Future submarines could arrive late and cost more, confidential negotiations reveal         


Posted 5 Dec 2018
ABC News

The first of Australia's new submarines could arrive late and cost substantially more than expected as Defence attempts to finalise the terms of the $50 billion project.
Key points:

    Former prime minister Malcolm Turnbull selected the French company in 2016 to replace Australia's ageing Collins Class fleet
    Defence officials and Naval Group have been locked in tough negotiations since to produce the 12 submarines
    Retired deputy Defence secretary Kim Gillis was recruited to lock in the Strategic Partnering Agreement

The ABC understands Defence recently offered a two-year extension to the French company building the future submarines as it tries to lock in a crucial final agreement.

Senior sources confirmed the "unprecedented" offer to allow an extra two years and 25 per cent cost increase was initially rejected by the French owned shipbuilder, Naval Group.

It instead wanted a three-year schedule delay and for an allowance of a 30 per cent increase in delivery costs, but the company later backed down.

The ABC can also reveal that negotiations between Defence officials and Naval Group became so tense that a former senior bureaucrat was hired in a bid to help resolve protracted disagreements.   

Former prime minister Malcolm Turnbull announced Naval Group, then known as DCNS, had been selected for the lucrative project in 2016.

The French bid was successful in a competitive evaluation process (CEP), beating rival offers from Germany's TKMS and the Japanese Government.

Unlike a regular military tender process, the CEP did not involve detailed commercial contracts being submitted to the Defence Department.

Prime Minister Scott Morrison insisted negotiations were back on track after meeting with French President Emmanuel Macron.

Defence officials and Naval Group representatives have since been locked in tough negotiations over details of the program to produce 12 submarines to replace Australia's ageing Collins Class fleet from the mid-2030s.

The Coalition is now anxious to complete a crucial Strategic Partnering Agreement (SPA), which will guide the submarine program for decades, before next year's election.

Defence Minister Christopher Pyne insisted there was "no real deadline for the SPA" but said he had "an unformal deadline of signing [it] before the election".

The Defence Department is refusing to confirm or deny any details of the confidential talks, telling the ABC the negotiations on the SPA were in the "final stages".

    "It is not appropriate to discuss any of the matters under negotiation between Defence and Naval Group," Defence said in a statement.

"Defence continues to negotiate the agreement in accordance with its obligations under the Public Governance and Performance Accountability Act 2013 to ensure value-for-money outcomes are achieved".

Leading Australian Defence industry analyst Andrew Davies said he believed the use of a CEP had created problems.   

"The biggest concern I have is that we've entered into a sole-source arrangement long before we had the information required to make a sensible evaluation of how much it's going to cost, how long it's going to take and what ultimately is going to be delivered."


Former deputy Defence secretary Kim Gillis, who left the department earlier this year, was recruited last month to help the secure the SPA.

"Mr Kim Gillis was engaged to advise senior officials as the Commonwealth negotiation team finalises agreement with Naval Group on the remaining commercial issues during November," the Defence Department confirmed to the ABC.

Last month, the ABC also revealed Naval Group chief Herve Guillou flew from Paris to Canberra for two days of talks to help end the deadlocked negotiations.

Prime Minister Scott Morrison declared the SPA negotiations were on track after meeting French President Emmanuel Macron at the G20 summit in Argentina.

"We made a lot of progress there, the SPA is progressing extremely well," Mr Morrison told reporters after meeting Mr Macron.

"We agreed that we can elevate that back up to leader-level to ensure it's finalised in the near term."

Mr Morrison praised the work of Mr Pyne and his French counterpart Florence Parly in getting the deal ready.

"It's a huge project, it's important to both countries for the next 50 years," he said.

"So we're getting very close to finalising that arrangement.   

Of course, "Mr Fixer" Christopher Pyne has denied that there has been a recent offer to pay 25% more and allow a two year delay in delivery.

Does anyone believe the $50 Billion price will not blow out?



How on earth did this French company get the contract which involves redesigning a nuclear submarine to be re-engineered to be a diesel submarine?

How ridiculous. 

Seems like the Australian people have been torpedoed.   

Its time wrote on Dec 5^th, 2018 at 8:50am:


Yes - when Labor fulfills the contracts laid down by the LNP, the costs will continue... maybe we need these kinds of processes removed from the hands of politicians.... so they can stop playing Fiscal Games with them.... and start working for the people first and foremost....

Its time wrote on Dec 5^th, 2018 at 8:50am:


Meaning:-

a) bills contracted pre-Labor government,

or

b) bills developed by Labor??????

Planting massive costs under a future government is like building a minefield for them... sign up to every costly deal under the sun and then let the opposition cop the blame when the payments fall due....

They must all think we're stupid out here - pity they don't put all that money and energy into running the country properly.

Sir lastnail wrote on Dec 5^th, 2018 at 8:11pm:



We should have bought off the shelf nuke subs.
What a silly idea to buy diesel rubbish.
It's old WW2 technology.

Underwater drones are mostly going to replace subs.

Captain Nemo wrote on Dec 5^th, 2018 at 9:29pm:



Thanks Captain and you can be the Captain of the first sub.