I welcomed Andrew Davies’s critique ^[1] of the Insight Economics report on the future submarine ^[2] (PDF), of which I was the principal author.

Davies substantially agrees with our findings about the major risks associated with the FSM project, in particular the risk of a major capability gap in the 2030s. Even if all goes well with the FSM and it’s delivered on schedule, the first new submarine will join the fleet when all six Collins-class submarines have reached the nominal end of their 30-year lives. And of course, there’s a very high probability that all will not go well with the FSM. The technical risks are extremely high and the industrial risks, if anything, are higher.

For example, Australian industry has only ever built six submarines, the last one 15 years ago. By contrast, the Barrow shipyard in the UK has built more than 180 submarines since 1902, yet when there was a much shorter gap in building submarines after the Cold War the skills fell away at an alarming rate. The result was that even with very substantial assistance from Electric Boat, the Astute was delivered six years late and more than 50% over budget.

In 2035, when the waters of the Asia–Pacific region will be teeming with half the world’s submarines—most of them either nuclear-powered or modern, advanced SSKs generally with air-independent propulsion—there’s a material probability that Australia won’t have even one submarine that could be sent into a high threat operational environment.

Our proposed solutions are based on the need to provide some insurance—first against the probability of a capability gap, and second against the possibility that the design of the FSM is unsatisfactory or fails to provide value for money in terms of the capability it offers.

In our view, and given that the attractive prospect of a ‘son of Collins’ design was abandoned four years ago, there are now only two possible options to avoid the capability gap.

The first is a Collins-class life extension (LOTE), which is favoured by Minister for Defence Industry Christopher Pyne ^[3]. We’re advised that it would cost around $15 billion, a figure that may cause ministers some discomfort when added to the already eye-watering budget for the FSM. Beyond the cost, however, it must be considered a highly risky option. If the LOTE for Collins, whose design is of a similar vintage to the FFG’s, produced the same outcome as that upgrade project, only four boats would be completed within the budget, they would be delivered seven years late, and they would be suitable for operations only in a low to medium threat environment. The RAN was the only navy, among many users, which attempted an FFG LOTE. No navy of the first rank would commit so much money to such a risky and second-rate option for a 30-year-old submarine.

Even if the Collins LOTE worked perfectly and came in on time and on budget, it wouldn’t provide a capability that would be regionally competitive in the 2030s. We’re advised that the boats wouldn’t incorporate air-independent propulsion or lithium-ion batteries. They may not even receive new generators. Who would want to see their children or grandchildren chugging around the South China Sea in 2040 in a submarine with diesels that belong in a museum and an indiscretion ratio that would be, at best, character-building?

The second option is to acquire six new submarines off the shelf but modified to provide a range of 10,000 nautical miles. They would have air-independent propulsion. They could also have a multi-purpose dock, with provision for unmanned underwater vehicles. They would all be delivered by 2033, would have a 30-year life and should cost well under $10 billion. And they would arguably have a greater capability than the Collins class.

We also suggest that the acquisition of a submarine tender could help address two problems. The first is the tyranny of distance: nearly half of a 10-week patrol by our submarines is taken up by very long transits. The second is the issue of crew fatigue on extended missions. If the tender were stationed at, say, Christmas Island, a four-week operation would provide the same time on station as a current 10-week mission. A tender would provide a significant force multiplier for our limited number of submarines. Of course, like all surface ships, a tender would be vulnerable in any conflict, but unlike other RAN warships could be pulled back to the mainland at very short notice.

The second advantage of the modified military-off-the-shelf solution is that it would provide cover in case the FSM program, which is highly risky, failed to provide a satisfactory solution. In that case, more of the new boats, evolved to higher standards in blocks of three, could be acquired while a longer-term solution was developed. Even after a LOTE, Collins couldn’t provide such insurance into the 2040s.

Of course, in proposing solutions at this stage of the process, we’re deep in the world of the second best. In a first best world, a proper, competitive acquisition process for the FSM would have begun 10 years ago. But we are where we are. It’s important to note that we’re not seeking any change to government decisions already taken. The FSM program would continue unchanged. The only real initiative is to invest less than $10 billion in six new, advanced submarines plus a tender, rather than $15 billion in a 10-year life extension for Collins. We consider that any evaluation of value for money and of the relative risk-adjusted return in terms of capability would show the first option to be far superior. It would also provide a valuable insurance policy against a capability gap and, down the track, the possible failure of the FSM design.