28 Desember 2015
Australia’s next fleet of submarines will be considerably cheaper due to a plethora of competing bids, estimated cost per unit from the bidder is 1.25 bio $ (photo : The Australian)
The navy’s future submarine fleet could cost taxpayers at least $5 billion less than expected, according to secret price estimates given to Defence by the three international competitors.
The Australian understands that the confidential bids lodged with the government last month by Germany, France and Japan each offer a dramatically lower cost of building an eight-submarine fleet in Adelaide than was anticipated, in the range of $10bn-$12bn. It was previously expected that the project would cost about $20bn, based on a 12-boat fleet.
Even if the government decides to restore its original promise of building 12 submarines rather than eight, the bidders estimate the construction cost will reach only about $15bn, a little more than $1bn a boat, amounting to a potential $5bn saving for taxpayers.
The lower cost estimates reflect the robust competition between the three international bidders to secure the submarine deal, which will be the most lucrative defence contract in the nation’s history.
The cheaper than expected estimates for building the new fleet may tempt the government to try to keep its original promise of building 12 submarines, rather than the revised figure of eight submarines with an option for four more that was in Tony Abbott’s draft defence white paper before he was deposed by Malcolm Turnbull in September.
The Prime Minister and Defence Minister Marise Payne have delayed the release of the white paper until the first quarter of next year and have left open the prospect of revising the contents of the blueprint, including the size of the submarine fleet.
The number of future submarines and shipbuilding jobs has been a hot-button issue in South Australia, where the issue contributed to the demise of Mr Abbott’s prime ministership after he backed away from his election promise to build 12 submarines.
Each of the three bidders for the submarine contract — Germany’s TKMS, France’s DCNS and the Japanese government — has refused to disclose publicly their final estimated costs of building the new fleet.
Germany and France have been able to undercut costs more than expected because they are experienced submarine exporters with highly efficient international programs. Last year, Germany’s TKMS publicly estimated that it could build a 12-boat fleet for $20bn, but this figure has since been revised down.
Japan, which has not built a submarine overseas before, has reportedly tried to keep costs down by telling submarine builder Mitsubishi the bid should not be framed with profit as the priority. This could give Japan a cost advantage over Germany’s privately owned TKMS and France’s partly private DCNS, which would both be required to profit from the contract.
The Australian government wants the largest and most sophisticated conventional submarine ever built, a 4000-plus tonne boat with a US combat system and the ability to fire cruise missiles and deploy special forces.
Former prime minister Kevin Rudd decided in 2009 that he wanted to double the size of the navy’s submarine fleet from six to 12 to help combat a rising China, nut this number was driven personally by Mr Rudd without being backed by strategic assessments. Since then the South Australian government has backed the 12-submarine proposal as the holy grail for industry and jobs.
The Abbott government, which initially supported Labor’s 12-boat plan at the 2013 election, came to see it as an unaffordable indulgence and backed away from the plan only to see its poll numbers dive in South Australia.
In February this year, the government announced the three-way, 10-month competitive evaluation process and asked the three chosen international competitors to base their cost estimates on an eight-submarine fleet.
On November 30, each of the competitors lodged their final bids for the project. The initial cost estimates of $10bn-$12bn for an eight-boat fleet will not be the final price. The winning bidder will negotiate a final submarine design with Defence and this will determine the ultimate cost of the submarines.
The government has frequently used $50bn as the projected figure for the future submarine project but this includes sustainment costs through the 30-year life of the fleet, which usually equate to about two-thirds of the cost of construction.
The government says it will choose the winning bidder by mid-next year. Japan is offering a long-range version of its existing Soryu-class submarines, Germany is offering a version of its yet-to-be-built Type-216 design while France is offering a conventional version of its Barracuda-class nuclear submarines currently being constructed in France.