Pearls and Irritations

Part 3: Implications: a more efficient and less risky approach

Introduction

The purpose of this three-part article is not to question the government’s requirement for advanced submarine capability but rather to explore some of the technological, economic and financial issues, and the associated risks, around the programme by which the government is seeking to deliver this capability. After all, it is not the new submarines themselves that constitute the objective of this major programme, but rather the capability they will deliver. If this capability could be provided more efficiently and at less risk, there would be clear benefits for the community.

First of all, in this final part of the article, the White Paper’s proposal for the FSM is evaluated in the light of the previous discussion of technological and economic risks. Secondly, I propose an alternative approach to providing the desired submarine capability at less cost and with lower risk.

Implications for the White Paper approach

Defence has determined that its requirements for future submarine capability can only be delivered by acquiring a large, conventional submarine with a very long range. No such submarine is available in the global market place. Australia’s requirement is unique.

Parent navy responsibilities can come at a high cost, particularly when there are no other purchasers of the equipment. Most of the problems and risks with the proposed acquisition relate to the insistence that Australia’s requirement for submarine capability demands a unique solution. The identical view led to the acquisition of a unique submarine last time around, the Collins class. While the Collins’ record has by no means been totally negative, overall the experience has not been a happy one. According to a former Prime Minister and his first Defence Minister, the Collins class has a “fragile capability”.

Turning to the roles required of the future submarine (FSM), we have seen in Part One of this report that a conventional boat would face substantial risks of destruction were it to operate in a reconnaissance and interdiction role in any conflict in contested waters far from base, particularly the South China Sea. First of all, even by the 2020s, let alone on delivery in the 2030s, the FSM will not be the ‘regionally superior’ submarine promised in the White Paper. By that time, China, Russia and India will be capable of operating modern hunter-killer SSNs in those waters. Secondly, detection technologies will have advanced to a degree that will make force projection in contested waters by a SSK unacceptably dangerous for its crew. The FSM’s large size will also act against it in terms of its sonar footprint and acoustic signature. Crucially, while the FSM will have air-independent propulsion or much better batteries than the Collins and therefore a significantly lower indiscretion rate, it would not be able to make a high-speed exit if detected.

On the other hand, the large size of the FSM, presumably required to provide greater fuel bunkerage and better habitability on lengthy operations, will reduce its effectiveness in other roles, such as reconnaissance, intelligence gathering and sea denial operations in the approaches to Australia and its littoral zone. The desirability of nimbleness and a modest footprint in these roles goes a long way to explain why there is no requirement globally, other than in Australia, for a large SSK.

Turning to the economic and financial issues and risks, the requirement to design and build twelve unique submarines for Australia has a profoundly negative impact on the outcomes projected by Defence. The effects on cost, delivery and the likelihood of a capability gap are of great concern.

First, the currently projected cost of each FSM at over US$3 billion is excessive. The capability that will be delivered by the FSM in no way justifies a higher cost than that of a much larger and immeasurably more capable Virginia class nuclear submarine (SSN). In terms of conventional submarines (SSK)s, the FSM will in no imaginable way be more than five times more capable than the current Soryu class, as the cost differential implies. Add to this the risk that the cost will blow out during the detailed design and construction process, as generally occurs with new acquisitions, and the economics of the project totally fail to stack up. The projected cost is simply unacceptable for the capability it will deliver.

Secondly, as has been pointed out extensively since the White Paper was published, the timeline for the project is far too long. The strategic situation described in the White Paper appears to require an advanced Australian submarine capability if not now at least by the early 2020s. Unless no alternative is available, delivering the first of the FSMs in the early 2030s (or later, given the history of defence projects) is an unacceptable response to the current threat.

Thirdly, if it were attempted, the cost of the proposal to undertake a significant upgrade to Collins in order to bridge the capability gap into the mid-2030s should be added to the already unacceptable cost of the FSM acquisition. But in the absence of further detail, the proposal is not credible. The White Paper provides no detail about how the upgrade will be achieved, other than by modernising the sonar.

As suggested in Part Two of this report, apart from a myriad of other barriers to upgrading the Collins class to contemporary standards, the fact that new diesels and air-independent propulsion cannot be installed means there is a high probability that the submarines will not be able to be sent on operations beyond the early 2020s. Upgrading the systems, while beneficial in itself, would also boost the power requirement and, therefore, increase the indiscretion rate. The probability of a complete gap in Australia’s submarine capability over a period of at least a decade is too high for this approach to be acceptable.

The conclusion must be that the proposal in the White Paper for providing a ‘regionally superior’ capability in submarines is highly likely to be neither efficient nor effective. Further, particularly if a local build were stipulated, the risks are all on the downside. In short, the proposal is unacceptable.

An alternative approach

An alternative approach requires the government to accept that substantial changes are required in its current proposal for procuring the submarine capability that Australia needs. The government would need to recognise that:

• The cost and timelines proposed for the FSM in the White Paper are unacceptable.
• There is a high risk that the proposal to upgrade Collins to contemporary standards so as to bridge the capability gap will not be cost-effective or even feasible.
• Given the level of threat identified in the White Paper and due to the obsolescence of the Collins class, a modern submarine capability is required in the early 2020s, not ten years later.
• Australia does not have a unique requirement for submarines but may need more than one type of submarine to provide the full scope of the capability described in the White Paper.
• Entirely satisfactory military off the shelf solutions are available to provide the capability that Defence requires from submarines in different roles.

In order to provide the capability required by Defence in an efficient and effective way and with the least possible risk to their crews, however, two types of submarine are required.

First, a modern conventional submarine, available off the shelf, would be suitable for discharging the critical role of sea denial in the waters around Australia. With a range of around 12,000 kms and the ability to operate submerged for extended periods of time, it could also undertake reconnaissance, intelligence gathering and covert operations in the waters to Australia’s north.

Secondly, a nuclear powered submarine would be required to undertake the force projection role in the South China Sea that, in the future, could not safely be discharged by a SSK. If Australia were unwilling or unable to acquire SSNs, then the RAN should no longer undertake submarine operations in contested waters far from base such as the South China Sea. This role should be left to the United States Navy or to other suitably equipped allies, at a considerable saving to Australia’s defence budget.

Acquiring SSNs may not be easy. Presently, the US opposes the acquisition of nuclear submarines by Australia. To turn this around, the government’s negotiating position would be based on the advantages to the US of Australia undertaking our share of the ‘heavy lifting’ in the Asia Pacific. As a loyal ally, no doubt Australia would note the US supply of a nuclear propulsion plant to the UK to support its first SSN acquisition nearly 60 years ago. In the face of the acquisition of SSNs by China and other countries, Australia would also emphasise the RAN’s unwillingness to undertake reconnaissance and force projection operations in the South China Sea in a conventional submarine.

The following approach is therefore suggested. Over the next year, the Australian government should:

• Initiate negotiations with the US administration to acquire four SSNs so that the RAN could undertake force projection operations in contested waters. These SSNs, preferably of the Virginia class so as to maximise inter-operability with the US Navy, would be sustained in Australia by the American supplier working with ASC in Adelaide.
• Order four leading edge conventional submarines to be delivered in the early 2020s when the Collins class would be decommissioned. They would not be built in Australia and would be supplied from a shipyard in France, Germany or Japan. These submarines would be off the shelf purchases with the exception that they would be configured to deploy a US combat system and the Mk48 Mod7 heavyweight torpedo specified by Defence. Ideally, they would incorporate lithium-ion battery technology rather than AIP.

The advantages of this approach include the acquisition of eight submarines that would provide a capability exceeding that of the 12 proposed by Defence, and delivered in the 2020s rather than 2032-50. There would be no capability gap and because they would be purchased off the shelf, with no Australian build, the submarine capability would be provided at a cost of around half the estimate in the White Paper (less than $30 billion).

If Australia were unable (or unwilling) to acquire nuclear submarines, then the force projection role in contested waters should be abandoned. A total of six new conventional submarines should then be acquired to undertake the other important roles identified in the White Paper. The cost of this approach should be under $10 billion.

Conclusion

The White Paper proposal to acquire 12 conventional submarines between the early 2030s and 2050 is not acceptable. At over $50 billion the cost would be highly excessive, delivery far too late and the risk of a capability gap extremely high.

In addition, a SSK, because it could not meet the White Paper’s benchmark of ‘regional superiority’, would be unable in the future safely to deliver force projection capability in waters contested by SSNs and characterised by advanced detection technologies. In order to undertake this activity with greater security for its personnel, the RAN would need a nuclear submarine. If the government is unable or unwilling to acquire SSNs, then it should not undertake the force projection role in the South China Sea.

Australia does not have a unique capability requirement for its submarine force. Because of the risks involved in waiting until the 2030s to deploy the new submarine, advanced conventional submarines should be ordered off the shelf and as soon as possible (within one year) for deployment in the early 2020s. At the same time, negotiations with the US should be initiated around the acquisition of four SSNs.

There are negligible benefits to be derived from building submarines in Australia but the associated risks are very high. Unless the conventional submarines were built under a fixed price contract to an existing design and with a guarantee of similar cost and delivery to imported boats, a local build should not be considered.

Finally, this is a massive investment with very high risks, rivalling the Gorgon LNG project in Western Australia in terms of capital expenditure. It is not at all clear that the proposal has been exposed to the very detailed investment appraisal process that any such substantial capital project in the private sector would undergo. With its single line appropriation, Defence can escape the scrutiny to which significant capital projects in other portfolios, such as Health and Education, routinely would be subject in the budget process. Both the ADF and the Australian taxpayer would benefit if in the future major Defence investments were subject to detailed evaluation by the Department of Finance.

Jon Stanford is a Director of Insight Economics. He had a significant career as an economist in the Australian Public Service, ultimately in the Department of Prime Minister and Cabinet.  He has worked extensively on economic and policy issues around defence procurement and naval shipbuilding.

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