ASPI raises mounting concerns about SEA 1000 future submarine costs
Maritime and Undersea Warfare 28 April 2020
By: Stephen Kuper
ASPI analyst Marcus Hellyer has raised renewed concerns about the costs associated with the long-term development and ‘future-proofing’ of the Royal Australian Navy’s future-Attack Class submarines at a time when both regional competitors are accelerating their modernisation plans and local budgets are going to be continually strained.
It is shaping up to be one hell of a labour and birthing process for Australia's multibillion-dollar SEA 1000 Attack Class submarine program as government, Defence and Naval Group move to allay the fears of Australia's strategic policy community and the public.
Despite repeated rebuffs by senior Defence uniformed personnel, bureaucrats and successive ministers of defence and defence industry, concerns released recently by the Australian National Audit Office (ANAO) in the report titled Future Submarine – Transition to design, combined with political concerns, all serve as powerful fuel to question the program.
When first announced, the Attack Class was promised to deliver a quantum leap in the capability delivered to the Royal Australian Navy and its submarine service by leveraging technology and capabilities developed for nuclear submarines, implemented on a conventional submarine.
Further complicating matters is the constantly fluctuating price associated with the program, with figures ranging from the original $80 billion as stated by former defence industry and defence minister Christopher Pyne, to a
now estimated $145 billion as revealed by Future Submarine Program manager Rear Admiral Greg Sammut during Senate estimates.
This cost explosion is further exacerbated by an apparent 'slip' in the planned commencement date for construction of the lead boat, HMAS Attack, which was widely publicised as 2022-23 and has now subsequently been pushed back to the 2024 time frame – further exposing Australia's ageing Collins Class vessels to potential adversary over match.
RADM Sammut was quick to explain this away, like a skilled operator, informing Senate estimates that the slated time frame was referencing the standing up of construction personnel, tools, infrastructure, processes and equipment to commence the construction of HMAS Attack's pressure hull in 2024.
Finally, with the first vessel expected to enter the water in the mid-to-late 2030s, concerns regarding the cost, delivery and capability of the vessels is serving to raise questions about the value proposition for a conventional submarine at a time of increasing technological advancement in comparable vessels operated by peer and near-peer competitors in the Indo-Pacific.
While each of these individual challenges will impact the recapitalisation of the Royal Australian Navy's submarine fleet, the growing program delays and estimated cost overruns will have dramatic impacts on the long-term modernisation and recapitalisation of the Royal Australian Navy in the middle of the 21st century.
In response to these mounting concerns, Marcus Hellyer, defence economist and analyst with ASPI has raised new alarms surrounding the costs associated with planned "batch building" and costs associated with the technology insertions required to maintain "regional superiority" over the life of the Attack Class, begging the question, how much are these things going to cost?
Please explain
Hellyer highlights concerns raised by former submariner and independent senator Rex Patrick regarding the wildly fluctuating costs associated with 'out turning' the future submarine fleet and the ramifications it will have on the capability delivered to the Royal Australian Navy.
Senator Patrick: It has been two years since DCNS, now Naval Group, were announced the winners. You’ve done a bit of work. Are there any updated costs on the acquisition for the submarine?
RADM Sammut: It’s still in the order of $50 billion based on the work that we’ve done to date on early design activities.
Senator Patrick: Do you have any idea of, say, the design cost or the build costs?
RADM 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.
"If the $50 billion constant/$80 billion outturned estimate hadn’t 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," Hellyer posits.
Building on this, Hellyer states, "What caused the change? Recently there’s been discussion — for example, at Senate estimates — about whether the Commonwealth has been commercially ‘captured’ by Naval Group because it chose a single provider too early, exposing itself to cost increases. While that’s an ongoing risk to guard against, it doesn’t explain cost increases during the competitive evaluation process when there was still competitive tension.
"There are likely two reasons for the growth of the estimate during the competitive evaluation process. The first is that Defence’s $50 billion outturned figure was already too low. ASPI’s 2009 estimate of $36.5 billion constant becomes around $42 billion constant when rebaselined to 2015. Outturned, that becomes $67 billion.
"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 ‘regionally superior’. If anything was going to lead to an open-ended expansion of requirements, that would be it."
The alternate options? Leveraging hunter-killer, cruise missile subs and unmanned systems
Drawing on advances in unmanned underwater systems like the Boeing Orca system, combined with a fleet of complementary, highly capable hunter-killer and cruise missile submarines designed to modified off-the-shelf solutions, further serves as a capability aggregator for the RAN.
The increasing proliferation of conventionally powered submarines incorporating vertical launch modules for accommodating advanced cruise missile systems, provides an important capability for Australian consideration, particularly when paired with unmanned underwater and aerial systems providing ISR capabilities enhancing the nation's deterrence capabilities.
Developing mutually complementary submarine fleets of approximately nine dedicated hunter-killer submarines for critical maritime interdiction, task force escort and anti-submarine operations, combined with a fleet of approximately nine dedicated cruise missile submarines, enables the development of a complementary and highly capable submarine fleet.
When using the costs for the sixth Soryu Class submarine of approximately US$540 million ($803.5 million), a fleet of 18 such submarines could cost Australia approximately between US$10 billion ($14.8 billion) and US$15 billion ($22.3 billion), while delivering the pound-for-pound most lethal conventional submarine force in the world.
By contrast, the Saab/Kockums A-26 Oceanic ER is estimated to have a unit price worth approximately US$945 million ($1.46 billion) compared to the multibillion unit costs associated with the Attack Class submarines depending on the figures chosen, be it the $50 billion, the $80 billion or larger figures associated with turned out costs.
Finally, establishing and maintaining a dedicated fleet of hunter-killer submarines designed to a common standard as the fleet of cruise missile submarines serves to lower costs, crewing requirements and long-term sustainment and operational costs despite acquiring a larger fleet of submarines than outlined in the 2016 Defence White Paper.
Questions to be asked
As an island nation, Australia is defined by its relationship and access to the ocean, with strategic sea-lines-of-communication supporting over 90 per cent of global trade, a result of the cost effective and reliable nature of sea transport.
Indo-Pacific Asia is at the epicentre of the global maritime trade, with about US$5 trillion worth of trade flowing through the South China Sea and the strategic waterways and choke points of south-east Asia annually.
While the Indian Ocean and its critical global sea-lines-of-communication are responsible for more than 80 per cent of the world's seaborne trade in critical energy supplies, namely oil and natural gas, which serve as the lifeblood of any advanced economy.
Submarines are critical to the nation's ability to protect these strategically vital waterways and key naval assets, as well as providing a viable tactical and strategic deterrent and ensure the nation's enduring national and economic security – recognising this, the previously posed questions will serve as conversation starting points.
However, given the geographic area of responsibility Australia will become increasingly responsible for and dependent on, is the RAN and the recapitalisation and conventionally-focused modernisation program for Australia's submarine fleet enough for Australia to maintain its qualitative and quantitative lead over regional peers?
Traditionally, Australia has focused on a platform-for-platform acquisition program – focused on replacing, modernising or upgrading key capabilities on a like-for-like basis without a guiding policy, doctrine or strategy, limiting the overall effectiveness, survivability and capability of the RAN.
Let us know your thoughts in the comments section below, or get in touch with
Stephen.Kuper@momentummedia.com.au or
editor@defenceconnect.com.au.
https://www.defenceconnect.com.au/marit ... rine-costs 
