{"id":55380,"date":"2020-04-28T06:00:33","date_gmt":"2020-04-27T20:00:33","guid":{"rendered":"https:\/\/www.aspistrategist.ru\/?p=55380"},"modified":"2020-04-27T18:08:07","modified_gmt":"2020-04-27T08:08:07","slug":"has-the-cost-of-australias-future-submarines-gone-up-part-2","status":"publish","type":"post","link":"https:\/\/www.aspistrategist.ru\/has-the-cost-of-australias-future-submarines-gone-up-part-2\/","title":{"rendered":"Has the cost of Australia\u2019s future submarines gone up? Part 2"},"content":{"rendered":"
<\/figure>\n

In the first part of this series<\/a>, we saw that by late 2015, before the Defence Department had received industry responses in the competitive evaluation process<\/a> for selecting the designer and builder of the future submarines, its cost estimate for the program was $50 billion \u2018outturned\u2019.<\/p>\n

A defence white paper and supporting investment program<\/a> were released on 25 February 2016. By that time, Defence had had industry responses to the competitive evaluation tender for nearly three months, so it would have had time to adjust the $50 billion figure if it had been incorrect.<\/p>\n

But the estimate wasn\u2019t changed, other than the addition of a \u2018greater than\u2019 sign\u2014\u2018>$50bn\u2019. Defence works in outturned dollars, which takes inflation into account, and there was nothing in the 2016 investment program to suggest the number was different.<\/p>\n

However, at Senate estimates hearings<\/a> in late May 2018, the program head, Rear Admiral Greg Sammut, stated that the acquisition cost estimate was \u2018$50 billion on a constant price basis\u2019. I estimated at the time that in outturned dollars that would be around $79 billion<\/a>. Since then, Defence has been using an $80 billion outturned figure as equivalent to its $50 billion constant figure.<\/p>\n

How did the estimate go from $50 billion outturned to $80 billion outturned in the space of two years? First, we should note that Sammut also implied at the May 2018 hearings that the cost hadn\u2019t changed since DCNS was announced as the preferred contractor on 26 April 2016:<\/p>\n

Senator Patrick: It has been two years since DCNS, now Naval Group, were announced the winners. You\u2019ve done a bit of work. Are there any updated costs on the acquisition for the submarine?<\/p>\n

Rear Adm Sammut: It\u2019s still in the order of $50 billion based on the work that we\u2019ve done to date on early design activities.<\/p>\n

Senator Patrick: Do you have any idea of, say, the design cost or the build costs?<\/p>\n

Rear Adm Sammut: Those costs are being determined in greater detail as we complete preparations to enter the full contract for design and build of the submarine. At this stage, as I said, total acquisition for the 12 submarines is remaining at $50 billion.<\/p><\/blockquote>\n

If the $50 billion constant\/$80 billion outturned estimate hadn\u2019t changed since Naval Group was selected, then the window in which the estimate increased must have been between the receipt of bids from the participants in the competitive evaluation process at the end of November 2015 and the announcement in April 2016.<\/p>\n

What caused the change? Recently there\u2019s been discussion\u2014for example, at Senate estimates\u2014about whether the Commonwealth has been commercially \u2018captured<\/a>\u2019 by Naval Group because it chose a single provider too early, exposing itself to cost increases. While that\u2019s an ongoing risk to guard against, it doesn\u2019t explain cost increases during<\/em> the competitive evaluation process when there was still competitive tension.<\/p>\n

There are likely two reasons for the growth of the estimate during the competitive evaluation process. The first is that Defence\u2019s $50 billion outturned figure was already too low. ASPI\u2019s 2009 estimate of $36.5 billion constant becomes around $42 billion constant when rebaselined to 2015. Outturned, that becomes $67 billion.<\/p>\n

The second reason for the increase is the more demanding performance requirements. The 2016 white paper moderated the requirements for the future submarine by dropping its strategic strike role, which should also have reduced the cost. But the white paper also introduced the undefined term \u2018regionally superior\u2019. If anything was going to lead to an open-ended expansion of requirements, that would be it.<\/p>\n

The Attack class will be in around 4,500 to 5,000 tonnes, up to 50% larger than the Collins. The size is no doubt driven by the range and endurance requirements, but it\u2019s also related to the pump-jet that will propel it. The acoustic benefits of a pump-jet appear to have been a key discriminator in Defence\u2019s selecting DCNS over the other competitors. But a pump-jet is viable<\/a> on a conventional submarine only if it\u2019s big. It\u2019s not clear whether the Attack class is big because it uses a pump-jet, or, conversely, is capable of operating a pump-jet because it is big. Either way, the Attack class is big. That is a key cost driver, and there are likely others.<\/p>\n

ASPI\u2019s original estimate of $67 billion was for a 4,000-tonne submarine, so an additional 500 to 1,000 tonnes per boat gets the figure close to $80 billion in a parametric cost estimate. If we also take into account the overheads associated with being the parent navy for what is essentially a unique class of submarine, it\u2019s easier to see how the cost became $80 billion as Defence worked through the competitive evaluation process and understood what it was getting itself and the country into. Unfortunately, it didn\u2019t update the price tag in the 2016 white paper so that the country would also know what it was on the hook for.<\/p>\n

We don\u2019t need speculation about whether the French are taking advantage of us to understand why the future submarine is costing $80 billion. Those who think that the Germans can deliver something similar for only $20 billion<\/a> are deluding themselves and simply wishing away the iron laws of defence costing. An extremely large, unique, manned conventional submarine that seeks to be \u2018regionally superior\u2019 will inevitably come at an exquisite cost, regardless of who designs and builds it.<\/p>\n

We are potentially at the end of the development curve for conventional submarines. Andrew Davies has written<\/a>, \u2018We are investing many billions of dollars to get small, incremental improvements in stealth, range and endurance while the counter-technologies are on the cusp of massive, and potentially relatively cheap, increases in performance.\u2019 Keeping the future submarine regionally superior means being superior not only to adversary submarines, but to the full range of counter-technologies\u2014a challenging, expensive and increasingly futile task.<\/p>\n

Defence has stated that the future submarine will be built in batches, with the design progressively updated to adapt to developing technologies. It would be interesting to know how much funding Defence has factored into its $80 billion cost estimate to keep the design regionally superior, because that quixotic chase will surely be a source of future cost growth.<\/p>\n","protected":false},"excerpt":{"rendered":"

In the first part of this series, we saw that by late 2015, before the Defence Department had received industry responses in the competitive evaluation process for selecting the designer and builder of the future …<\/p>\n","protected":false},"author":767,"featured_media":55381,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"footnotes":""},"categories":[1],"tags":[2436,26,1051,114],"class_list":["post-55380","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-attack-class","tag-defence-spending","tag-future-submarine-project","tag-ran"],"acf":[],"yoast_head":"\nHas the cost of Australia\u2019s future submarines gone up? Part 2 | The Strategist<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.aspistrategist.ru\/has-the-cost-of-australias-future-submarines-gone-up-part-2\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Has the cost of Australia\u2019s future submarines gone up? Part 2 | The Strategist\" \/>\n<meta property=\"og:description\" content=\"In the first part of this series, we saw that by late 2015, before the Defence Department had received industry responses in the competitive evaluation process for selecting the designer and builder of the future ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.aspistrategist.ru\/has-the-cost-of-australias-future-submarines-gone-up-part-2\/\" \/>\n<meta property=\"og:site_name\" content=\"The Strategist\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/ASPI.org\" \/>\n<meta property=\"article:published_time\" content=\"2020-04-27T20:00:33+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2020-04-27T08:08:07+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.aspistrategist.ru\/wp-content\/uploads\/2020\/04\/HMAS-Rankin-with-MH-60R.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"676\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Marcus Hellyer\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@ASPI_org\" \/>\n<meta name=\"twitter:site\" content=\"@ASPI_org\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Marcus Hellyer\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.aspistrategist.ru\/#website\",\"url\":\"https:\/\/www.aspistrategist.ru\/\",\"name\":\"The Strategist\",\"description\":\"ASPI's analysis and commentary site\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.aspistrategist.ru\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-AU\"},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-AU\",\"@id\":\"https:\/\/www.aspistrategist.ru\/has-the-cost-of-australias-future-submarines-gone-up-part-2\/#primaryimage\",\"url\":\"https:\/\/www.aspistrategist.ru\/wp-content\/uploads\/2020\/04\/HMAS-Rankin-with-MH-60R.jpg\",\"contentUrl\":\"https:\/\/www.aspistrategist.ru\/wp-content\/uploads\/2020\/04\/HMAS-Rankin-with-MH-60R.jpg\",\"width\":1200,\"height\":676,\"caption\":\"725 Squadron's MH-60R 'Romeo' helicopter conducts an Anti-Submarine exercise with HMAS Rankin in the Eastern Australian Exercise Area. *** Local Caption *** The Navy\u0092s Fleet Air Arm has been conducting exercises with HMAS Rankin off the coast of New South Wales in the vicinity of Jervis Bay. Both 725 and 816 Sqn\u0092s have been exercising with HMAS Rankin conducting both Anti- Submarine Warfare activities as well as Helo Submarine transfers. The MH-60R Seahawk \u0091Romeo\u0092, is a significant increase in technology and capability for Navy as the helicopters are equipped with a sophisticated sensor suite, torpedoes and air-to-surface missiles. The MH-60R multi-mission and multi-target precision strike capabilities will increase Navy\u0092s versatility and potency as a high-end fighting force as an integrated element of the Navy\u0092s and ADF\u0092s military capabilities. 725 Squadron will undertake training and 816 Squadron will be the operational support squadron.\"},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.aspistrategist.ru\/has-the-cost-of-australias-future-submarines-gone-up-part-2\/\",\"url\":\"https:\/\/www.aspistrategist.ru\/has-the-cost-of-australias-future-submarines-gone-up-part-2\/\",\"name\":\"Has the cost of Australia\u2019s future submarines gone up? Part 2 | The Strategist\",\"isPartOf\":{\"@id\":\"https:\/\/www.aspistrategist.ru\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.aspistrategist.ru\/has-the-cost-of-australias-future-submarines-gone-up-part-2\/#primaryimage\"},\"datePublished\":\"2020-04-27T20:00:33+00:00\",\"dateModified\":\"2020-04-27T08:08:07+00:00\",\"author\":{\"@id\":\"https:\/\/www.aspistrategist.ru\/#\/schema\/person\/87e4e7561c0d7071411d7d635b9e32c1\"},\"breadcrumb\":{\"@id\":\"https:\/\/www.aspistrategist.ru\/has-the-cost-of-australias-future-submarines-gone-up-part-2\/#breadcrumb\"},\"inLanguage\":\"en-AU\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.aspistrategist.ru\/has-the-cost-of-australias-future-submarines-gone-up-part-2\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.aspistrategist.ru\/has-the-cost-of-australias-future-submarines-gone-up-part-2\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.aspistrategist.ru\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Has the cost of Australia\u2019s future submarines gone up? Part 2\"}]},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.aspistrategist.ru\/#\/schema\/person\/87e4e7561c0d7071411d7d635b9e32c1\",\"name\":\"Marcus Hellyer\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-AU\",\"@id\":\"https:\/\/www.aspistrategist.ru\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/ab3d49a0ff8e79106b3af65880612804?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/ab3d49a0ff8e79106b3af65880612804?s=96&d=mm&r=g\",\"caption\":\"Marcus Hellyer\"},\"url\":\"https:\/\/www.aspistrategist.ru\/author\/marcus-hellyer\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Has the cost of Australia\u2019s future submarines gone up? Part 2 | The Strategist","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.aspistrategist.ru\/has-the-cost-of-australias-future-submarines-gone-up-part-2\/","og_locale":"en_US","og_type":"article","og_title":"Has the cost of Australia\u2019s future submarines gone up? Part 2 | The Strategist","og_description":"In the first part of this series, we saw that by late 2015, before the Defence Department had received industry responses in the competitive evaluation process for selecting the designer and builder of the future ...","og_url":"https:\/\/www.aspistrategist.ru\/has-the-cost-of-australias-future-submarines-gone-up-part-2\/","og_site_name":"The Strategist","article_publisher":"https:\/\/www.facebook.com\/ASPI.org","article_published_time":"2020-04-27T20:00:33+00:00","article_modified_time":"2020-04-27T08:08:07+00:00","og_image":[{"width":1200,"height":676,"url":"https:\/\/www.aspistrategist.ru\/wp-content\/uploads\/2020\/04\/HMAS-Rankin-with-MH-60R.jpg","type":"image\/jpeg"}],"author":"Marcus Hellyer","twitter_card":"summary_large_image","twitter_creator":"@ASPI_org","twitter_site":"@ASPI_org","twitter_misc":{"Written by":"Marcus Hellyer","Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebSite","@id":"https:\/\/www.aspistrategist.ru\/#website","url":"https:\/\/www.aspistrategist.ru\/","name":"The Strategist","description":"ASPI's analysis and commentary site","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.aspistrategist.ru\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-AU"},{"@type":"ImageObject","inLanguage":"en-AU","@id":"https:\/\/www.aspistrategist.ru\/has-the-cost-of-australias-future-submarines-gone-up-part-2\/#primaryimage","url":"https:\/\/www.aspistrategist.ru\/wp-content\/uploads\/2020\/04\/HMAS-Rankin-with-MH-60R.jpg","contentUrl":"https:\/\/www.aspistrategist.ru\/wp-content\/uploads\/2020\/04\/HMAS-Rankin-with-MH-60R.jpg","width":1200,"height":676,"caption":"725 Squadron's MH-60R 'Romeo' helicopter conducts an Anti-Submarine exercise with HMAS Rankin in the Eastern Australian Exercise Area. *** Local Caption *** The Navy\u0092s Fleet Air Arm has been conducting exercises with HMAS Rankin off the coast of New South Wales in the vicinity of Jervis Bay. Both 725 and 816 Sqn\u0092s have been exercising with HMAS Rankin conducting both Anti- Submarine Warfare activities as well as Helo Submarine transfers. The MH-60R Seahawk \u0091Romeo\u0092, is a significant increase in technology and capability for Navy as the helicopters are equipped with a sophisticated sensor suite, torpedoes and air-to-surface missiles. The MH-60R multi-mission and multi-target precision strike capabilities will increase Navy\u0092s versatility and potency as a high-end fighting force as an integrated element of the Navy\u0092s and ADF\u0092s military capabilities. 725 Squadron will undertake training and 816 Squadron will be the operational support squadron."},{"@type":"WebPage","@id":"https:\/\/www.aspistrategist.ru\/has-the-cost-of-australias-future-submarines-gone-up-part-2\/","url":"https:\/\/www.aspistrategist.ru\/has-the-cost-of-australias-future-submarines-gone-up-part-2\/","name":"Has the cost of Australia\u2019s future submarines gone up? Part 2 | The Strategist","isPartOf":{"@id":"https:\/\/www.aspistrategist.ru\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.aspistrategist.ru\/has-the-cost-of-australias-future-submarines-gone-up-part-2\/#primaryimage"},"datePublished":"2020-04-27T20:00:33+00:00","dateModified":"2020-04-27T08:08:07+00:00","author":{"@id":"https:\/\/www.aspistrategist.ru\/#\/schema\/person\/87e4e7561c0d7071411d7d635b9e32c1"},"breadcrumb":{"@id":"https:\/\/www.aspistrategist.ru\/has-the-cost-of-australias-future-submarines-gone-up-part-2\/#breadcrumb"},"inLanguage":"en-AU","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.aspistrategist.ru\/has-the-cost-of-australias-future-submarines-gone-up-part-2\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/www.aspistrategist.ru\/has-the-cost-of-australias-future-submarines-gone-up-part-2\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.aspistrategist.ru\/"},{"@type":"ListItem","position":2,"name":"Has the cost of Australia\u2019s future submarines gone up? Part 2"}]},{"@type":"Person","@id":"https:\/\/www.aspistrategist.ru\/#\/schema\/person\/87e4e7561c0d7071411d7d635b9e32c1","name":"Marcus Hellyer","image":{"@type":"ImageObject","inLanguage":"en-AU","@id":"https:\/\/www.aspistrategist.ru\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/ab3d49a0ff8e79106b3af65880612804?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/ab3d49a0ff8e79106b3af65880612804?s=96&d=mm&r=g","caption":"Marcus Hellyer"},"url":"https:\/\/www.aspistrategist.ru\/author\/marcus-hellyer\/"}]}},"_links":{"self":[{"href":"https:\/\/www.aspistrategist.ru\/wp-json\/wp\/v2\/posts\/55380"}],"collection":[{"href":"https:\/\/www.aspistrategist.ru\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.aspistrategist.ru\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.aspistrategist.ru\/wp-json\/wp\/v2\/users\/767"}],"replies":[{"embeddable":true,"href":"https:\/\/www.aspistrategist.ru\/wp-json\/wp\/v2\/comments?post=55380"}],"version-history":[{"count":4,"href":"https:\/\/www.aspistrategist.ru\/wp-json\/wp\/v2\/posts\/55380\/revisions"}],"predecessor-version":[{"id":55389,"href":"https:\/\/www.aspistrategist.ru\/wp-json\/wp\/v2\/posts\/55380\/revisions\/55389"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.aspistrategist.ru\/wp-json\/wp\/v2\/media\/55381"}],"wp:attachment":[{"href":"https:\/\/www.aspistrategist.ru\/wp-json\/wp\/v2\/media?parent=55380"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.aspistrategist.ru\/wp-json\/wp\/v2\/categories?post=55380"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.aspistrategist.ru\/wp-json\/wp\/v2\/tags?post=55380"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}