Audit Office torpedos $80 billion submarine pork

The Australian National Audit Office (ANAO) has released a report into Australia’s $80 billion future submarines project – “the largest Defence procurement in Australia’s history” – which warns that the decision not to go with an off-the-shelf design has materially raised procurement risks:

The decision not to acquire a military‐off‐the-shelf submarine platform, and instead engage a ‘strategic partner’ to design and deliver the submarines with significant Australian industry input, has increased the risk of this acquisition.

It notes that the project is running nine months behind schedule and is experiencing cost pressures:

The program is currently experiencing a nine-month delay in the design phase against Defence’s pre-design contract estimates, and two major contracted milestones were extended. As a result, Defence cannot demonstrate that its expenditure of $396 million on design of the Future Submarine has been fully effective in achieving the program’s two major design milestones to date. Defence expenditure on design represents some 47 per cent of all program expenditure to 30 September 2019.

ANAO also reveals that the Naval Shipbuilding Advisory Board, which was established in December 2016 to provide expert third party advice to government, advised the Defence Department to reconsider whether proceeding with the project was in the national interest:

The Naval Shipbuilding Advisory Board expressed a separate view that, even if the Strategic Partnering Agreement negotiations were successful, Defence consider if proceeding is in the national interest. This consideration was represented in the advice to Government seeking approval to enter the Strategic Partnering Agreement.

Recall the prescient testimony from defense expert Brian Toohey three years ago:

…everything is wrong about the Turnbull government’s decision to build 12 extremely large submarines in Adelaide.

…The government’s refusal to go with an off-the-shelf design will cost more billions, because the first of new submarines won’t be operational until after 2030 and the last until almost 2060.

This means the decrepit Collins class submarines will have to be kept going for more than 20 years beyond their planned 2025 retirement date – necessitating new capital spending and very high maintenance and operating costs that will soon pass $1 billion a year.

Last year, Senator Rex Patrick – a former submariner – also seized on official figures obtained through the Senate committee process to claim that the cost of building and sustaining the 12 submarines may ultimately reach $200 billion over their life:

“Right now that project is approaching recklessness and that needs to be addressed by government,” Senator Patrick said.

Whatever the case, it is clear that the decision to build the submarines in Adelaide is shaping up as a giant budgetary milestone that only came about to pork barrel the seat of former Defence Minister Christopher Pyne by ‘creating’ 3,000 jobs.

And to think, the same Coalition Government chose to jettison 40,000 to 200,000 jobs in the car industry into the sea by refusing to pay a paltry $500 million in assistance.

This must rank as one of the worst examples of government waste and mismanagement on record.

Leith van Onselen

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