Nuclear submarines: We don’t know the costs and we don’t know the risks
Oct 15, 2021
The nuclear submarine deal with the US and the UK upends Australia’s carefully thought out forward planning in defence, without a clear explanation to the nation of the ramifications.
The commissioning of nuclear-powered submarines under the AUKUS agreement with the US and the UK is perhaps the biggest ever investment by an Australian government. Yet on the information available it is simply not possible to know if it is the right investment. Perhaps it is, but the public is being asked to accept it on faith and some jingoistic claims about addressing Chinese threats, not on the basis of careful analysis openly shared and debated.
The processes over the past decade and a half leading to this decision have been embarrassing. First, the delay in deciding on both the Collins extension and post-Collins requirements, then the Japan announcement, then the French announcement after an ill-defined competitive assessment, and now this latest announcement.
As Finance Minister Simon Birmingham admitted, we don’t know the costs; nor do we know the risks. We therefore don’t know the opportunities forgone if some of or all the money was spent on other defence capabilities (or on non-defence priorities), nor the consequences should the risks involved lead to further costs, delays and gaps in our defence capability.
The 2008 audit of the Defence Budget led by external consultant George Pappas set out in some detail the processes required for identifying strategic requirements and translating these into procurement priorities and specifications. His recommendations were aimed to strengthen the discipline involved in the framework long espoused in the Department of Defence to maximise the capability to defend Australia from the funds available, and to resist the internal and external pressures to circumvent that discipline.
In essence, the process should start with a proper strategic assessment looking two or more decades ahead, reviewing capabilities in our region and possible adverse intent that might threaten our interests. This leads to identifying the capabilities we require to respond to or deter possible threats. Those capabilities must then be carefully translated into the equipment, platforms and personnel required. Procurement, preferably by open competition, is then based primarily on the desired capability but inevitably increasingly portrayed as particular equipment and platforms.
Each step requires careful consideration of costs and trade-offs; also constraining those inside keen to have favoured products and those outside keen to benefit from the largesse involved for political or pecuniary reasons. Risks also need explicit assessment. For example, as Pappas highlighted, technical risks inevitably add to budgetary risks.
While there have been several defence strategies released over the last two decades, most recently in 2016, the discipline these are meant to impose does not seem to have applied with respect to the biggest single investment being made.
Some have argued that the 2016 assessment that war is unlikely in the next 20 years is not the assessment we would make now, and that an updated assessment would justify the major shift in investment priorities represented by this latest decision. But we do not have a properly developed new strategic assessment and hence the means to test these arguments. China’s “intent” may have moved adversely, but whether to the extent some are now suggesting has not been dispassionately assessed.
Moreover, long-term investments arising from defence strategies should focus primarily on the capabilities in our region, not intent. The major increase in China’s capability was well known in 2016 and further increases were predicted. Such increases in capability shorten warning times should intent change, justifying increases in defence spending including on long-term investments. A change in “intent” does not of itself justify a major increase in long-term investments: it primarily affects the deployment of existing assets and shorter-term investments to expand the capacity of those assets (eg by extra manpower, missiles etc.). It also demands increased investment in diplomacy.
In other words, if nuclear submarines and the additional capabilities they offer in 20 or more years’ time are justified now, why were they not endorsed in the 2016 Defence White Paper? Or, if circumstances have really changed so much regarding both China’s capability and intent, why haven’t we seen an updated strategy?
The answer presumably is that the option of US or UK nuclear submarines not requiring us to produce our own fuel rods was not open in 2016, and the window for taking this option was very narrow given the imminent new commitments to the French boats.
While that might explain the lack of an updated strategy, it does not excuse the failure to now answer the sorts of questions such a strategy and subsequent disciplined processes would have demanded, including:
- What precisely are the additional capabilities the nuclear submarines offer, why are they needed and can we be sure the costs involved represent value for money over alternative ways of achieving those capabilities (eg by conventional submarines and/or enhanced anti-submarine warfare)?
- What factors led to a greater emphasis on range and speed over more boats?
- What domestic support will these nuclear submarines require to ensure Australian autonomy over their deployment? What risks are posed by the absence of a domestic nuclear industry and how will they be managed?
- How will the costs be controlled? How will the overall contractor be chosen and how will they subcontract with the US suppliers (nuclear propulsion, systems) and other suppliers?
- How will the Australian content be determined and at what cost? (For decades, defence experts have tried to get governments to focus on genuine defence needs such as maintenance capacity and ability to upgrade systems, and to constrain the high-cost political demands for local jobs.)
- What upgrades to the Collins are now required and for how long and with what risks as China’s technical capability to detect submarines increases?
- If we lease US submarines, how locked in are we to US policy demands and restrictions?
The risks that must be managed are not just about escalating costs but also about a further gap in our defence capability in the 2030s and possibly beyond.
The Parliament and the public need answers to these questions, and to hold the government to account not only for the money involved but also the failure of good process.
An edited version of this article was first published by The Australian.
Andrew Podger is honorary Professor of Public Policy at The Australian National University, and former Australian Public Service Commissioner and Secretary of the Departments of Health and Aged Care, Housing and Regional Development, and Administrative Services. He was national president of the Institute of Public Administration Australia from 2004 to 2010, and a member of the foundation board of the Australian and New Zealand School of Government. He was made an Officer of the Order of Australia (AO) in 2004, and has written extensively on social policy including health financing, retirement incomes and tax and social security, and on public administration.
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