De­fence ad­vised to walk away from French subs


A key ad­viser to the fed­eral gov­ern­ment was so con­cerned about the $80bn Fu­ture Sub­ma­rine Project it warned De­fence it should con­sider walk­ing away from the French-built boats.

A re­port by the Aus­tralian Na­tional Au­dit Of­fice re­leased on Tues­day re­vealed the Naval Ship­build­ing Ad­vi­sory Board warned that De­fence should con­sider whether pro­ceed­ing with the project was in the na­tional in­ter­est.

The ANAO said in the re­port the sub­marines’ de­sign phase was run­ning nine months late, and “De­fence can­not demon­strate that its ex­pen­di­ture of $396m … has been fully ef­fec­tive” in achiev­ing key mile­stones.

The re­port also re­vealed De­fence had ap­proved the fab­ri­ca­tion of com­plex hull parts for the first fu­ture sub­ma­rine to be un­der­taken in France, rather than Aus­tralia, to guard against de­lays to the build sched­ule.

The rev­e­la­tions fol­low the De­fence Depart­ment’s ad­mis­sion to a Se­nate es­ti­mates hear­ing late last year that con­struc­tion of the first boat had been pushed back by up to a year, and the cost to build and main­tain all 12 sub­marines would reach $225bn over their 50year life­span.

De­fence told the ANAO that if the subs project was de­layed by more than three years, it would “cre­ate a gap in navy’s sub­ma­rine ca­pa­bil­ity” that could af­fect plans for the na­tion’s Collins-class sub­marines.

In a sign of the ten­sions be­tween De­fence and French ship­builder Naval Group, the re­port said the gov­ern­ment’s Naval Ship­build­ing Ad­vi­sory Board, chaired by former US Navy sec­re­tary Don Win­ter, warned in Septem­ber 2018 that “De­fence should as­sess whether pro­gram risks out­weighed the ben­e­fits of pro­ceed­ing”.

At that time, De­fence was strug­gling to ne­go­ti­ate a strate­gic part­ner­ing agree­ment with Naval Group. “The Naval Ship­build­ing Ad­vi­sory Board ex­pressed a

sep­a­rate view that, even if the strate­gic part­ner­ing agree­ment ne­go­ti­a­tions were suc­cess­ful, De­fence con­sider if pro­ceed­ing is in the na­tional in­ter­est,” De­fence told the ANAO. “This con­sid­er­a­tion was rep­re­sented in the ad­vice to gov­ern­ment seek­ing ap­proval to en­ter the (SPA).”

The agree­ment was fi­nally signed in Fe­bru­ary last year and in­cluded a pro­vi­sion for Aus­tralia to break the con­tract if the subs were de­layed or failed to de­liver promised ca­pa­bil­ity.

De­fence has pre­vi­ously warned of “high to ex­treme risk” to its naval ship­build­ing pro­gram, with dif­fer­ing en­gi­neer­ing method­olo­gies be­tween France and Aus­tralia cited as a po­ten­tially ma­jor is­sue.

The Au­di­tor-Gen­eral said that es­tab­lish­ing “an ef­fec­tive long-term part­ner­ship be­tween De­fence and Naval Group” was a key risk-mit­i­ga­tion mea­sure.

Op­po­si­tion de­fence spokesman Richard Mar­les said gov­ern­ment “mis­han­dling” of the na­tion’s big­gest ever de­fence ac­qui­si­tion posed ma­jor risks.

“On all three mea­sures of this pro­gram — on time of de­liv­ery, on the cost of the project, and on the amount of the Aus­tralian con­tent — the num­bers are all go­ing the wrong way,” he said.

Cen­tre Al­liance se­na­tor Rex Pa­trick said the ANAO re­port was “one of the most con­cern­ing re­ports I have ever seen”.

“The alarm bells are ring­ing. If the min­is­ter is not hear­ing them, they need to be turned up,” Se­na­tor Pa­trick said. “De­fence’s view that they can re­cover the sched­ule is naive at best.”

But De­fence Min­is­ter Linda Reynolds said the sched­ule de­lay had been es­sen­tial to get the sub­ma­rine de­sign right.

“Do­ing so will re­duce costly changes and un­cer­tain­ties while the At­tack-class sub­marines are built, and will re­duce the need for larger con­struc­tion con­tin­gen­cies,” she said.

She said the first sub­ma­rine was still due to be de­liv­ered to the navy in 2035, as planned.

The Naval Ship­build­ing Ad­vi­sory Board’s role is to pro­vide ex­pert, in­de­pen­dent ad­vice to the gov­ern­ment on its $90bn ship­build­ing pro­gram. Its mem­ber­ship in­cludes three re­tired se­nior navy of­fi­cers — Rear Ad­mi­ral Thomas Ec­cle, Vice Ad­mi­ral Wil­liam Hi­lar­ides, and Vice-Ad­mi­ral Paul Sul­li­van — and former Depart­ment of Ed­u­ca­tion sec­re­tary Lisa Paul.

Aus­tralian Strate­gic Pol­icy In­sti­tute de­fence an­a­lyst Mar­cus Hel­lyer said the ad­vice of the high-level board was nor­mally con­fi­den­tial. “It’s the first time I have seen that gloomy as­sess­ment,” he said. Mr Hel­lyer said the po­ten­tial “ca­pa­bil­ity gap” was likely to re­fer to the risk of hav­ing fewer than six op­er­a­tional sub­marines at any point.

He said it was now likely all six Collins-class boats would have to have their lives ex­tended.

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