It appeared to be the announcement Australian industry had been waiting for. Finally, political pressure on prime minister Tony Abbott’s leadership had forced a “fair go” for Australian shipbuilding. On Sunday, the prime minster appeared to commit to a competitive tender for Australia’s future submarine.
Or did he? In a backflip that echoes the government’s refusal to honour its pre-election promises on the subject, it appears that we’ve been misled. The promise of a “competitive evaluation process” may be meaningless. There is no such term in the world of defence procurement.
What, then, is the reality? Perhaps this was a “captain’s call” offering nothing new. No guarantees for Australian industry; no change in policy.
In my submission to the Senate’s Economics Reference Committee last year, I used defence procurement terminology to outline a proposed competitive tender process for the future submarine.
That process would be rigorous and transparent, in line with Australian procurement legislation. No weasel words here.
The government would articulate its requirements for the fleet and the four leading contenders (Japan, Germany, France and Sweden) would be asked to submit their proposals as to how the submarines would be designed, built and sustained.
Known as a “contested project definition study” this phase would be partly funded by the Australian government: it would ensure that the contenders’ proposals met Australia’s economic and strategic requirements.
Crucially, the study would also establish how the contenders plan to work with Australian industry. This is fully in line with the Economics References Committee’s inquiry into the future of Australia’s naval shipbuilding industry and the future submarine.
In its final report, the committee said:
“Given the weight of the evidence about the strategic, military, national security and economic benefits, the committee recommends that the government require tenderers for the future submarine project to build, maintain and sustain Australia’s future submarines in Australia.”
That requirement – if followed by the government – would ensure that Australian submarine and shipbuilders work in partnership with the winning contender. The design, build and sustainment phases would all be based in Australia.
Until now there have been four contenders: DCNS, the French manufacturers of the SMX Ocean Class; Japan and its much-debated Soryu; the German submarine builder TKMS and the Swedish manufacturer Saab Kockums.
Now it appears there are three, after a Japanese government source suggested that Japan would be unlikely to proactively participate in a competitive process.
“If we are asked that’s not a problem, but we can’t really be seen to be going out and actively pursuing a deal,” the unnamed source told Reuters, echoing comments Japanese sources have previously made about taking part in an open tender. The question must be asked: what promises have been made to Japan by the PM or the federal government regarding the procurement process, for them to reject any prospect of actively competing?
As the Senate inquiry identified, the winning contender must demonstrate the ability and the readiness to establish a design, manufacturing and sustainment base in Australia. Given the complexity, secrecy and strategic importance of submarine technology, the tender process must ensure Australia’s sovereign capability.
“It is critical that Australia has full access to those technologies that underpin Australia’s Submarine Force strategic interests,” explained two former submarine Commanding Officers in their submission to the inquiry. “Otherwise the effectiveness of the new submarines will always be reliant on the relationship with the overseas parent navy and its industry base.”
As a nation, we need control of our defence assets and the freedom to engage in military operations without overseas approval or support. To achieve that we need the expertise, the capability and the supply chains to equip, sustain and defend ourselves.
For Australia’s submarine and shipbuilders, this means a tender process that prioritises their involvement from the start. The winning contender must be prepared to establish a design office at the building shipyard in Australia, share technology and engage fully with Australian industry to build capability.
It also requires a tender process that is both rigorous and transparent. To date, the government’s preoccupation with the Soryu has prevented adequate exploration of alternatives from Europe. It has also failed to recognise the expertise we have at home.
Australia’s submarine industry has learnt many lessons. As David Johnston acknowledged himself – before his “rhetorical flourish” undermined his position – the Australian Submarine Corporation has made remarkable progress in implementing change. The findings of the Coles Review into ASC’s submarine sustainment programs have been taken seriously.
Today, ASC is internationally recognised as an authority in submarine design and engineering: the US submarine designer and builder Electric Boat has assessed ASC to be an authority in submarine design and manufacture by international benchmarking standards.
ASC has more than 300 degree-qualified engineers with know-how spanning 16 engineering disciplines. Their expertise is highly specific to submarines; ASC is the largest organisation of its kind in the southern hemisphere.
ASC’s expertise is beyond doubt: it is ready, willing and capable of playing a significant role in the manufacture and sustainment of Australia’s future submarine. All that’s needed now is the right design partner, identified through a contested project definition study and a competitive tender process.
Built into that process should be a guarantee for Australian industry and the wider community. It makes no sense for Australian taxpayers to invest in innovation that benefits another country’s economy, with little benefit at home.
According to the National Institute of Economic and Industry Research (NIEIR), Australia would conservatively lose out by around A$21 billion if comparing the costs of building the future submarine overseas to building it at home.
This is not counting the benefit to the country’s long-term wealth generating capability, through the increase in economic complexity. This is essential to retain as we face the loss of a similar complexity provided by the automotive industry and its ecosystem.
For months, Australia’s submarine experts have been proposing a way forward that defends both economic and national security. On Sunday, it appeared the prime minster was listening.
With so much to gain, let’s not allow weasel words to get in the way.