Australia's $50 Billion Contract with Naval Group to build Submarines Has Collapsed: Report

  • Our Bureau
  • 03:31 PM, March 1, 2021
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Australia's $50 Billion Contract with Naval Group to build Submarines Has Collapsed: Report
Suffren Barracuda-class nuclear submarine (image: Naval Group)

Australia’s ambitious $50 billion project to build a dozen Attack-class submarines with French company Naval Group has reportedly been shelved.

Pierre Eric Pommellet, head of Naval Group, is currently in Australia to meet federal ministers in an attempt to rescue the contract, Independent Australia has reported.

Australia’s Ministry of Defence recommended the three contenders for the competitive evaluation process, and it picked the French as the eventual winner. Naval Group won the Collins-class replacement program, also known as SEA1000, in 2016 with its Shortfin Barracuda Block 1A design. This vessel is based on a scaled-down version of the nuclear-powered Barracuda design that is now entering French Navy service.

It is said to be due to a combination reasons, including cost blowouts, missed delays and political. Since negotiations with France began, Australia has had three prime ministers, three deputy PMs, three failed treasurers, five defence ministers and four ministers for defence industry. Of the 15 individuals to have held these portfolios, seven have left the Parliament.

While the project was initially estimated to cost between $20-25 billion, an agreement between parties signed in late 2016 showed a figure that’s double the prediction, or $50 billion. By February 2020, the Parliamentary Library research service reported that the acquisition cost “... is in the order of $80 billion in out-turned dollars and the estimate for sustainment might roughly work out to be around $145 billion...”

France, meanwhile, is reportedly paying $10.2 billion for six Barracudas.

Even the idea of building a submarine powered by a diesel-electric engine has been considered a fail. The addition of U.S.-made systems in the Australian submarines potentially also adds cost and complexity.

Additionally, Defence Minister Linda Reynolds is holding out for 60% local input, down from 90% when the project was first announced. The French now insist it must be much less as Australia cannot deliver. This was not settled before the production agreement was signed in 2018.

An alternative solution instead of scrapping the project is to negotiate a submarine deal with Swedish company Saab, which owns Kockums that built Collins. Australian Financial Review reports that Reynolds has not denied this possibility. “As the original designer of the Collins class submarine, Saab Kockums has an ongoing relationship with [the Australian Submarine Corporation] supporting the life of type extension program for the Collins class submarine,” she said.

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