Australia’s Valley of Death

MONCh looks into the latest developments for Australia’s future frigates

As the announcement of the decision of the winner of the Future Frigates programme (SEA 5000) comes closer, tensions continue to run high at political level on discussions regarding the benefits the building of the Future Frigates will have on the Australian shipbuilding industry. Over the past week, this has been particularly blatant to anyone following the news down-under.

MONCh already previously reported (http://www.monch.com/mpg/news/maritime/3263-of-mergers-frigates-and-politics.html) that the decision to be made on the winner of the AUS$ 35billion project is very likely to be based as much on politics as it will be on the merits of the ships proposed by the three contenders (BAE Systems’ Global Combat Ship, Navantia’s F-5000 and Fincantieri’s FREMM). Indeed, significant concerns persist within opposition in the government as to the ability of the SEA 5000 programme, as well as the other two major Australian shipbuilding programmes (Future Submarines – SEA 1000 – and Offshore Patrol Vessels – SEA 1180), to create skills for the Australian workforce as well as provide future export opportunities for Australia. These concerns, which are now being leveraged by opposition in a way that risks significantly affecting the outcome of  the SEA 5000 competition, were particularly reinforced this past week as a result of two key developments.

Firstly, the Australian National Audit Office (ANAO) released a report last week, which warned of the multiple risks that had been brought into the Offshore Patrol Vessel (OPV) programme after the government had decided to bring it forward by two years, in order to “maintain a degree of continuity of shipbuilding between the wind-down of the ‘Hobart’ class destroyer build from 2017, and the commencement of the OPV and Future Frigates builds.” Without going into too much details (the full report can be found here: https://www.anao.gov.au/sites/g/files/net4181/f/ANAO_Report_2017-2018_39.pdf), the ANAO noted that: “Further Defence analysis in July 2017 confirmed Defence’s 2015 advice  to the Government that a reduction in the shipbuilding workforce could not be avoided. The analysis identified that bringing forward the OPV build, and building the first two vessels at the Osborne Shipyard, has not mitigated the decline in workforce demand.” Indeed, while the third and final ‘Hobart’ class Air Warfare Destroyer (AWD), HMAS Sydney, was launched on 19 May, construction of the first OPV is not set to commence before late 2018, thus having only a very minor impact on workforce demand. This is further exacerbated by the fact that, according to that same analysis, “the resource requirements to build an OPV are less than those required for the DDG [‘Hobart’ class destroyer] or the Future Frigates.”

The ANAO report goes on to discuss the fact that while the initial rationale for bringing the programme forward did not yield the desired results, it has however carried several risks into OPV acquisition, including the fact that commercial arrangements between the selected shipbuilder and Australian shipbuilding firms had not been settled when the tender outcome was announced.

Seeing how key the involvement of the Australian shipbuilding industry is for the political debate on the three major Australian shipbuilding programmes, it is therefore not surprising that the fact that   the Future Frigates programme was also brought forward (by three years) with the same original intentions is therefore now bringing particular scrutiny to the impact of SEA 5000 on the future workforce.

Secondly, on 12 May local reports announced that Naval Group’s Australian Industry Plan (AIP), originally submitted during the Competitive Evaluation Process for the Future Submarines programme, had been released to Centre Alliance senator Rex Patrick after years of battling with the Minister of Defence and the Department. The AIP triggered a new wave of criticism by Senator Rex Patrick (who has been regularly condemning the way in which the Government is managing the three main programmes) centred on the fact that, while the release of the AIP revealed that Naval Group had planned to transfer technology to an Australian sustainment organisation (ASO) of the Government’s choice as well as utilise ASC staff, the document’s section explaining Naval Group’s build scenario had been heavily redacted in the released document. This, according to Senator Patrick, was proof that the Government intentionally cut out ASC from the project and it is now attempting to cover it up.

Whether this is true is not for this article to decide; rather, what is worth noting in the context of the upcoming SEA 5000 decision is that this, compounded with the fact that last week it was also revealed that the Government had not mandated the use of an Australian shipbuilder for the SEA 5000 programme when it had transpired that it had done so for the SEA 1180 and the SEA 5000 programmes, has further reinforced Senator Patrick’s determination to see his Defence (Sovereign National Shipbuilding) Bill 2018 pass. This new Bill aims to amend the Defence Act 1903 to require “all naval vessels to be built in Australia, except in times of emergency or war… [and] responsibility for any vessels built in Australia to be assigned to a well-established, high performance Australian controlled shipbuilder.” If the Bill passes, it will apply to SEA 5000, effectively forcing the winning bid to ensure the ships will be built in Australia.

To be sure, the future of the Royal Australian Navy’s Frigates does not rest solely on political considerations. The Australian Strategic Policy Institute (ASPI) delivered a report this week that examines the bids for the Future Frigates programme looking at the strengths and weaknesses of each vessel in the competition and identifying four major discriminating factors that are very likely to define the decision.

First amongst those factors is Anti-Submarine Warfare (ASW) capabilities, for which both BAE Systems and Fincantieri’s ships are seen to have an advantage over Navantia’s, which is seen as being an adaptation of the AWD for ASW rather than a ship built for the original purpose of ASW. Indeed, the Global Combat Ship (GCS) has the most advanced design while the FREMM provides hangars for two ASW helicopters and has been operationally proven. Second is the project risk, where Navantia has a clear advantage seeing as its workforce has gained experience through the AWD programme, although this advantage could be lessened by the fact that the Future Frigates will be built in a new facility. Third is the industrial strategy, where it is much harder to determine who has the competitive edge, although sources close to MONCh have indicated that Fincantieri’s bid is often regarded as having the best strategy. Finally, the issue of cost would work in Navantia’s favour since the F-5000 design is based on the AWD and is therefore likely to be the least expensive option.

Manifestly stakes are high for the last of the three major Australian shipbuilding programmes. For Australian politicians, it is now a matter of demonstrating that the programmes will yield sustainable results for the country’s shipbuilding industry, in particular trying to avoid a ‘Valley of Death’ through programmes that can create opportunities for Australian exports. For BAE Systems, Navantia and Fincantieri this is an important contract to win, not only for the Australian market but also because in the context of an increase in the procurement of ASW platforms in the region, having an industrial base for export in Australia would be a significant win.

AV

Publish date

05/23/2018

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