Government frustrations and concerns grow over Australia's multi-billion-dollar submarine and warship programs
Exclusive by defence correspondent Andrew Greene
Posted 24 February 2021
Defence Minister Linda Reynolds has expressed "frustration" and "disappointment" with the French company building Australia's $90 billion future submarines as she prepares to confront its visiting global boss over crucial contract negotiations.
A year after Naval Group pledged to spend 60 per cent of the massive contract value on local suppliers, the company is yet to enshrine the figure in a formal deal with the Commonwealth.
At the same time, there are fears Australia's ambitious $45 billion program to construct new anti-submarine frigates could go the way of a related Canadian warship project which is experiencing massive cost and time blowouts.
Sources have said Prime Minister Scott Morrison has become increasingly worried in recent months about Defence's ability to deliver the massive projects and has relayed his concerns directly to the Department's National Naval Shipbuilding Enterprise team.
Ahead of her meeting with Naval Group, Senator Reynolds has told Parliament she is annoyed with the slow progress of the negotiations with the French.
On Wednesday, Naval Group's global chief executive, Pierre Eric Pommellet, is expected to meet with Senator Reynolds in Canberra after flying into Adelaide where he completed a mandatory two-week quarantine stint.
"I am frustrated and I'm very disappointed that Naval Group have yet been able to finalise this contract with Defence, but it will not be done at the expense of Australian jobs, and Australian industry," Senator Reynolds said on Tuesday.
"This capability is far too important for our nation to do that."
The ABC understands the Commonwealth is insisting on annual audits of Australian Industry Content (AIC) in the project to construct 12 Attack Class submarines, but the French are so far resisting.
Despite the tense and protracted negotiations, the government insists the complex submarine build schedule remains on track.
"Defence continues to work closely with Naval Group to progress this project to ensure it is delivered on-time, on-spec and on-budget," a government spokesperson told the ABC.
Naval Group has also restated its commitment to Australian industry ahead of Mr Pommellet's meeting with the Defence Minister.
"Naval Group Australia is fully committed to maximising Australian industry capability and content in the design and construction of the Attack Class fleet," a company spokesperson said.
"We remain in productive discussions with our Commonwealth partners about the best way to achieve this common goal and including our commitment in the Australian future submarine program's Strategic Partnering Agreement."
Defence insists $45 billion warship program on track
The Defence Department has dismissed concerns Australia's $45 billion Future Frigate Program may also be facing problems, as a related warship project in Canada faces intense scrutiny for cost and schedule blowouts.
In 2018, British owned company BAE Systems was selected to build nine new anti-submarine Hunter-class warships for the Australian Navy, based on the United Kingdom's Type 26 frigate, a decision soon followed by Canada.
However, the Canadian Surface Combatant project to construct 15 British-designed warships is already facing delays and significant cost increases, with the price tag climbing to $70 billion.
On Wednesday, the Canadian Parliamentary Budget Office will release a report on the controversial project, and a day later the auditor-general of Canada is expected to table a report on the country's National Shipbuilding Strategy.
Independent Senator Rex Patrick said the warning signs in Canada should be taken seriously in Australia.
"The Canadian frigate and the Australian frigate are based on the same design, it is highly likely similar problems would be occurring here in Australia," Senator Patrick has told the ABC.
A Defence spokesperson said the department was closely monitoring developments in Canada and the United Kingdom.
"Defence has a close and cooperative relationship with defence counterparts in both Canada and the UK and regularly discusses a range of topics relating to the Global Combat Ship program shared across the three nations," the spokesperson said.
"As the lead nation currently constructing the Type 26, the UK is feeding lessons learnt into the Australian Hunter Class program."
Australian Industry and Defence Network chief executive Brent Clark said local companies also appeared to be missing out on work in the $45 billion Future Frigate Program.
"Australian companies can be at a disadvantage because they're only being asked to quote for small numbers on the program, whereas the overseas supply chain companies are being asked to quote for the entire global program," he said.
BAE Systems has rejected the assertion, claiming it is already exceeding its goal of a minimum of 58 per cent Australian content and insisting the company is "absolutely confident of maximising Australian industry involvement".
"The Hunter Class Frigate Program is a program that will not only deliver nine of the most modern anti-submarine warfare frigates but is also designed to put in place a sovereign shipbuilding industry," a spokesperson said.
"To achieve that we need Australian companies involved."
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