Australia and BAE Systems have reallocated some hull construction work for the government's $8.55 billion destroyer project from BAE shipyards to reduce production delays.

The move is designed cut down on a potential two-year delay to the first of the three Air Warfare Destroyers being built by the AWD Alliance, which consists of three partners: ASC, formerly called the Australian Submarine Corp.; the government's Defense Materiel Organization; and Raytheon.

The first of the three Hobart-class vessels, the 7,000-ton HMAS Hobart, is due for delivery in December 2014. The other two ships -- the Brisbane and Sydney -- are to be in service by 2017.

The Hobart class is a derivation of the Spanish firm Navantia's F105 design. Navantia was awarded the design work in June 2007.

Construction of the ships involves 90 separate steel hull blocks being built at three shipyards -- ASC's Adelaide shipyard, Forgacs' shipyard in Newcastle and BAE Systems Melbourne shipyard.

But BAE realized as early as last year it was coming under increasing production schedule pressures because of other work at its Melbourne shipyard. BAE Systems also is building 14 steel hull blocks for the superstructure of two new 27,066-ton Landing Helicopter Dock ships due for delivery starting at the same time as the first of the destroyers.

BAE notified the alliance that its AWD work was slipping behind schedule as a result.

"To assist the AWD project schedule, earlier this year the AWD Alliance reallocated construction of nine steel blocks from BAE Systems in Melbourne to the Forgacs shipyard in Newcastle," Minister for Defense Stephen Smith and the Minister for Defense Materiel Jason Clare said in a statement.

The statement said, "The Melbourne BAE Systems shipyard remains stretched, working on two major projects at the same time -- steel blocks for the Air Warfare Destroyers and the superstructure and integration of the Landing Helicopter Dock Ships."

Earlier this month BAE Systems presented the AWD Alliance with a plan to adjust its AWD workload.

"The advice of the AWD Alliance is that if no action is taken to relieve the pressure on the Melbourne BAE Systems shipyard the first ship would be two years late, approximately 25 percent over schedule," the statement said.

Up to 13 of BAE's steel blocks for the AWD project will be reallocated to ASC's Adelaide shipyard and Forgacs' shipyard in Newcastle. Also, up to five steel blocks will be reallocated to Navantia in Ferrol, Spain.

However, the reallocation involves blocks for the first two AWD ships only "and are subject in the usual way to satisfactory commercial arrangements with the shipyards," the statement said.

"BAE will complete the structural steel and initial outfitting work on the seven steel blocks it is currently working on, as well as all its work on the 14 blocks for the superstructure of the Landing Helicopter Dock Ships and the integration work."

A decision on the reallocation of blocks, if any, on the third AWD will be made later in the project, the Defense statement said.

Even with the reallocation of blocks away from BAE, there remains a potential delivery delay to the first AWD ship of one year.

In May 2010, the Defense Department chose Thales Australia as the preferred supplier for $7.5 million worth of satellite communications equipment for the three AWD ships. Thales will design and make the equipment at its Garden Island site in Sydney.

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