Australia's Submarine Dilemma

Here in Australia, the Future Submarine (FSM) project has been the subject of significant commentary over recent months, leading to the statement by Defense Minister Andrews on February 20 on the structure and conduct of the competitive evaluation that will be undertaken. That statement provided some additional clarity for industry but left many key questions unanswered.

On February 17, Air Chief Marshall Binskin was reported as stating that it was "more important—in both economic and defense terms—that the life-long upkeep of the submarine fleet is done locally rather than actually building them at home." He’s further reported as stating that "by integrating the systems such as sensors and combat systems into the boats at home, and testing the boats and their systems locally, Australia would get the know-how to do the sustainment work over the next 30 or 40 years."

If we ignore the sundry (important) unanswered questions regarding access to the design knowledge and intellectual property, considerations of associated strategic and sovereign risks, and the wider economic benefits that an in-country build would provide, we’re left to consider the risk the government perceives from committing to in-country construction. And that brings us to the potential builder: ASC.

The Government’s frustration with ASC has been evident since taking office; from repeated commentary around the schedule delays and cost overruns of the Air Warfare Destroyers to Senator Johnston’s remark as Defense Minister that he wouldn’t "trust them to build a canoe." Whether that comment was a "rhetorical flourish," as subsequently claimed, or indicative of a deeper discomfort and distrust in the Government with respect to ASC is unclear, but more recent events tend to support the latter view.

On February 19, at a hearing of the Senate Economics References Committee inquiring into the build of the submarines, senior ASC officials provided testimony that was frankly disappointing, disheartening, and even disturbing. That testimony indicated ASC hadn’t even bothered to determine from Defense the likely requirements for the FSM, nor undertaken any activities to promote its capability to build the FSM in Australia. Rather than proactively moving to develop its business, ASC seems to have chosen the "cargo cult" approach to business—waiting for that business to come to them, and relying on the fact that they’re the only option for in-country construction. The fact that ASC chose such a course of action whilst under investigation by the government for its performance on AWD and Collins sustainment seems incredible. Then again, perhaps it isn’t—in spite of such an obvious lack of business development the ASC still receives DMO contracts worth the best part of a billion dollars per year.

The case for a local build has been vociferously argued by a host of commentators including politicians, defense industry, unions and academia—but not ASC. Such an approach detracts from the industrial position that many in Australia are trying to support and build, and devalues the position of multiple small companies in the ASC supply chain. How can an organization that relies on naval work, and which would be the beneficiary of a decision to build submarines in Australia, not undertake the basic business development tasks to acquaint itself with the situation, understand the developing requirements, and promote its capability and capacity to undertake the job? Not to do so smacks of arrogance and complacency. Such an approach has no doubt confirmed and strengthened the government’s preconceived views regarding the risks in a local build—management risks, not necessarily technical risks.

It’s a pity there are no other options in country to undertake this work. It seems the attitude of government-owned shipyards has not changed since the dark days of the 1970s and early 1980s.

Graeme Dunk is manager of Australian Business Defense Industry, a national defense industry association.