Additional Comments - Labor Members

Future Submarine Program - France; Classified Information Exchange - France

The Future Submarine Program (FSP) will be the largest Defence acquisition in Australia’s history; it is the key to our regional maritime defence strategy as outlined in the 2016 Defence White Paper; and it is the centrepiece of the Royal Australian Navy’s continuous shipbuilding program.

Labor supports both the strategic value and the potential for industry capacity-building that are inherent in the FSP. But these will only be delivered by the ongoing, close, stringent, and responsive supervision of all aspects of the FSP.

We recognise that Defence strategy, procurement, and operations fall within a distinctive sphere of policy and administration in the national interest. Nevertheless, Labor asserts the importance of rigorous and discerning analysis and oversight of the FSP, free of any tendency to regard such projects as being above ordinary review or criticism.

Defence strategy, procurement, and operations cannot be matters so arcane and rarefied as to prevent the full and proper supervision of parliament and government in relation to all relevant aspects of the national interest. Defence acquisitions should always be necessary, fit-for-purpose, and cost‑effective; and the consideration of opportunity costs involved in any acquisition should not be limited to foregone opportunities in Defence alone.

In supporting the binding treaty action, we make the following additional comments:

It is paramount that Australia learns the lessons of the Collins Class submarine project, which included disputes over intellectual property that had the potential to seriously diminish Australia’s sovereign capacity to maintain and operate its submarines. Witnesses before the Inquiry into this Agreement have noted that Australia continued to be reliant on Kockums personnel for some on-board repairs to the Collins Class submarine, which reduced operational availability and sea-time. That must be avoided in the course of the FSP.

The French government majority ownership of DCNS may not persist through the life of the FSP, which is expected to be several decades. Article 8(3) requires that France shall continue to ensure its obligations under the Agreement are met even in the event of a change of control of DCNS, but it’s not clear how this would occur in some circumstances – for example, if DCNS was to be controlled by a third-country entity.

It is salient to reflect on the fact that the while Article 8(1) recognises that “security of supply is crucial for the delivery of the Future Submarine, and Australia’s ability to maintain its sovereign operational and sustainment capability […] including in times of peace, crisis or armed conflict”, Article 23(5) allows either Party to terminate the Agreement if its ability to implement its obligations is “fundamentally impacted by exceptional events, circumstances or matters”. It is not hard to imagine that a grave crisis or an outbreak of armed conflict could constitute an “exceptional event”.

The FSP cannot be considered a matter principally confined between Australia and France. The Future Submarine’s integrated combat weapons system will be provided by Lockheed Martin, and witnesses before the Inquiry have made the point that appropriate trilateral arrangements will be necessary if the objectives of the Agreement under consideration are to be achieved in areas like intellectual property, security of supply, security of information, sovereign capability, and Australian industry participation.

Achieving the objective of maximising Australian industry participation [Article 3 (1)(h)] will not be easy or straightforward. We support Recommendation 1 which calls for the Department of Defence to report back in the 2018 Winter Sittings of the Parliament on the acquisition of the necessary intellectual property and its ongoing maintenance, and, on the suggestion of Labor members, that this report also provide more detail in relation to the contractual and other arrangements that will secure maximal opportunities for Australian industry involvement.

On that issue, it is worth noting that whereas Article 13 (Industry Cooperation) (2)(b), states that:

“France shall […] not hinder French industry efforts regarding Australian industry involvement in the design, build and sustainment of the Future Submarine, with Australian companies able to bid for work, including as part of the supply chain, in all phases of the FSP on an equal basis with French companies.”

It may have been stronger and more effective for the Article to read:

For that reason, Labor members of the Committee sought to have included Recommendation 2, below, and we are grateful for the Committee’s support for that inclusion.

Recommendation 2

In reference to Article 13(2)(b), the Committee recommends that government seeks to ensure that the further detailed agreements and arrangements have the effect of allowing Australian companies to bid for work in all phases of the FSP on a preferred basis, all other things being equal.

As noted in the Report [at 2.10], by selecting DCNS, Australia has chosen as its platform the Barracuda class which is the ‘latest, state-of-the-art, nuclear attack submarine’. There has been discussion by experts in the media about the possibility that the choice of the Barracuda platform may have been positively influenced by the option of developing a nuclear-powered version of the Future Submarine as the program develops. Such an option, if it has been contemplated, should not be a matter of secrecy, and would on the face of it be incompatible with Australia’s clear policy and national interest on that issue.

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