October 3, 2018

Pyne Vows $50bn Submarine Contract is on Track

Defence Minister Christopher Pyne has moved to hose down concerns that the $50 billion ­Future Submarines project has become mired in contract disputes between Australia and the subs’ French manufacturer, Naval Group.

“The submarine project is on schedule, it is on budget,’’ Mr Pyne said yesterday. “The strategic partnering agreement is the second agreement that lasts for many decades into the future. There is no delay to the program or the schedule or the budget. The reality is that that negotiation is on track.”

The Strategic Partnering Agreement is the main header document governing the exchange of sensitive commercial information between Naval Group, the government and Lockheed Martin, the weapon’s system integrator. Two years after the Turnbull government selected the French organisation to build the 12 new subs, the key working document remains unsigned.

Reports vary as to the crux of the dispute. Some sources have told The Australian the parties disagree over issues relating to technology transfer and warranties while others have indicated the dispute is more serious, with Naval Group seeking rigid assurances it will be responsible for every aspect of the multi-phased construction timeline. A Naval Group spokesman declined to discuss the contract ­negotiations other than to say they were “ongoing’’.

“Given the life of the SPA, the negotiations are by their very ­nature challenging and complex,’’ the spokesman said.

Mr Pyne said media reports that he had refused to meet visiting Naval Group executives were false. And he said a push by a handful of South Australian senators to dump the project — which is not expected to deliver its first submarine until the early 2030s — was fanciful. There was “no such thing’’ as an off-the-shelf sub that would meet Australia’s requirements.

“The Barracuda-class offered by Naval Group won a very ­thorough competitive evaluation process more than two years ago,’’ Mr Pyne said.

“The idea that we could scrap that when so much work has already been done on it and so much money spent on it is quite frankly fanciful.’’

Most defence analysts agree that off-the-shelf boats already in service in Europe would be unsuited to Australia’s conditions, which require long travel times ­before subs are on-station.

As a consequence, the Defence Department sought a bespoke submarine that would be larger and capable of greater range.

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