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Here we go again: Naval Group Australia CEO issues scathing challenge for Aussie industry

Naval Group Australia CEO John Davis has some very strong words about the readiness and capacity of Australia’s industry to support the nations most expensive and strategically sensitive acquisition program, SEA 1000, again throwing the program into question.

Naval Group Australia CEO John Davis has some very strong words about the readiness and capacity of Australia’s industry to support the nations most expensive and strategically sensitive acquisition program, SEA 1000, again throwing the program into question.

It is starting to sound like a bad joke, but it appears that the challenges facing Australia's multibillion-dollar SEA 1000 future submarine program mount almost daily, as Navy, government and Australia's defence industry continue to prepare for the first stage of construction mid-this-decade. 

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However, despite repeated rebuffs by senior Defence uniformed personnel, bureaucrats and successive ministers of defence and defence industry, concerns released recently by the Australian National Audit Office (ANAO) in the report titled Future Submarine – Transition to design combined with political concerns all serve as powerful fuel to question the program. 

This has included a response from Future Submarine Program manager, Rear Admiral Greg Sammut, to the Senate estimates hearing that the 'out-turned' cost of Australia's future fleet of submarines was estimated to be around $80 billion – a figure frequently cited but subsequently rubbished by former defence minister Christopher Pyne and other Defence officials. 

Further compounding the costs associated with the acquisition is the continuing concerns about the capability of the proposed vessels, with many expressing, often vocally, concerns about the obsolescence of lead-acid batteries and the conventional power plant expected to power the vessels out to the 2080s. 

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However, the latest round of challenges to the multibillion-dollar program has come as a result of comments made by Naval Group Australia's CEO, John Davis, to Ben Packham of The Australian raising a number of concerns about the capacity of Australia's defence industry to meet the very specific and unique requirements of such a complex and strategically sensitive program. 

The often turbulent relationship between Naval Group, Defence and industry has been a major focal point for many seeking to amend the decision made in 2016 by then prime minister Malcolm Turnbull, who promised a fleet of "regionally superior" submarines at a time when the Indo-Pacific is expected to be home to approximately half of the world's combat submarines.

In particular, Davis raised questions about whether the boats, to be built in Adelaide, will be supported by 50 per cent Australian industry content, raising a number of concerns among Australia's burgeoning defence industry, with small-to-medium enterprises be expected to be disproportionately impacted. 

Australian specific challenges

Davis explained to Packham that the company, which is scheduled to begin construction in 2022 on the lead boat, HMAS Attack, was facing a number of "specific challenges" regarding Australian industry, with the cultural differences between Australian and French personnel a well documented flash point. 

Expanding on this, Davis added, "We didn’t know the Australian market before we joined the program. Now we have a much deeper insight, and we recognise there is a lot more work to be done than we anticipated."

Further compounding the questions mounting regarding Australian industry content, Davis stated that the company was "obliged to develop the capabilities of the local industry", seemingly circumventing direct Australian industrial input.

Both of these raise important questions: just how prepared was Naval Group, then DCNS, to engage with Australian industry and how much consultation had it done prior to being awarded the initial contract? 

"I don’t have the ability to prophesise on (content). What I will say is we have a commitment to Australian industry capability, and we will deliver on that," Davis explained to Packham. 

In response, Marcus Hellyer of the Australian Strategic Policy Institute moved to rebuff the comments made by Davis, particularly regarding concerns about the capacity and quality of Australian industry in supporting complex submarine capabilities. 

"It’s interesting they have that view because ASC has been able to achieve a very high level of ­Australian industry content in the sustainment of Collins (the current submarine class), so there is certainly Australian industry capability in the submarine ­sector. For Australian industry, if they don’t reach 50 per cent, it will be very disappointing," Hellyer said to Packham. 

Potential off-ramp and a contract cancellation? 

Continued and heated exchanges regarding the strategic partnering agreement as the program enters the design phase has seen growing calls for the program to be scrapped in order to save money, while shifting to a modified, off-the-shelf solution to meet Australia's submarine capability needs. 

Indeed, in the lead up to the 2019 election, it was revealed that cancelling the Future Submarine Program would cost the Australian taxpayer $404 million to cancel, as opposed to the estimated multibillion-dollar expenditure required to build, field and sustain the most complex weapons system ever built in Australia. 

This is something that Davis seemingly eluded to in his conversation with Packham, telling him: "If Defence is doing its job and the program is in an intolerable state, it may choose to select an exit ramp."

This was met with contempt by South Australian senator Rex Patrick, who has long raised concerns about the nation's submarine capability and the selection of the French design in particular.

"It is unconscionable for Naval Group to now walk away from the position that won them the bid," Senator Patrick explained. 

This comes following concerns raised by the ANAO report, stating that the design process was nine months behind schedule and that Defence had approved the fabrication of key hull components in France. 

Senator Patrick explained to Packham, "The ­report showed the government had lost control both of the ­program’s cost and the schedule. It’s now apparent they have lost control over the level of Australian industry involvement in this critical program."

Again, this leaves more questions then answers, namely, did Naval Group actually intend to honour its contractual agreements to Australian industry content, particularly when comparable global defence primes like Lockheed Martin, Boeing and BAE Systems seemingly can't get enough of AIC? 

Questions to be asked

As an island nation, Australia is defined by its relationship and access to the ocean, with strategic sea-lines-of-communication supporting over 90 per cent of global trade, a result of the cost effective and reliable nature of sea transport.

Indo-Pacific Asia is at the epicentre of the global maritime trade, with about US$5 trillion worth of trade flowing through the South China Sea and the strategic waterways and choke points of south-east Asia annually.

While the Indian Ocean and its critical global sea-lines-of-communication are responsible for more than 80 per cent of the world's seaborne trade in critical energy supplies, namely oil and natural gas, which serve as the lifeblood of any advanced economy.

Submarines are critical to the nation's ability to protect these strategically vital waterways and key naval assets, as well as providing a viable tactical and strategic deterrent and ensure the nation's enduring national and economic security – recognising this, the previously posed questions will serve as conversation starting points.

However, given the geographic area of responsibility Australia will become increasingly responsible for and dependent on, is the RAN and the recapitalisation and conventionally-focused modernisation program for Australia's submarine fleet enough for Australia to maintain its qualitative and quantitative lead over regional peers?

Traditionally, Australia has focused on a platform-for-platform acquisition program – focused on replacing, modernising or upgrading key capabilities on a like-for-like basis without a guiding policy, doctrine or strategy, limiting the overall effectiveness, survivability and capability of the RAN.

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Here we go again: Naval Group Australia CEO issues scathing challenge for Aussie industry
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