Awkward Truths About U.S. and U.K. AUKUS Challenges

Three reports over the past two months are required reading for anyone involved in or scrutinising the Australian Government’s work on AUKUS.  Two are U.S. reports and one is from the U.K.. 

Put together, the three reports show an alarming and growing set of challenges in front of Australia’s AUKUS partners when it comes to meeting their own submarine needs.  AUKUS adds additional demands on top of this, and additional complexity by introducing a third nation, its government, laws, budget and acquisition processes.

The U.S. Navy is required by law to provide to Congress its long-term shipbuilding plan every year (it’s a striking contrast to our situation where Defence has not released a public version of its acquisition plan for nearly three and a half years). The U.S. Congressional Budget Office (CBO) has released its assessment of that plan in October.  The U.S. Navy has set out three options for its future surface and undersea fleets, with slightly different numbers and mixes of ships and submarines in each. 

This was followed by the U.S. Congressional Research Service’s 13 November 2023 report titled the ‘U.S. Navy’s Virginia Class submarine program and the AUKUS Submarine Proposal’.  The CRS is required to provide independent advice to the Congress on the legislation it will consider. In this case that legislation includes funding for submarines and authorising the President to transfer nuclear-powered submarines to Australia. The CRS report is consistent with the CBO report in its understanding of the challenges to U.S. submarine building and maintenance, but goes deeper on the submarine industrial base challenges. 

Its analysis shows that the U.S. is currently producing Virginia Class submarines at the rate of about 1.4 boats a year, which is a shortfall against the targeted rate of 2 boats a year.  This is despite years of focused investment into the industrial base and supplier network that builds these boats.  But much more significantly, the CRS assessment, which is accepted by the U.S. Navy, shows that the rate of submarine product has to grow not just to 2 boats a year but to the equivalent of five ‘standard’ Virginia Class boats a year by 2028.  That’s because by then, the U.S. needs to be building the larger Block V Virginia-class submarines with the missile payload insert along with the much larger and more complex Columbia-class ballistic missile submarines.  Each Columbia takes 2.5 times the industrial base capacity that it takes to build a ‘standard’ Virginia class boat.

So, not only does the U.S. have to invest between 31 and 40 per cent more per annum into its programs, it needs to lift production capacity to over 3.5 times the current rate of 1.4 boats a year.  That’s without counting the even greater industrial capacity required on top of this to meet the AUKUS demand of producing 3-5 extra Virginia subs for Australia (backfilling ones provided out of the existing U.S. Navy fleet and building new ones sold to Australia before SSN AUKUS (Snorkus) arrives.

The numbers understate the difficulty of doing this.  It’s not just running a production line faster or replicating the existing production line with a new one.  Nuclear submarine building relies on highly skilled shipyard workers that are hard to recruit and retain, and the builders depend on 100s – 1000s – of small suppliers for all the components and subsystems that go into each boat.  Expanding the capacity or variety of this supply chain is harder than growing the skilled submarine construction workforce. So, the CBO and CRS reports, in their measured, quiet but authoritative way raise real doubts about the U.S. capacity to do what it needs to do – for itself –  and on top of this deliver for AUKUS.

In June 2023, a U.S. Government Accountability Office report had already told us that, because Virginia Class sub construction continued to degrade, it looked like each Block V submarine would take an average of over 2 years longer than reported last year.

Shifting from the U.S. situation, we now have recent news on nuclear sub challenges from across the Atlantic. The most recent report is from the U.K.’s National Audit Office – the equivalent of Australia’s ANAO, which brought us bad news on Defence’s Hunter frigate program. 

It has assessed the U.K. Ministry of Defence’s 10-year Equipment Plan2023-2033 and found that it is unaffordable, with costs for key programs growing rapidly because of inflation and a better understanding by the U.K. defence ministry of the actual costs involved.  Two of the largest cost increases are in the U.K.’s Defence Nuclear Enterprise (that builds the U.K.’s nuclear submarines and nuclear missiles) and the Royal Navy (which is acquiring the BAE Type 26 frigate that is the basis for our Navy’s ‘Hunter’).

The U.K.’s defence nuclear program has had a 62 per cent increase from the costs forecast in last year’s version of the Equipment Plan.  That’s a £38.2 billion increase (equivalent to $A73 billion).  And the Royal Navy’s non-nuclear acquisition program has had a 41 per cent cost increase between the 2022 and the 2023 10-year plan – that’s an increase of £16.4 billion (equivalent to $A31 billion). 

The U.K. NAO notes that the Equipment Plan is unaffordable, and has yet to include ‘must have’ capabilities for the U.K. military identified from studying the lessons of the Ukraine war – integrated air-missile defence, cruise missiles and ballistic missiles, long-range surface-to-surface missiles to strike deep into an enemy’s rear areas, unmanned aerial systems and electronic warfare’.  These make the U.K. plan’s unaffordability problem worse, requiring either large cancellations or large budget increases.

Action by the U.K. government to make the military’s plans fit its budget won’t affect the nuclear enterprise, because that has been ‘ringfenced’, but as the NAO says, will ‘put greater pressure on programmes not included in [the ringfence]’ – including the Royal Navy’s surface fleet. 

The net result is that both nations were challenged meeting their own surface ship and submarine needs before AUKUS came along, and those challenges are growing because the consequences of many years of low investment are now inescapable. 

They also show that both the U.S. and U.K. face cost spirals in their submarine programs, with forecast costs rising owing to inflation and supply chain troubles that are making everything more expensive. Those costs have not stabilised.  This experience means that Australia’s stated cost of $268-368 billion for the eight AUKUS submarines now must be considered to be understated—or at the very least fall at the upper end of that band–as it will be affected by the rising costs faced by the U.K. and U.S..

AUKUS helps in one way – Australia is bringing a bag of gold to the effort.  But overall, AUKUS makes the total program harder – there’s more to be done and it needs to be done across three different governments, economies and defence industries.

So, while much of the domestic discussion and debate on AUKUS has been on Australia’s readiness to produce, operate and maintain eight nuclear submarines, the greater challenges to AUKUS come from the ‘home games’ that the U.K. and U.S. must play to meet their own needs.  These face deep, long term underlying problems. They won’t be solved by the U.S. Congress passing AUKUS-related legislation this year. U.S. investment into its submarine base has increased in recent years, and Congress supports more of it, which is good but insufficient.

Almost 2.5 years since the September 2021 announcement, it’s becoming increasingly clear  that delivering the ‘optimal pathway’ requires some more than heroic efforts in both the U.K. and the U.S. across very broad fronts of activity, all of which must succeed. And that’s while both nations help Australia get its training wheels on and shift rapidly from a toddler learning to walk when it comes to nuclear submarines to a mature, high performer in one of the most demanding areas of human endeavour.

Asking for plans or mentioning real world challenges is received here as bordering on un-Australian. That’s odd, because the U.S. Congressional Research Service points out, almost every U.S. military acquisition program that hasn’t had a proper business case engaging with the real risks and industrial environment it has to operate in has failed.  The now cancelled multi-billion dollar Littoral Combat Ship program is just the most recent example.

Public understanding and support is critical to the sustainability and delivery of AUKUS.  That begins with openness about the eyewatering challenges faced by each nation in the partnership – and credible plans that match the scale of the challenges, starting now.

Michael Shoebridge is Director of Strategic Analysis Australia. From 2018 until September 2022, he was the Director of the Defence, Strategy and National Security Program at the Australian Strategic Policy Institute (ASPI) in Canberra.

Before the think tank world, Michael was a deputy in two Australian intelligence agencies – the Australian Signals Directorate and the Defence Intelligence Organisation.