.7

  The consequences flowing from these events were many. They

  began a soap opera, continuing for the rest of the decade, of

  numerous ‘drops’ of the combat system, with names like ‘release

  1.5.5, drop 3’, each of which tried to offer slightly increased per-

  formance on the previous drop. They meant that ASC lost its

  right to default Rockwell and therefore the only power it had

  over its recalcitrant sub-contractor. The corollary of this was that

  ASC also abdicated from any responsibility for Rockwell’s per-

  formance. From this time on the combat system was a growing

  nightmare for the navy and the Defence Department, but for ASC

  it could be used to take the spotlight of criticism away from areas

  of the project where its responsibility was not in question.

  From the time that the decision was made to build submarines

  in Australia, there were hopes – even expectations – that some

  could be sold overseas. Initially Canada and New Zealand were

  seen as the most likely markets as both showed an early inter-

  est in the submarines. Like Australia, Canada had a squadron of

  Oberons and was interested in replacing them with new, long-

  range, conventional submarines. Soon after the new submarine

  project office opened, three Canadian officers came to work with

  the Australian team in drawing up the requirements and looking

  at the options for the new submarines.

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  New Zealand has never had submarines, but in the early 1980s

  the National Party government’s concern at the cost of new sur-

  face ships led it to investigate buying four submarines as a more

  cost-effective deterrent. As New Zealand had no infrastructure

  for supporting submarines, it made sense to work closely with

  Australia and an NZ officer, Andy Millar, was sent to Australia

  in October 1982 to join Graham White’s project team.

  However, the elections in July 1984 led to a change of gov-

  ernment and within 24 hours of becoming prime minister, David

  Lange announced that New Zealand would not be getting sub-

>   marines. Andy Millar heard the news on the radio that New

  Zealand had withdrawn from the submarine project and that the

  officer on the project team had been sent home – and soon he was.

  Millar shortly afterwards accepted an invitation from Admiral Bill

  Rourke to return to the Australian submarine project, but New

  Zealand’s interest was at an end.

  The Canadians remained with the Australian project until

  1985 but then went home and nothing more was heard from

  them for several years. In 1987 a defence review recommended

  that Canada should acquire 12 nuclear submarines, and it was not

  until this fantasy was exploded that the Canadian navy returned

  to the market for conventional submarines.

  An important part of the Hawke Labor government’s overhaul

  of defence industries in the 1980s was to build up defence exports,

  and the successful sale of submarines would be clear proof of the

  success of this policy.8 In October 1989 Kim Beazley optimistically

  said that:

  Already several countries are showing keen interest in the

  Type 471. We hope that the Canadians will find that the

  Type 471 will meet their requirements. There may also be

  good prospects for exporting our submarine technology and

  expertise to navies in our own region.9

  Neal Blewett, a senior cabinet minister in the Labor government,

  recorded the story of a dinner with the Canadian assistant Defence

  Minister, Mary Collins, in July 1992:

  We are in pursuit of a Canadian purchase of the Collins-type

  submarines being built at Port Adelaide. Needless to say there

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  was much punning on the Collins name in the hope that

  Minister Collins might purchase the Collins submarine.10

  The problem with selling submarines was that there were

  only a handful of potential buyers and the competition from

  established submarine builders was fierce. Even at the most opti-

  mistic, in the late 1980s the only politically acceptable countries

  considering buying conventional submarines were South Korea,

  Pakistan, Canada, Malaysia, Singapore and Indonesia.11 Taiwan

  was potentially the most enthusiastic customer, but the conse-

  quences for Australia’s relations with China would have been

  disastrous.

  Even more limiting than the small number of potential cus-