Author of How to Defend Australia Hugh White has used the launch of a report by Insight Economics to call for greater competition in Australia’s largest, most complex and expensive defence acquisition program to ensure the Royal Australian Navy has a submarine fleet that is fit for purpose.
It is the gift that keeps on giving, Australia's multibillion-dollar SEA 1000 program continues to stir debate among Australia's strategic policy, defence and industry communities and even the public as the government and Defence seek to avoid the troubles of the Collins Class program.
The fever pitch of robust, public discourse gathered further steam in recent weeks following the release and launch of a report by Submarines for Australia, conducted by Insight Economics, on the troubled program and the challenges facing cost, delivery and the potential for capability gaps – with Australian strategist Hugh White launching the report at the National Press Club.
Gary Johnston of Submarines for Australia, who commissioned the report, said not only are we heading for an inevitable capability gap, but there was a "high risk" the project will fail.
The report, which was prepared by Insight Economics supported by an expert reference group that includes four retired admirals, says that the budget jumped by 60 per cent in two years and that already two project milestones have been missed.
Also, after initially promising 90 per cent local content, the French government-owned company, Naval Group, has shown an "extremely low level of commitment" to Australian industry participation in the project.
Johnston said, "The government’s own advisory body, including three American admirals, even recommended the government should consider walking away from the project."
At least consider a 'plan B'
To get the project back on track with no further delays to the process, the report proposes a low-cost risk mitigation strategy – a ‘plan B’ – to inject competition into the process.
Under plan B, the government would commission Saab Kockums, designers of the Navy’s existing submarines, to develop a preliminary design study (PDS) for an evolved version of the Collins Class submarine.
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In 2022-23, both Naval Group and Saab would present a PDS for their respective designs together with a fixed price tender for building the first batch of three submarines in Adelaide. The selection between the two designs would then be based on capability, delivery and local content, as well as price.
A second and more fundamental area of concern, however, is whether the submarines will even be fit for purpose in the 2030s and beyond. To address this, the review of submarine technologies flagged in the last Defence White Paper should be brought forward to the present.
Johnston said with China seeking to deny access to the South China Sea by investing heavily in advanced ships, aircraft and satellites, the finding in the report that caused him the greatest worry is that by the 2030s our submarines’ effectiveness and survivability in a high-intensity theatre will be threatened.
"If the government wants to continue deploying submarines to this theatre alongside the US Navy, the nation’s duty of care to the dedicated men and women of the ADF means we will need to begin the long and difficult process of acquiring nuclear-powered submarines," he said.
Adding further fuel to the fire, White in a recent piece for the Australian Strategic Policy Institute, titled 'Australia's Attack-class submarines need competition', has called for greater consideration of Australia's rapidly evolving strategic circumstances to best inform the program moving forward.
"Australia’s strategic circumstances over the next few decades will mean we cannot afford to be without a submarine capability. But that’s an area in which we are terribly vulnerable. Serious concerns have been raised over both the ability of the future submarine program to produce the Attack Class boats and the time it will take to comprehensively upgrade the Royal Australian Navy’s Collins Class submarines so that we avoid a capability gap," White establishes.
Problems from the get-go
The report released by Submarines for Australia highlights the issues with the very foundation of the multi-billion program, beginning with the Government's selection of the French submarine, prior to the completion of the preliminary design, and before the "before the project could be costed and before there was any solid basis to produce a really tough contract. So matters like cost, schedule, performance and Australian industry participation weren’t spelled out."
Further compounding these challenges is the long-standing public recognition of challenges during the negotiation, strategic partnership and planning phases, with repeated revelations of rising cost, delivery overruns and the like further hampering the program.
White explains, "Real problems have already appeared. The outturned cost of the 12 Attack Class submarines has blown out from $50 billion to $80 billion early in the project, and the negotiations for the strategic co-operation agreement took a long time and were clearly acrimonious. Add to that Naval Group’s evident reluctance to commit to Australian content and the nine-month slippage in the very first stages of the design process.
"This is the biggest conventional submarine in the world by far and will be very complex to design and build. If the whole process runs on time, the first submarine won’t be in service until the mid-2030s."
For the Insight Economics report, the answer is simple; introduce some competition into the program, with the most likely competitor to be a combination of Saab and ASC to design an 'evolved Collins' class vessel to fill the capability gap.
"The solution set out in the Insight Economics report is for the government to contract the design of an evolved version of the Collins as an alternative to the Attack Class. The two designs would then compete against each another, and the winner would enter a fixed price contract to deliver the boats. This is the proven, successful approach to major projects like this," White says.
"There’s no question of abandoning the Attack class at this stage. The aim is to provide competition for it, which the report says can be done for less than $100 million, and without delaying delivery.
"The report argues that the lack of competition is the source of many of the program’s emerging risks. And surely any responsible government would adopt this kind of low-cost option to reduce risk once it becomes clear that those risks are otherwise likely to become unmanageably high."
This flies in the face of comments made by ASPI executive director, Peter Jennings when discussing the likelihood of a 'plan B' being endorsed by the government.
Right off the bat, Jennings hits a six, declaring that the nuclear option, despite being a key part of Australia's submarine future, without significant support and local investment and a positive hearing from the US, they're not simply going to hand over the keys to the US Navy's newest Virginia Class or even their older, Cold War-era Los Angeles Class attack submarines.
"In 2016, and still today, we do not have a realistic option to go for nuclear propulsion. Not without a decade-long investment to build the nuclear engineering, infrastructure, safety and operating experience the Navy would need," Jennings articulates.
"In 2016, and still today in my view, the US Navy is not going to sell, lease or give us Los Angeles Class attack submarines. The Americans would rightly want to see massive Australian investment in building the skills to operate such boats. Right now they don’t think we could do it, and they won’t hand over the crown jewels, even after 100 years of mateship."
In response, White levels a pointed question for Jennings and his contemporaries, when he asks, "So, my question to people like Jennings who think it’s too soon to take remedial action is, what further evidence are they waiting for? How far will the schedule have to slip, how far will the price have to rise, how far will the Australian content have to fall, before they decide it’s time to act? And how much harder will it then be to salvage the project?
"Jennings argues that there’s no alternative because only the Attack Class can meet our operational needs. That’s not true. A Collins 2.0 would have the range and capability to operate in and around the South China Sea as well as closer to home. A lot of the work to update the Collins design has already been done by Saab as it bids for a big long-range submarine for the Royal Netherlands Navy," White expands further.
Given the geographic area of responsibility Australia will become increasingly responsible for and dependent on, will the RAN and the recapitalisation and modernisation programs currently underway be enough for Australia to maintain its qualitative and quantitative lead over regional peers?
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.
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.
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.