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Op-Ed: Industry confidence in future submarine project sunk

"We’re six years and $2 billion into the project and Australian industry isn’t happy. And they shouldn’t be." Senator Rex Patrick compiled his analysis on Australia's recent submarine program. 

"We’re six years and $2 billion into the project and Australian industry isn’t happy. And they shouldn’t be." Senator Rex Patrick compiled his analysis on Australia's recent submarine program. 

We’re six years and $2 billion into the project and Australian industry isn’t happy. And they shouldn’t be.

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The Australian Future Submarine Program is in a mess. The cost has blown out, it’s not on schedule, the likelihood of a regionally superior submarine is highly questionable and Australian industry are being stabbed in the back. If that’s not concerning enough, Plan B for the submarine is “make Plan A work”. 

And when it comes to the government’s industrial capability plan, there’s not even a plan A. We have a “maximise Australian Industry involvement” slogan, but no commitment and, the way we’re going, there will be no real sovereign industry.

In the years to come, taxpayers will be $89 billion lighter in the pocket, Defence will be arguing that they got value for money and the government will be on the next round of promises for the future.

The genesis of the current project path goes back to 2015 when then defence minister Kevin Andrews announced the Future Submarine Program was going to be the largest Defence procurement program in Australia’s history and would represent an investment in Australia’s security in the order of $50 billion (out turned). A Competitive Evaluation Process (CEP) was to be used to select an international partner.

His announcement included variants of the mandatory ‘maximise Australian industry involvement’ slogan adding that a significant proportion of this investment would be spent in Australia during the lifetime of the Future Submarine and Defence would be inviting potential partners to seek opportunities for Australian industry participation.

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The expectations were set. But they’ve not been met.

 

Cost

$50 billion was the original number. It’s somehow now $89 billion, with Defence remarkably arguing there has been no increase in cost. It’s a serious concern when our Defence Department lives in an alternate reality.

We now have the most expensive submarine program in the world, which might be OK if we were truly growing a strategic industry capability, but we’re not. 

I served in Oberons and Collins and have spent time at sea in a Type 210, Type 214s and a Los Angeles Class submarine. As a result of my experiences, I spent much of the last two decades arguing we should have bought a high value-for-money off-the-shelf class of submarine, built it Adelaide, but made special by Australian industry. I wanted a ‘Holden Special Vehicle’ submarine. 

At the time the discussion regarding the acquisition budget were in the order of $20 billion, had I known we were going to spend $89 billion on acquisition and could wait until the mid-2030s to get a new submarine, I would have backed a locally developed son of Collins solution delivered by our real sovereign Australian industry.

 

Schedule 

There is no denying – although the Department certainly tries – the program is running late. Negotiation of the all-important Strategic Partnering Agreement was a drawn-out affair. The Platform System Requirement Review was 17 months late from the original schedule which I emphasise because Defence likes to shift the baseline and pretend they are still on schedule. The Platform System Functional Review, due to be completed in January this year, has been reported to the Senate as not complete. Defence say, in blind hope, they will regain the schedule. Both I and industry know this is just not going to happen, certainly not without significant additional cost or capability cuts.

Whatever Australian industry capability is used in this project, it will come towards the end of the project. That’s looking a long way off now. The submarine delivery target date is 2035, likely 10 years after when we might need it to assist in a range of possible contingencies that may emerge all too quickly, including conflict over the future of Taiwan. Those experienced in bespoke projects know that the delivery date is likely to be well beyond 2035.

 

Performance

Much of the submarine’s performance is being kept secret, but I can’t see us getting what we want – that being a regionally superior submarine. 

Singapore initiated its submarine capability well after we initiated the Collins program. They have gone from a secondhand Challenger Class submarine, to a secondhand Archer Class submarine with air independent propulsion (AIP) inserted, to a next-generation high-end Type 218SG class submarine with AIP and all the bells and whistles.

By the time we send our first non AIP, lead-acid battery Attack Class submarine out to sea in 2035, Singapore will be operating the next latest thing with a new submarine project underway.

By then the only place you’ll be able to find a lead-acid battery other than our new submarine, will be in a museum. But here’s the sting. If we were going to get lead acid batteries, you’d think we’d go to PMB Defence in Adelaide. For the diesels and motors, things we don’t really do here, MTU and Jeumont got sole source contacts. For the batteries, which PMB have a deep history in and are even exporting, the Project saw fit to compete that with a Greek battery provider. If there was ever a quintessential Australian industry betrayal moment in this project, that was it, and it sets the scene.

 

Industry

Finally, to Australian industry involvement. What a disgrace. The aim point was supposed to be ‘significant involvement’, which then defence industry minister Christopher Pyne designated as 90 per cent in 2016.

Naval Group was paid $8 million during the CEP to assess Australian industry capability whilst our industry paid their own attendance fees to assist. Naval Group put together a fantastic Australian Industry Capability Plan for their bid (which I got after a long and arduous Freedom of Information fight) that Defence then didn’t include in the contract. To add salt to the wound, after winning the job, Naval Group then said Australian industry was not up to the task, contrary to what they claimed in their CEP submission.

Naval Group’s website states that as at November 2020 “almost 2,000 companies in Australia register interest to join the Attack Class submarine supply chain, but only Australian 100 companies have applied to Naval Group to manufacture 23 specialised items of submarine equipment”. That’s not the program that was promised.

South Korea had a plan to develop a sovereign submarine industry capability and, with the launching of KSS-3, have done so. Singapore had a plan to develop certain specific sovereign submarine industry capability and have also done so. 

They seem to have been able to do that which we’ve failed.

None of this is anywhere near good enough. So long as I’m sitting in the Senate, I’m going to continue shining a big light on the project and be a vocal advocate for Australian defence industry. And unlike defence industry, as a senator, I won't follow the talking points.

Senator Rex Patrick is an independent senator for South Australia and former Royal Australian Navy submariner.

Op-Ed: Industry confidence in future submarine project sunk
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