Defence Must Offset Massive Risk In Naval Shipbuilding Program (excerpt)
(Source: Australian Strategic Policy Institute; posted Nov 2020)
By Marcus Hellyer
There are a lot of moving parts involved in the ramp-up of the government’s naval shipbuilding enterprise. It’s hard for anybody to keep track of them all, particularly as new pieces of information are sporadically disclosed in a range of forums and sources.

The inclusion of both the Attack-class submarine and Hunter-class frigate for the first time in the Australian National Audit Office’s 2019–20 major projects report, due out later this month, will help and is certainly a step in the right direction.

But a compelling case can be made for an annual report on the entire enterprise, covering not just the component projects but also their enabling elements such as infrastructure, workforce, industrial capability, funding, and so on. There are precedents for annual reports on key elements of Defence’s modernisation efforts, such as the excellent annual report on defence industry and innovation programs.

In the meantime, for those who are interested in what is our now $137-billion shipbuilding program (give or take) but don’t have the time or inclination to trawl through transcripts of Senate estimates hearings, submissions to parliamentary inquiries, Defence’s annual reports, or its freedom of information disclosure log, here are some observations on key developments over the past few months.

This first part of a two-part series looks at enterprise-level issues. In the next instalment, I’ll look at individual projects.


When $50 billion is really $80 billion

Under questioning from Labor’s Penny Wong at October’s estimates hearings, it became very clear that the government and Defence continued to publicly use their $50 billion out-turned cost figure for the future submarine for over two years after Defence actually estimated it to be around $80 billion out-turned. And both continued to use the $35 billion figure for the future frigate for nearly two years after Defence estimated it to be around $45 billion.

That means the government’s own estimate for what it repeatedly described as a $89-billion shipbuilding program was nearly $130 billion (including a non-controversial $4 billion or so for the OPVs).

After Defence admitted there was no need to keep using the lower figures for commercial sensitivity reasons, Wong asked what the real reason was. After a prolonged silence, Secretary Greg Moriarty said, ‘When the government chooses to announce particular phases or particular prices is a matter for government.’ Unfortunately, the government has not provided a convincing reason for why it chose to understate the cost of its shipbuilding program by around $40 billion.

With even the most vocal advocates of the future submarine program lamenting its lack of public support, the government and Defence have to do better if they want Australians to continue to back this endeavour. (end of excerpt)

Click here for the full story, on the ASPI website.


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