Introduction
3.1
This chapter will review the progress of the Hunter-class frigates, also referred to as the Future Frigate Programme (SEA 5000).
Background
The frigates and their capability
3.2
The SEA 5000 program is the planned acquisition to replace the ANZAC-class frigates which entered service in the late 1990s and early 2000s. Named the Hunter-class, this Frigate Program (HCFP) is expected to provide nine frigates optimised for anti-submarine warfare and are based on the United Kingdom’s (UK) Type 26 Global Combat Ship, modified to meet Australian requirements. According to the Department of Defence, the design changes include:
the Aegis combat management system with the Saab Australia developed Australian Interface;
the Australian designed and built CEAFAR2 phased array radar;
integration of systems to support Australian weapons;
integration of the Seahawk Romeo Maritime Combat Helicopter;
Australian communications systems; and
Australian legislative requirements.
3.3
The Hunter-class frigates are intended to provide the Australian Defence Force (ADF) with the highest levels of anti-submarine capability and intended to form a key element of the continuous naval shipbuilding plan as outlined in the Defence White Paper of 2016 and the Naval Shipbuilding Plan of 2017. The construction program is, according to Defence, expected to secure Australian jobs and further invest in Australian defence industry to build and sustain the industry capability needed to design and construct Australia’s major warships over the coming decades.
3.4
The first three ships of the Hunter-class will carry the names of three major Australian regions, all with strong historical maritime and naval ties. HMA Ships Flinders (II) (the South Australian region named after explorer Captain Matthew Flinders—first circumnavigation of Australia and identified it as a continent); Hunter (the New South Wales (NSW) region named after Vice-Admiral John Hunter—first fleet Captain and second Governor of NSW); and Tasman (the state and sea named after explorer Abel Tasman—the first known European explorer to reach Tasmania, New Zealand and Fiji).
3.5
According to Defence, Initial Operating Capability for the first of class HMAS Flinders is expected to be achieved by 2031.
Local industry
3.6
SEA 5000 is a multi-billion dollar program with the Australian Government having approved the initial budget of $6 billion for the design activity to incorporate the Australian requirements, to conduct prototyping of ship blocks in the new shipyard under construction at Osborne in South Australia, and to order long-lead items for the first three ships.
3.7
According to the Defence Department, BAE Systems Maritime Australia is implementing a strategy to maximise opportunities for small to medium Australian suppliers in the build and sustainment phases (including their current supply chains).
3.8
To date, more than 1400 Australian companies have pre-qualified for inclusion in BAE Systems Maritime Australia’s Hunter-class frigate supply chain.
Australian National Audit Office analysis
3.9
The Australian National Audit Office (ANAO) reviewed the project as part of the Major Projects Report (MPR). They made the following observations.
Uniqueness
3.10
Delivering the nine Hunter-class Anti-Submarine Warfare Frigates to the Royal Australian Navy is one of the largest naval ship building projects ever undertaken.
3.11
SEA 5000 Phase 1 will be delivered in several stages to achieve the objectives of the Continuous Naval Shipbuilding (CNS) project. Each stage requiring separate approvals by Government to ensure the project remains within cost constraints.
3.12
While the principles of Defence’s Capability Life Cycle will be applied to this project, due to the longevity, and staged nature of the project, ANAO argued that a unique approach will be required to manage the nine Hunter-class frigates through the life cycle.
Major Risks and Issues
3.13
According to the ANAO, the project is currently managing risk at both a strategic and tactical level. Strategic risks identified broadly fall under a number of key areas being:
capability delivery to Navy;
Australian Industry Capability;
overall budget affordability; and
3.14
In addition, the project is managing one issue relating to information sharing with international users.
Decision-making process
3.15
In June 2014, an Initial Pass was approved by the Australian Government to commence capability development activities, which included conducting studies through to Interim Pass regarding the feasibility of utilising the Hobart-class Guided Missile Destroyer (DDG) platform as the basis for the SEA 5000 Phase 1 capability. The project was directed to return to government in March 2015 when further decisions on SEA 5000 Phase 1 would be taken in the context of the planned 2015 Defence White Paper (DWP) and subject to successful implementation of the Air Warfare Destroyer (AWD) Reform Program.
3.16
In August 2015, the Australian Government announced bringing forward the Future Frigate program to replace the ANZAC-class (FFH) Frigates as part of a continuous onshore build programme intended to commence in 2020. The Future Frigates are to be built in South Australia based on a Competitive Evaluation Process (CEP).
3.17
In November 2015, an Interim Pass was approved by the Australian Government for SEA 5000 Phase 1 to progress the CEP and other activities through to First Pass consideration scheduled for the second quarter of 2016. Government approval was given for the High-Level Capability Requirements (HLCRs) for the Future Frigate and the criteria by which frigate designs would be shortlisted for further development through the CEP.
3.18
In April 2016, the Australian Government provided First Pass approval for SEA 5000 Phase 1 to complete the CEP (based on tenders received from the three ship designers that had been shortlisted), conduct combat system related activities that support integration of the CEA Technologies suite of radars, and develop capability proposals to support Gate 2 consideration in 2018.
3.19
In October 2017, the Government announced the decision to select the Aegis Combat Management System together with an Australian Interface developed by SAAB Australia as the Combat Management System solution for the Future Frigate. This further interim pass included approval for SEA 5000 Phase 1 to provide funds to progress combat system work ahead of Gate 2 in addition to providing for workforce and schedule protection up to April 2018.
3.20
In June 2018, the Government announced BAES Global Combat Ship–Australia (GCS-A) as the capability best suited to Defence needs. A Smart Buyer assessment was not conducted for this project as a similar risk review process had already been conducted as part of the CEP. The platform system is based on the existing Type 26 Global Combat Ship (GCS) design, with changes to meet the HLCR’s as prescribed by Government. The nine frigates were classed as the Hunter-class FFG.
3.21
On 14 December 2018, the Government signed the Head Contract with ASC Shipbuilding Pty Ltd now known as BAE Systems Maritime Australia, a subsidiary of BAE Systems Australia Ltd, to build the Hunter-class frigates under Project SEA 5000 Phase 1.
Project status
3.22
Much like the Attack-class submarines, there has been a growing chorus of concern about the Hunter-class programme. The following summary gives a timeline as to how these concerns have developed. It is an overview only and not exhaustive.
3.23
On 26 October 2020, the Australian Financial Review reported on potential delays:
Top defence officials have admitted the $45 billion future frigate is facing delays because of issues over its design, with Defence Minister Linda Reynolds unwilling to guarantee that construction of the first ship will start on time in late 2022.
3.24
On 24 March 2021, further media reporting indicted that the ship design was proving problematic in terms of weight and performance:
The Australian Financial Review revealed in June last year the frigates were undergoing design changes because the ship was becoming longer and heavier, potentially affecting its ability to hunt submarines.
Ms Lutz said the system design review was looking at the weight issue. “The overall weight of the ship has changed.”
While Ms Lutz said the design was tracking to meeting the weight margin the navy had set for the first batch of frigates, Mr Moriarty said “there is pressure on that weight margin”.
3.25
Further reporting on 31 May 2021 reinforced the weight problems being experienced:
The ability to upgrade the navy’s future frigates with new weapons and systems could be crimped, with the Defence Department revealing the first batch of ships will have a weight margin of little more than 3 per cent for future growth.
With weight issues bedevilling the Hunter-class frigate design, Defence has admitted to a Senate estimates committee the first batch of warships will have a weight margin of just 270 tonnes.
3.26
Finally, reporting on 6 July 2021 further confirmed the project’s delay:
The start of construction of the navy’s $44 billion new fleet of frigates is poised to be pushed back for up to 18 months after the Morrison government agreed to delay the project because of issues with the design.
Work building the first frigate may not start in Adelaide until 2024, after senior ministers approved the delay last week. The move comes as the Auditor-General on Tuesday flagged a potential audit into the project this financial year.
ASPI’s analysis
3.27
In August 2021, Marcus Hellyer, from the Australian Strategic Policy Institute (ASPI), provided a summary of the project and its various maladies. Mr Hellyer’s analysis indicates an unrealistic optimism—wishful thinking—that is being more and more exposed the longer the project runs. He wrote:
The selection process included a two-year, $200 million design phase in which two competitors were funded to develop their designs. The government gave second-pass approval in June 2007 to acquire Navantia’s design, known as the ‘existing’ design because it was based on a vessel that was already in service in the Spanish navy. Importantly, that vessel already used the Aegis combat system and AN/SPY-1 radar that were to be installed on the Hobart-class. Despite that, it still took five years and three months for construction to start in September 2012...
In August 2015, concerned about the prospects of a shipbuilding ‘valley of death’ between the close of the AWD project and the start of construction on the future frigates, the government announced it was bringing forward the frigate program with construction to start in 2020—that is, construction would start in five years, even though the government had not yet selected a design, let alone funded any work on it.
Later that year, the government commenced a competitive evaluation process to identify a reference ship design that was mature, in the water and in service. However, it said it also required five significant modifications to the successful design: integration of the Australian CEA radar, the Aegis combat system, US weapons which were already in Australian service, the MH-60R Seahawk maritime combat helicopter and any modifications necessary to meet Australian regulatory requirements.
The list of contenders was whittled down to three, who were funded to conduct design activities such as assessing the risk of modifying their designs. Those risks forced the government to acknowledge that it wasn’t possible to meet the 2020 construction deadline. So, the 2020 milestone was redefined as the start of ‘prototyping’ (that is, demonstrating that the new shipyard in South Australia worked), while the start of construction on actual ships was moved to the end of 2022.
In June 2018 the government announced that it had chosen BAE Systems’ Global Combat Ship based on the Type 26 frigate being built in the UK. This was in some ways surprising since the Type 26 was the only one of the three contenders that was not mature, not in the water and certainly not in service. We have continued to see instability in the reference ship’s design and it also didn’t use the radar, combat system, weapons or helicopter required by Australia. In essence, the government accepted Defence’s recommendation to choose the least mature design and then perform fundamental modifications to it.
In that light, the four and a half years available to achieve the start of construction by late 2022 seem quite inadequate, compared to the AWD design that needed more than five years despite starting with a more mature design requiring fewer modifications. The growth of the Hunter’s design from around 8,800 tonnes to 10,000 tonnes confirms the immaturity of the initial design.
If we add into the mix the fact that the UK’s program still requires design resources, the Canadians have also selected the Type 26 and are also seeking to implement substantial design changes, and Covid-19 has disrupted everybody’s plans, the announcement of a further 18-month delay to the start of construction simply confirms that reality beats wishful thinking every time.
Leaked Defence report
3.28
In early February 2022, a classified Defence report was leaked to The Australian which described fully the issues dogging the Hunter-class frigates. The article stated:
Australia’s new $45 billion Hunter-class frigates will be “substantially” slower, have a shorter range than originally intended, and could be vulnerable to detection by enemy vessels, a classified Defence Department report reveals. The Defence ‘Engineering Team Assessment’ of the frigates program, undertaken last November, warns the ships could also be less safe for crews, with the potential for sailors to become trapped below deck by floodwaters in “credible damage conditions”.
The 36-page report sets out an array of serious problems with the “immature” British design, which is being substantially modified to meet Australian requirements, and warns that the government’s contract with shipbuilder BAE Systems provides “very limited means … to influence contractor performance.”
3.29
When questioned a Senate Estimates about the leaked report, Defence responded:
It's a pessimistic, conservative view to make sure we're looking at the worst case so that we manage and make sure we meet our requirements moving forward in the design.
3.30
Moreover, Defence claimed that despite the issues identified, the project was essentially on track. Chief of Navy, Vice Admiral (VADM) Michael Noonan stated:
I am confident in the capability that this ship will deliver... Issues around weight margins, issues around power, issues around effects of design are all reviewed through this steering group. And I remain very confident that all elements of the enterprise are working extremely well together to deliver a well-designed—and what will be a well-built—ship that meets the requirements of our Navy into the future.
When the Admirals talk…
3.31
On 28 April 2022, the Australian Strategic Policy Institute published an extensive 48-page document examining the status of the Hunter-class project. Authored by former Vice-Admiral (VADM) and Chief of Navy (CN), now Dr David Shackleton, The Hunter Frigate: An Assessment, was a highly critical analysis of the ship itself and the project overall.
3.32
The Executive Summary provides a searing assessment of the choice of ship and its limitations compared to other designs. Dr Shackleton observed:
There were three contenders for what became the Hunter Frigate Program. The Italian FREMM was already in service. Spain’s Navantia offered a derivative of the Hobart-class, known as the F-5000, proposing an extended flight deck, two hangars and an integrated mast to carry the CEA radar. The third design, the BAE Systems Type 26, was incomplete, but the first ship for the Royal Navy (RN) had commenced construction. Navantia’s offering carried the lowest technical risk, but the FREMM, and much more so the Type 26, would need considerable modification to equip it with the RAN’s sensibly mandated changes. Those included the US Navy (USN) Aegis combat system, which was to be integrated with a new Australian-developed advanced phased-array radar, the US Standard missile system, Australian-specified communications systems, and USN helicopters.
In 2018, Australia selected the Type 26, of which the Hunter will be a derivative. BAE Systems had never integrated a US combat system into its RN ship designs. Defence described important aspects of the risk as extreme.
With an estimated displacement of 10,000 tonnes, it will be the RAN’s most numerous and largest, but least well-armed, surface combatant. Not including deck-mounted launchers, it will have 32 missile cells, which is 16 fewer than the smaller Hobart-class with 48, and 64 less than the USN DDG-51 (a ship slightly smaller than the Hunter) with 96. The Hunter will operate a single helicopter with space to carry a second, versus two for the DDG-51. China’s Type 055 destroyer is about 12,000 tonnes and has 136 cells and two helicopters.
From 2016 to mid-2020, the Future Frigate Program cost increased from an estimated $30 billion to $45.6 billion, and further increases are likely. Some $6.26 billion has been contracted to convert the ostensibly mature design and fund ‘productionisation’ activities, but the schedule has slipped by at least 18 months. In raw terms, the approximate cost of a missile cell in the nine-ship Hunter-class will be $158 million, compared to about $31 million per cell for 10 ships of the now building DDG-51 Flight III. The Hunter’s crew is forecast to be 180, versus the 329 of a DDG-51, but nonetheless it will take three Hunters to deliver the same firepower as a single DDG-51 and require 211 extra crew.
3.33
Dr Shackleton also raised the issue of potential foreign influence or loss of sovereignty should both the Hunter-class and the future submarine be built by the same company:
BAE Systems UK is the prime contractor for the UK Astute-class nuclear submarine. The design and construction of nuclear submarines is a sovereign requirement for the UK, which it achieves with assistance from the US. BAE Systems Maritime (Australia) is a wholly owned subsidiary of its UK parent and is the prime contractor for the Hunter program… If chosen for the nuclear submarines, the company would become the only source of major surface combatants and submarines for the RAN. This is an unsound position to be in, and it’s to be expected that Australia’s government wouldn’t place itself in a position in which it had no choice over the future designs and construction of its ships and submarines.
3.34
Dr Shackleton concluded:
The Hunters aren’t powerful enough to meet the Navy’s needs and won’t give the government a range of military options it could need for managing a future conflict. A misguided emphasis on optimisation for ASW operations has resulted in Australia choosing a ship unsuited for its needs. A change of direction is needed.
3.35
Dr Shackleton’s report also included a list of recommendations, the first of which was: “The Hunter frigate program in its current form should be stopped and redirected.”
3.36
Other ASPI analysis also supported the former Chief of Navy’s conclusions. Paul Greenfield and Jon Stanford commented:
…the selection of the Hunter to replace the Anzac-class ships was a mistake. The operational requirement for Defence’s SEA 5000 program took inadequate account of the magnitude and nature of the developing strategic threat to Australia...
While the addition of Aegis, SM systems and CEA radars to the Sea 5000 operational requirement was sensible, the selection of the Type 26 as the reference design then made it highly risky. These systems had never before been integrated on a British warship. Indeed, the obvious choice from among the competing platforms for SEA 5000 now became the Spanish F-5000, which was a development of the Hobart-class and already embodied Aegis and SM weapons. It also had 50 per cent more missile cells than the Hunter and we knew how to build it.
The question now is whether the Hunter’s obvious shortcomings can be rectified or if the program should be cancelled at significant cost.
Committee comment
3.37
The Hunter-class acquisition is showing very similar problems to the Attack-class submarines. Questions over the design chosen, the level of risk, optimistic program schedules and slipping timeframes have led to time and cost blow-outs.
3.38
Like the Attack-class, there is a growing chorus of observers who, in some cases, are calling for a complete review of the program or, in other cases, are calling for the programme’s outright cancellation.
3.39
And like the Attack-class, almost right up until its cancellation, the Department of Defence continues to claim that despite some issues, the Hunter-class project is essentially on track and will ultimately deliver the capability required.
3.40
The committee notes that on 26 April 2022, the Secretary of the Department of Defence, Mr Greg Moriarty, was in the UK to discuss the status of the
Hunter-class project:
Defence sources say that during the visit to the UK, Mr Moriarty is expected to press BAE representatives about problems being encountered on the UK's Type 26 program and possible implications for Australia's Hunter-class project.
3.41
It appears all is not well with SEA 5000, and further scrutiny and transparency is required to establish the truth of the matter. The next Federal Government, regardless of political colour, should conduct a fundamental review of the Hunter-class frigate project and make a public statement on its status and what needs to be done to address its failings.
3.42
That the Australian Government and the Department of Defence undertake a review SEA 5000 and issue a public statement clarifying:
the overall status of the Hunter-class Frigate project;
what problems have been identified and how they are to be resolved;
the current expected cost of the project including any further new expenditure; and
if a ‘Plan B’ is being considered should the project be cancelled as the Attack-class submarine contract was.