ADF General discussion thread

[ADMk2]

Interesting article on Egypts purchase of the K9 howitzer. Many parallel’s with Australia’s purchase with local construction plans.

I know there are different ways of reporting purchase costs but Egypts cost is $1.7B for over 200 howitzers and scores… whatever that means of support vehicles including K10 supply vehicles. From memory Australia is getting 30+15 for around $700M. There is a stark difference in cost and number of guns.
Can anyone explain why for double the spend Egypt is getting close 7x the number of guns?

Why did Egypt choose to buy South Korea’s K9 howitzer?

Egypt expressed interest in updating its artillery systems in 2009, but efforts were postponed for nearly a decade amid the Arab Spring. Now the African nation has chosen a system by Hanwha.

www.defensenews.com

Because we have to make them substantially out of gold plating and that ain’t cheap?

Seriously, ours are heavily modified, manufacturing in Australia costs a LOT and costings are rarely ever apples to apples…

 

[oldsig127]

Because we have to make them substantially out of gold plating and that ain’t cheap?

Seriously, ours are heavily modified, manufacturing in Australia costs a LOT and costings are rarely ever apples to apples…

KNOWING what is included on either figure is by far the least understood issue here, not "gold plating" which frequently means things like changing to AU standard connectors, and a slew of similar changes rather than adding unnecessary extras (in the mind of we oldies who know what was "necessary " in 1960 or 1970)

Building here is more expensive. But supply lines are shorter and *ours*. The pandemic has surely shown the hidden cost of cheap overseas imports.

oldsig

 

[vonnoobie]

Interesting article on Egypts purchase of the K9 howitzer. Many parallel’s with Australia’s purchase with local construction plans.

I know there are different ways of reporting purchase costs but Egypts cost is $1.7B for over 200 howitzers and scores… whatever that means of support vehicles including K10 supply vehicles. From memory Australia is getting 30+15 for around $700M. There is a stark difference in cost and number of guns.
Can anyone explain why for double the spend Egypt is getting close 7x the number of guns?

Why did Egypt choose to buy South Korea’s K9 howitzer?

Egypt expressed interest in updating its artillery systems in 2009, but efforts were postponed for nearly a decade amid the Arab Spring. Now the African nation has chosen a system by Hanwha.

www.defensenews.com

Take your pick on the reason's.

Labour costs - cheaper wages in Egypt compared to Australia.
Contract details - what is or isn't included no one knows.
Economies of scale - general rule of thumb to my knowledge every doubling in manufacturing leads to a 20% drop in costs. Local industry. - Egypt has built and rebuilt quite a number of heavy vehicles over the years so they have the experience and equipment to undertake this in place already.
Local content - how much or little is local content can impact positively or negatively the cost

Anyone alone wouldn't make a massive difference, all combined well that could easily account for the lower unit costs, but if we want ours cheaper I'm sure we could ask China what deal they could do for us

 

[alexsa]

Take your pick on the reason's.

Labour costs - cheaper wages in Egypt compared to Australia.
Contract details - what is or isn't included no one knows.
Economies of scale - general rule of thumb to my knowledge every doubling in manufacturing leads to a 20% drop in costs. Local industry. - Egypt has built and rebuilt quite a number of heavy vehicles over the years so they have the experience and equipment to undertake this in place already.
Local content - how much or little is local content can impact positively or negatively the cost

Anyone alone wouldn't make a massive difference, all combined well that could easily account for the lower unit costs, but if we want ours cheaper I'm sure we could ask China what deal they could do for us

And there is costing and cost. Australia tend to cost an asset at its service life and necessary support as well as the actual bit of kit. Prime example is the AOR's ... this was a 1.5b projection but only 600m of that was the actual vessels.

 

[ngatimozart]

And there is costing and cost. Australia tend to cost an asset at its service life and necessary support as well as the actual bit of kit. Prime example is the AOR's ... this was a 1.5b projection but only 600m of that was the actual vessels.

Just to add to that, @Bob53 every country calculates its costs and does its sums differently and Egypt and Australia will most likely be good examples of that. Australia and NZ calculates their costs and do their sums differently.

 

[ddxx]

And there is costing and cost. Australia tend to cost an asset at its service life and necessary support as well as the actual bit of kit. Prime example is the AOR's ... this was a 1.5b projection but only 600m of that was the actual vessels.

You’re so right - I cringe every time a total budgeted figure is divided by units.

So-called Defence analysts do this all the time, and in turn they’re comparing apples with oranges.

 

[old faithful]

D

KNOWING what is included on either figure is by far the least understood issue here, not "gold plating" which frequently means things like changing to AU standard connectors, and a slew of similar changes rather than adding unnecessary extras (in the mind of we oldies who know what was "necessary " in 1960 or 1970)

Building here is more expensive. But supply lines are shorter and *ours*. The pandemic has surely shown the hidden cost of cheap overseas imports.

oldsig

Dont forget that our work force gets paid sick leave, superannuation, at least 4 weeks annual leave (I get 7) at least 3 months long service leave (I get 4) overtime rates after 40 rostered hours, Medicare, public holidays, PPE provided, risk assessments done, union meetings, paid meal breaks (I don't get these) etc etc add to that the profit margin on materials.....wonder why manufacturing has all but disappeared in Australia....

 

[Bob53]

All of the above acknowledged and in particular our all of life support costing included on the project costs. Ships are one thing but scratching me head at the logic of building 45 or even 90 vehicles here.

Why do we cost all of life anyway? How accurate would that be…… who can accurately predict wages and other inflationary costs over 10-20-30 years?

This one stick out like dogs nuts when the total number of vehicles are put side by side.

 

[Bob53]

But ….. if we were to assume 50% of the AU spend was sustainment. Then it’s $360m purchase price for 45 vehicles x 5 is a lot closer to the Egyptian numbers so is making more sense.

 

[ddxx]

But ….. if we were to assume 50% of the AU spend was sustainment. Then it’s $360m purchase price for 45 vehicles x 5 is a lot closer to the Egyptian numbers so is making more sense.

mate, I’m at the very least, neither confirming or denying your take, from my perspective at least, I am rather agreeing with the common issue which plagues comparisons between AU and international procurement.

Arguably, from a PR perspective Defence should release both direct and through-life costs seperate from one another.

 

[Stampede]

An article of interest in the ADBR re the upcoming 80th anniversary of the bombing of Darwin in WW11.

Australia’s Front Line! | ADBR

Lessons from the bombing of Darwin 80 years ago The attack on Pearl Harbor on 7 December 1941 has been re-lived through every medium, from the humble written word to…

adbr.com.au

A good overview of the events of the 19th of February 1942, with thought and reflection given as to the world we live in today.


Regards S

 

[ADMk2]

KNOWING what is included on either figure is by far the least understood issue here, not "gold plating" which frequently means things like changing to AU standard connectors, and a slew of similar changes rather than adding unnecessary extras (in the mind of we oldies who know what was "necessary " in 1960 or 1970)

Building here is more expensive. But supply lines are shorter and *ours*. The pandemic has surely shown the hidden cost of cheap overseas imports.

oldsig

In the case of the AS9 / AS10, it means a new armour package (passive, reactive, hybrid slat armour) added APS, a remote weapon station, a new fire control system, hooked up to a new battle management system, new radios, new ammunition type (Assessgai 155mm, plus SMART 155 and Excalibur), upgraded chassis and mobility components to handle the weight increase, added sensor systems (Iron View most likely) as well as mobile camouflage systems and finally a brand newly developed C2 vehicle based on the AS10 hull…

So yeah, pretty gold plated in actuality…

Hanwha Defense to help transform Australian artillery - Army Technology

The South Korean defence company will provide custom-made AS9 howitzers to the Australian Army to help transform its artillery capabilities.

www.army-technology.com

 

[Redlands18]

And there is costing and cost. Australia tend to cost an asset at its service life and necessary support as well as the actual bit of kit. Prime example is the AOR's ... this was a 1.5b projection but only 600m of that was the actual vessels.

Another one is the F-35, quoted figures for the 72 F-35s in RAAF service at the time they were ordered was $21b, dived that by 3 and then 72 you have about $96m per Aircraft, smack bang in the ball park of the average cost Australia will pay per Aircraft.

 

[StingrayOZ]

.wonder why manufacturing has all but disappeared in Australia....

Because of Automation?
Because of under investment?
Because lack of Australian companies?
Because lack of research and development?
Because of a lack of value of the manufacturing sector?
Because of globalized supply chains that internationals have lock us out of?
Because of lack of market access with a one sided FTA with the US, China, Thailand etc and lack of any trade agreement with the EU due to disagreement on agricultural export mostly over naming of agricultural products?
Because of government policy that is explicitly hostile to local manufacturing?
Because of government policy regarding prioritizing mining and keeping the dollar excessively high for an unsustainable period?

No, I don't think the lunch breaks are the key reason why Egypt (or South Korea, or Germany or the US) are able to keep a manufacturing sector, and the reason we don't have manufacturing here.

We are a service economy that doesn't make tangible items because that what is what we, as a nation deemed important over everything else. We make lots of lawyers, real estate agents, accountants and politicians. All of these are paid outrageous amounts of money, and have far more outrageous work demands. Not sure how these elements of the economy will help us in a global war, or global economic collapse, I guess we will see.

Yes, there is a huge cost to build a factory to build just 30 + 15 x SPA. It is like building a car factory, to build just 30 cars. Or a ship building yard (well actually 3 ship yards) to build just 3 destroyers and then make it sit idle for 8+ years. Presumably it will get some use performing in country maintenance, upgrades, and possibly future builds.

Also compare the build it in Australia with the MOTS M1 program. Obviously a very different program, but just an exploration, humor me. At least we are comparing two Australian land programs.

The K9 is what $788/45 = $17.5m per item project
The m1a2 is what $3.5b/120 = $29.17m per item project

Given a comparison, the Huntsman program isn't particularly poor value as it may seem on the surface. The huge cost of the huntsman program isn't centrally with local production, its that military equipment is expensive if you operate it.

Egypt also has had mix success of local construction, see their M1A1 program.

Seems like buying off the shelf from overseas, isn't in fact possibly any cheaper over the life of the program. Not only do you loose the local capability, the strategic robustness of being able to do things yourself, the local spending of local dollars for the national economy, the creation of a wider defence industry, creation of skilled civilian jobs, the ability to use military production as a form of diplomacy, with civilian industry aspects, but over the life of the program it may actually cost you less dollars and give you a better outcome with better availability.

We saw this with surface ships, submarines, tanks, planes, rifles, missiles, etc. Repeated over 100 years of Australian history.

Not every item needs to be built entirely here. But, we need to sustain and operate the item here. Consumables need to be built here, repairs made here, upgrades planned, managed and executed here, etc.

Purchase price is actually usually the smallest aspect of the cost of an item.
Manning, operating, storage, training, maintenance, upgrades etc are usually many times the initial cost of the item. Saving a few bucks on purchase price is completely false economy if it blows out your other costs for the item. If the item doesn't work, can't deploy, isn't available, then you have spent your money very poorly indeed. It is never about a drive away, single item price. Ever.

 

[John Fedup]

Because of Automation?
Because of under investment?
Because lack of Australian companies?
Because lack of research and development?
Because of a lack of value of the manufacturing sector?
Because of globalized supply chains that internationals have lock us out of?
Because of lack of market access with a one sided FTA with the US, China, Thailand etc and lack of any trade agreement with the EU due to disagreement on agricultural export mostly over naming of agricultural products?
Because of government policy that is explicitly hostile to local manufacturing?
Because of government policy regarding prioritizing mining and keeping the dollar excessively high for an unsustainable period?

No, I don't think the lunch breaks are the key reason why Egypt (or South Korea, or Germany or the US) are able to keep a manufacturing sector, and the reason we don't have manufacturing here.

We are a service economy that doesn't make tangible items because that what is what we, as a nation deemed important over everything else. We make lots of lawyers, real estate agents, accountants and politicians. All of these are paid outrageous amounts of money, and have far more outrageous work demands. Not sure how these elements of the economy will help us in a global war, or global economic collapse, I guess we will see.

Yes, there is a huge cost to build a factory to build just 30 + 15 x SPA. It is like building a car factory, to build just 30 cars. Or a ship building yard (well actually 3 ship yards) to build just 3 destroyers and then make it sit idle for 8+ years. Presumably it will get some use performing in country maintenance, upgrades, and possibly future builds.

Also compare the build it in Australia with the MOTS M1 program. Obviously a very different program, but just an exploration, humor me. At least we are comparing two Australian land programs.

The K9 is what $788/45 = $17.5m per item project
The m1a2 is what $3.5b/120 = $29.17m per item project

Given a comparison, the Huntsman program isn't particularly poor value as it may seem on the surface. The huge cost of the huntsman program isn't centrally with local production, its that military equipment is expensive if you operate it.

Egypt also has had mix success of local construction, see their M1A1 program.

Seems like buying off the shelf from overseas, isn't in fact possibly any cheaper over the life of the program. Not only do you loose the local capability, the strategic robustness of being able to do things yourself, the local spending of local dollars for the national economy, the creation of a wider defence industry, creation of skilled civilian jobs, the ability to use military production as a form of diplomacy, with civilian industry aspects, but over the life of the program it may actually cost you less dollars and give you a better outcome with better availability.

We saw this with surface ships, submarines, tanks, planes, rifles, missiles, etc. Repeated over 100 years of Australian history.

Not every item needs to be built entirely here. But, we need to sustain and operate the item here. Consumables need to be built here, repairs made here, upgrades planned, managed and executed here, etc.

Purchase price is actually usually the smallest aspect of the cost of an item.
Manning, operating, storage, training, maintenance, upgrades etc are usually many times the initial cost of the item. Saving a few bucks on purchase price is completely false economy if it blows out your other costs for the item. If the item doesn't work, can't deploy, isn't available, then you have spent your money very poorly indeed. It is never about a drive away, single item price. Ever.

Ditto Canadian economy. The recent trucker blockade also seriously screwed with JIT inventory re auto plants, a perfect excuse for the industry to abandon Canada as most production is for the US market. Another junior C-F, no balls to bash heads and get the border in order.

 

[Shanesworld]

Ditto Canadian economy. The recent trucker blockade also seriously screwed with JIT inventory re auto plants, a perfect excuse for the industry to abandon Canada as most production is for the US market. Another junior C-F, no balls to bash heads and get the border in order.

One of my first jobs as an engineer was to setup a wiring department for a company making heating elements in nz. We were sending a huge amount of new business to Australia at the time. This I kept being told was due to massive overreach of health and safety regulations and liabilities to employers. Australian element manufacturers were effectively destroyed by legislation. Couple years later nz adopted the same legislation and I had to modify our guarding to suit and frankly it was crazy and our productivity suffered and as they slowly introduced other massively pointless elements of the same legislation my time became more focused on reading arcane, verbose and pointless legislation and satisfying 2 or 3 safety audits per year rather than actually checking machinery, tooling staff and product. Yet a cambodian woman and her sister down the road could ignore all that. Undercut us and do it all by hand and they could almost match our output at a fraction in price because they just focused on the job and doing it safely rather than keeping up appearances.

 

[John Fedup]

One of my first jobs as an engineer was to setup a wiring department for a company making heating elements in nz. We were sending a huge amount of new business to Australia at the time. This I kept being told was due to massive overreach of health and safety regulations and liabilities to employers. Australian element manufacturers were effectively destroyed by legislation. Couple years later nz adopted the same legislation and I had to modify our guarding to suit and frankly it was crazy and our productivity suffered and as they slowly introduced other massively pointless elements of the same legislation my time became more focused on reading arcane, verbose and pointless legislation and satisfying 2 or 3 safety audits per year rather than actually checking machinery, tooling staff and product. Yet a cambodian woman and her sister down the road could ignore all that. Undercut us and do it all by hand and they could almost match our output at a fraction in price because they just focused on the job and doing it safely rather than keeping up appearances.

I am not sure how much of hindrance safety legislation is to manufacturing here. I would imagine our legislation mirrors that of the US for the most or we couldn’t sell jack$hit to that market otherwise. One advantage we have here is lawyers can’t win massive financial legal settlements which is the case in the US.

As for the UK, I have a proBrexit supplier who constantly complained about EU regulations, safety and otherwise. Not sure if his ranting was legitimate or not.

 

[oldsig127]

In the case of the AS9 / AS10, it means a new armour package (passive, reactive, hybrid slat armour) added APS, a remote weapon station, a new fire control system, hooked up to a new battle management system, new radios, new ammunition type (Assessgai 155mm, plus SMART 155 and Excalibur), upgraded chassis and mobility components to handle the weight increase, added sensor systems (Iron View most likely) as well as mobile camouflage systems and finally a brand newly developed C2 vehicle based on the AS10 hull…

So yeah, pretty gold plated in actuality…

Hanwha Defense to help transform Australian artillery - Army Technology

The South Korean defence company will provide custom-made AS9 howitzers to the Australian Army to help transform its artillery capabilities.

www.army-technology.com

I'd imagine Army would prefer that the radios and BMS be consistent with those in other vehicles, and that they be able to use the ammunition which will give best effect for longest rather than run down old stocks. Most of the other changes will be because of the way Army plan to use them versus the way SK operate. Out of my area (which is communication install and integration, or was) but I'm willing to believe that ghere's *someone* in Canberra knows more about this than the usual press experts.

oldsig

 

[ngatimozart]

I would suggest that the current pandemic and subsequent shipping and logistics disruptions have illustrated the Achilles heel of the JITS and how it is easily disrupted by a an unforeseen event of significant magnitude. The shipping companies are laughing all the way to the bank at the moment with shipping rates going through the roof. I remember reading something recently of rates being10 times what they were in 2019. It appears that Kiwi importers are reverting to "just in case" purchasing habits since the supply chain crunch from pre-Covid "just in time", which may not be a silly idea. I think that it maybe time to completely reassess JITS and revert back to warehousing and keeping stock on hand, especially both in military and national resilience contexts.

 

[ADMk2]

I'd imagine Army would prefer that the radios and BMS be consistent with those in other vehicles, and that they be able to use the ammunition which will give best effect for longest rather than run down old stocks. Most of the other changes will be because of the way Army plan to use them versus the way SK operate. Out of my area (which is communication install and integration, or was) but I'm willing to believe that ghere's *someone* in Canberra knows more about this than the usual press experts.

oldsig

Yep, no doubt there are reasons, but in the end those “necessary” costs add up. They aren’t free and besides money the price is normally a small number of exquisite platforms.

The guns no doubt are excellent, but at the end of the day the operational effect our $785m is going to deliver, is 18x operational guns. A single regiment if grouped, or a single battery for each of our 3 combat brigades if dispersed and no attrition or maintenance rotation platforms…

Similarly, $1.5B is going to deliver a single operational battery of NASAMS II surface to air missiles, again no attrition platforms…

It seems to be a very comfortable place we’re in. How it accords with our geo-strategic environment I am not sure. How we can afford combat losses at that price, I’m also not sure…