JON STANFORD. Australia’s Future Submarine – Part 1: The problems

At the National Press Club in Canberra on 27 September 2017, Hugh White, Professor of Strategic Studies at the ANU, launched an independent report by Insight Economics on Australia’s future submarine (FSM). The report, Australia’s Future Submarine: Getting This Key Capability Right, was commissioned by Gary Johnston, a Sydney businessman and owner of the website, submarinesforaustralia.

Much of our early concern about the FSM was reflected in pieces Michael Keating and I wrote for Pearls and Irritations in 2016. We are grateful to John Menadue for giving us air time  and also taking so much interest in what many would see,wrongly in my view, as a marginal issue which is essentially esoteric. It is particularly fitting,therefore,at the end of this study that we should expose our findings for discussion on this blog.

This first post (of three) focuses on the problems with the FSM acquisition.

The fundamental problem is that the government is paying too much ($56 billion) for a submarine that, even if everything goes to plan, will be delivered far too late to provide Australia with the defence capability it requires in a strategic environment characterised by an increasing level of threat. Further, there are major risks to the project that cast significant doubt on when the capability will be delivered or even, in extremis, whether it will ever be delivered at all.

Governments of both persuasions are responsible for the mess in which we now find ourselves. As we say in the report, “In 2009, the Rudd/Gillard governments talked a good game in terms of acquiring 12 advanced submarines and then did virtually nothing over the following four years to begin the acquisition process. The Abbott and Turnbull governments approved a grossly inflated acquisition budget for the submarines, established a flawed process that resulted in the costliest and most risky acquisition approach possible over an unacceptable timeframe, and then, for political reasons, stated that the submarines must all be built in Adelaide regardless of cost.”

There is little point in rehashing the flawed Competitive Evaluation Process undertaken in 2015-16. Suffice it to say that by selecting a design partner for the FSM rather than a particular platform, Defence by-passed all of the various checks and balances that had been carefully put in place over the years so as to avoid the kind of procurement disasters we have seen in the past. Further, by selecting a single partner that proposed little more than a design concept, and then eliminating all further competition, Defence exhibits a heroic disregard for risk.

Why did the government choose to pursue this highly risky approach? We believe that there are two main reasons why Defence selected Naval Group of France as its design partner. First, Naval Group’s concept allowed Defence the greatest scope to design their own very large, conventional submarine, an ambition that appears to have been first conceived about ten years earlier. Secondly, of the three contenders, only the French could offer the future option of acquiring a nuclear submarine if government policy were to change at a later date.

The two main dangers in our current situation are that:

  • Australia will have a significant gap in submarine capability, perhaps lasting for over a decade
  • Should the design of the FSM fail or be unaffordable or run too late, we will have no options available for providing a credible submarine capability.

Currently Australia has six Collins class submarines, with a maximum of two likely to be on patrol at any one time. After much pain, these boats are now highly effective, but they were designed for a thirty-year life and are approaching obsolescence. On current plans, they will undergo a major upgrade to their sonars at a cost of $3 to $4 billion that will take them through to the end of their lives in 2026 to 2033.

But according to the existing schedule the first FSM will not be operational until 2033-34, with perhaps four or five available by 2040. Given that six submarines are required to maintain two on patrol even in ideal situations, this means that through the 2030s, even if everything goes perfectly with the FSM project, on current settings the RAN will only intermittently have one submarine operating on station. This contrasts with the requirement in the 2009 Defence White Paper to have twelve new submarines in commission in the 2030s, which would allow four to be on patrol at any one time.

Defence believes the answer lies in a full life extension for the Collins class, thereby keeping the submarines in service for an additional ten years. We are advised that this would cost up to $15 billion and has yet to be approved by the government. This would be a highly risky investment. It would not provide a superior capability in the 2030s. It would not include installing air-independent propulsion or Lithium-Ion batteries, two breakthrough technologies for conventional submarines. There is a high chance it just won’t work — trying to integrate modern systems with 1980s platforms is generally fraught. Australia’s unilateral attempt to extend the life of its six 1970s, US designed frigates (FFGs) was not successful. The cost blew out — only four ships could be upgraded, not six — the project was delivered seven years late and the upgraded ships were unfit to be sent into high threat environments.

Even if the life extension to Collins did work, however, it would not provide sufficient insurance were anything to go wrong with the FSM. All the above analysis of the capability gap is predicated on the acquisition process for the FSM going according to plan. But what if the design of the FSM, when finally completed, was not acceptable to the Navy? It might prove impossible to meet Defence’s capability requirements or it might turn out to be even more egregiously expensive than it is now, so that a sufficient number of platforms became unaffordable. What if there were delays in the process, with deliveries perhaps beginning six or seven years late, when even the extended Collins boats would have been consigned to retirement?

These risks are very real. Looking at the experience with ab initio submarine projects around the world, even the technical risks alone, in our view, make it highly likely that not more than one FSM will be operational by 2040.

But if you add industrial risks to the technical risks, even 2040 might be optimistic. Australia has only ever built six submarines, the last one fifteen years ago. Virtually no experienced workforce is available to build these subs, which in any case are being constructed by a different company new to Australia. By contrast, BAE Systems’ Barrow shipyard in the UK has built over 180 submarines, starting in 1902. Yet, at the end of the Cold War there was a gap in submarine building and the shipyard’s workforce fell to ‘only’ 3,000. When the order for a new submarine, the Astute, came along the shipyard soon ran into difficulties. Despite only a short gap of a few years since the last submarine was built, far less than in Australia, the Astute was delivered nearly six years late and 53 per cent over budget.

In conclusion, the risks around the FSM programme are extremely high, with a contingent threat to Australia’s national security from the mid-2020s on.

Jon Stanford is a Director of Insight Economics and was the principal author of its submarine report, available at: www.submarinesforaustralia.com.au and www.insighteconomics.com.au

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