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Major Projects Report: Overview and Assessment November 2010

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Part 3 (continued): Project Data Sheet: ANZAC Frigate Platform Systems Upgrade (PSU)

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Part 2: ANZAC Frigate Platform Systems Upgrade (PSU)

Project Description

The Platform Systems Upgrade (PSU) will address equipment obsolescence, performance degradation, operational limitations, and compliance issues with the platform systems of the ANZAC-class Frigates. These platform systems are distinct from combat capabilities and enable the frigates to move, float, generate power, and recover from damage.

Policy Value

The PSU will maintain the operational effectiveness and efficiency of the ANZAC frigates, HMNZ Ships Te Kaha and Te Mana over their remaining lives. It will thereby sustain and enhance the Navel Combat Force's contribution toward Government options for:

Government Approval Milestones

Project Initiation:

Occurs once a capability requirement has been identified by Defence and a broad assessment of the options for meeting the capability requirement has been authorised by the Chief Executives and noted by the Minister of Defence.

Approval to Initiate:

Attained when Cabinet agrees to the project's inclusion on the capital acquisition plan and authorise Defence to engage with industry to refine its initial assessment with more accurate information.

Approval to Commence:

Attained when Cabinet agrees to the refined capability requirement and authorises the Ministry of Defence to commence a formal tender and tender evaluation process.

Approval to Negotiate:

Attained when Cabinet agrees to the preferred tender, specifies funding limits, and authorises the Ministry of Defence to enter into contract negotiations.

Approval to Commit:

Attained when Cabinet agrees to the final contract and authorises the Ministry of Defence to sign the contract and commit funding.

Date Approved By Approval
11 September 2006 Cabinet
CAB Min (06) 34/2
Approval to Initiate. Cabinet agreed to include the ANZAC PSU as a new project in the revised, 2006 Defence Long Term Development Plan (LTDP) and authorised Defence to commence definition and options analysis.
19 November 2007 Cabinet
CAB Min (07) 42/3
Approval to Commence.39 The Ministry of Defence was authorised to release the tender documentation for the PSU. Defence was also authorised to seek approval from Joint Ministers (Minister of Finance and Minister of Defence) to enter into a contract not to exceed NZ$57.6 million once the tender evaluation process had been completed.
19 May 2008 Joint Ministers Approval of Revised Acquisition Strategy. Joint Ministers approved a revised acquisition strategy to break the project down into four elements (See section 2.1) and authorised the Ministry of Defence to procure long lead items and commit initial funding for project start up costs.
23 October 2008 Joint Ministers Approval to Commit. Joint Ministers approved funds for the power upgrade and stability enhancement and compartment changes elements of the project.

Section 1: Capability Definition Phase

During the capability definition phase, capability and operational requirements are assessed and refined. Stakeholder needs are considered. Scenarios may be used to identify requirements. Hypothetical options which include a rough order of costs are used to analyse affordability and evaluate requirements.

1.1 Summary of Capability Definition Phase

Capability Requirement: a description of the ability needed to achieve the policy objective.

Operational Requirement: a description of a component of what is required to complete a task.

How Defence identified and assessed capability and operational requirements

The PSU Project was initiated following a reprioritisation of Defence's Long Term Development Plan in September 2005, in which PSU was identified as a priority. In May 2006, the NZDF's Assistant Chief of Development assembled a joint MoD and NZDF team to conduct planning for the Project. The issue that the Project sought to address was the obsolescence and wearing out of the Platform Systems on the ANZAC class frigates. The Platform Systems that the upgrade would upgrade included the propulsion systems, electrical power generation and distribution, auxiliaries, damage control and platform management. In August 2006 a project charter and management plan were developed, and in November 2006 Cabinet agreed to include the project in the Defence Long Term Development Plan.

Following this approval, the project team carried out an analysis to identify the technical requirements for PSU. Operational deficiencies, maintenance requirements, and manning constraints drove the initial requirements. These requirements were subsequently analysed against policy objectives, the identified risks, and the potential risk mitigation measures. The findings of this process were presented to Defence's Integrated Capability Management Committee in the form of an internal initial gate document in May 2007.

Following the initial work, an analysis of options for the upgrade was undertaken, the findings of which were worked into a Comprehensive Capability Investment Proposal in October 2007. The Comprehensive Capability Investment Proposal formed the basis for a Cabinet paper that then sought Government approval to proceed. Cabinet approved this paper, and the proposed upgrades for the ANZAC class Frigates in November 2007.

The upgrade was planned to coincide with a major scheduled overhaul of the frigates' diesel engines, which is a parallel project to be funded using NZDF operating capital and to occur in conjunction with the PSU. The engine upgrade will integrate new engines because this was judged to be less expensive than refurbishing the old engines.

How Defence analysed the options

The Project Team carried out analysis of various options for the project throughout 2007. The principal parameter on which these options were based was cost. These cost-based options were then assessed according to criteria that covered key areas of risk and capability associated with the upgrade project. The criteria included:

The Project Team presented the findings of the options analysis to the Defence Executive Capability Board in July 2007. The Executive Capability Board accepted the proposed options and recommended they be further developed in the Comprehensive Capability Investment Proposal that was produced in 2007. Three options were examined in detail in the Comprehensive Capability Investment Proposal, and then presented in the November 2007 Cabinet paper seeking approval to proceed. These options are detailed in the table in section 1.2.

How Defence considered interoperability

Interoperability has been a key consideration for the PSU project because the ANZAC frigates are part of a joint capability programme between New Zealand and Australia. As a result, the frigates comprise New Zealand's main contribution toward naval combat force ANZAC operations and exercises.

Under the original ANZAC acquisition programme, New Zealand and Australia laid the foundations for joint management and support of the ships throughout their lives. This was formalised through the signing, in 1991, of an Implementing Arrangement for the Management of Assets and the In Service Support of the ANZAC class Frigates and shore facilities.

These arrangements, coordinated through the Australian Defence Material Organisation of the Australian Defence Force and the RNZN, provide insurance for the fleet, as well as a pool of rotables and spares for maintaining the ships.

How Defence considered 'through-life' costs and issues

The RNZN ascertained estimated 'through life' costs from a range of sources (but not from industry as consultation with industry prior to 'main gate' was not permitted). From this broad base of information a range of costs was assembled that covered the best and worse case scenarios for the upgrade. Within these costs, the most significant through-life components per ship were depreciation, fuel and personnel costs.

From this information, the net present values were calculated for the worst case scenario. This information was compared through the use of a cost benefit analysis against each of the options to be included in the Comprehensive Capability Investment Proposal. It was estimated that option three would realise an operational expenditure savings of NZ$27.0 million.

1.2 Requirements Analysis in the Capability Definition Phase

Options analysis in the capability definition phase is used as a tool to compare, assess and evaluate capability and operational requirements.

Whereas options analysis in the acquisition stage identifies the best procurement solution to deliver the capabilities required.

Table One: Options for Upgrading the Platform Systems on the ANZAC Frigates
Options Considered Capability option Description
Option 1 Undertake the minimum amount of work required to maintain the current availability of the ANZAC frigates.

This option would include:

  • Maintenance of the ships' 3600t displacement;
  • Maximum power output from the Propulsion Diesel Engines limited to 3.2MW;
  • Maintaining of the original Heating, Ventilation, Air Conditioning system, but replacement of the type of gas (R22) used in this system;
  • Control and monitoring system replaced by integrated Integrated Platform Management System with simulator function.
Option 2 Undertake the level of work required to maintain availability of the ANZAC frigates and improve their ability to deploy, in support of government policy, in all operating environments.

This option would include:

  • An increase of the ships' displacement to 3700t;
  • Maximum power output from the Propulsion Diesel Engines increased to 3.6MW;
  • Upgrade of the Heating, Ventilation, Air Conditioning system, and replacement of the type of gas (R22) used in this system;
  • Control and monitoring system replaced by integrated Integrated Platform Management System with simulator function.
Option 3 - the recommended option Undertake work to provide the ANZAC frigates with the equivalent capability as Option 2, but incorporating improved overall operational efficiency and cost-effectiveness.

This option would include:

  • An increase of the ships' displacement to 3700t;
  • Maximum power output from the Propulsion Diesel Engines increased to 4.4MW (with new TB93 engines);
  • Upgrade of the Heating, Ventilation, Air Conditioning system, and replacement of the type of gas (R22) used in this system;
  • Enhanced Integrated Platform Management System with integrated bridge system, onboard operational trainer, remote monitoring capability, and battle damage control system.
ASSESSMENT The third option was considered affordable at the time. It addressed equipment obsolescence, environmental compliance issues, overcame all identified operational constraints and provided a future growth margin. It also provided the ANZAC frigates with the ability to fill their operational profile efficiently and within the manpower constraints.

1.3 Description of the Capability and Operational Requirements

Capability Requirement Operational Requirements - Description and Explanation
Stability of frigates after incurring damage and their reserve buoyancy
  • A minimum weight growth margin of 100 tonne.
  • Conformance to the requirements of DEF AUST 500, Australian Defence Force Maritime Materiel Rule Set, Vol. 3, Hull System Requirements, Part 2 Stability of Surface Ships and Boats.
ANZAC Operational Profile - the propulsion configuration system
  • Propulsion systems where the diesel engines shall, in combination, provide sufficient power to drive the ship not less than 20 knots under the specified design environmental conditions at a maximum displacement of 3700 tonnes.
High Temperature Operating
  • Adopt the ISO 7547-2002 standard for heating, ventilation and air conditioning.
  • An environmental control system which is capable of controlling the ship's internal air temperatures.
  • A chilled water cooling capacity of not less than 986 kW.
Control and Monitoring System that delivers automated functions across all platform systems
  • Integrated platform management systems.
  • Simplified propulsion control.
  • Gas turbine engine control module.
  • Integrated bridge system.
  • Onboard operational trainer.
  • Enhanced battle damage control system.
  • Remote monitoring capability.

1.4 Schedule of Capability Definition Phase

Dates Duration Explanation
September 2005 - October 2007 23 months

During this period Defence analysed the requirements, identified options and received approval to upgrade the platform systems on the ANZAC frigates.

1.5 Expenditure of Capability Definition Phase

 
Expenditure (NZ$)
Definition Phase 2003/04 24,155.41*
2004/05 49,145.86*
2005/06 171,336.52*
2006/07 136,855.58*
2007/08 650,652.71+
2008/09 (7,725.83)+
Explanation

In the definition phase, the above costs are classified as pre-acquisition costs and have been met from the NZDF's operating budget.

* During the period FY03/04 to FY06/07, these figures included costs from the ANZAC PSU and the ANZAC Self Defence Upgrade.

+ During the period FY07/08 to FY08/09 these figures were for PSU costs only.

1.6 History of Cost Estimates in the Capability Definition Phase

Date 2004 (NZ$ million) 2006 (NZ$ million)
Costs 50-60 49.5 - 55.7
Explanation of variance N/A

1.7 Estimates of Proposed Schedule in the Capability Definition Phase

Original Estimate Current Estimate Actual
HMNZS Te Kaha HMNZS Te Kaha HMNZS Te Kaha
Start of Upgrade (part one) Jan 2009 Part One Implementation April - December 2009 Part One Implementation April 2009 - February 2010
Start of Upgrade (part two) Aug 2009 Part Two Implementation early 2012 Part Two Implementation N/A
Upgrade complete Not provided Upgrade complete Not provided Upgrade complete N/A
HMNZS Te Mana HMNZS Te Mana HMNZS Te Mana
Start of Upgrade (part one) Mid 2009 Part One Implementation March - October 2010 Part One Implementation April - November 2010
Start of Upgrade (part two) Mid 2010 Part Two Implementation Mid 2012 Part Two Implementation N/A
Upgrade complete Not provided Upgrade complete Not provided Upgrade complete N/A
Explanation In May 2008 Defence sought Joint Ministers (Defence and Finance) authorisation to adopt a revised acquisition strategy to allow the propulsion systems component of the PSU to be undertaken in conjunction with the engine replacements planned for during the frigates' extended maintenance periods in 2009 and 2010. However, the tight timeframe prevented the other elements of the PSU project from being ready at that time and were, therefore, rescheduled for implementation during subsequent maintenance periods.

Section 2: Acquisition Phase

The acquisition phase procures the capability solution. Deeper analysis of requirements and options may be required once defence industry is engaged. Included in this stage are processes for tendering, contract negotiation and acceptance of the deliverables.

2.1 Summary of acquisition phase

Description of acquisition work

In November 2007 Cabinet approved Defence's Main Gate investment case for the project and authorised the commencement of the acquisition phase (Approval to Proceed). The budget was not to exceed NZ$57.6 million, and Cabinet authorised Joint Ministers (Defence and Finance) to approve final costs. The Secretary of Defence was delegated authority to enter into contractual arrangements for the project.

The preferred acquisition strategy was to appoint Thyssen Krupp Marine Systems Australia (TKMSA) to be the project design authority, and to tender a prime contract on the international market. The November 2007 Cabinet paper also noted that Defence had a strong preference for the work to be undertaken at Devonport Naval Base.

Revised Acquisition strategy

In May 2008 Defence sought Joint Ministers (Defence and Finance) authorisation to adopt a revised acquisition strategy. The propulsion systems component of the PSU had been envisaged from the start of the project as taking place in conjunction with the replacement of the ANZAC frigates' engines in order to avoid duplication of work and significant extra cost. It became apparent after the Main Gate approval, however, that the engine replacements had to be done within a tight timeframe during the frigates' extended maintenance periods in 2009 and 2010. It would not have been feasible to ready the entire PSU work package under a prime contract in time for these maintenance periods.

Defence proposed, consequently, that four separate contracts be tendered, covering:

The power upgrade contract would be initiated in time for work to be carried out in conjunction with the engine replacement.

Joint Ministers authorised the revised acquisition strategy, as well as the commitment of NZ$4.5 million for the purchase of long lead items, and commitment of $4.75 million as project start up costs. The Ministers noted that the heating, ventilation and air condition systems and the integrated platform management system replacement would go through an international tender process.

Phase One

Following approval of the revised strategy, work proceeded on a first phase, which took in the power upgrade, as well as the stability enhancement and compartment changes. The project team appointed TKMSA as the design authority and awarded MTU Detroit Diesel Australia Pty Ltd (and partners, VT Fitzroy and Australian Marine Technologies) a contract to conduct a Preliminary Design Study on the power upgrade element in order to firm up costs and clarify the design.

On 23 October 2008 Joint Ministers delegated authority to the Secretary of Defence to enter into contractual arrangements for the power upgrade. The Phase 1 budget was finalised through two separate approvals. The first approval covered the long lead items and project start up costs totalling NZ$9.25 million. The second approval covered NZ$7.5 million to achieve the power upgrade element and NZ$7.5 million to achieve the stability enhancement and compartment changes.

HMNZS Te Kaha completed its power upgrade and stability enhancement in February 2010 during its extended maintenance period. HMNZS Te Mana will undergo these upgrades during its maintenance period in late 2010.

Phase Two

The tender processes for the Heating, Ventilation, Air Conditioning upgrade and the Integrated Platform Management System are currently underway. The evaluation is expected to be completed in the final quarter of 2010, and the systems implemented in 2012.

Contractor Contract
ThyssenKrupp Marine Systems Australia Design Authority Services
Australian Marine Technologies Stability Enhancement and Compartment Changes

MTU Detroit Diesel Australia Pty Ltd

Preliminary Design Study - power upgrade

Long Lead Items - power upgrade

Power Upgrade system design solution

2.2 Project Budget

Budget variation
  Date Approved Total (NZ$million)
Original budget at Approval to Commit - Total (Phase 1 & 2) 19 November 2007 57.6040
Approved budget - Phase 1 (see Note 1)

29 May 2008

31 October 2008

9.25

15.00

Budget - Phase 2 (see Note 2) To be confirmed To be confirmed
Total - Phase 1 24.25
Remaining budget for Phase 2 33.35
Note 1

The Phase 1 budget was finalised through two separate approvals.

  • The first approval covered Long Lead Items (NZ$4.5 million), Design Authority (NZ$4.0 million), Project management (NZ$0.5 million), Preliminary Design Study (NZ$0.25 million).
  • The second approval covered NZ$7.5 million to achieve the power upgrade element and NZ$7.5 million to achieve the stability enhancement and compartment changes.
  • The second approval also accepted that the original estimate has been exceeded by NZ$3.6 million and this will impact the total project contingency.
Note 2
  • Phase two budget will cover the heating, ventilation and air conditioning upgrade and the integrated platform management systems upgrade. Cabinet approval of the Phase two budget will be sought in the last quarter of 2010.
  • This will include all underspends within Phase I to ensure the project is maintained within the NZ$57.6 million, however the project is unlikely to have any remaining contingency and this matter will need to be addressed as a risk to the project.
Project Contingency (as at end of financial year)
  Total (NZ$million)
Contingency built into the budget Nil
Total contingency expended Nil
Remaining balance Nil
Note: The project's allocated contingency is to be reviewed. The original assessment was based on the prime contract outlined in the 2007 Comprehensive Capability Investment Proposal. The contingency allocated in the budget for phase two may need to be updated due to the project's change in strategy and the additional project definition work that has been completed.
Explanation of major contingency draw downs
Draw down Total Explanation
Total N/A  

2.3 Financial Performance - Phase 1

Project expenditure to date (as at 30 June 2010)
  Total (NZ$million)
Life to date expenditure (cumulative) 19.5
Remaining balance of approved budget- Phase 1 4.8
Forecast commitments 4.6
Total forecast expenditure (as at 30 June 2010)
Forward Cover

To remove uncertainty from a future cashflow in a foreign currency, Forward Exchange Contracts are used to purchase the funds required to satisfy the forecasted project costs. A Forward Exchange Contract is a contract to buy/sell a nominated amount of currency on a given date. The rate is struck at the time of the contract and becomes the contract rate. This is the rate that will be used on the agreed future date to settle the contract and receive/pay the foreign currency regardless of what the market rate is on the day. The resulting gain or loss when the contract is compared to the market rate on the day - or at any point in the timeline - is the price of certainty of future cashflows.

  Total (NZ$million)
Approved budget Phase 1 24.3
Total forecast expenditure 24.1
Gross project variation (forecast) 0.2 (under spend)
Foreign exchange impact (0.2) (favourable)
Actual project variation (forecast) 0.0
Explanation Current forecasts result in a negligible project variation.
2.4 Schedule/Timeframe Progress
Variations in forecast acceptance date.
  Initial Estimate Current forecast/Achieved Variation in Acquisition phase (months)
Acceptance Date Phase 1 - (power upgrade, stability enhancement) Coordinated with Te Kaha and Te Mana's planned extended maintenance period Te Kaha
December 2009
8 February 2010 2
Te Mana
Late 2010
(scheduled maintenance period)
late 2010 N/A
Acceptance Date Phase 2 - (heating, ventilation, air conditioning and the integrated platform management systems) To be confirmed by Joint Ministers. Approval will be sought in late 2010 To be completed within the RNZN's maintenance periods. N/A
History of variations to schedule
Date of individual variation Variation length (months) Explanation
April 2009 2 The RNZN deferred the start of Te Kaha's maintenance period by three months to ensure that the power upgrade work could be undertaken in conjunction with the engine replacement.

Section 3: Introduction into Service Phase

The introduction into service phase develops the force elements required to generate NZDF outputs at a specific level of capability. Part of this stage is the test and evaluation process, which demonstrates the capability has met specific standards of safety and is operationally effective in accordance with the suite of operational concept documentation.

3.1 Summary of Introduction into Service phase

Description of Introduction into Service phase

The Configuration Management Plan developed by the ANZAC Ship Design Authority describes the procedures for accepting and introducing the Platform Systems Upgrade into service. Included in the plan is an Integrated Logistics Support Impact Statement, which details the methods for supporting the upgraded systems throughout their lives.

As noted in the Project Management Plan for PSU, the upgrades are to be verified through analysis, inspection, demonstration and test activities. Verification will span from the design stage until the end of contractor Cat 5 sea trials and will include:

Cat 4 and 5 trials will be conducted by the Crown with contractor assistance and RNZN crewing, and successful completion will be documented through a certificate of conformance and an acceptance certificate, respectively.

After completion of the contractor test phase, the ships will enter into naval test evaluation and acceptance under the responsibility of the RNZN. Cat 6 ship qualification trials will focus on performance and functional aspects of the implemented solutions under seagoing and operational conditions. Cat 7 (First of Class) trials will be conducted to establish and record the performance envelopes of the implemented solutions, and to establish the baseline against which future performance can be compared.

Status of Introduction into Service phase
Phase 1

Most of the Introduction into Service components for the first phase have been managed to date through the PSU Project Team, on behalf of the RNZN. The Project Team has worked to ensure that documentation required to support and manage the capability in-service has been delivered in the required RNZN format and that the necessary spares are delivered to the Naval Supply Depot for issue. In addition, the Introduction into Service Navy Orders and publications have been drafted on behalf of the RNZN. The manufacturer's equipment training has been delivered along with the necessary material and resources to enable the RNZN to develop and deliver their training in the future.

The Introduction into Service process for the first phase is ongoing. Deliverables for in-service use of ships, which include such items as reference material, spares, and training packages, were delivered for Te Kaha by December 2009, as implementation work was being completed on the ship. In February 2010 Category 5 sea acceptance trials, which were part of the acceptance from the contractor, were carried out on Te Kaha, and demonstrated the successful integration and performance of the propulsion engines. Following these, the Project Team recommended that the RNZN conduct Category 6 and 7 trials over the proceeding months. These trials are still pending.

In relation to the completed stability work, there is a need to carry out 'inclining' testing of Te Kaha, as she is yet to be inclined following extensive modification. This is an important activity that will show whether the stability characteristics of the modified vessel are consistent with the allowable tolerances that were modelled for the upgrades during the design phase.

Phase II

Yet to commence.

3.2 Schedule of Introduction into Service

The introduction into service schedule mirrors the table outlined in section 1.7 above.

3.3 Summary of Through-life Cost Estimates for ANZAC Frigates41

[View text equivalent for image 'Summary of Through Life Cost Estimates' in table format below:]

Years
Maintenance
Te Kaha

($NZ Million)
Depreciation
Te Kaha

($NZ Million)
Total
Te Kaha

($NZ Million)
Maintenance
Te Mana

($NZ Million)
Depreciation
Te Mana

($NZ Million)
Total
Te Mana
($NZ Million)
Personnel

($NZ Million)
Operating-
fuel/equip/cons
($NZ Million)
Miscellaneous

($NZ Million)
2010/11 5.93 18.29 24.22 6.34 20.91 27.26 14.60 9.34 6.16
2011/12 11.57 18.59 30.16 11.09 21.18 32.27 14.60 9.34 6.16
2012/13 9.18 19.21 28.39 7.33 21.73 29.06 14.60 9.34 6.16
2013/14 12.42 19.54 31.96 6.76 22.03 28.78 14.60 9.34 6.16
2014/15 10.28 19.9 30.18 9.15 22.34 31.49 14.60 9.34 6.16
2015/16 10.17 19.90 30.07 6.32 22.34 28.66 14.60 9.34 6.16
2016/17 7.54 19.9 27.44 7.19 22.34 29.53 14.60 9.34 6.16
2017/18 11.85 19.90 31.75 7.07 22.34 29.40 14.60 9.34 6.16
2018/19 7.69 19.90 27.59 6.92 22.34 29.26 14.60 9.34 6.16
2019/20 7.88 19.90 27.78 5.64 22.34 27.98 14.60 9.34 6.16
2020/21 11.97 19.90 31.87 8.93 22.34 31.27 14.60 9.34 6.16
2021/22 8.32 19.90 28.23 6.70 22.34 29.04 14.60 9.34 6.16
2022/23 5.70 19.90 25.60 6.45 22.34 28.79 14.60 9.34 6.16
2023/24 10.00 19.90 29.90 7.74 22.34 30.08 14.60 9.34 6.16
2024/25 5.85 19.90 25.75 6.56 22.34 28.89 14.60 9.34 6.16
2025/26 6.04 19.90 25.94 6.93 22.34 29.27 14.60 9.34 6.16
2026/27 12.13 19.90 32.03 7.74 22.34 30.08 14.60 9.34 6.16
2027/28 12.13 19.90 32.03 7.74 22.34 30.08 14.60 9.34 6.16
2028/29 12.13 47.20 59.33 7.74 22.34 30.08 14.60 9.34 6.16
2029/30 12.13 47.20 59.33 7.74 22.34 30.08 14.60 9.34 6.16
2030/31 12.13 47.20 59.33 7.74 22.34 30.08 14.60 9.34 6.16

Section 4: Operational Capability

4.1 Progress towards Delivery of Capability and Operational Requirements

Capability Requirement Operational Requirement Requirement
Likely to be met
Explanation
Damage Stability and Reserve Buoyancy
  • A minimum weight growth margin of 100 tonne
  • Conformance to the requirements of DEF AUST 500, Australian Defence Force Maritime Materiel Rule Set, Vol 3, Hull System Requirements, Part 2 Stability of Surface Ships and Boats
Likely Project elements have been implemented successfully on Te Kaha with operational testing underway. The propulsion elements have met requirements on Te Kaha. Te Mana implementation is due to take place in late 2010.
ANZAC Operational Profile - the propulsion configuration system
  • Propulsion systems where the diesel engines shall, in combination, provide sufficient power to drive the ship not less than 20 knots under the specified design environmental conditions at a maximum displacement of 3700 tonnes
Likely

High Temperature Operating

  • Adopt the ISO 7547-2002 standard for heating, ventilation and air conditioning
  • An environmental control system which is capable of controlling the ship's internal air temperatures
  • A chilled water cooling capacity of not less than 986 kw
To be confirmed

These elements of the PSU project are yet to be contracted.

The tender processes for the HVAC and the IPMS elements are currently underway. The evaluation is expected to be completed in the final quarter of 2010, and the systems' implemented in 2012.

Control and Monitoring System that delivers automated functions across all platform systems
  • Integrated platform management systems
  • Simplified propulsion control
  • Gas turbine engine control module
  • Integrated bridge system
  • Onboard operational trainer
  • Enhanced battle damage control system
  • Remote monitoring capability
To be confirmed
Percentage of requirements that will be meet To be confirmed  
Percentage of requirements that are vulnerable at present Nil  
Percentage not to be met To be confirmed  

Section 5: Major Project Risks and Issues

5.1 Risks

Key for Risks*
Colour Green = Low

Little or no impact on ability to deliver outputs, meet objectives and goals. Little or no resource allocation or management effort required.

Colour Yellow = Medium

Degrade the ability to deliver outputs, meet objectives and goals. A moderate level of resource allocation or management effort is required.

Colour Orange = High

Significantly degrade the ability to deliver outputs, meet objectives and goals. A high level of resource allocation or management effort is required.

Colour Red = Extreme

Goal achievement or output delivery unlikely. Significant resource allocation or management effort required.

Key for Likelihood
Almost certain

Very high probability of occurrence, could occur several times during the coming year.

Likely

Likely to occur about once per year.

Possible

Possible, likely to occur at least once over a ten year period.

Unlikely

Plausible, unlikely, likely to occur during the next ten to forty years.

Rare

Very low likelihood, but not impossible, very unlikely during the next forty years.

Risks identified at contract signing
  Risk Phase Rating* Consequences Likelihood Treatment Actions
1

Costs - There is the risk that the power upgrade and stability enhancement packages could exceed initial estimates, which would push the project beyond the NZ$57.6 M cap, and potentially have impacts on funding for the second phase.

Acquisition High Defence would have to seek additional funding from Cabinet to complete the project. Likely Develop acquisition strategy to ensure design packages are individually contracted and implemented within the Cabinet approved funding cap. Complete additional analysis on possible trade-offs to reduce costs.
2 Schedule - There is a risk that designs for the power upgrade and stability enhancement packages will not be far enough advanced to align with planned maintenance schedules for the two frigates. Minor RNZN configuration changes could also affect this schedule. Acquisition High Poor management of design stage could result in an adverse impact on the project's wider schedule, or on the capability requirements. Likely Work with RNZN to allocate appropriate dates for installation work, taking into account the need to minimise the time out of service for the frigates and achieving the upgrades in a timely manner.
Active Risks
  Risk Phase Rating* Consequences Likelihood Treatment Actions
1 Potential trade off for Phase II capability - Defence may not have the remaining level of funding required under the existing budget limit to complete the second phase of work to the capability level originally specified. (This has been the result of unforeseen rise in costs associated with the power upgrade, and was noted to Ministers at the time funding was committed to the first phase). Acquisition Medium Defence may have to accept either a minor reduction in capability of the IPMS and HVAC systems, or seek additional funding to cover costs over and above the original Project budget. Likely Defence has kept Ministers (Defence and Finance) informed of the cost escalation of the Phase I power upgrade, which has arisen from external factors, and the flow on of risk to Phase II capabilities and costs. Defence has also informed Ministers that a trade off will be conducted if required at the end of the Phase II tendering process, with the aim of meeting budget requirements, with possible minor reductions in capability.
2 Unexpected Costs - There could be some costs associated with the project that could not have been anticipated and were, therefore, not included in the original estimates. Acquisition Medium Extra funding may be necessary to cover the unforeseen cost increases. Unlikely Monitor all project costs to make sure that the project outcomes are not compromised. Manage contracting to ensure solutions align with estimates.

5.2 Issues

  Issues Phase Severity Impact Treatment Actions
  Nil        

  1. This Government Approval Milestone was labelled 'Approval to Proceed' in the Cabinet paper.
  2. Budget limit set but no contract had been negotiated or signed.
  3. Through life costs are calculated for the capability as a whole, in this case the ANZAC frigates.

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