Pearls and Irritations

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.

This second post (of three) focuses on our thoughts on how to address the major problems with the FSM acquisition.

As stated in Part 1 of this story, 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.

The objectives of our proposed policy approach are to:

• Take action in the very near future to ensure there will not be a gap in Australia’s submarine capability through the 2030s
• Provide an insurance policy in the event that the design of the Shortfin Barracuda fails to provide the required capability at an acceptable cost
• Introduce some contestability into the process
• In order to provide practical solutions, not require the government to change any existing decisions on the FSM programme.

Avoiding a capability gap

If everything goes according to plan, the first of the FSMs will be delivered in 2033-34. With the Collins class submarines  reaching the end of their lives between 2026 and 2033, even if all goes well, this will leave a capability gap. As a solution to this, we understand that Defence has proposed, a 10-year life extension of Collins that may cost around $15 billion. In our view, there is a significant probability that the first FSM will not be delivered until around 2040. There is also a high probability that the Collins upgrade will incur major problems and at best will not deliver submarines capable of being sent into a high threat environment in the 2030s and beyond. The bottom line is that we do not believe that a Collins class life extension provides an adequate insurance against a capability gap.

There is, therefore, an acute possibility that Australia could have no submarines at all that could responsibly be sent on operations through the 2030s and possibly into the 2040s. In making this judgement we need to remember three things. First, Australia’s strategic environment is growing more threatening and submarines are a critical element in the ADF’s order of battle.  Secondly, half of the world’s submarines, many of them very modern, will be operating in this region by 2035. Thirdly, and as Defence well recognises, the Australian government has a duty of care not to send ADF personnel into harm’s way on obsolete platforms or equipped with inadequate kit.

So if the Collins class life extension is ruled out as a too risky and costly approach to fill the looming capability gap, what is the answer? Clearly we need six new submarines to be delivered between 2028 and 2034, the same timetable as the life extended Collins as proposed by Defence. The only option in that time period is to acquire off-the-shelf submarines, modified to extend their range. Presumably the government would want to build these new modified off-the-shelf (MMOTS) submarines in Adelaide, but as always this should be subject to a value for money criterion as was specified in the 2016 Defence White Paper (and subsequently ignored).

In our report we suggested that only the French Scorpène and the German Type 212 would be suitable contenders, but now we consider the Japanese government should also be invited to propose their latest version of the Soryu class in a three-way competition. The three contenders should be required to provide a detailed project definition study (PDS) and a fixed price tender for building the submarines either in Australia or overseas with construction commencing in 2020.

An enduring problem confronted by the Submarine Force is the very long transits between their base at HMAS Stirling near Fremantle and their areas of operation (AOs) in the waters to our north. The time travelling in transit can account for up to five weeks in total in a single operation. In economists’ terms, this is a major inhibitor of the productivity of the Submarine Force. The length of submarine operations also results in crew fatigue and, because of the cramped space on board, may inhibit recruitment and retention of submarine crews. This is one of the major reasons why Defence has the idée fixé that Australia needs a very large submarine and should not acquire many more and less expensive platforms off the shelf.

For this reason, we also propose the government should acquire a tender ship for the submarines. This would provide accommodation for the crews, medical facilities and the ability to undertake repairs to the submarines and provide routine maintenance. It would also allow the submarines to refuel, re-victual and replenish munitions. Patrols could be reduced to four weeks and, with replacement fly-in, fly-out crews, the Submarine Force would spend more time on station. The tender ship would have the effect of being a force multiplier.

Insurance policy for the Shortfin Barracuda

In the longer term, the new MMOTS submarines plus the tender will provide some competition for the Shortfin Barracuda in terms of deploying submarine capability on station in the most efficient way. The government has contracted with Naval Group for the detailed design of the FSM, but it is not obliged to build it. It may be that the design does not provide sufficient capability consistent with the value for money criterion. In that case, the government could decide to build more of the MMOTS boats.

The 2016 White Paper stated that a review of Australia’s future requirement for submarine capability would be held in the late 2020s. We propose that this review should be brought forward by a few years and consider three options for the future:

• Build the Shortfin Barracuda as planned; or
• Do not build the Shortfin Barracuda and continue with a continuous build of the MMOTS submarine, in flights of three incorporating improvements over time; or
• In the event of a significant deterioration in Australia’s strategic circumstances, begin the lengthy process of acquiring nuclear submarines, while constructing a total of twelve MMOTS submarines.

The final post in this series will consider the reaction to our report and respond to some of the criticisms.

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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