Opinion on the Replacement of the Submarines: The study phase examined
(Source: Rekenkamer - Dutch National Audit Office; issued Oct. 12, 2020)
(Unofficial translation by Defense-Aerospace.com)
While the Dutch court of audit considers that the budget to replace the Dutch Navy’s four Walrus-class diesel submarines is €730 million short, the Ministry of Defence is confident it will be able to ensure the program will deliver the four new boats without overruns. (Dutch MoD photo)
In 2016, the Minister of Defense started a new submarine procurement project. In December 2019, the minister informed parliament in a so-called B letter the choice she wanted to make.

This is the largest new investment project of the Ministry of Defense since the purchase of JSF fighter aircraft.

On October 12, 2020, the Court of Audit published a report in which we examined the study phase of the ministry’s process to procure new submarines. We conclude that the budget reserved by the Ministers of Defense for replacement and operation is not sufficient. At least € 730 million will have to be added.

In the report “Views on the replacement of submarines,” we note that at the end of 2019, the Ministry of Defense properly provided parliament with more insight into the total purchase, operation and maintenance of the submarine replacement project. But the reserved budget is not enough.

In addition, the Netherlands will not be able to meet its own target for the next 10 years: at most 2 of the current 4 boats of the Walrus class can be used simultaneously.

Financial risks

The research shows that since 2016 the Minister of Defense has already increased the budget by € 1.14 billion extra for this large materiel project. The total budget has almost tripled since 2016, partly because the operating burden has been mapped out for 30 years.

Since not all foreseeable expenses for the new submarines and their operation have been included, we conclude that the budget is too low. In addition to price level adjustments, we identify financial risks. For example, the costs of the transition phase from the Walrus class to a new type of boat have not yet been calculated. Not all armament is included either.

Furthermore, experience in countries such as Canada and Australia shows that the use of modern submarines is more expensive than older generations. It is not clear whether international cooperation saves or increases costs. Unforeseen risks have not yet been included in this project.

Don't buy a boat off the shelf

In the so-called B letter from the minister to parliament, she inquired about the choices she wants to make. The intended type of boat is a combination of various designs of yards, not one of which has proven itself in service. The Netherlands therefore probably cannot buy "off the shelf" to replace the current four Walrus class boats from the 90s with four new ones.

According to the minister, a better design that could handle all tasks with three units would be rejected due to excessive costs. The Ministry of Defense will not determine the final design choice until later.

The current submarines will be given a service life extension. That limited their efforts in 2016, 2018 and 2019. In those years, the Netherlands could not meet its own standard of two deployable boats, let alone the NATO target of three submarines. This will not be the case for the next 10 years either.

Considerations

We indicate in the report that the House of Representatives and the Senate can better keep their finger on the pulse if they make further agreements about the provision of information with the Minister and State Secretary of Defense. The House of Representatives previously placed this investment project in the Large Projects Scheme. But that has not worked out yet. The Court of Audit gives points for attention in this regard, referring to the earlier publication on a major materiel project of Defense, Lessons from the JSF.

The Minister of Defense will not actually make a decision regarding the acquisition of new submarines until the so-called D phase of the Defense Materiel Process.

What methods did we use in our research?

In October 2016, we already sent parliament a letter with points for attention about the investment project for submarines of Defense.

For the “Views on the replacement of submarines” report, we examined the study phase of the Ministry of Defense (the so-called B phase of the Defense Materiel Process). The underlying documents have been studied. This includes the multi-criteria analysis that the ministry has used to investigate the capacities and possibilities of new types of submarines and to map the choices made by the Netherlands. In our research, we will further discuss the chosen boat type, the number of boats to be purchased and the required budget.

Why did we investigate this Ministry of Defense investment project?

The Court of Audit examines the expenditure, income and obligations of the central government. The proposed investment of the Ministry of Defense in new submarines is one of the largest projects for this Ministry. The choices that the minister and parliament must make in this regard may also influence other investment projects at this ministry.

Situation

The total expected expenditure for the purchase and operation of new submarines has been declared commercially confidential by the Ministry due to the ongoing tendering process. That is why the Court of Audit reports in a confidential annex to the House of Representatives on some aspects thereof.

The report Visor on the replacement of submarines was presented to the House of Representatives and the Senate on 12 October 2020 and made public. The State Secretary of Defense has responded to the findings and conclusions of the Court of Audit. We also published this information on October 12, 2020. The House of Representatives will be updated on the confidential information in a confidential consultation.


Click here for the full report (20 PDF pages), on the Rekenkamer website.

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Court of Audit Assesses Investigation Phase of Submarines Replacement
(Source Dutch Ministry of Defence; issued Oct. 12, 2020)
(Unofficial translation by Defense-Aerospace.com)
The Court of Audit today presented its findings on the investigation phase of the submarine replacement. In the report "Views on the replacement of submarines", the Court concludes that positive steps have been taken in terms of studies, lifespan and cost-benefits. These improvements contribute to transparent and efficient decision-making.

At the same time, there are also comments to be made, according to the Court of Auditors. For example, it is noted that the budget has increased since the start of the project and that other replacements may possibly get in the way. According to Defense, when it took office, the cabinet deliberately released more money to make these and other necessary replacement projects possible.

The Court of Auditors also sees financial risks associated with the purchase of the weapons system yet to be developed. Defense argues that risk management is an ongoing process, which is used to make timely adjustments and to keep the project financially fit. For this project, the Ministry of Defense also uses a risk reservation that is broader than usual.

Compact dimensions

Today's four Walrus-class submarines are still among the most modern conventional non-nuclear submarines in the world. The boats are distinguished by their compact dimensions and can therefore collect intelligence or carry out (coastal) reconnaissance close to the coast, in shallow water.

The current generation of submarines came into use in the early 1990s and is approaching the end of their useful life. According to the current schedule, the builder's first new submarine is to be delivered in 2028.

The so-called B letter (research phase) was sent to the House of Representatives at the end of last year and discussed there earlier this year. After phase B, the so-called Defense Materiel Process changes into phase D (acquisition phase), in which three prospective suppliers remain: Naval Group, Saab Kockums and ThyssenKrupp Marine Systems.

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