ASPI’s decades: Building submarines and warships

ASPI celebrates its 20th anniversary this year. This series looks at ASPI’s work since its creation in August 2001.

Australian naval shipbuilding has a long history. Calling it a chequered history only just captures the drama and the dollars of the determination to make our own ships and submarines.

More than any other area of defence procurement, shipbuilding consistently captures the nation’s attention, Hugh White, ASPI’s first executive director, observed in 2002, ‘from the troubled Government shipyards of the 1950s and 1960s through to the Collins submarine project of the 1990s. Naval construction is a challenging, and at times risky, billion-dollar business’.

After selling off its defence factories, the federal government spent the final two decades of the 20th century insisting on arm’s-length competition for all defence contracts.

Then, in 2001, the government announced a new approach. It would reduce competition and instead build long-term relationships with major defence suppliers. Shipbuilding—‘the jewel in the defence industry crown’—would be the testbed, and an ASPI report offered proposals for ‘modest but valuable’ reform:

  • Do not force an outcome on the industry as a whole. Let commercial forces decide how many shipbuilders we can support in this country.
  • Smooth out the shipbuilding workload later in the decade, so the industry does not face a boom and bust cycle.
  • Reform naval repair and maintenance, to better support the ships at sea and the industry.
  • Sell ASC [Australian Submarine Corporation] to the highest competent bidder, allowing new firms to enter the industry which might be able to bring non-defence work to the corporation.
  • Avoid buying Australian-unique systems which seldom offer operational advantages to offset the very high costs and risks they impose.

Reviewing the Collins-class submarine in 2006, Patrick Walters called it Australia’s most ambitious and controversial defence project:

No major defence procurement project in Australian history has generated such an extraordinary saga of strategic, commercial and bureaucratic rivalries, technical snags, cultural misunderstandings, political interference and genuine national achievement as the building of the Collins Class vessels.

Walters concluded that the Commonwealth’s $5 billion investment in Collins had given Australia a key strategic asset and greatly boosted the skills of our naval construction industry.

In Keeping our heads below water, Andrew Davies in 2008 advocated going from the six Collins boats to 12 future submarines:

The project risks arising from the ‘stop start’ approach to building submarine classes could be mitigated by a rolling production model of continuous building. That would require a fleet of probably twelve boats to sustain, but the unit cost of each would be brought down and industry sustainment would be much more manageable. This approach would require a sustained government funding commitment beyond the usual forward estimate period.

The desire to load the new design with high-end capabilities at the leading edge of submarine technology, Davies wrote, must be balanced against the need for a design that could be delivered close to schedule and budget.

Davies gave the 2009 defence white paper a tick for announcing 12 new submarines, but also a kick for a significant omission: it gave no cost estimate for the project. To fill that hole, Davies and Sean Costello offered their estimate—$36 billion (in 2009 dollars)—a controversial calculation, subject to much argument, that eventually became the benchmark figure.

At $3.04 billion each, the most expensive conventional submarines ever built would be large, complex and expensive—and a bespoke Australian design. Because ASC had been retained under government ownership, Davies and Costello wrote, the Commonwealth would be better placed to evaluate the designs, but ‘ASC should not be handed the build contract as a fait accompli’.

In 2010, ASPI went Naval gazing to consider the future of Australia’s shipbuilding and repair sector, drawing views from the federal and state governments and industry:

Some common themes emerged: the challenge of delivering the Defence White Paper’s planned expansion of the naval fleet, the need to manage the workflow for industry to avoid a ‘boom and bust’ pattern, and the need for Australian industry to be competitive in a global marketplace.

At the end of 2011, Andrew Davies lamented that the nation’s biggest ever engineering undertaking, Subaqueana australis, was listing. The saga of the Collins fleet made Canberra uncomfortable about ‘throwing good money after bad’ on the future submarine. The principals in charge of the project weren’t making an authoritative case to steer ahead.

Treating Collins and the future submarine as stand-alone problems, Davies said, increased the chance of a future capability gap between the two classes. Fixing the Collins’ problems and developing technologies to go into the future boats could be the same activity. Davies’ judgement was that an ‘evolved Collins’ looked the best bet.

In 2012, Davies and Mark Thomson pronounced that the promise of the 2009 defence white paper for 2030—a force of 12 new, highly capable, long-range submarines—wasn’t going to happen: ‘We’re already past the point at which a force of that size and capability can be in place even by the mid‑2030s.’

Mind the gap explored the options to fill the gap, to get serious about subs: ‘The government needs to ratchet up the priority of the project and marshal the resources needed to accomplish the task.’

After the election of the Abbott government in 2013, ASPI held a conference to discuss Australia’s submarine choice. Feedback from the 220 attendees pointed to a striking message: ‘the lack of agreement from Defence, the Navy and the Australian Government on design, capability requirements and numbers for the Future Submarine project’.

The Abbott government turned towards a version of Japan’s Soryu-class submarine (dubbed ‘Option J’), setting up a competition with designs from Germany or France.

The battle over the new boat bounced in many directions, from the billions to the battery technology. Why should Australia build its own submarines? What were the benefits of deepening the Japan defence relationship? In Japan versus Europe, would Prime Minister Tony Abbott would do a ‘captain’s pick’ for Japan. The sub was a wonderful case study of defence acquisition, Davies observed:

Because of its scale and time frame, it spans every aspect of defence decision-making from long-term strategic crystal ball gazing, including the possible impact of future technologies, through military strategy development and force structuring, all the way to robust politics of shipyard jobs.

For The Strategist, the submarine has consistently generated headlines, with arguments for big submarines, little submarines, conventional submarines, nuclear submarines, no submarines, and the protest that Australia’s ultimate choice was a preposterous submarine.

The Turnbull government’s 2016 choice of France’s DCNS (now Naval Group) as the international partner for the design of the 12 subs merely ended one stage of the saga.

The dollars being fed the boat made it ‘the very hungry future submarine’.

Submarines: your questions answered, published in November 2020, had nearly 40 significant questions to answer. The specialist world of defence procurement could provoke argument at an Aussie barbecue, Peter Jennings noted:

Why are they so expensive? Why do we need 12 of them? Why build them here? Why not nuclear propulsion? Why a French design? Why not an American, German, Japanese or Swedish design? Aren’t submarines obsolete, to be replaced by drones? Won’t technology make the oceans transparent?

Australia set out on a multi-decade undertaking to build ships and subs, but in 2018 Andrew Davies worried that we were making it up as went go along in a high-risk enterprise, with inadequate governance, and a piecemeal approach to managing risk.

Reflecting on ASPI’s two decades of worrying about the cash–kit–capability nexus, Davies lamented:

I think we’re still paying too much, both in dollar terms and in broader opportunity costs, for our defence capability. And we’re being too patient about getting it. I haven’t won many friends in defence industry with my views on local procurement versus off-the-shelf purchases, but that’s something I’m unrepentant about. What we have today is an uneasy amalgam of defence capability development and defence industry sector support, hiding behind a veneer of ‘sovereign capability’ or ‘jobs and growth’.

If Australia’s strategic circumstances looked more benign, Davies wrote, this would be only a misuse of resources, ‘but it runs the risk of also being a dreadful strategic oversight’.

Since Vietnam, Michael Shoebridge wrote in 2018, Australia had had a small defence force with a clear technological edge over potential adversaries. That had given governments confidence that Australian forces would prevail—and suffer minimal casualties.

Unfortunately, Shoebridge noted, that edge had dissipated because of military modernisation across the region. Regional militaries operating near-peer capabilities would inflict combat losses on the Australian Defence Force:

Ships, aircraft and vehicles that are lost in combat with their ADF operators are almost impossible to replace in a timely way given their complex nature. The lead time for getting a new ship is at least five years. For an F-35, it’s a matter of joining a global queue.

But even if a new platform was available, the bigger limiting factor to sustaining combat of this type is that replacing skilled military personnel takes years, and, in some cases, over a decade. That means we might be deploying a force that’s unable to sustain itself against losses long enough to prevail. That’s a fancy way of saying it would probably lose.

The changing risk equation meant the Defence Department should focus beyond the low-number, high-capability formula it had used for decades.

As well as protecting advanced kit from loss, Shoebridge said, Defence needed lots of complementary consumables that could be deployed, lost and replaced in numbers.

Australia’s chequered history of shipbuilding faces a crowded and complex strategic chessboard.