Identified Risks (risk identified by standard project risk management processes)

Description

Remedial Action 

Change Management: Any change introduced to the existing platform design will have cost and schedule impact. The extent of which is dependent upon the timing of the change.

Pressure for change could occur for a variety of reasons including:

•  Requirements change.

•  Legislative and compliance requirements.

•  Equipment obsolescence.

Recognise that the program will have to manage change to cope with obsolescence.

Effectively engage with all stakeholders to ensure that they understand the potential implications of change to cost and schedule.

Provide robust mechanisms to control the authorisation of change.

Ensure that where change is required that it is approved and implemented in an appropriate phase of the program. Delays in approval will usually result in significant cost and schedule impact.

Integration of the Australianised Aegis Combat System.

Key Risks:

•  The current version of the Aegis  Weapons System has not been previously integrated in the platform.

•  Integration of Electronic Warfare and Communications Systems

•  Equipment selections may impact on the topside design.

•  Sonar - The software development and integration.

The risks associated with the integration of the Aegis Weapons System are being actively managed through regular reviews between the Alliance, Platform System Designer, US Navy and Lockheed Martin (the Aegis equipment supplier to the US Navy). Action is taken to ensure emerging issues are identified and addressed in a timely manner.

Electronic Warfare and Communications and Information Systems procurement strategies have been developed with a wide range of stakeholder engagement. These strategies are aimed at ensuring that the customer will be satisfied with the contracted solution and that the solution will have minimal impact on the platform design.

Sonar - Is being actively managed by the Alliance including formal reviews with close out actions and embedded staff.

Capability Acceptance: Certification requirements are unclear for some equipment and US Navy and some Original Equipment Manufacturers are not disclosing requested objective quality evidence.

The Project Certification Plan has been agreed with the RAN. The Program is working closely with the US Navy and Original Equipment Manufacturers to obtain the required objective quality evidence.

Subcontractor Performance: Subcontractor performance may result in poor quality product, delays or changed requirements.

The performance of some subcontractors has required active management and intervention.

Embedding Alliance staff in block subcontractors premises provides management oversight and the ability to address and resolve issues quickly.

Sonar - The Alliance is actively working with the Sonar OEM to manage risk associated with software development and integration.

Indexation: Applying an average, fixed Specialised Military Equipment index to the Program budget may not be sufficient to fund the actual cost increases and liabilities defined in the ABTIA and PSD contracts.

Close monitoring through annual estimates to ensure that the balance of the contingency budget remains sufficient to cover any shortfalls.

Support System: current data available to the Alliance and/or the Commonwealth may not be mature enough to achieve an optimised support system. Facilities may not be ready when required for transition into in-service support.

Mitigation strategies are in place to minimise the risk and work is in hand with the Alliance to develop strategies to progressively seek the data required to support the development of an optimised support system.

Defence Support Group has now engaged a Managing Contractor and the Facilities submission to the Public Works Committee is scheduled to be achieved in 2011.

Shipbuilding Productivity: achieving the required level of shipbuilding productivity may be compromised by skilled labour shortages, delays in deliveries of data and materials to the shipyards, and limitations on the  production engineering capacity of the shipyards.

Actions to mitigate include increased shipbuilder recruitment activities, deployment of Navantia skilled labour to all 3 build locations, roll out of Lean process improvement across the ASC facility, process improvements to minimise delays caused by problems at the work front, increased focus on improving construction design products, and prioritisation of the delivery of urgent construction products from Navantia. Benchmarking of the shipbuilder's production effort is also underway to provide further tools and techniques to improve productivity into the future.

Emergent Risks (risk not previously identified but has emerged during 2010-11)

Description

Remedial Action 

Schedule: the quality and rework issues in block construction are higher than originally envisaged. As a result of the increasing workloads the schedule is being reviewed and managed by the Alliance. On 26 May 2011 the Minister for Defence announced the reallocation of construction work for the AWD Project. The AWD Alliance advised this action will reduce the delay of the completion of Ship 1 by up to 12 months, and all three AWD's by up to 12 months.

The AWD Alliance took two key actions to address schedule slippage. There was an initial reallocation of hull blocks among Australian shipyards in December 2010, followed by a further reallocation of blocks between the Australian shipyards and Navantia in May 2011. The AWD Alliance also took action in 2010 to place more shipbuilding experts from Navantia, Bath Iron Works and Lloyds Register into the three shipyards.

PMO Budget: The out-turned budget (FY10/11) might be insufficient  to cover AWD Program costs due to change in financial management policy to allocate budgets in Out-turn Budget rather than Constant Dollar Budgets. Risk exposure will occur from a reduction in buying power as and when funds are reprogrammed (from year to year) due to schedule/payment slippages and movements resulting from estimate spend spread variations.

Manage budget allocations against activities. Monitor and manage the annual spend forecast within agreed tolerances.

The full extent of this is unknown and will become clearer in coming years.