How to buy a submarine – part 2
25 Jun 2014| and

The building of a replacement for Australia’s Collins class submarines will be the country’s most expensive and complex defence project to date. There are a myriad of capability, commercial and industrial issues to be managed: the expertise for the design and construction of conventional submarines resides in Europe and Asia while Navy’s preference is for American combat and weapon systems. Pulling those elements together while managing the technical risks is no easy task.

Local construction of the future submarine has been a bipartisan position for several years, and it has the support of industry and the bureaucracy. But there’s no simple or fast way to produce a unique Australian submarine. If the government decides to go down that path, it will have to do so in the knowledge that it’s a high-stakes venture.

In April 2014, ASPI held a two-day conference called ‘The Submarine Choice’. At the conclusion, we were left with three disquieting impressions.

First, pursuing an entirely new design will be risky. Conference presenters drove home the message that Australia currently lacks two key prerequisites for success: ongoing collective experience and a highly-trained design, engineering and submarine-specific building workforce.

Second, there’s a worrying disconnect between Defence’s plans and the government’s thinking (to the extent that either are public knowledge).

Third, it was clear that Defence’s thinking on the submarine acquisition strategy was simultaneously prescriptive and vague— prescriptive about the sort of commercial entity it wanted to undertake the submarine project but vague about how to create it.

With those impressions in mind, we decided that it was time to revisit ASPI’s 2009 paper ‘How to buy a submarine’, written when the enterprise was formally instigated. Our paper released today is our attempt to do so.

Sorting out fact from folklore wasn’t easy. Once we thought we had a consistent picture we sent a draft out to most of the stakeholders and interested commercial entities. We received a wealth of feedback and were struck (though not entirely surprised) by the diverse views expressed. It proved impossible to include, let alone reconcile, all of the disparate and sometimes diametrically-opposed opinions.

For example, several respondents told us that a European firm wouldn’t get the permissions required to integrate sensitive US subsystems and submarine technologies onto vessels they designed, while others told us that the issue was entirely manageable. One possible explanation for the apparent disconnect is commercial interest—for a number of players circling the submarine program, it’s a convenient story. We’re not sure which version is true, but there’s little doubt that the merger of a European design and American combat system is possible under some circumstances—after all, that’s what the Collins is. Our recommendation as a sensible early step in the process would be for Australia to have government-to-government discussions with the potential players—especially in Washington—to determine what the actual constraints are, and what’s merely unsubstantiated folklore.

Conventional submarine design capability with the experience required is found in France, Germany, Japan and Sweden. The UK hasn’t designed or built a conventional submarine for decades, but the trusted nature of the ‘five eyes’ intelligence relationship and its ongoing nuclear submarine programs means that it’s also a potential partner if access to American technology is the issue some claim it to be.

Of the Europeans, France and Germany have established export markets, and have exported designs for construction elsewhere. The Swedish submarine industrial base is currently undergoing significant changes, but the close relationship between the Swedish and US Navy submarine arms makes them a credible contender. Japan’s an established builder of large conventional submarines and there’s high-level political support on both sides for a collaborative effort—and this is rapidly developing into one of the more likely options.

Then there’s the Australian end of the arrangement. The most recent public statements from officials suggest that their preferred approach is similar to the Collins project: the creation of a commercial entity specifically to execute the design and build. The advantage would be that a purposely-created Australian-based entity could manage the interplay of participating European and American firms and their intellectual property. However, having gone in this direction, the government would carry the majority of risk associated with the project from the start.

Other approaches are possible. Most simply, the government could test the market and contract an existing international submarine designer/builder to undertake the project. Not only would this result in a cleaner commercial relationship, it would also give the Commonwealth a commercial counterpart with sufficient financial depth to shoulder a share of the risk in the project.

Finally, there’s always the possibility that the government will weigh up the issues we describe in this paper and decide that it’s all too difficult. In that case it’d need to decide whether offshore procurement options are able to deliver the required capability—or find an acceptable compromise between capability and risk.

Andrew Davies is senior analyst for defence capability and director of research at ASPI. Mark Thomson is senior analyst for defence economics at ASPI. Strategic Insight ‘How to buy a submarine: part 2’ is available free to download hereImage courtesy of Flickr user n1ct4yl0r