More Questions than Answers
Introduction
2.1
The committee's Interim Report, published in May 2021, provided a detailed analysis of the Attack-class' procurement status and the issues that had presented themselves.
2.2
Since then, the 16 September 2021 announcement cancelling the Attack-class boats and announcing the intent for Australia to acquire nuclear submarines in conjunction with the United Kingdom (UK) and the United States of America (USA), has completely changed the future submarine program and with it the naval shipbuilding plan.
2.3
This chapter examines these developments.
The First Interim Report
2.4
The First Interim Report came to the following conclusions on the status of SEA 1000:
all was not well with the Future Submarine Program (FSP). There had been little good news since the April 2016 announcement that Direction des Constructions Navales (DCNS) (now Naval Group) had been selected as the international partner to design and build the nation’s new fleet of submarines.
Since the April 2016 announcement, there had been nothing but delays, cost blow-outs, changes of personnel driven by dissatisfaction with the program’s outcomes, secret agreements on local industry content way below the level initially promised, and a strained relationship between Defence and Naval Group;
the decision to go with a diesel-electric boat converted from an existing nuclear design with a pumpjet propulsor was a high-risk option;
the German boat builder ThyssenKrupp Marine Systems (TKMS) had offered a fixed price of $20 billion for 12 submarines to be built in Australia, yet the decision was made to go with the Naval Group proposal at a cost of $50 billion evidently on the strength of that pumpjet propulsor;
the reported decision to ask Saab/Kockums to consider providing a design for an improved 'Son of Collins' boat was quite extraordinary, given that the Swedish boat-builder was not invited to be part of the Competitive Evaluation Process (CEP) in 2016.
that such an outcome had even been considered was a poor indictment of the decision to go with the Naval Group's proposal; and
the renegotiated Strategic Partnership Agreement that included a local content requirement of at least 60 per cent had not and would not be presented for parliamentary scrutiny.
2.5
The committee made the following recommendations:
The Commonwealth Government and the Department of Defence report to the Parliament on what discussions were or are being undertaken with Saab/Kockums, or any other alternative submarine builder, about the provision of a Collins-class derivative boat, or any other design, as part of a 'Plan B' should the Naval Group agreement be cancelled; and
the Department of Defence provide the Senate Economics References Committee, on a confidential basis, an un-redacted version of the renegotiated Strategic Partnership Agreement with Naval Group for scrutiny.
2.6
As it turns out, the Interim Report was a remarkably prescient document: the Naval Group agreement was in serious trouble, and even more so than the committee realised. Although it was at the time believed that the political cost of the cancelling the Attack-class would be too high, the government has decided to make that decision and accept that risk.
Going nuclear
2.7
On 16 September 2021, the Federal Government announced the Australia-United Kingdom-United States (AUKUS) security agreement, which included the procurement of nuclear submarines for the Royal Australian Navy (RAN), and meant the cancellation of the Attack-class submarines which were to be produced in partnership with France's Naval Group.
2.8
According to the Prime Minister's webpage:
The first initiative under AUKUS is for Australia to acquire nuclear-powered submarine technology, leveraging decades of experience from the US and UK.
Under AUKUS, the three nations will focus immediately on identifying the optimal pathway to deliver at least eight nuclear-powered submarines for Australia.
Over the next 18 months, Australia, the UK and US will intensely examine the full suite of requirements that underpin nuclear stewardship and demonstrate a clear pathway to becoming a responsible and reliable steward of this sensitive technology. Australia will establish a Nuclear-Powered Submarine Taskforce in the Department of Defence to lead this work.
Nuclear-powered submarines do not have the same limitations that face conventional submarines on weapons storage, speed and endurance. They can stay completely submerged for many months, limiting the opportunities for detection by adversaries.
As a three-ocean nation, it is necessary for Australia to have access to the most capable submarine technology available. As a nation, we are ready to take the step to pursue the most advanced submarine technology available to defend Australia and its national interests.
Australia has no plans to acquire nuclear weapons and this proposal will remain consistent with Australia’s longstanding commitment to nuclear non-proliferation. All three nations are deeply committed to upholding leadership on global non-proliferation.
The Government’s intention is to build the nuclear-powered submarines in South Australia, maximising the use of Australian workers.
Building the submarines in Australia is the best way to develop a strong and effective sustainment industry, which will enable us to meet every requirement to safely operate and maintain nuclear-powered submarines.
2.9
This is an extraordinary development—one that significantly changes the strategic footing of the Australian Defence Force (ADF).
2.10
It also raises a series of questions which have yet to be addressed either through the government announcement or through the public hearings the committee held into the announcement on Friday, 15 October 2021 and Wednesday 17 November 2021.
Questions to be answered
2.11
The Prime Minister's announcement raised many more questions than it answered. The announcement was nebulous and provided little information on costs, schedules, capability, sustainment and logistics. Given the importance of the project, and the expected large cost, this is an unsatisfactory outcome in terms of accountability and transparency. It also creates a serious risk of Australia having limited or no submarine capability in the years prior to the delivery of the first nuclear powered submarine.
2.12
Moreover, the commentary on the proposed nuclear boats and their strategic ramifications has glossed over the abject failure of the government's decision-making processes regarding the Attack-class.
Management of the Attack-class submarine project
2.13
To recap: in April 2016, the decision was made to proceed with the French Attack-class proposal with a stated cost of $50 billion in constant 2016 dollars. This was in contrast to a credible offer from Germany's TKMS of a $20 billion fixed-price contract to construct twelve conventional diesel-electric boats in Adelaide.
2.14
The CEP left both the Japanese and the Germans dissatisfied and baffled at the process with questions raised about how badly the relationship between Australia and those two countries was undermined.
2.15
Since the publication of the previous Interim Report in May 2021, a curious story was published by Robert Gottliebsen in The Australian. In it, he claimed:
Earlier government meetings had decided on the German submarine.
The Germans were unofficially told they had won the tender and boarded planes to come to Australia for the announcement on April 26, 2016 – the day after Anzac Day.
But suddenly a meeting of the National Security Committee (a collection of top ministers) was called for Sunday, April 24. At that meeting defence officials gave a passionate endorsement of the French bid and that endorsement was backed by Turnbull.
Defence and Turnbull won the day and the Germans returned home with their tails between their legs.
2.16
The committee notes that this report remains uncorroborated by other sources. However, if true, this is another example of how ineptly the CEP process was conducted.
2.17
Moreover, a follow-up article was published by Gottliebsen on 31 October 2021 where he not only reiterated the point, but also claimed the original Naval Group proposal was ‘between $20 billion and $25 billion in 2016 dollars, which was not much bigger than the German bid.’ This would be consistent with the claim made in October 2015 by the then Defence Department’s Secretary, Dennis Richardson, that the future submarine project would be $50 billion in out-turned dollars, and in direct contradiction with the repeated claim by the government that the cost was always $50 billion in 2016 dollars. The committee will return to this theme in the next chapter.
2.18
The contract with France's Naval Group has now been cancelled, much to the anger of the French Government. The re-calling of their Ambassador to Paris was an extraordinary development given the close historic ties between both countries. The net result is that five and a half years and $2.4 billion have now been squandered. Furthermore, the project's cancellation will cost between $140 million and $400 million. Bernard Keane described it as: ‘the most staggering piece of project mismanagement in Australian history, in our most important portfolio.’
2.19
Former Coalition Prime Minister the Rt. Hon. Malcolm Turnbull, concluded:
…regardless of what you think about the submarines, this was a diplomatic debacle of the first order and the consequences being that it has undermined Australia’s honour, security and sovereignty.
2.20
So, the questions that need to be addressed by Defence and the government are:
who in Defence advocated for the Attack-class boats, and have there been consequences for that advice having been proven wrong?
what accountability within the Defence Department has there been for the decision?
were the people who advocated for the Attack-class also involved in the decision to go with the nuclear boats?
If so, what confidence can we have in their judgement?
media reports indicate that the government began exploring alternatives to the French submarine project 18 months ago.
how much money was spent during those 18 months on the Attack-class when the project was under serious question?
Constructing, sustaining and decommissioning nuclear submarines
2.21
The construction of nuclear submarines is a completely novel concept for Australia and is outside this country's experience. Nuclear submarines are larger and more complex than conventional diesel-electric submarines. Coupled with that, is the safety and sustainment aspect of the nuclear reactors. Australian engineering and shipbuilding have little experience in this field.
International and domestic law
2.22
Australia is a signatory to the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) and is a member of the International Atomic Energy Agency (IAEA) and the Nuclear Suppliers Group. The Commonwealth Government has stated that Australia will continue to observe its non-proliferation obligations, and the Federal Opposition has stated that this is a condition for its support for the nuclear submarine program.
2.23
The Australian Strategic Policy Institute (ASPI) has also reviewed this question and observed:
…the export of WGEU [weapons grade enriched uranium] to Australia will create some unique issues for the NPT, given that Australia is a non-nuclear-weapon state. At this stage, the only other nation developing nuclear submarines that doesn’t possess a nuclear weapon is Brazil, but it’s expected to use LEU [low enriched uranium]. Regardless of the Australian Government’s declared intentions, once Australia possesses WGEU, the breakout time to develop and construct nuclear weapons would be less than a year if a simple nuclear-weapon design were pursued.
…to fully meet our obligations and demonstrate our commitment to being a responsible stakeholder, Australia will need to work through these issues with the IAEA of governors to establish the most robust arrangements possible. This would also require the involvement and agreement of the US or the UK as the supplier, which would need to be comfortable that any inspection regime protected its technology.
2.25
The nuclear submarine acquisition program also raises domestic legal issues. As it stands, nuclear power and some nuclear industries are prohibited under Commonwealth law. Two particular pieces of federal legislation—the Australian Radiation Protection and Nuclear Safety Act 1998 and the Environment Protection and Biodiversity Conservation Act 1999—prohibit nuclear-fuel manufacture, nuclear power generation, as well as enrichment or reprocessing facilities generally. Other legislation also exists on a state and territory level that regulates nuclear activities.
2.26
When asked during the 15 October 2021 public hearing as to the status of Australian law and the required changes necessary, Australian Radiation Protection and Nuclear Safety Agency (ARPANSA) responded that Australian law is not prepared for such an exercise and that amendments to series of existing Acts was likely necessary.
Nuclear submarines without a nuclear industry
2.27
It has been proffered that the reactors to be procured for the boat can be run for the life of the boat (approximately 30 years) without refuelling and do not require a domestic nuclear industry or expertise to sustain them. However, doubts have been expressed. Marcus Hellyer of ASPI noted:
We may not need civil nuclear power plants, or facilities that can enrich uranium to fuel the submarine’s reactor, but we’ll still need to perform maintenance and repair on the submarines, including the reactor. You can’t have an effective military capability if you need to return it to the US any time there’s a defect. Deeper maintenance will require putting the boats in dry dock and shutting down the reactor, working on it and starting it up again in an absolutely safe manner. We’ll need to develop that maintenance workforce from a very low base.
2.28
Furthermore, the UK experience provides a profound example of just how fraught servicing and decommissioning nuclear boats can be. The Royal United Services Institute published a paper examining the extraordinary state of the UK efforts to decommission and scrap its old nuclear boats. Boats decommissioned over 20 years ago are still in dock waiting for disposal. It stated:
Britain’s parliamentary financial watchdog, the National Audit Office’s (NAO) report on the Ministry of Defence’s (MoD) snail-like progress on de-fuelling and dismantling of the country’s retired nuclear submarines exposes the MoD’s long history of failure to prioritise this matter and its preference for spending a modest amount for many years rather than larger sums in the near future. As a consequence, the MoD has 20 old submarines in storage at Rosyth and Devonport with nine at the latter site still containing their nuclear fuel; the 20 include the original Polaris boats which left service in the 1980s.
Although the MoD established disposal as the final phase in its formal acquisition life cycle as early as 1998 in its Smart Procurement Initiative, this does not appear to have had much impact in the submarines area: 20 years later the MoD does not know how long disposal will take or what it will cost.
2.29
Further analysis was done by Kevin Naughton who observed that, because of its own difficulties, the UK was in no state to assist Australia in the nuclear submarine project in term of decommissioning. He stated:
As a key AUKUS partner, the UK, a builder of nuclear submarines for more than 40 years, is struggling with the dismantling and storage of radioactive parts from its decommissioned boats.
The UK's Audit Office report’s findings are stark:
The Ministry of Defence (the Department) has not yet disposed of any of the 20 submarines it has decommissioned since 1980.
The Department now stores twice as many submarines as it operates, with seven having been in storage for longer than they were in service…
Underpinning the UK’s capacity to dismantle its nuclear submarines is an extensive civil nuclear capability with storage and disposal sites up and down the coast at Devonport, Rosyth, Cumbria, West Cumbria and Cheshire.
Australian Prime Minister Scott Morrison promises that "we are not seeking to acquire nuclear weapons, nor establish a civil nuclear capability." Given the National Audit Office's findings that the UK has capacity and storage problems from its current decommissioned subs that will take until at least 2060 to resolve, our alliance partner is in no position to assist.
2.30
This was also noted by the Electrical Trades Union of Australia. They commented that they had:
…seen nothing whatsoever in the announcement that deals with the issue of decommissioning and disposal. We note the offshore difficulties in disposing of nuclear-powered submarines, particularly with the Royal Navy. We note some of the issues in relation to the offshore oil and gas industry in this country, where there are difficulties in disposing of facilities. It would seem to be a massive risk to a future Commonwealth budget to decommission and dispose of these units without any public debate or consultation having been arrived at to this point in time.
2.31
ASPI has also looked at this question:
Australia has no experience with or ability to handle or store such high-level waste. Additionally, the spent WGEU reactor fuel is still highly enriched and would be an extreme nuclear non-proliferation risk if Australia were to manage that waste... That would require significantly increased International Atomic Energy Agency (IAEA) oversight obligations.
Therefore, Australia shouldn’t be responsible for the long-term storage of the spent reactor fuel. The fuel should be returned to the providing nation under an agreement based on the fact that the partner nation has in place the necessary capacities for its storage or reprocessing.
2.33
Some of the questions falling out of this are:
What safety aspects need to be considered with nuclear submarines and their reactors?
How many amendments will be required in Australian law for this project to proceed?
What will happen to the nuclear submarine acquisition if all the relevant amendments cannot be passed through the Federal Parliament?
How will Australia, without a nuclear industry, repair and/or sustain the boats if there is a failure within the reactor?
Given the UK experience, has any thought been given to the decommissioning of the boats, and the storage and disposal of the radioactive material?
What will be the cost of decommissioning and have these costs been included in the project’s cost estimates?
Australian sovereignty and shipbuilding sustainability
2.34
Two of the premises of the naval shipbuilding program were sovereignty and the sustainability of Australia's naval shipbuilding industry. In short, Australia would be able to build and sustain its boats and ships through local construction rather than be reliant on a foreign power.
2.35
In terms of sovereignty, Australia, the US and the UK did, on 22 November 2021, sign the Exchange of Naval Nuclear Propulsion Information Agreement. This agreement will, according to Minister Dutton:
…'support Australia in completing the 18 months of intensive and comprehensive examination of the requirements underpinning the delivery of nuclear-powered submarines’. The agreement will also allow Australian personnel to access ‘training and education from their UK and US counterparts, necessary for learning how to safely and effectively build, operate and support nuclear-powered submarines’.
2.36
While welcome, this agreement shows the extent to which Australia will be reliant on information sharing arrangements with the US and UK to be able to construct and operate these submarines.
2.37
Moreover, the concurrent and coordinated construction of the Offshore Patrol Vessels (OPVs), the Hunter-class frigates and the Attack-class submarines was supposed to provide the basis for a long-term sustainable Australian naval shipbuilding industry and avoid the so-called 'Valley of Death' where a period of no active shipbuilding means the loss of the skills and experience required to do so.
2.38
When asked by the committee if he shared the concerns of others that delays in the submarine program with open up a 'Valley of Death', the Hon. Mr Martin Hamilton‒Smith, Director, Australian Sovereign Capability Alliance said:
Yes, I do. The problem is continuous work. We've discussed this, and we'd urge the government not to move away from the principle of the continuous naval shipbuilding enterprise. We're managing, at the moment, projects in silos. We managed the submarine project separately to the surface ship, the frigate. Primes are pinching people and infrastructure off each other as they work in silos. A shipbuilding authority might manage the entire enterprise, but we certainly need to do it better. There seems to be a gap.
2.39
Both the sovereignty and sustainability aspects are now under question.
Given that the nuclear technology is from the US and UK, how has this decision impacted Australia's sovereign capacity to sustain the RAN?
If Australia is reliant on the US and/or the UK for the decommissioning and storage of the expended nuclear material (as discussed by ASPI above), what implications does that have for Australian sovereignty?
Similarly, IAEA inspections will need some form of US and UK agreement (as discussed by ASPI above), what implications does that have for Australian sovereignty?
What level of technology transfer will be necessary for Australia to maintain US or UK designed and possibly built nuclear boats?
What ongoing willingness will there be from the US and UK to share such technology—particularly if there is a change in both countries' political environment?
Is the 'Valley of Death' now unavoidable given the first of the new boats aren't expected until the mid-2030s at the earliest and that is assuming that they will be built in Australia?
Cost and delivery timeframes for the new submarines
Costs
2.40
The initial announcement indicated that eight or possibly more submarines were being considered and the conjecture is that Australia will acquire either Astute-class boats from the UK, or Virginia-class boats from the US. Initial media reporting indicated that this would cost the Australian taxpayer A$100 billion+
2.41
Since then, ASPI has done some comprehensive analysis on the nuclear submarine proposal. They concluded that:
The government has been open in stating that the SSN [Submersible Ship Nuclear] program will cost more than the Attack-class program, which would have cost around $56–57 billion in current-day constant dollars.
We agree: at an absolute minimum, an eight-boat SSN program will cost around $70 billion constant (or $116 billion in out-turned dollars, which account for inflation).
However, it’s highly likely that it will cost substantially more once the cost drivers are more clearly understood.
Those include both the US and UK moving to bigger submarine designs, our choice of build strategy, and the broader support system and infrastructure needed to operate nuclear submarines.
2.42
Ultimately, ASPI concluded that the cost of the nuclear acquisition in out-turned dollars was between $116 – $171 billion.
Delivery time
Construction
2.43
An initial estimate for the delivery of the nuclear boats was 2038 or even 2040 – some 16–18 years into the future. This is an extraordinary timeframe given one of the rationales for the nuclear submarine acquisition is that Australia's strategic environment has 'rapidly deteriorated'.
2.44
Bradley Perrett commented:
As Chinese military power escalates, it's beyond ludicrous for the government to be talking about receiving the first of our nuclear submarines as late as 2040, when the threat to this country may have risen alarmingly.
2.45
To make a hypothetical historical analogy: in 1985 Australia announces a major, expensive, Defence purchase for delivery in 2002—say a pair of aircraft carriers or fleet of nuclear submarines—in order to counter the Soviet naval presence in the Indian Ocean. But in 2002, there is no Soviet Union and Australia is, in fact, involved in an asymmetric war against Islamic terrorism in Afghanistan.
2.46
Delivery of nuclear boats in 16 years' time is hardly the answer to an immediate regional threat. Liberal Senator, and former Major-General, Jim Molan, said:
The PM’s prediction on getting the nuclear submarines in one or two decades means we will fight the (hypothetical) China war, itself variously predicted within three to 10 years, with the Collins. The nukes are a worthwhile long-term strategic objective, but they are not the one answer to our national security needs.
2.47
On 24 December 2021, it was announced by the Defence Minister, the Hon Mr Peter Dutton MP, that an agreement had been reached with the US that the 'first half of the 2030s' at about the same time as the first Attack-class boat was to be delivered. The same article stated that the Minister 'strongly hinted' that the new submarines would be built in Australia rather than in the US or the UK.
2.48
There are, however, serious questions on whether those boats can be delivered from 2038 or even the 'first half of the 2030s' as is now claimed given the status of those boat construction programs in their home countries.
2.49
US shipyards have little spare capacity to build Australian boats. An article from the New York Times explained:
…the two American shipyards that make nuclear submarines, as well as their suppliers, are straining to keep up with orders for the U.S. Navy. The shipyards complete about two Virginia-class boats a year for the Navy and are ramping up to build Columbia-class submarines, 21,000-ton vessels that carry nuclear missiles as a roving deterrent—a priority for any administration.
A report to the Senate Armed Services Committee last month warned that the "nuclear shipbuilding industrial base continues to struggle to support the increased demand" from U.S. orders. That report was prepared too late to take into account the Australian proposal…
2.50
With regard to building Australian boats in the UK, the article further explained that this option was also difficult:
Other experts have said Australia should choose Britain’s Astute-class submarine, which is less expensive and uses a smaller crew than the big American boats. The head of Australia’s nuclear submarine task force, Vice Adm. Jonathan Mead, said this week that his team was considering mature, "in-production designs" from Britain, as well as the United States. "That de-risks the program", he said during a Senate committee hearing.
But Britain’s submarines have come relatively slowly off its production line, and often behind schedule. Britain’s submarine maker, BAE Systems, is also busy building Dreadnought submarines to carry the country’s nuclear deterrent.
"Spare capacity is very limited", Trevor Taylor, a professorial research fellow in defense management at the Royal United Services Institute, a research institute, wrote in an email. "The U.K. cannot afford to impose delay on its Dreadnought program in order to divert effort to Australia."
2.51
ASPI, in its thorough analysis concurred:
Both the US and the UK face capacity constraints in their nuclear submarine enterprises. The UK enterprise is stretched, and fundamental functions such as the disposal of submarines have been in abeyance now for many years. The UK is producing only one submarine every three years, so working with us would require it to double the output of its nuclear enterprise. The USN’s [United States Navy] capacity for the construction and maintenance of nuclear submarines is also stretched.
Leasing
2.52
Furthermore, there appears to be a very limited possibility that nuclear boats could be leased to cover the long lead-time that is expected before the new nuclear boats are completed and commissioned.
2.53
Marcus Hellyer provided two pieces of analysis on the question of leasing UK or US boats. Firstly, he noted that there is more to generating capability than just the boats themselves:
The Australian Department of Defence refers to nine fundamental inputs that are needed to generate an effective military capability. In addition to the equipment, there are factors such as personnel, supplies, facilities, training and industry. So even if the RAN could find some boats, that doesn’t come close to providing a military capability without these other elements—all of which Australia currently lacks.
2.54
With regard to the potential leasing of refurbished Los Angeles-class boats, he concluded:
…if we assume that the USN keeps the five newest boats for itself, completes refuels on a one-year drumbeat (which is roughly what it achieved for refuels of its Ohio-class ballistic missile submarines) in a process lasting three years, and then turns its attention to providing Australia with submarines, the soonest we could get a boat would be around 2031. It would have been commissioned in around 1994, so it would be around 37 years old.
Of course, our countries’ political leaders could come to an agreement that could see Australia getting some of the initial five refuelled Los Angeles boats. Or the USN could provide some that haven’t been refuelled as loaners until they’re refuelled or retired. Either way, that would mean taking boats out of USN service. The hard truth is there are no USN boats simply sitting around doing nothing that are in fit shape to be handed over to the RAN. [The committee's emphasis]
2.55
With regard to potentially leasing UK boats, Hellyer concluded that the remaining Trafalgar-class boats represent the only reasonable option. However, this option is also rather fraught. Hellyer explained:
The RN still has the last two of the original seven Trafalgar-class boats in service. Another has recently been laid up pending decommissioning. The average age of the three is 31, but the final two will have to keep going to meet up with the commissioning of the last Astutes, which has stretched out longer than planned. A detailed investigation would be needed to determine how serviceable they will be at that point. The reactor cores may have some life left in them, but it won’t be enough to bridge the gap to new Australian submarines being delivered in the late 2030s, at which point the last Trafalgars will be approaching 50. So they’d probably need to be refuelled and refurbished for Australian service.
The Trafalgar-class was designed to be refuelled; the last refuel and refit was completed in 2011 and took six years at a cost of nearly £300 million. However, in light of the detailed reports into the risks the UK Ministry of Defence is facing in sustaining its current nuclear capabilities while delivering new ones, it’s not immediately obvious that 10 years down the track it will still have the ability to produce a new reactor core for the Trafalgar’s PWR1 reactor, which isn’t used on its other classes of nuclear submarines, or that its shipyards will have the capacity to do the work. But let’s assume it can be done and the UK refuels and refits the last two or three Trafalgar-class boats as they are replaced by the last Astutes. We’re still looking at the late 2020s for delivery of boats that would be close to 40 years old.
Another challenge is that the RN’s industrial base will have transitioned to support the Astute-class, so we would be operating a tiny orphan fleet with no industrial base anywhere in the world to support it... The Canadians went down the path of a small, orphan fleet when they acquired four second-hand conventional submarines from Britain when the RN decided it was only going to operate nuclear boats. Despite years of repairs and upgrades, the fleet didn’t achieve a single sea day in 2019. I know I tend to be a glass-half-empty person, but acquiring a small number of orphan boats sounds like a recipe for disaster.
2.56
Given the status of UK and US shipyards, the lack of apparent leasing opportunities and the stated desire by the Australian Government to build the new boats in Adelaide, it is difficult to see how Australia can receive new nuclear boats in the early-mid 2030s, or an interim nuclear submarine capability, in timeframe mooted.
2.57
Questions to be considered:
How will this expensive project – up to $171 billion – be paid for given the extraordinary debts that the Commonwealth Government has taken on due to the pandemic?
Given the status of US and UK shipyards, how can those countries add another (at least eight) boats to their delivery programmes without delaying their own?
Given the lack of existing and available UK or US nuclear submarines for lease, how can a capability gap be avoided should there be delays in the delivery of the newly constructed nuclear boats?
Given that the nuclear boats under consideration are larger and more complicated that the cancelled Attack-class, what gives the Australian Government confidence that the ambition to produce the first boats in Adelaide by 'early to mid-2030' can possibly be fulfilled?
Capability questions – the Collins-class and conventional successor(?)
2.58
The committee notes the age of the existing Collins-class boats. HMAS Collins commissioned in July 1996, with the final boat, HMAS Rankin, commissioned in March 2003. This means that by the time the first nuclear boat is scheduled to come on-line, even the youngest of the Collins-class will be over 30 years old.
2.59
Unlike newer designs, the Collins-class is not equipped with Air Independent Propulsion (AIP) and requires 'snorting' to maintain its battery charge at far shorter intervals than those more modern designs.
2.60
As explained by Vice-Admiral (VADM) Noonan, all six boats are still expected to be in service in the mid- to late-2030:
I expect that we will still have six Collins-class submarines operating in the mid- to late-2030s. I don't rule out that there could be an opportunity here, under AUKUS, to accelerate the build of the nuclear-powered submarines. But even if that were to be accelerated, I can't see it coming too far left. So, on the time frame that you're indicating, we would still be operating the six Collins-class submarines.
2.61
VADM Noonan also acknowledged that the Collins-class boats could potentially be in service until 2050 and everything had to go smoothly for there not to be a capability gap before the new nuclear boats arrive:
Senator KITCHING: So we're going to have Collins-class in the water until 2040 or 2050?
Vice Adm. Noonan: Potentially, yes.
Senator PATRICK: Fifty-year-old submarines.
Senator KITCHING: We can't get anything wrong, then, on receiving that first nuclear sub. It's tight.
Vice Adm. Noonan: No, we can't get anything wrong in maintaining the current capability and ensuring that we're investing in LOTE [Life-Of-Type-Extension] to maintain the Collins-class submarine capability.
2.62
There is an understandable scepticism that the Collins-class boats can last until 2050 or even 2040—some 40 years after they were commissioned—and that a capability gap can't be avoided without a bridging capability. Marcus Hellyer from ASPI commented:
Every time ASPI has looked at the path to acquiring nuclear boats we’ve concluded that Australia still needs a new conventional submarine to ensure we can safely transition to a nuclear fleet. Yet the government has cancelled the Attack program and burned its bridges behind it. So, the final question is, what gives the government such confidence that this plan is going to work?
2.63
Peter Briggs, a retired submarine specialist and a past president of the Submarine Institute of Australia, agreed with Marcus Hellyer.
2.64
Yet, Navy itself said that such a transition capability is not practical. Running three separate classes of submarines is, according to the Navy, not viable. Speaking about a hypothetical Collins-Attack-nuclear submarine transitional pathway, VADM Noonan said:
With respect to that question regarding the determination around the pathway from Collins forward, there was extensive thinking around what we could achieve in terms of capability across the forward period. Certainly, my view was that we had no capacity within the Navy to have three classes of submarine operating as we went through a period of transition. So… my consideration and advice to the Chief of Defence Force was that it was not viable for us to operate Collins-Attack as we transitioned to the nuclear-powered submarine.
2.65
Some questions to be considered:
Given the Collins-class' age, is it at all realistic to expect the last of this class of boats to be retired in the 2040s or even 2050s?
Is it possible to avoid a capability gap without either a nuclear or conventional interim capability?
Even if the Collins-class boats can be kept in service until the 2040s and 2050s, can they be still considered a 'potent capability' given their age and their lack of AIP?
Defence Industry and Workforce Impacts
2.66
The sudden and unexpected cancellation of the Attack-class has left a large question mark over the Australian companies engaged in the project. It seems clear that a number of Australian businesses had invested in the project and were now suffering as a result.
2.67
Brent Clark, the CEO of the Australian Industry and Defence Network (AIDN) stated:
Naval Group had signed up something like 600 Australian companies into their supply chain. We know that about 400 of those companies had started and concluded a contract, and we know that about 200 had live contracts going. That's one element. The other part of the equation is, of course, Naval Group claimed that they had in the order of about 2,000 companies looking into their supply chain. Obviously, I can't speak for Naval Group; however, it is a reasonable assumption that the full spectrum of activities would have been undertaken by these companies. So there would have been companies that were starting the process of getting qualified for the supply chain, and there would have been companies that had concluded that process and were awaiting an opportunity to get into the supply chain…
You can't shut down the world's largest defence program and there be no economic impact on the industrial base. What we now do is work out how we ensure that that impact is minimised.
2.68
Mr Clark was further reported in the media as saying he:
… was also aware of the financial pain and fear many of his members will be feeling after Naval Group's contract was torn up.
"There are a lot of companies that have contracts with Naval Group," he told ABC News.
"They will have been issued cease work orders. That will be devastating for them.
"We are staring down the barrel of nearly three years from when people get work. How are those companies going to be looked after?
"How are we going to ensure that they survive? Because we need them to survive, because they're going to be required going forward. How are we going to manage the workforce?"
2.69
Charlie Turner, writing for ASPI, observed:
…a significant number of Australian companies investing in these initiatives were small and medium enterprises that wouldn’t hold contracts directly with the defence organisation but rather with the large prime contractors. They have no claim for losses—and it’s unlikely that the multinational primes will miss out on any penalty clauses contained in their contracts’ cancellation terms.
The repercussions of these actions will have long-lasting implications for the new program, in whatever form it takes. Initial indications are for a reduction in Australian industry content by 30 per cent, down to 40 per cent of the total build of the new submarines from the 60 per cent under Naval Group. The absence of a commitment to 12 submarines under the AUKUS pact (the statement that there will be ‘at least eight’ is suitably vague) further reduces the market by another 30 per cent.
2.70
There have also been open calls for the nuclear submarines not to be built in Australia. Should that be the ultimate decision then the implications for Australian industry are even direr, not to mention the Valley of Death's return to life. So, some questions arising from this are:
What will the employment impacts be in Australia of the decision to cancel the Attack-class?
How many local businesses in Australia will be disadvantaged by the cancellation?
How will this impact on Australian manufacturing more broadly?
Assuming the new boats will be built in Adelaide—by no means certain—what employment opportunities will there be for Australian workers through the acquisition, construction and maintenance of the new boats?
What can be expected in terms of Australian content of the new boats?
Committee comment
2.71
The committee understands the advantages that nuclear submarines bring to the Australian Defence Force over conventional diesel-electric boats and notes the bi-partisan support for the initiative.
2.72
However, even with in-principle support for the proposed nuclear submarine acquisition, it is difficult to see the manner in which the replacement submarine acquisition programme to replace the Collins-class has been handled as anything but a shambles.
2.73
The 2009 White Paper identified the requirement that twelve submarines would be needed. In April 2016, the announcement was made that Naval Group had won the CEP to supply those twelve submarines.
2.74
Now, thirteen years after the White Paper and almost six years after the Naval Group announcement, Australia does not have a contract in place at all. Former Coalition Prime Minister, the Rt. Hon. Malcolm Turnbull, stated:
Australia now has no new submarine program at all. We have cancelled the one we had with France and have a statement of intent with the UK and the US to examine the prospect of acquiring nuclear-powered submarines.
2.75
Having identified the need for twelve boats, there now seems to be an acceptance that eight (or so) are enough for Australia's requirements. Given that ship rotations have to be considered in terms of '3s', this means that, notwithstanding the greater endurance time of nuclear submarines, at best there will only be three Australian boats on station at any one time, instead of the four that would be available with a fleet of twelve submarines.
2.76
When AUKUS was announced on 16 September 2021, Prime Minister Morrison said in a press conference:
When it comes to the delivery of this programme, I indicated that we anticipate being able to commence build this year and the first of those submarines will be in the water, we believe, before the end of next decade.
2.77
During the October 2021 Estimates, the Prime Minister’s comments were explored. Defence hedged slightly on this, with Vice Admiral Mead clarifying that the:
Prime Minister made that statement—before the end of the next decade. We have provided advice to him that we are looking for early delivery of that submarine… From the information we have at hand, we are confident that we'll have a boat in the water by the end of the next decade. But the work we'll need to do with the US and the UK over the next 18 months is to drive that timeline as far left as possible.
2.78
It should be noted that ‘in the water’ does not necessarily mean operational either—testing and commissioning of new submarines can take several years.
2.79
In short, Navy say that their worst-case scenario is one boat by 2039‒40, but the 18 month review underway will determine if they can bring that forward—either the delivery of the first boat, or multiple boats before 2040.
2.80
This makes an article in The Australian on 24 December 2021, quite curious. The article reports the following claims by Defence Minister Dutton:
Australia is set to get its first nuclear submarine at least five years ahead of schedule after Washington agreed to help fast-track the project, Defence Minister Peter Dutton has revealed…
Mr Dutton said he now expected the first Australian nuclear submarine to be completed in the “first half of the 2030s” compared with the initial estimate of 2040…
Mr Dutton did not say how the shortened timeline would be achieved, saying that the options were being worked through in high-level meetings with US and UK officials.
2.81
On 7 February 2022, the Sydney Morning Herald reported the following:
Asked whether the submarines would arrive before 2038, Mr Dutton said: “I have no doubt we’ll have a nuclear-propelled submarine before that date.”
2.82
After the most recent Estimates held in February 2022, it is still unclear when we can expect to see an operational nuclear-powered submarine, or even if the government can determine that date with any accuracy. We have gone from having a contract and plan for twelve Attack-class submarines to a review period of 18 months to consider future submarines, with no information on what the platform will be, where they will be built, how much they will cost and how much Australian Industry Content there will be.
2.83
Coupled with this, is the serious question of whether Australia's submarine capability can be maintained given the age of the Collins-class. Everything will have to run according to the stated timeline and without disruption for the RAN not to experience a capability gap. Given what we know about Defence procurements generally, this seems very unlikely.
2.84
Even if the Collin-class does manage to stay in service—what capability will the by then 40-year-old boats still be able to offer? Marcus Hellyer observed:
[The Collins-class] will need to serve on into the 2040s, hopefully (but not assuredly) ageing gracefully. But if the brand-new Attack-class wasn’t going to be the undersea warfare capability we need, it’s hard to see the 40 year-old Collins providing it.
2.85
Hellyer concluded that along with the delays to the Hunter-class: ‘the RAN’s entire warfighting capability is at risk.’
2.86
From a variety of reports, it appears unlikely Australia will be able to lease UK or US boats as an interim capability, while other experts have identified the need for a further class of conventional boat as a transition capability. Yet we have heard little from the Department of Defence or the government about how that can occur—particularly as the Australian Government has, through the CEP and the cancellation of the Attack-class, antagonised three of the leading conventional submarine building nations.
2.87
The dependence of Australia on US and/or UK support for the nuclear boats clearly undermines the stated intent of the 'sovereign' shipbuilding program. At the same time, the delay in the acquisition of the new submarines, not to mention the real possibility that they may not even be built in Australia, seriously undermines the stated intent of a continuous build so as to avoid the so-called 'Valley of Death'.
2.88
Greg Sheridan, writing in The Australian, expressed his scepticism that the acquisition would even take place:
As things stand, it is unlikely Australia will ever get a nuclear submarine…
It fills me with regret to say this, but analytically the conclusion is inescapable that the nuclear subs under the AUKUS rubric will probably proceed the way of all our other submarine announcements.
They will enjoy a brief flower of credibility before doubts creep in, critics become mobilised, the prime minister who ordered them moves on and eventually they are consigned to the dustbin for a new submarine announcement that can enjoy its brief season in the sun.
Our submarine acquisition process remains a complete shambles and the chances of anything significant emerging from it remain remote.
2.89
It is also concerning that there has been no update to the Naval Ship Building Plan.
2.90
In 2017, the Government launched the Naval Shipbuilding Plan and as of 16 February 2022, the Defence website states: “the Government will update the Naval Shipbuilding Plan during 2021.” However, it is now 2022, and no such update has been released. Rather, the answer to Question on Notice 89 states “the Government will consider an update to the 2017 Naval Shipbuilding Plan in due course.”
2.91
In Question on Notice 88, when asked: “Please confirm no shipbuilding project has been approved to be ‘brought forward’ yet?” Defence responded, “The Department of Defence is continuously reviewing, and providing advice to the Government on, the large and complex portfolio of shipbuilding and sustainment programs that comprise the Naval Shipbuilding Enterprise”. This implies ‘no’.
2.92
Similarly, no answer was given on the following matters: who is conducting this evaluation, how many shipbuilding projects are being considered for an earlier start/completion date, and what “refined” encompasses.
2.93
Complementing Greg Sheridan's views, are those of some in the US Administration who have also expressed the view that the project may not withstand changes in the political leadership in both countries:
Australia might not receive a single nuclear submarine as part of the AUKUS security pact, according to the former Trump administration official who helped coined the term "Indo-Pacific", which now dominates security and diplomatic discussion across the region.
Randy Schriver, a former assistant secretary of defence in the Trump administration, said "many potential obstacles on both sides" including pushback from the US navy and political turnover in Washington and Canberra could spell doom for the promised fleet of eight nuclear-powered submarines.
A supporter of AUKUS, he said there needed to be "sustained commitment from the senior political leaders in both capitals, otherwise the chances of Australia deploying its own nuclear submarine will drop below 50 per cent".
2.94
The possibility that a future US President shutting down the project because of concerns about security and/or technology transfer is very real. As Peter Jennings from ASPI noted, the political situation in the US Congress, 10 Downing Street, and the Australian Parliament are also factors to be considered, even within the relatively short 18-month timeframe of the consideration process:
On the AUKUS timeframe announced last September, we have until February 2023 to develop 'an optimal pathway to deliver this capability'. Thirteen months to go.
By February 2023 Australia could have a different government, one more doubtful about nuclear propulsion. Boris Johnson’s attempt to hang on to the UK prime ministership, optimistically titled ‘Operation Save Big Dog’, may have sunk well before 2023.
Biden could face a Republican-controlled Congress after the November 2022 midterm elections, constraining his ability to make bold executive decisions.
Just like the Attack-class submarine project, it may emerge that the technology on offer is ultimately not going to deliver what Australia needs. Or it may be unaffordable or too far into the future to matter, or, as the US Navy worries, beyond what our navy of 16,000 people can handle.
It took half a decade for our government to conclude that it needed a Plan B to escape from the Attack-class project. Does anyone seriously think we should approach AUKUS as though nothing could go wrong?
2.95
The entire nuclear submarine proposal seems to have been concocted with little thought for the practical realities of making it happen. Who will build the boats and where the boats are to be built, along with costs, delivery time-frames, maintenance and sustainment, the status of the Collins-class, crew numbers and skills seem to have received little consideration. All these questions are supposed to be clarified in the 18-month consideration process. The committee awaits the outcomes of that process with great interest.
2.96
And what if the 18-month consideration process concludes that nuclear submarines are, in fact, not practical for Australia? Or a future US President withdraws the offer of shared nuclear technology? What will the Australian Government then do? To whom will the Australian Government turn to build an even further delayed new class of conventional diesel-electric boats?
2.97
This, the largest and most expensive Defence acquisition ever, needs continuing scrutiny to ensure that the Australian people are kept informed about how well their nation's security is being defended and how efficiently their tax dollars are being spent.
2.98
Noting bipartisan support for AUKUS and to ensure delivery of critical military capability, that the Government establish a bipartisan process to oversee the implementation of the AUKUS partnership and the delivery of the AUKUS objectives and military capability.