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On September 15, Australia, the United Kingdom and the United States made a new policy statement (“AUKUS”) to enhance security cooperation in Asia, especially against China.  The most tangible element of the pact is Australia’s purchase of nuclear-powered attack submarines from the U.S. and/or the U.K..  This also meant Australia’s cancellation of an existing contract with a French shipyard to procure conventionally powered attack submarines.  

The French were outraged, but they hoisted themselves on their own petard.  They notified the Australians of a much higher price before manufacturing submarines, especially in Australia, had begun.  As American defense corporations and Pentagon acquisition advocates know, you don't let the customer know the real price until huge amounts of spent money pile up, and there are plenty of active jobs at manufacturing cites -- politically distributed — making it an irreversible commitment.

In 2016 Australia’s deal with the French was to cost $50 billion (AUD) for 12 diesel-electric Attack class subs.  By 2019 it had grown to $90 billion (AUD) – due to cost overruns and newly estimated future inflation.  Those and other irritations made the Australians ripe for an offer from the U.S. and the U.K. for nuclear-powered attack subs.   Neither the cost nor the number of subs is specified in the joint statement, but that the Australians will be getting fewer subs for more money is clear from available reporting – the issue of more capability from nuclear-powered attack subs put aside momentarily.

There seems general agreement that the number of the new AUKUS attack subs will be “at least eight,”  not 12.  The Australians have already conceded that their cost will be at least A$100 billion, not A$90 billion.

The Australians should consider eight to be the ceiling for subs and $100 billion (AUD) to be the floor for the costs.

The most important factor will be the nature of the new subs.  The September 15 statement says nothing other than “Today, we embark on a trilateral effort of 18 months to seek an optimal pathway to deliver this capability” and that they will build on U.K. and U.S. “submarine programs to bring an Australian capability into service at the earliest achievable date.” Thus, it will take 18 months to sort out the basic formulation of the new sub, how and where they will be built, and when deliveries might start.  

U.S. Deputy Defense Secretary Kathleen Hicks has urged the most advanced design possible, saying, "The Chinese are advancing their capabilities at a remarkable clip. Those capabilities include, of course, undersea capabilities.”  The existing U.S. nuclear attack sub, while periodically upgraded, was originally designed in the 1990s.  Presumably, Hicks is talking about a significantly upgraded U.S. Virginia class (now at $3.5 billion per copy), but more probably the future U.S. attack sub, now dubbed SSNX, at a currently predicted unit cost of from $5.8 billion to $6.2 billion.  The U.S. Chief of Naval Operations, Michael Gilday, reinforced the likelihood of the more expensive version saying, “This is a very long term effort that’ll be decades before the submarine goes in the water.”  He was looking at 2040 at the earliest, not in the 2030s scheduled in the French deal.

Some have speculated that to get something to the Australians quickly, they might lease one or more existing U.S. Virginia class subs right away – to learn nuclear submarine propulsion technology and train personnel.  In the event that occurs, it could be additive to the Australians' ultimate costs, especially if the Virginia class is dubbed inappropriate for beyond 2040. 

There are other cost bombs in the AUKUS sub program.  

The Australian Prime Minister Morrison has announced that the submarines will be built in Australia.  Such co-production arrangements are notoriously expensive, involving steep learning curves, inefficiencies, and data and technology transfer costs.  But it's not that simple in this case.  Because of Australia's virtually non-existent nuclear infrastructure and considerations under the Nuclear Non-Proliferation Treaty, there has been speculation that just the hulls will be fabricated in Australia and then transported to U.S. shipyards for the installation of the nuclear propulsion and other components.  More costs.

Add to this the A$2.4 billion in sunk costs already paid to the French for no subs delivered, plus several hundred Australian dollars in contract termination fees.  Add also the currently unknown cost to extend the service life of Australia's current Collins-class conventionally powered subs to bridge the gap between their retirement dates in about a decade out to 2040, perhaps beyond.

British Prime Minister Boris Johnson has further complicated the picture, saying the program would also bring jobs to the U.K..  He may have in mind elements not just of Britain's existing Astute-class nuclear attack subs but their planned new design, currently dubbed SSN(R).  Still, more co-production and split design mean still more cost and time.

Or, the three national parties may decide that the AUKUS sub will be a completely new design, not directly benefitting from the specific design, engineering, and production-base advantages of existing or future U.S. or U.K. builds.  That cost is completely unknown but assuredly much more than the shunned French design.

Recently, the Australian Finance Minister told Australian radio listeners, “The Prime Minister has acknowledged that it will likely cost more than what we assessed for the conventionally powered submarines.”  The only thing in doubt is how much the actual costs will go up from this preliminary A$100 billion baseline.  Australia is not likely to learn the real bottom line until all detailed design work is completed and construction and early testing are advanced enough to demonstrate efficacy.  The U.S. and U.K. are not going to replicate France's error of premature disclosure.

But all this will be OK, the conventional wisdom runs.  Nuclear-powered attack subs are vastly more capable than diesel-electrics.  Nuclear attack subs can stay submerged literally for months, transit huge distances submerged (such as from Australia to the South China Sea where the Chinese have aggressively been building bases), and they can sustain high speeds almost indefinitely, thus escaping threats and finding more targets.

All true, but again not that simple.  

Nuclear attack submarines don't deploy very often, and U.S. Virginia class subs are at sea as few as about 15 times over their 33-year lifespan for their six month deployments.  You are not "more capable" if you're not in the neighborhood.  In addition, cheaper, modern conventionally powered attack subs are significantly quieter and harder to detect than the nucs – and have repeatedly attacked them successfully and the aircraft carriers they protect in naval exercises.  The detection issue is particularly relevant in the mostly shallow South China Sea, where noise from size and speed and the nucs’ hot water exhaust (from cooling the reactors) can produce a detectible signature.  There are operational reasons to sometimes prefer (cheaper) conventionally powered attack subs.

Finally, the modern acquisition records of the U.S. and U.K. navies are not a confidence builder.  The new U.S. and U.K. aircraft carriers are not the only cases in point; add in the horrific Zumwalt class “destroyers” and Littoral “Combat” Ships that came in at twice, or more, the original unit price with far less than promised capability. Moreover, Australians are now learning that they will pay more and get less for the U.S. F-35s they are now buying -- just as they learned decades ago with an equally problematic acquisition of American F-111 bombers.

In a decade or more, Australia will learn the actual cost, schedule and capabilities of their new subs.  But then it will be too late for the too-big-to-fail program.  Good luck with that, Australia.


Winslow T. Wheeler worked for three decades for Republican and Democratic Senators and GAO on national security issues. He then ran the Center for Defense Information, now at the Project On Government Oversight.  He is now semi-retired.



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