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Cost of Future Submarine Project in the spotlight

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As speculation mounts on the cost of both the acquisition and sustainment of the Future Submarine project, with estimates ranging from $100 billion to $200 billion, Defence has been warned to better consider the interests of the taxpayer.

During the most recent round of Senate estimates, Rear Admiral Greg Sammut, Head Future Submarine Program, confirmed the $50 billion price tag in the 2016 Integrated Investment Program (IIP) was only in relation to the acquisition of the submarines. He then offered up $50 billion as the current estimate for the sustainment of the submarines into the 2080s. 

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While industry experts debate the accuracy of the IIP price tag and the current $50 billion sustaiment estimate, with many cautioning that sustainment costs are typically two to three times the price of the acquistion, former submariner senator Rex Patrick has taken shots at Defence for the "arrogant" attitude towards the taxpayer.

"The Rear Admiral’s remark almost had me falling off my Senate seat. 'I’m not aware of any contract, senator, that is negotiated with the consent of the Senate', he said. I had been asking questions about the Future Submarine Project’s partnering negotiations. Some of my questions raised some awkward issues," Senator Patrick said.

"Why, when Defence has no idea of what the sub it is building looks like or what it costs, would they seek to commit early to a contract that gifts the build to its French designer? And what was Defence doing to ensure it could terminate the contract without significant financial penalty if things weren’t panning out as planned?

"These were reasonable questions centred about protecting taxpayers’ interests. After all, whatever gets committed to, it’s you, the Australian taxpayer who will have to fund it. Despite the fact that you get to pay the bills, the admirals and bureaucrats in Canberra seem to think you have no right to check what you’re being signed up for before they sign you up for it.

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"I think that’s both arrogant and disrespectful, and I won’t have a bar of it."

The mammoth submarine project was always going to attract intense scrutiny from experts and novices alike, with costs and the contribution of Australian industry to the project at the centre of most of the debate.

Naval Group Australia special adviser Brent Clark once again had to clarify former CEO Sean Costello's comments in relation to the 90 per cent industry figure promised to Australian industry during the Competitive Evaluation Process to secure the project over the German and Japanese bidders.

Clark, as previously told to Defence Connect, said highly publicised 90 per cent figure relates specifically to the production aspect of the submarine, rather than the entire acquisition.

Elsewhere, Defence has been under fire for what has been dubbed reckless spending on other aspects of the project.

In 2017, the submarine project paid one person $75,000 for one month’s consultancy work and then paid another consultant $4,500 per day for an entire year. There is also an investigation on-foot into misappropriations of public funds by a former project team member.

On top of that there is the bikes and fridge debacle.

Defence bought 16 bikes here in Australia, dismantled them and then air freighted them to France where a French bicycle mechanic was then paid to assemble the bikes. It also bought three special lockable compartment fridges for $13,770 and is in the process of taking the locks off.

Senator Patrick said such spending this early on in a multibillion-dollar project is concerning.

"The submarine project is starting to make me very nervous. That’s not to say I don’t fully support the Navy getting new submarines. I’m a former submariner and understand better than most of their importance to our nation’s defence," he told Defence Connect

"These [bicycle and fridges] sums are tiny compared to the overall size of the project, but they show that Defence bureaucrats are pretty sloppy about how they spend your money."

Cost of Future Submarine Project in the spotlight
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