Fleet Replacement Strategies – Searching for Best Value for Money (I)

Peter Haydon noted the “Boom and Bust” characteristic of Canadian naval shipbuilding and the consequence to Canadian ship design capability. Could another replacement strategy be better?  In an earlier post Peter noted that he had given a paper over 15 years ago to the 1993 annual meeting of Society of Naval Architects and Marine Engineers in New York about a steady state, government fleet replacement program [See also: Further Thoughts on Requirements].  A recent paper from Australia presents a compelling argument in a similar vein.

Improving The Cost-Effectiveness of Naval Shipbuilding In Australia was a submission by ASC Pty Ltd to the Senate Foreign Affairs, Defence and Trade References Committee of the Australian Parliament in March 2006.  It included an interesting attachment on shipbuilding construction strategies that discussed different fleet renewal strategies.  The data presented is based on work that ACIL Tasman conducted on the economic life of major naval surface ships for the Australian government.

ACIL Tasman investigated different models for surface fleet renewal to explore the relationship between replacement strategy and the annualized cost of capability.  The modelling maximized fleet value within a budget constraint.  While a value judgment is subjective, value must always form the basis for spending scarce government dollars on defence, otherwise why have a navy at all. The ASC report compared four fleet replacement models (with an underlying assumption of one-for-one replacement of ships and no residual value):

  • 30-year replacement with a mid-life upgrade (the current model)
  • 25-year replacement with no mid-life upgrade
  • 20-year replacement with no mid-life upgrade
  • 18-year replacement with no mid-life upgrade

The paper presents the results for the 30 and 20-year replacement options graphically.  The graphs are reproduced here and are labelled Figures 1 and 2 respectively.