Australia wrote to Naval Group noting progress on submarines a week before contract was cancelled
Australia’s defence department wrote to France’s Naval Group a week before the submarine contract was sensationally cancelled, acknowledging the successful completion of one requirement for moving to the next stage of the project.
The three-page letter, obtained by Guardian Australia under freedom of information laws, shows the Australian government set out six conditions on which Canberra would agree to pass a key milestone in the $90bn project.
The letter acknowledged that at least one of those conditions was “successfully completed” as of 8 September, and said the Australian government “has, to date, demonstrated its commitment to working collaboratively with Naval Group”.
But the document also included a cautionary line that the next stage of the project – which aimed to deliver 12 conventionally powered submarines – remained “subject to Government approval”.
The letter was sent eight days before the prime minister, Scott Morrison, dumped the French deal in favour of the new Aukus partnership with the US and the UK for nuclear-powered submarines.
The move, which followed a year and a half of private deliberations, sparked a diplomatic rift with Paris, which complained of being blindsided and “stabbed in the back”.
The tensions culminated in French president Emmanuel Macron’s direct accusation that Morrison had lied. Morrison labelled that accusation as “sledging” and a private text message from Macron was released, further angering French officials.
The French foreign minister, JeanYves Le Drian, told a parliamentary hearing in late September that “someone lied”, because he could not reconcile positive correspondence from Australia’s defence department with the Aukus decision communicated by Morrison.
The correspondence with Naval Group in the lead-up to the decision is a key piece of the Aukus puzzle, although to date the documents released do not show Australia giving a concrete assurance that the project would proceed.
Instead they paint a picture of progress steadily being made towards highly technical requirements.
Guardian Australia has previously reported on the contents of a letter sent on 15 September – hours before the Aukus announcement – which was at the heart of French claims of Australian double-dealing.
In that letter, the director general of the Future Submarine Program, Royal Australian Navy Commodore Craig Bourke, confirmed “the exit of the Functional Ship System Functional Review (SFR) has been achieved as required”.
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But Bourke added a caveat about the government not yet granting authorisation to proceed. He said the Australian government “reminds Naval Group that this exit does not remove the obligations” outlined in a different letter sent a week earlier.
The defence department has now released the earlier letter, dated 8 September, with some portions redacted.
Bourke told Guillaume Jampy of Naval Group in Paris that “the purpose of this letter is to set out the path forward to ensure” the formal completion of the functional review and a subsequent milestone “can be achieved”.
Bourke wrote that the next milestone was “necessary for Naval Group to verify and validate, and for the Commonwealth to have assurance of, the system performance of the Whole Warship to demonstrate the achievement of the functional characteristics of the Commonwealth’s requirements for the design”.
Some parts of the document were blacked-out, on the basis that it contained information of a commercial value to the French contractor, which had been consulted as part of the FOI process.
After one such redacted passage, Bourke wrote: “However, the Commonwealth has, to date, demonstrated its commitment to working collaboratively with Naval Group throughout this process.
“In order to minimise disruption to the program, subject to Government approval and to enable the continuation of work under the [Submarine Design Contract], the Commonwealth advises it will agree” that Naval Group will exit the functional review “subject to the following conditions”.
The letter outlined six criteria, including that certain technical requirements were “demonstrated to the Commonwealth’s satisfaction by 30 Aug 2021 – this has been successfully completed”.
The second condition was that three action plans were consolidated into one plan approved by the commonwealth – but Bourke said that “at the time of writing this letter, this action remains open”.
The other four criteria were blacked out. The FOI decision maker found that disclosing certain commercial arrangements “could reasonably be expected to benefit Naval Group’s competitors in winning future work for which Naval Group is competing by revealing the terms that Naval Group is prepared to accept”.
Bourke advised Naval Group on 8 September: “Upon Naval Group completing the actions, and agreeing to the conditions … the Commonwealth will send a subsequent letter formally advising Naval Group it has exited [the functional review].”
That follow-up letter was then sent on 15 September, hours before Morrison announced the project was being abandoned altogether in favour of a “forever partnership” with the UK and the US.
Morrison, Boris Johnson and Joe Biden launched an 18-month study, to help Australia find a way to build at least eight nuclear-powered submarines.
Australian officials say the plan is driven by increasing concerns about China’s assertiveness in the Indo-Pacific, and by Australia’s desire to project power farther north and for its submarines to be less easily detectible.
The secretary of the defence department, Greg Moriarty, told a recent Australian Senate estimates hearing the contract with Naval Group had been terminated “for convenience” because “our requirements have changed” – not because of poor performance.
Moriarty said he spoke with Naval Group representatives on 15 September – “the night before” the 7am announcement – to advise them of the decision to cancel the program. “They were surprised and disappointed, understandably,” Moriarty said.
The Australian government has not revealed how much it expects to pay out to Naval Group in cancellation fees, nor the cost of scrapping the related deal with American contractor Lockheed Martin for the submarine combat system.
The government’s budget update last week said the termination costs were “subject to negotiations with the companies, which have commenced”.
The Australian defence minister, Peter Dutton, has previously urged France to put aside any “hurt feelings” over the scrapping of the contract, arguing the decision was in Australia’s “best interests” and the French “were going to be upset whenever they were told”.