The elephant in the conference room
30 Jul 2014|

Is that an elephant in the room?

The worst-kept secret at the DMO Defence and Industry conference this week was the government’s active consideration of buying submarines from Japan. Although it was never mentioned in any presentation, Option J, as it has come to be known, was discussed in every corner and corridor of the Adelaide convention centre.

Good policy rarely results from secret deliberations shielded from public scrutiny, so I think it’s time to discuss Option J directly, at a level beyond passing media speculation.

As recently as a month ago, the Abbott–Abe strategic cozying up seemed likely to deliver little more than access to Japanese submarine technologies—in particular, the propulsion system. But today it appears that the government is actually considering having replacements for the Collins built in Japan.

Before going any further, it’s worth noting that would be a move laden with geopolitical consequences. The export of Japanese submarines to Australia would represent a much more rapid normalisation of Japan’s defence posture than anyone has anticipated so far. It would alarm China and heighten Beijing’s fears of containment by the United States and its US allies. Those are serious first-order strategic considerations not to be dismissed lightly or as somehow secondary to the reasons for acquiring submarines in the first place.

But for the moment, at least, I’ll leave it to others to argue the strategic merits and risks of the proposal and focus instead on the question of whether Option J represents a credible path to the cost-effective delivery of submarines to meet Australia’s needs.

It’s commonly believed that Japan builds and operates capable submarines of a displacement commensurate with Australia’s needs. Moreover, they do so through a mature industrial arrangement that exploits dual sourcing to deliver efficient construction and maintenance. So far, so good. The trouble is that, at least in the public domain, we know little about the range, endurance, sensor effectiveness and acoustic properties of the vessels.

Even on the basis of what we do know, if Japan is willing to sell us submarines, we should be looking closely at what they have to offer to see if it meets our needs, or might meet our needs with some modification. For example, we’d almost certainly want to equip the vessels with US weapons and combat systems.

The option of building submarines offshore will alarm Australia’s domestic shipbuilders who have been waiting patiently to play a role in what was long promised to be a domestic program. I’m largely agnostic about building offshore, provided that appropriate steps are taken to ensure the availability of cost-effective and strategically necessary in-country support the fleet will need.

The fear among many people I’ve spoken to, and which I share, is that Option J is being driven at the political level in the absence of the due diligence needed for a multi-billion dollar critical defence acquisition. Japan isn’t the only country that builds submarines. France, Germany and Sweden all have credible products and a declared interest in helping Australia fulfill its submarine needs.

We need something more than a beauty contest—which appears to be all that’s currently planned—that rushes to a decision. With three or four credible contenders we need to see what’s on offer and use competitive mechanisms to secure the best possible deal for the Australia taxpayers.

The bare bones of what we should do is straightforward:

Step One would be to seek formal expressions of interest from prospective suppliers for both in-country and foreign-build boats, based around a clear statement of what Australia wants in terms of platform performance, US-system compatibility and, critically, efficient through-life support in Australia.

Step Two would be to select the two best contenders, or three if absolutely necessary, and conduct funded preliminary design studies. Preliminary design studies would allow decisions to be made on the basis of reasonable estimates of the cost and capability available from the selected firms.

Of course, the conduct of the second stage would be more complex than the simple picture I’ve painted. For example, for domestic construction, the involvement of local firms complicates matters somewhat. But the principle underlying my proposal is simple: in the absence of competitive pressure to contain costs and negotiate affordable through-life support we’ll find ourselves at the mercy of the supplier for the next thirty years.

Mark Thomson is senior analyst for defence economics at ASPI. Image courtesy of Flickr user Justin Elson.