Monday, February 16, 2015

Opinion: Aussie prime minister wants sub deal with Japan to placate Washington

By Hugh White/The Age
Last week Tony Abbott did not just back away from promises allegedly made to South Australian back-benchers. He stood up in Parliament and mocked the idea of choosing our new submarines through a competitive tender process. That makes it clearer than ever that he intends to sign an agreement with Japan just as soon as he can, without seriously considering the alternatives.
This is the biggest captain's pick of them all – in the dollars involved, in the consequences of getting it wrong, and in the lack of elementary due diligence in making really momentous national decisions. There is simply no precedent in Australia for a defence decision of such importance to be made so irresponsibly.
Japan builds fine submarines but there are major doubts that they are the best bet for us, and there is no way we can be sure without a rigorous competition against the other possibilities.
Instead, Tony Abbott wants to go straight to the Japanese option for three reasons. Strategically, it would strengthen the growing alliance with Japan, which he and Japanese Prime Minister Shinzo Abe are so keen to build in the face of China's rise. It would also please Washington, which is pushing very hard behind the scenes because it too likes the idea of an Australia-Japan alliance to co
Administratively, he believes it would be easier to buy from Tokyo in a government-to-government deal, rather than to create the kind of messy partnerships that have caused such problems in the air warfare destroyer project.
And technically, he believes Japan is the only country building non-nuclear submarines that are big enough for us, so we can avoid risk by buying a tried and proven design from Japan off-the-shelf.
He is wrong on all three points.
There are huge strategic risks to Australia in mortgaging the future of our submarine capability to  Abe's vision of Japan as a resurgent strategic power in Asia. There are huge administrative risks in partnering in such a complex and sensitive project with a country that has no experience at all in arms exports or collaborative defence procurement.
And it is simply not true that the Japanese are already building the kind of submarine we need. Their Soryu-class boats are big enough, but size isn't everything, and that design is already being superseded. Japan's boats would need a lot of changes to meet our requirements.
The fact is that no one anywhere in the world has an existing design that meets all our needs. Germany's Type 214 is an excellent boat but is too small. France has a bigger boat but it is nuclear powered. Sweden, which designed the Collins class submarine, has nothing close to that size on its books now. So whatever happens, we will have to modify an existing design.
That will be both costly and risky. The question is how best to manage those costs and risks, and the answer is carefully managed competition. There is a well-established process for situations such as this, where none of the potential suppliers have what you want. It is called a project definition study, or PDS. We have used it before on many complex projects, and it works.
First, we invite anyone who wants to register their interest in being considered. From those we select a small number – maybe four or five – of the most serious contenders. They are then asked to develop their proposal by doing substantial preliminary work on the design and project planning. It is a big task, and we pay them quite serious money to do it, which is why it is called a funded PDS.
At the end of that process, the two most promising proposals are invited to submit fully developed tenders for a fixed-price contract. The winner of that contest gets the job.
The shape of a funded PDS for the new submarine is pretty clear. There is no reason why the Japanese should not be invited to take part, but they should be joined on the starting line by the Germans, the French, the Swedes and perhaps some others as well.  If, as some reports suggest, the Japanese are not willing to compete against the others – well, that tells you something, doesn't it?
The PDS responses would, among other things, explain where the bidder would plan to build the submarines, and allow the government to make an informed decision about whether to build them in South Australia or somewhere else, and in partnership with ASC or with someone else.
No one would pretend for a moment that a funded PDS followed by a limited final tender removes all the risks from a project like this. Of course it doesn't. But long experience shows it limits and manages those risks better than any other approach – and certainly a lot better than a Captain's pick.
The biggest problem for us today is that a PDS process like this takes several years at least, and we are running out of time to get new boats in the water as the first of the Collins class approach the end of their service terms. Labor's defence ministers under Rudd and Gillard bear a big share of the blame for this, because they wasted years while they were in government by simply refusing to make a decision.
However, that is no excuse for the present government to say, as Joe Hockey has done, that there is now no time for a proper competitive process. The Japan option might very well go bad on us for any number of reasons, leading to even longer delays, so going straight to Tokyo with our chequebook is no solution. Instead, the government must apply itself to managing the problem sensibly, by launching a funded PDS as soon as possible, and by looking at ways to extend the life of the Collins-class boats until the new ones are ready.
And before it does anything else, it must decide what it actually wants these submarines to be able to do. Believe it or not, that question has never been seriously answered.
Hugh White is an Age columnist and professor of strategic studies at the Strategic and Defence Studies Centre, ANU.

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