23 Jun 2013
Risks of building subs need analysis
By Mark Thomson
The Australian, p10
In these pages recently, Peter Cosgrove set out the case for building Australia's future submarines locally. It was an inspiring effort, complete with references to nation building, space shuttles, the Snowy Mountains Scheme and, curiously, the GPO.
He needn't have wasted his time. While there are good arguments for foreign construction, the political fix is in. In the forthcoming election campaign, both sides will have "12 submarines built in Adelaide" written in indelible ink on their election platforms.
The politics of the defence industry are reflected in the Defence SA Advisory Board chaired by Cosgrove. With two ex-chiefs of the defence force and a bevy of retired admirals, generals and ex-senior Defence bureaucrats, it is a lobbying machine without compare in the private sector.
It's the heavyweight end of Australia's military industrial complex. Given that politics dictates, for better or worse, that the next generation of submarines will be built in South Australia, and with as much as $36 billion and a critical military capability at stake, how do we get it right?
The real danger with Cosgrove's stirring call to "fire up the national imagination" is that it underplays the risks and challenges ahead. Does he really believe that Australia is "a world leader in long-range conventional submarine design, manufacture and maintenance"? That description may surprise the accomplished submarine designers and builders in Japan. But perhaps in a world where, as he claims, "our capabilities are limited only by our imagination" it's true.
Today's reality is very different. The long and troubled Collins fleet is only now beginning to show signs of being reliable - 17 years after the first boat hit the water. And that's largely a result of a scathing review of Collins maintenance arrangements by John Coles, who was brought in from Britain for advice.
Further evidence of difficulties ahead can be found in Air Warfare Destroyer project under way at the ASC (formerly the Australian Submarine Corporation) facility in Adelaide - the site where the next-generation submarines will be built. During the planning phase, the estimated cost of the three-vessel project grew from $4.5bn to $8bn. The final module for the first vessel has only just been delivered, yet the project has already been delayed twice. The first vessel is now expected to be 21 months late, and the most difficult jobs - the integration phases that have plagued previous projects - are still in the future.
A shroud of secrecy surrounds the AWD project. The 540 pages of last year's Defence annual report devoted a scant 190 words to explain how $8bn of taxpayers' money was being spent. Initially the government claimed that the delays "will not increase the cost of the project", yet Defence has recently said costs have increased by $200 million. Who knows the true state of the project's finances?
Greater transparency is needed on the AWD project and a rational assessment of it before we can plan a rational approach to the next generations of submarines.
Two questions stand out. First, what sort of submarine do we build? Cosgrove refers to a project "akin in size and complexity to building the next generation of space shuttles because these will be the biggest, most complex non-nuclear submarines on the planet". Well, that's one option that would delight the burghers of South Australia. But the government has also been examining less ambitious options. The final choice should be informed by a sober assessment of costs, benefits and risks, rather than breathless allusions to "visionary policies of a country on the move".
Second, there's the question of production schedule. In its recent Future Submarine Industry Skilling Plan, developed in consultation with local industry, Defence proposes a rolling build program where a boat is retired as every 12th boat is delivered. For South Australia it would be manna from heaven - a monopoly that once entrenched would never end. In fairness, there are advantages to such an approach; skills would be retained and designs could be evolved. But there are also substantial additional costs that Defence fails to acknowledge.
A rolling build program with 12 boats would almost certainly result in a shorter life for the vessels. A shift from a 30-year life to a 24-year life would result in 25 per cent higher costs due to more frequent replacement alone. As well, a project that produces one vessel every year and then shuts down will incur lower total overhead costs than a shipyard that never closes. With decisions fast approaching, it's time to set aside the nation building Kool-Aid and plot a course that puts the needs of navy and the taxpayer above the pleading of vested interests.
Mark Thomson is a senior analyst at the Australian Strategic Policy Institute. These are his personal views.