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Governments and balance sheets—submarines and industry in Australia

Posted By on October 2, 2014 @ 12:15 pm

Comparing apples and oranges. [1]

It now seems a real possibility that the replacement for the Collins-class submarines might come from Japan, rather than being built in Australia as previously promised by the government. The principal argument for that proposal is the supposed cost for the capability acquired—with a figure of $25 billion being considered better value for money than the somewhat woolly $50–80 billion for the local alternative. In the Australian Financial Review on 8 September (‘Japanese subs on the way [2]’), Prime Minister Abbott is quoted as saying that ‘The most important thing is to get the best and most capable submarines at a reasonable price for the Australian taxpayer’.

While a simple comparison of potential costs is sobering (and obviously intended to be so) the arguments presented to date have been somewhat simplistic and don’t take into account the full range of factors upon which such a decision should be based. They also show a spectacularly naïve view on what comprises capability.

In his article ‘Option J for FSM—a Japanese solution? [3]’ Peter Briggs undertakes a comparison of the Japanese Soryu-class with the Collins-class submarine and finds that on an operational basis the Soryu doesn’t stack up as well as claimed.

What we don’t know is what’s included in the figure of $25 billion. Is it the acquisition cost only? Does it include any through-life support; and if so to what level, where? Does it include modifications to existing facilities that will be required for maintenance done in Australia, and for re-training Australia’s submariners? Does it include facilities costs in Japan to cater for a submarine that won’t be the Soryu-class—even though it might look like one from the outside? Does it include full access to the Soryu-class design and all associated intellectual property? What level of technology transfer will be provided? If it does not include all IP, what will be included and how are the risks of handling a new design to be mitigated? All of those issues have the potential vastly to inflate the stated $25 billion cost, create schedule delays, and add to the overall sovereign risk.

A similar series of questions might be aimed at the local option—although it could be reasonably assumed that the ‘$50 to $80 billion’ cost includes every cost that could conceivably be associated with a locally-built submarine. Until we get a true comparison we can’t make a sensible judgment.

What’s also clear is that the ‘Australian-Soryu’ will have a different combat system, different sonar and different weapons to the off-the-shelf version operated by the Japanese Maritime Self Defense Force. Will it also have a different propulsion system and battery to overcome the range and indiscretion-rate limitations of the Soryu? The result will be an ‘evolved-Soryu’, developed in Japan with Japanese designers and workers, rather than an ‘evolved-Collins’ developed in Australia with Australian designers and Australian workers. All the design effort to date on the evolved-Collins and the new submarine design options will be wasted. We’ll have to—or have to pay the Japanese to—start again on the evolved-Soryu option. We’re also likely to have to pay to have the Japanese shipyards to incorporate that new design into their build program. That doesn’t seem a sensible way in which to approach the much-discussed submarine capability gap.

We seem to be heading into a strategically important decision on the basis of a short-term ‘sugar kick’ to the balance sheet, rather than sound strategic considerations. What’s required at this point is some transparency from the government—with regard to the detail of the potential purchase from Japan, and with respect to the assessment and application of strategic and sovereign risks. The pending decision is too important to be made on a whim.

Graeme Dunk is manager of Australian Business Defence Industry, a national defence industry association. Image courtesy of Flickr user mcgovernville [4].



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URLs in this post:

[1] Image: http://www.aspistrategist.org.au/wp-content/uploads/2014/10/48178733_03777f51f6_z.jpg

[2] Japanese subs on the way: http://www.afr.com/p/national/japanese_subs_on_the_way_5SJAz6oHuuAE9cdt3HeHmM

[3] Option J for FSM—a Japanese solution?: http://www.aspistrategist.org.au/option-j-for-fsm-a-japanese-solution/

[4] mcgovernville: https://www.flickr.com/photos/mcgovernville/48178733

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