Andrew Clark, Financial Review
1 June 2017
AUSTRALIA - It sounds like something out of Monty Python. A crime wave hits a neighborhood and the police can't cope. A delegation from plodders' HQ asks the crimes to hold off until local police numbers are adequate.
Bizarrely, Australia could face a similar dilemma with its mother-of-all-defense-purchases – the $50 billion (and counting) order for 12 French-designed long-range submarines.
Among other things, the original impulse to order the subs was to bolster Australia's maritime capacity for a worst-case scenario where conflict arises with China in the South China Sea.
However, the first of the French-designed, Australian built Short-fin Barracuda subs will not be ready until mid-way through the 2020s – at the earliest. The last one may not be finished until well into the 2050s.
To understand how different the world could be by then, consider that in the time it took from deciding that Australia needed new subs, to inviting bids and finally making a decision, China has grown about seven times over as an economy and now rivals the US.
According to Hugh White, Professor of Strategic Studies at the Strategic and Defense Studies Centre of the ANU, "both sides of politics carry a lot of blame" for the long delay. "We lost a decade stuffing around."
Moreover, White says, "we have accepted a very protracted acquisition process" at a time when "the strategic environment" – a la the South China Sea – is becoming more problematic".
In an article on the snail-like progress of Australia's submarine replacement program headlined "Shakespearean Tragedy", the Pacific Defense Reporter pointed out that in 2012 Singapore "initiated a program to replace the oldest of its six submarines".
"Less than two years later it had entered into a contract with Germany's TKMS for the supply of two highly capable Type 218SG submarines for delivery to the island state by 2020/21."
This compares with an Australian time frame of more than a half a century from first deciding to commission a new generation of subs to the projected delivery of the last of the Shortfin Barracudas. Our "Shakespearean tragedy" is part government-bureaucratic muddle, but also due to the demand that Australia retain a significant local ship-building capacity for Navy vessels – one that shores up employment in marginal government-held seats in Adelaide.
Critics argue there are no significant defense reasons for building naval platforms in Australia. Australia does not manufacture jet fighters or build tanks for the army; in fact, we do not produce any significant weapons systems.
The same critics argue a sensible defense acquisition policy should focus on value for money. This appeared to be the initial approach taken by the Abbott government when it indicated a preference for buying Japanese Soryu class submarines off the shelf.
Apart from its cost, the DCNS proposal involves significant risks. The slow delivery schedule means the
existing Collins-class submarines may require major upgrades, costing about $15 billion. There are also safety concerns, including the need to convert a submarine designed for nuclear propulsion to diesel-electric, involving substantial technical risks.
At the same time, Defense rejected a $20 billion proposal from the German company TKMS. It guaranteed the cost of building 12 submarines in Adelaide would be no higher than in Germany and offered a fixed-price contract with a delivery schedule that would remove the need for the costly Collins-class upgrade.
On paper, this seems like a better option. But Australian defense planners wanted a big, long-range sub, one capable of travelling 7000 to 8000 kilometers into the northern reaches of the Pacific off the coast of China, monitoring movements in the waters near major Chinese ports like Shanghai, even moving near the Russian seaport of Vladivostok.
Indeed, the interminable bid process spawned a virtual sub-industry of submarine experts furiously working out the reasons why the government's decisions are wrong. They have many strong points in argument, but what is glossed over in this mine's-better-than-yours rhetoric is that in the end the decision must be based on a series of judgments about the future which may prove to be right, or way off the mark.
Shorn of the jargon littering Defense documents, the French subs were preferred because they are big, have a long range, will carry a big delivery platform, are backed by a major defense-ship building-submarine construction company with experience dating back more than a century, and, crucially, they are quiet and can therefore avoid detection.
At the same time "it's not hard to identify what's driving the project's cost, risk and schedule", White has written. "At 5000 tons, the boat is very big.
"We're aiming so big for two reasons: range and roles. We're after a boat that can operate for a long time, far from home and we want it to do many things when it gets there, including intelligence collection, land strike missions, special forces support, and to operate autonomous underwater vehicles, as well as traditional anti-surface and ASW operations."
While "longer range and diverse capabilities are good", projected benefits "have to be set against their costs and risks. Prudent capability development means trading off what we'd like against what we can afford, what has a reasonable chance of actually working in service and of being available when we need it."
"Minimizing cost and risk is always important, but it's critical here because submarines are so central to Australia's defense and because our strategic risks are rising sharply," White points out
However, as the old Rolling Stones songs puts it, time waits for no one. The Australian Strategic Policy Institute's Defense Budget brief, released early last month, warns about rising world tensions. According to the Pacific Defense Reporter, the Australian Defense Department is working behind the scenes and responding to this tension by "modelling a range of contingencies/conflicts in which Australia might see itself facing off against the People's Liberation Army (PLA) – or more likely its Navy cousin, the PLA(N)."
"No one would suggest that Australia would become involved in a bilateral confrontation with China. But a multilateral confrontation is not beyond the probability horizon.
"A number of events could trigger a multilateral conflict; the invasion of Taiwan or a miscalculation over a disputed island between, say, China and Japan, or any of a number of countries who lay claim to some of the disputed islands in the South China Sea."
However, underlining the exposed nature of Australia's position, there is no record in the history of warfare of one party holding back until another is combat ready.
ASPI's Defense Budget Brief says the federal government has surrendered Defense policy to the "jobs and growth" mantra. "There's a lot of debate going on about Defense, but none of it addressing the issue of Australia's security," ASPI's Dr Mark Thomson says
In fact, we may be well past the use-by date for such distractions. Earlier this week US Republican Senator John McCain visited Australia and urged the government to join America in challenging Chinese claims to islands in the South China Sea.
There's a huge difference between joining patrols through contested waters in the South China Sea and armed conflict involving superpowers, and possibly Australia, over the same issue. But any prudent defense force would ensure it was combat ready before making such a commitment.
The US Trump administration's decision in May to carry out its first freedom of navigation exercise, sailing within 12 nautical miles of the Chinese-occupied Mischief Reef in the South China Sea, increased tension in the region. It will dominate Friday's Asian defense summit in Singapore – the Shangri-La Dialogue – where Prime Minister Malcolm Turnbull will deliver the keynote address. Among other speechmakers will be US Defense Secretary Jim Mattis.
For Australia the issue is whether to commit to sailing within the 12-nautical-mile territorial zone around Chinese-claimed reefs which have been rapidly converted into virtual, stationary aircraft carriers, complete with landing strips, aircraft hangars and assorted weaponry.
Australian defense officials and commentators are divided over what to do, but, whatever one's view, an inhibiting factor is lack of local preparedness.
One of the Royal Australian Navy's largest warships, HMAS Adelaide, has been dry-docked as naval engineers scramble to fix engine problems with the $1.5 billion vessel. As this article goes to press, it is unknown how long it will take to repair the Landing Helicopter Dock (LHD) vessel, which was commissioned only 18 months ago.
HMAS Adelaide's sister ship, HMAS Canberra, is also out of action and is berthed at Sydney's Garden Island Naval base. Reports first emerged more than two months ago that both ships had been sent to Garden Island after problems were identified with their propulsion systems.
At the very least, the hobbling of two frontline Australian Navy vessels crimps our possible involvement in joint allied patrols in the South China Sea. McCain, who is chairman of the US Senate Armed Services Committee and a one-time Republican Party presidential candidate, said in Sydney this week the US and allies like Australia "should be doing joint military exercises" in the region.
Short term, the problem may be frontline stricken Australian Navy ships, a la the Adelaide and the Canberra. Longer term, a 35-year plus projected turnaround time in the subs' project is a significant limitation.
Whatever the final release date, the delay also prompts a question about the role of submarines. According to conventional defense doctrine, submarines have five significant operational characteristics – stealth, endurance, freedom of movement, flexibility and lethality.
In times of peace they also contribute to prevention of conflict, naval diplomacy and offshore, lower-level police-style tasks.
Australia has a chequered submarine history and spent much of the 1950s and 1960s without subs. Delivery of six Oberon class subs coincided with the Whitlam Labor government in the 1970s.
The impressive operational record of the Oberon subs meant they played a significant, though largely undocumented, role in cold war monitoring. This included shadowing Soviet nuclear subs in the northern Pacific off the port of Vladivostok, and even shadowing Chinese vessels around Shanghai.
Later the Oberons were replaced with the Collins-class subs, which were based on a Swedish design. Australian Defense officials began working on a replacement for the troubled Collins class as far back as 2003, or four years before the defeat of the Howard government.
During the six years of the Rudd-Gillard-Rudd Labor governments, the matter was effectively dispatched to the too hard-basket. In the almost two years of the Abbott-led Liberal government that followed, the Japanese Soryu-class sub proposal received strong prime ministerial backing prior to any formal bid process being undertaken.
It was not until late 2016, or one year into the Malcolm Turnbull-led government, that the venerable and impressive French ship and submarine builder, DCNS, stunned competitors and observers to emerge with the contract.
But in what has been a 13-year contract preparation, review, bidding and awarding process, there are still no firm prices, only estimates about the final completion dollar numbers.
Professor White says DCNS is an impressive military contractor, renowned for building "very good subs". According to the Pacific Defense Reporter, members of its highly skilled, highly motivated workforce "are bound together for a common goal and sustained over time".
A senior DCNS executive, Michel Accary, told a recent conference on submarines hosted by ASPI that "all these players must be able to exchange information and take decisions rapidly and efficiently at the right level during the detailed design, building, setting to work and test process".
However, Hugh White points out that "we still don't have any price on these subs. They're all just estimates. They'll come to us and say 'here's the design and here's the price' and they have us over a barrel. I can't fathom how the Commonwealth can think this is a prudent practice."
Instead, White says, the government should have introduced a competitive design process, technically known as a "Funded Competitive Project Definition Study".
According to the current contract, DCNS is in charge of the design of the 12 new subs, and will be heavily involved in the building process, although the actual construction work will be based at the government-owned Australian Submarine Corporation (ASC) shipyards in South Australia, and not in the DCNS complex at Cherbourg, on France's western Atlantic seaboard.
Under a competitive design structure, White says the government would impose "huge competing pressure on both players". However, under the current structure, "it's pumpkins to peanuts they'll screw us if they can."
Time – about 35 years and counting – will tell.
