AIDN National 4th Quarter Newsletter - Now Available

Get all your AIDN News from around the country and hear from the AIDN National CEO, Brent Clark in his address to members, the Minister for Defence Industry and Minister for Science and Technology, the Hon Melissa Price MP and Shadow Minister for Defence Industry, Matt Keogh MP.

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Media Release – Wednesday 22 Dec 2021

MEDIA RELEASE AIDN WA Votes to go National

The Australian Industry & Defence Network (AIDN) Western Australian chapter has voted to formally become part of the AIDN National Network.

AIDN has been in the process of becoming a national organisation and at the AIDN WA’s recent AGM the membership made the decision to formally become part of the National organisation.

The nationalisation of AIDN brings together the entire membership base under one national collective making the organisation an extremely powerful advocate for the interests of Australian Industry, in particular the SME community. Importantly under the AIDN National constitution the individual states and territories have a vital role in forming both national strategies and ensuring that the individual requirements and circumstances of the states and territories are fully represented.

The Chair of AIDN National board, Mr Graham Priestnall, stated “The decision of the AIDN WA membership and committee to formally vote to join the National body is a great outcome and now brings all the AIDN chapters into the National organisation. I know that our WA committee and membership will take a very proactive role in AIDN National. We look forward to WA being a proactive member of the national organisation and look forward to their strong contribution.”

Kris Constantinides, AIDN WA President stated, “Our members have voted to place their trust in the national body. We deliberately took the time we needed to ensure that the interests of WA Industry could be heard in a national organisation. Once we were satisfied that this could be guaranteed we took the vote to our membership who endorsed the decision, we now look forward to working closely and contributing strongly to the National organisation.”

CEO of AIDN National, Mr Brent Clark, stated “Having AIDN WA formally voting to be part of the national organisation is a tremendous outcome, I look forward to working closely with the AIDN WA committee, the membership and form closer ties with the WA Government. AIDN’s ability to advocate for the Australian SME community continues to get stronger and with WA voting to formally become part of the National entity we have now had all our state and territory chapters formally join the National organisation.”

Ends

Media Enquiries:

Brent Clark (CEO) + 61 (0) 409 445 145

The Australian Industry & Defence Network (AIDN) is the largest industry defence association focussed on supporting the interests of the Australian Small to Medium Enterprises (SMEs) in the defence sector.

Media Release – Monday 20 Dec 2021

AIDN NT Votes to Go National

The Australian Industry & Defence Network (AIDN) Northern Territory chapter has voted to formally become part of the AIDN National Network.

AIDN has been in the process of becoming a national organisation and at the AIDN NT’s recent AGM the membership made the decision to formally become part of the National organisation. This is the culmination of a great deal of work and consultation by the AIDN NT committee.

The nationalisation of AIDN serves to bring together the entire membership base under one collective making the organisation aa powerful advocate for the interests of Australian Industry. Importantly under the AIDN National constitution the individual states and territories have a vital role in forming both national strategies and ensuring that the individual requirements and circumstances of the states and territories are fully represented.

The Chair of AIDN National board, Mr Graham Priestnall, stated “The decision of the AIDN NT membership and committee to formally vote to join the National body is a tremendous vote of confidence in the ambitions and ideals of the National organisation. We look forward to the NT being a proactive member of the national organisation and look forward to ensuring that the interests of the NT membership are fully represented at both the Federal and Territory levels.”

Andrew Jones, incoming AIDN NT President stated, “The members here have voted to place their trust in the national body, myself, the committee and the members took our time to satisfy ourselves that being part of the national body was in the best interests of the NT, ultimately the ability to be part of a national organisation that is fully devoted to Defence Industry was the ultimate factor in our decision, we are excited by this outcome.”

CEO of AIDN National, Mr Brent Clark, stated “Having AIDN NT formally voting to be part of the national organisation is a tremendous outcome, I look forward to working closely with the AIDN NT committee, members and the NT Government, AIDN is the only association fully committed to representing Australia’s Defence Industry on the national stage, Defence industry has unique challenges which only a Defence Association understands and can represent properly. The ability for AIDN to advocate for the Australian SME community just got stronger today as the expected input from the Northern Territory adds significant authority to our ability to speak for the community.”

Ends

Media Enquiries:  info@aidn.org.au

The Australian Industry & Defence Network (AIDN) is the largest industry defence association focussed on supporting the interests of the Australian Small to Medium Enterprises (SMEs) in the defence sector.

Subs taskforce mulls new Collins before nuclear boats arrive

Exclusive
Andrew Tillett Political correspondent
Nov 16, 2021 – 5.17pm

Defence officials are weighing up whether Australia will need a new conventional submarine to avoid a capability gap while the navy waits for a fleet of nuclear-powered boats to be delivered.

This could include building an updated version of the navy’s Collins-class submarine in Adelaide by the government-owned shipbuilder ASC with support from the submarine’s original Swedish designer, Saab Kockums, according to multiple sources.

Submarines featured heavily in an unpublicised virtual bilateral meeting between Defence Minister Peter Dutton and Swedish Defence Minister Peter Hultqvist last week.

“The minister spoke to his Swedish counterpart about the strategic environment, AUKUS, and the ongoing role Saab plays in supporting Australian Defence,” Mr Dutton’s spokeswoman said.

Mr Hultqvist said he briefed Mr Dutton on the “increased national military capabilities of the Swedish Armed Forces”, which included acquiring stealthier submarines.

While the nuclear-powered submarine taskforce is concentrating on acquiring submarines from the United States and Britain under the AUKUS arrangements, sources said the chief of the taskforce, Vice-Admiral Jonathan Mead, had a remit that also includes looking at interim submarine capability.

The government had initially floated leasing a British or American nuclear-powered submarine until the first of the new boats were delivered, but this is viewed as increasingly unlikely.

Admiral Mead told a budget estimates committee last month Defence wanted at least one nuclear submarine, and ideally more, before 2040 and was working to accelerate that timetable.

In the meantime, all six Collins-class submarines will have their lives extended for another 10 years, beginning in 2026 and two years thereafter. However, that means the first submarine is due to retire in 2038, cutting it fine if there are any delays with the nuclear program.

Navy chief Mike Noonan has left open the possibility of carrying out a second life extension to the Collins-class submarines, but sources said the price difference between refurbishing an ageing submarine and building a brand new diesel-electric boat based on the Collins but with more modern systems would be comparatively small.

ASC has conducted comprehensive studies on modernising the existing Collins-class submarines, which drawing upon the original design could form the basis a new boat.

“Building a new Collins-class submarine would give you more capability and keep the workforce together in Adelaide. And you are not trying to force a 40-year-old submarine to do stuff,” one source said.

The fresh consideration of interim submarine capabilities comes after Defence Department Secretary Greg Moriarty told Senate estimates last month the department had “not at the moment” provided advice to government on the matter.

“The focus of the Nuclear-Powered Submarine Task Force is to work closely with the UK and US over the next 18 months to identify the optimal pathway to deliver at least eight nuclear-powered submarines for Australia,” the department said in a statement.

“In parallel, the government is investing between $4.3 – 6.4 billion in the life-of-type extension of all six Collins class submarines. The Collins class submarine to this day remains one of the most capable conventional submarines in the world.”

Australian Strategic Policy Institute analyst Marcus Hellyer said building a “son of Collins” had problems, including that original component manufacturers were no longer around and the navy was reluctant to operate three classes of submarines, but nevertheless it could help mitigate risk.

“We’re in a bad situation. But it is definitely worth exploring in a serious way,” he said.

“You line up the schedule [for retirement of the Collins and delivery of the nuclear-powered submarines], and it doesn’t line up. If your delivery drumbeat for the nuclear-powered submarines is greater than two years, you are getting new boats slower than the old ones are retired.”

The Australian Industry and Defence Network said while a decision on an interim submarine was a matter for the government, such a program would benefit local defence contractors and preserve the capabilities created by the cancelled French submarine program

“It would allow an Australian workforce to be grown and prepared for the construction of the nuclear submarine. It would allow Australian Industry to efficiently and effectively establish itself for the coming task,” chief executive Brent Clark said.

Just one Australian business contracted

for Hunter-class frigate work

November 2, 2021
SA News

Only one Aussie firm has been contracted to provide equipment for the future Hunter-class frigates, raising fears Defence will rely heavily on the British supply chain for the fleet.

First Assistant Secretary of Ships, Sheryl Lutz, told a senate estimates hearing fewer than 40 Australian businesses were working on the prototyping phase of the project at Osborne.

She said just one supplier with a presence in Australia had secured work on the construction of the first three ships, labelled “batch one”.

Ms Lutz said the existing British supply chain for the Royal Navy’s future Type 26 frigate, on which the Hunter-class is based, would be used for key elements initially.

Defence would then use a $600m fund to help boost local content for the second and third batches of ships.

Australian Industry & Defence Network boss Brent Clark said Defence must sign up local companies including those dumped by the AUKUS submarine announcement, immediately.

“It’s going to be very difficult for Australian companies to break into the supply chain for ship four onwards,” he said.

“Given they have allocated this $600m to boosting local content, why have they not spent this today on getting Australian suppliers into batch one?”

A spokeswoman at BAE Systems, the leaders of the Hunter-class build, said they were “exceeding” contracted requirements of 62 per cent local content.

Ms Lutz said extra time had been set aside to progressively increase the local content across the life of the program.

She suggested those working on prototyping would be included in the main supply chain.

“The whole idea of prototyping is not only to look at the process for the shipyard but actually to ensure that the (businesses) that you are using can do the job, so that when you use them on production,” she said.

Ron Finlay from the Naval Shipbuilding Advisory Board, at a previous committee hearing, warned swapping from foreign suppliers in batch one to Australian suppliers in batch two would compromise performance.

Independent SA senator Rex Patrick, who was questioning Ms Lutz in senate estimates, called the frigate project a “sad story”.

“With the frigate program delayed yet again, this extra time should be used to incorporate Australian equipment into the design of the batch one ships,” he said.

The construction start date was pushed back by 18 months.

It has prompted a major defence industry lobby group to call for Defence to accelerate the acquisition of local equipment.

Revealed: What the dumped subs deal cost SA firms

Up to 350 small and medium South Australian businesses have together sunk at least $35m just getting themselves ready for work on the cancelled Attack-class submarines, industry estimates show.

The Australian Industry Defence Network estimated 175 SA companies had qualified as suppliers for the submarines, which were to be built by French company Naval Group at Osborne.

Network boss Brent Clark said each company invested on average at least $200,000 in new equipment, technology and staff just to qualify as a supplier for the $90bn program.

Mr Clark said the estimate was based on a “sliding scale” and several businesses would have spent far more than $200,000 in preparation.

The other 175 businesses were yet to qualify and many would have spent less than that figure.

“Clearly the ability for those companies to recoup their investment is pretty minimal at this stage,” Mr Clark said.

The new figures come amid an extraordinary escalation of diplomatic tensions, with French President Emmanuel Macron accusing Prime Minister Scott Morrison of lying about the decision to sign a nuclear submarine deal with Britain and the US.

Mr Clark, a former interim Naval Group Australia chief executive, called on the federal government to swiftly include the businesses in BAE System’s supply chain for the Hunter-class frigate program.

The Defence department established the Impacted SME Support Cell a month after the Attack-class contract was torn up in favour of at least eight nuclear-powered submarines under the historic AUKUS alliance.

The cell provides advice and “access to collaboration opportunities” for businesses affected by the decision.

Finance Minister and SA Senator Simon Birmingham recognised there would be many local companies that expected work on the Attack-class fleet.

“With a hive of shipbuilding activity happening right now in SA and in the decades to come, these local companies should be optimistic about their ability to secure new work and gain new contracts,” he said.

“SA companies have runs on the board when it comes supporting defence programs and there will be no shortage of opportunities for this to continue well into the future.”

Among future defence projects include the Collins-class life-of-type extension and upgrades to the Hobart-class air warfare destroyers.

Mr Morrison is facing calls to make an iron-clad promise the future nuclear-powered submarines will be built in Adelaide.

To date, Mr Morrison has only said the federal government “intends” to build the boats at Osborne.

Prime Minister Scott Morrison is facing calls to give SA workers an iron-clad guarantee the nuclear subs will be built in Adelaide. French President Emmanuel Macron on the sidelines of the G20 summit accused Mr Morrison of lying about the deal.

National secretary of the Australian Manufacturing Workers’ Union, Steve Murphy, said there had been “no assurances” for shipbuilders that the fleet would be built in Australia.

“Australia has no experience with nuclear fuel cells, and no appetite to develop this technology,” he said.

Mr Murphy raised fears of another “Valley of Death” – a long gap of limited work, which he said happened in the mid 2000s between construction of the Collins-class submarines and the Hobart-class air warfare destroyers.

“The lack of apprentice recruitment during these years created a generational gap in skills that continues to cause problems to this day,” he said.

A Defence spokeswoman said the federal government was “committed to finding a role for every skilled shipbuilding worker impacted by the Attack-class decision”.

gabriel.polychronis@news.com.au

SA businesses spent at least $35m in preparation for Attack-class submarine work

November 1, 2021 - 10:20PM

Up to 350 small and medium South Australian businesses have together sunk at least $35m just getting themselves ready for work on the cancelled Attack-class submarines, industry estimates show.

The Australian Industry Defence Network estimated 175 SA companies had qualified as suppliers for the submarines, which were to be built by French company Naval Group at Osborne.

Network boss Brent Clark said each company invested on average at least $200,000 in new equipment, technology and staff just to qualify as a supplier for the $90bn program.

Mr Clark said the estimate was based on a “sliding scale” and several businesses would have spent far more than $200,000 in preparation.

The other 175 businesses were yet to qualify and many would have spent less than that figure.

“Clearly the ability for those companies to recoup their investment is pretty minimal at this stage,” Mr Clark said.

The new figures come amid an extraordinary escalation of diplomatic tensions, with French President Emmanuel Macron accusing Prime Minister Scott Morrison of lying about the decision to sign a nuclear submarine deal with Britain and the US.

Mr Clark, a former interim Naval Group Australia chief executive, called on the federal government to swiftly include the businesses in BAE System’s supply chain for the Hunter-class frigate program.

The Defence department established the Impacted SME Support Cell a month after the Attack-class contract was torn up in favour of at least eight nuclear-powered submarines under the historic AUKUS alliance.

The cell provides advice and “access to collaboration opportunities” for businesses affected by the decision.

Finance Minister and SA Senator Simon Birmingham recognised there would be many local companies that expected work on the Attack-class fleet.

“With a hive of shipbuilding activity happening right now in SA and in the decades to come, these local companies should be optimistic about their ability to secure new work and gain new contracts,” he said.

“SA companies have runs on the board when it comes supporting defence programs and there will be no shortage of opportunities for this to continue well into the future.”

Among future defence projects include the Collins-class life-of-type extension and upgrades to the Hobart-class air warfare destroyers.

Mr Morrison is facing calls to make an iron-clad promise the future nuclear-powered submarines will be built in Adelaide.

To date, Mr Morrison has only said the federal government “intends” to build the boats at Osborne.

Prime Minister Scott Morrison is facing calls to give SA workers an iron-clad guarantee the nuclear subs will be built in Adelaide. French President Emmanuel Macron on the sidelines of the G20 summit accused Mr Morrison of lying about the deal.

National secretary of the Australian Manufacturing Workers’ Union, Steve Murphy, said there had been “no assurances” for shipbuilders that the fleet would be built in Australia.

“Australia has no experience with nuclear fuel cells, and no appetite to develop this technology,” he said.

Mr Murphy raised fears of another “Valley of Death” – a long gap of limited work, which he said happened in the mid 2000s between construction of the Collins-class submarines and the Hobart-class air warfare destroyers.

“The lack of apprentice recruitment during these years created a generational gap in skills that continues to cause problems to this day,” he said.

A Defence spokeswoman said the federal government was “committed to finding a role for every skilled shipbuilding worker impacted by the Attack-class decision”.

gabriel.polychronis@news.com.au

AIDN Re-Establishes AIDN Victoria

The Australian Industry & Defence Network (AIDN) Australia has today taken the required steps to re-establish the Victorian Chapter of the network.

For several years AIDN was not represented in the state of Victoria, however after extensive consultation with Victorian Industry and the Victorian State Government AIDN will formally bring AIDN Victoria back online.

AIDN Victoria will initially be represented by an interim committee, as the membership is brought online, once the membership is at a minimum level AIDN will undertake the process to ensure that Victorian members are given the opportunity to nominate and select a committee, including the roles of President and Vice President of AIDN Victoria.

The Chair of AIDN National board, Mr Graham Priestnall, stated “The AIDN National board has been driving the re-establishment of AIDN Victoria for some time, the board believes that you cannot truly be the National voice of the Defence SME community without representation in each state and territory. Our board looks forward to working closely with the interim committee as we fully restore AIDN Victoria to our National organisation.”

One of the first activities for AIDN Victoria will be to organise an event prior to the New Year to announce the Victorian Young Achiever of the Year Award, the first from Victoria in several years, the Victorian Government is proudly supporting the YAA for AIDN Victoria.

CEO of AIDN National, Mr Brent Clark, stated “Having AIDN Victoria completes the nationalisation of the organisation, we look forward to working closely with the Victorian Government, the Victorian Defence Alliances and Victorian businesses. The ability for AIDN to advocate for the Australian SME community just got stronger today as the expected input from Victoria adds significant authority to our ability to speak for the community.”

AUKUS deal set to torpedo an entire industry

To understand how much confusion still surrounds the government’s shift to nuclear-powered submarines, look no further than the Defence Department website.

It’s no joke.

By CAMERON STEWART
23 OCTOBER 2021

Canberra must look into the mirror and decide if it still wants a naval shipbuilding industry in Australia – and, if so, at what cost?

To understand how much confusion still surrounds the government’s historic shift to acquire nuclear-powered submarines, one needs to look no further than the defence department website.

There you will find – in a scene worthy of the satirical sitcom yes, minister – a single page with two conflicting visions for the future of Australia’s defence and shipbuilding industry.

The first part touts the “important announcement on submarines” of September 16, declaring the French project to build 12 boats will be scrapped for the “acquisition” of eight nuclear-powered submarines.

The second part of the page speaks glowingly about a $180bn defence industry policy which has now been all but torpedoed by the nuclear submarine plan.

The 2017 policy, called the national naval shipbuilding enterprise, aimed to produce a “continuous” rollout of warships and submarines in Adelaide over the decades ahead.

“The enterprise is about more than building ships, submarines and shipyards – it will establish a long-term sustainable Australian shipbuilding and sustainment capability that will generate industry growth and develop secure Australian jobs for the future,” the defence web page states.

But no one – possibly not even the Morrison government and its PR spinners – seriously believes that Australia’s defence and naval shipbuilding industry will ever be the same again as a result of the AUKUS pact and the associated plan to acquire nuclear-powered submarines.

At best, the industry in Australia, which employs about 25,000 people, many of whom are directly or indirectly involved in naval shipbuilding projects, will slowly atrophy because even under the most optimistic scenario, the first of the nuclear-powered

submarines will not be completed in Adelaide until about 2040, six years after the first French boat was due.

At worst, the new submarines may not be built in Adelaide at all. Given the strategic urgency posed by the rise of China, the ageing of the current Collins-class submarines and the enormous cost and technical challenges of building nuclear-powered submarines in Australia, the government may simply choose to lease or buy ready-made subs from the us or Britain. If so, Australia would no longer be a builder of submarines, leaving the project to build nine new hunter-class frigates as the last major hurrah for the country’s naval shipbuilding industry.

Neither of these scenarios bodes well for Australian industry, which is why it is now demanding answers from the government about whether Canberra is still committed not just to the prosperity of a local shipbuilding industry, but to its very existence.

“We have been told nothing concrete by the government,” says Brent Clark, who heads the Australian Industry & Defence Network, which represents more than 1000 small and medium sized defence-related companies. “I think the issue is that they don’t know yet themselves.”

Clark accepts that the Morrison government has the right to change its plans on submarines but he wants assurances the local shipbuilding industry will not become collateral damage.

“We understand that the strategic circumstances we find ourselves in have degenerated – blind Freddy can see that,” he tells inquirer. “But our greatest fear is that a lot of people seem to be saying ‘let’s buy the submarines from overseas’ and not worry about local industry.

“We don’t want this (nuclear submarine plan) to become an export program for American and British companies at the expense of Australian companies.”

The Australian Shipbuilding Federation of Unions also doubts the government’s commitment to local shipbuilding after cancelling the French project.

“We’re calling on the government to stick to the priority it set out in creating a sovereign industrial capability in Australia and not just exporting opportunities to the UK and US industry,” says Australian Manufacturing Workers Union Assistant National Secretary Glenn Thompson.

The government has given itself 18 months to assess how best to move forward with the plan to build a fleet of nuclear-powered submarines with the help of the us and the UK. The hope is that after 18 months the government will have answers to the key questions of how it will acquire and sustain at least eight nuclear-powered boats, and what the ramifications are for local industry.

So far, all Scott Morrison has said is that they will be built in Adelaide but he has offered no further details.

In response to questions from inquirer, defence industry minister melissa price denies that the government is abandoning its naval shipbuilding plan and claims the new AUKUS pact will eventually provide “a world of new opportunities for Australia’s defence industry”.

“We will need an industry established around our nuclear-powered submarines to support and maintain them,” she says.

“I wanted to reassure those businesses that i have their backs and that supporting small business is my top priority.”

The great mystery is whether the AUKUS agreement and the long timelines for the nuclear submarine project are leading the government to abandon its core philosophy on naval shipbuilding. Is it now willing to sacrifice Australian industry and jobs by building fewer or no submarines in Adelaide in favour of the potentially cheaper and quicker purchase of nuclear-powered subs from established shipyards in the US and the UK?

When asked to confirm whether all the nuclear-powered submarines would be built in Adelaide, price was non-committal, saying only that “we intend” to build the subs in Adelaide but that “our priority is to have a superior submarine capability for our region. That is why we will work with the US and UK over the next 18 months to determine how we best acquire nuclear-powered submarines”.

Such a potential policy U-turn would have seemed unthinkable only a few years ago when the then prime minister Malcolm Turnbull unveiled his much-touted 2017 national shipbuilding plan, which promised to protect and foster a permanent and continuous Australian naval shipbuilding industry. The plan was the response to a pattern of repeated failures in naval shipbuilding which saw major projects – from the Collins-class submarines to the air warfare destroyers – suffer from major technical problems, cost blowouts and delays.

A landmark 2015 report by the rand corporation estimated that there was a 30 to 40 per cent extra cost of building naval ships in Australia compared with purchasing them off-the-shelf from overseas.

But Rand also said that the government could greatly reduce these extra costs if it rationalised local shipbuilding to ensure that there was a continuity of projects – a “continuous build” – to maintain skills, jobs and knowledge.

It said such a policy would prevent the so-called valley of death job and skill losses associated with the previous stop-start naval shipbuilding industry.

The Turnbull Shipbuilding Plan aimed to create for the first time a continuous build that would span the construction of Australia’s new navy – the recently completed air warfare destroyers, the new offshore patrol vessels, new frigates and the new submarines.

By doing this, the government hoped it would minimise the extra costs of building in Australia while also reaping the reward of fostering local industry, jobs and know-how.

It awarded these major projects to Adelaide with a keen eye to shore up its own political fortunes in south Australia’s marginal seats.

But the benefits of the Turnbull plan will now be lost because the continuous cycle of shipbuilding will be broken by the slower start to the nuclear submarine project, assuming it starts at all.

So will the government still be willing to swallow this extra risk to cost and schedule by building the nuclear subs in Adelaide?

Can it afford to do so strategically when it needs faster solutions in the face of a rising China? Or will it look to buy offshore to save time and money, even though that would cost thousands of Australian jobs and may spark a political backlash in south Australia?

“I do think there is a bit of recalibration going on in the government,” says Marcus Hellyer, senior analyst with the Australian Strategic Policy Institute.

“It is unclear whether this is at a policy level or whether they simply decided to go with SSNS (nuclear submarines) and will now work out the messy details as they go along.”

Hellyer says that although the government has recently embraced the idea “if it can be built in Australia, it should be”, there was no guarantee it won’t move to a more economically rationalist position which says that the defence budget and national security are not tools to subsidise a local defence industry.

“Right now the entire shipbuilding program is in disarray with the cancellation of the French attack submarines and the delays in the frigate project,” he says.

Hellyer believes the best way to sustain the industry now would be to order another major project, such as the building of several more air warfare destroyers to complement the three AWDs that have recently been built.

“You need a big industrial program to generate thousands of new jobs and set the industry up for the nuclear submarine project when it starts,” he says.

AIDN’s Clark says the rise of China makes it more important than even to foster a sovereign naval shipbuilding capability.

“Why in the current strategic circumstance would you not want to create a sovereign domestic industry?” He says. “Otherwise you are putting Australia in a situation where it is forever beholden to the whims of other countries.”

Clark is also seeking answers from the government on what will happen now to those local defence companies which have already taken an estimated $120m hit from the cancellation of the $90bn French submarine contract after investing in new systems, equipment and personnel to win contracts with France’s naval group.

He estimates that about 600 contractors had qualified as naval group suppliers, including 400 with signed contracts that spent an average of $200,000 each in the hope of securing work with naval group.

Clark is not calling for the government to reimburse these companies but says he wants those companies to be given clear priority in future contracts relating to other naval projects, such as the frigates and the construction of the nuclear subs.

“The government has changed strategic direction and that is fair enough, but we would like defence to prioritise those companies moving into the supply chain of the hunter-class frigates and other maritime projects,” he says.

Price says the government will help those defence companies that signed contracts or invested money into the French submarine project so they can “compete for future work in either the shipbuilding domain or in the wide array of defence”.

The project to construct 12 French-designed submarines was expected to employ around 6000 people both directly and indirectly.

An even larger workforce will eventually be needed if the government proceeds with its plans to construct nuclear-powered submarines in Adelaide, but this construction project will not begin until more than a decade from now, in or around 2033.

Independent Federal Senator and former Submariner Rex Patrick is more pessimistic about the future of the submarine fleet after the AUKUS decision. He believes the only way to safeguard Australia’s security as well as keep its shipbuilding industry alive is to build more interim conventional submarines in Adelaide – sourced from either Europe or Japan – before the nuclear submarine project begins.

“The submarine building industry is currently in a mess,” Patrick says. “This announcement effectively kills off our submarine capability. It is no longer a valley of death, it is a sloping continental shelf plunging into the abyss.”

Patrick doubts the government wants to build submarines in Australia anymore.

“For all the excitement, I don’t think the government is genuine about building in Adelaide so it will be the end of Australian-built submarines. We will be left with the old Collins-class submarines that will eventually be steel coffins because they will be 40 years old,” he says.

The slow timeline for building nuclear subs means that the government is under acute pressure to ensure that the AUKUS project is not delayed. It will examine the possibility of leasing nuclear-powered submarines from the US or the UK as a stopgap measure.

The temptation will be for the government to plug this potential capability gap by buying at least the first few of the eight nuclear submarines from shipyards in either the US or the UK rather than building them in Adelaide.

If so, then ASPI’s Hellyer believes it could spark an exodus of Australian companies that are currently involved in defence and shipbuilding.

“The Australian defence industry has long memories,” he says of Labor’s defence budget cuts in 2012 which hit the industry hard.

“Some companies may say that it’s not worth it to play in the defence industry space because you are at the whim of just one customer. So when the government changes its priorities it doesn’t matter how good your product is, all that money you have invested is gone.”

Having made the historic decision to acquire nuclear-powered submarines, the Morrison government must now decide whether it’s priorities have changed.

Has AUKUS altered the balance on submarines between costs, schedules, capabilities, jobs, politics, local industry and international alliances?

Canberra must look into the mirror and decide if it still wants a naval shipbuilding industry in Australia – and, if so, at what cost?

French submarine fallout threatens tens of millions of dollars in contracts for SA companies

Australia’s dumping of plans for French submarines will have costly and extensive consequences for SA companies, defence figures predict.

Gabriel Polychronis
October 2, 2021 - 8:00PM

Tens of millions of dollars of work in 200 contracts given to Australian companies on the Attack-class submarine project will be cancelled after the government dumped French shipbuilders Naval Group, a major industry lobby group predicts.  The federal government has started untangling the complex $90bn Attack-class  contract, which involves dozens of subcontracts given to local suppliers.

Australian Industry & Defence Network chief executive Brent Clark estimated there were about 200 ongoing subcontracts, with an approximate total value of $30m, associated with the program at the time it was dumped for a new fleet of nuclear-powered submarines.

But government officials, without providing an exact number, believed the actual figure was much lower as construction on the first of the 12 planned ships wasn’t due to start until 2024, and many contracts were years away from being finalised.

In late August, Naval Group revealed more than $10m in contracts had been awarded to more than 100 Australian companies to supply and test various materials including steels and alloys.

A Naval Group spokesman said Australian suppliers were “at the heart” of its plans to build 12 new submarines in Adelaide.

“Naval Group is working through the termination process with the Commonwealth, our suppliers and partners,” he said.

Mr Clark, a former Naval Group executive, raised concerns for the “hundreds” of companies that had invested heavily in new equipment, staff and research to improve their chances of securing work, but had not yet signed a contract.

“People were quite within their rights to be assuming that they had very long term work coming their way,” he said.

“We would like to see those companies diverted into the supply chains of other defence programs very quickly.

“Those businesses can’t just be ignored.”

Both state and federal governments are confident SA suppliers can pivot and reap the benefits of other future defence projects.

Finance Minister Simon Birmingham recognised there would be “some local companies” that expected to secure contracts closer to the construction start date of the Attack-class.

“There will be many new opportunities for companies to take on new work over the next few years to help extend the life of the Collins Class fleet, upgrade the systems of our air warfare destroyers or build the new future frigates,” he said.

More than 2000 Australian businesses had registered their interest with the Naval Group Australia Industry Capability Network portal.

Premier Steven Marshall last month held a roundtable with major defence prime contractors who committed to bringing forward work schedules to provide relief for local suppliers “where possible”.

“There were a number of local SMEs (small and medium-sized enterprises) who had begun the negotiation process with Naval Group but who had not yet finalised contracts, which is of course a disappointment to those companies,” Mr Marshall said.

More than 5000 South Australians are expected to be employed in naval shipbuilding activities by 2030.

SA senator and Opposition foreign affairs spokeswoman Penny Wong said hundreds of businesses had been “left high and dry”.

“(Prime Minister) Scott Morrison needs to provide some certainty now by making clear how Australian industry content will be guaranteed in this new deal, and ensuring these workers and businesses have a role,” she said.

A Sunday Mail analysis of publicly available tender information shows at least 131 work packages for the Osborne Naval Shipbuilding Precinct have been either awarded or still taking applications.

It is expected construction of the shipyard will halt while the government alters designs to accommodate the much larger nuclear-powered submarines, a process that will take up to 18 months.

Local firms sink $120m on subs

Ben Packham
Foreign Affairs and Defence Correspondent, The Australian 

Small and medium enterprises face an estimated $120m hit from the cancellation of the Attack-class submarines, after investing in new systems, equipment, security and personnel to win contracts with France’s Naval Group.

The defence industry estimates the 600 contractors that had qualified as Naval Group suppliers, including 400 with signed contracts, spent an average of $200,000 each in the hope of securing 30-plus years of work on the $90bn program. The Australian Industry & Defence Network surveyed its 1500 members to determine the impact of the government’s submarine decision on domestic firms, finding many had invested heavily on the expectation of rich returns.

One firm said it had outlaid $3.4m on new systems, equipment and personnel to become a Naval Group supplier. It said it would now have to sack about 50 per cent of its workforce, because “all the employees brought on to this program are no longer required”.

Another said: “We have invested considerable time and money into the Attack-class program, in the order of $1m. We will now need to substitute other business to cover future expected business losses (due to) the cancellation.”

A third said: “To date the company has invested $400,000 to qualify to obtain contracts on the Attack-class program. This is now sunk investment with no opportunity to recover costs.”

All of the companies declined to be named, fearing they would miss out on future defence business if they spoke out publicly.

AIDN chief executive Brent Clark said companies that had been strongly encouraged by the government to pursue opportunities on the Attack-class subs program were now counting the costs.

“For member companies entering and concluding the pre-qualification phase and then implementing the upgrading and upskilling as advised by Naval Group, this figure appears to be in the general order of $200,000,” Mr Clark said.

Naval Group sources said $200,000 was a reasonable and “possibly conservative” estimate of the average investment by firms that had achieved qualified supplier status. A termination process is under way for firms that had progressed to contract stage, but qualification costs are unlikely to be recoverable.

Mr Clark said firms that qualified as suppliers should be prioritised for other Defence programs.

The government’s decision to buy nuclear-powered US or British boats that won’t enter construction until the end of the decade at the earliest has left the government’s defence industry agenda in disarray.

It has vowed to build the nuclear boats in Adelaide, but many defence experts say rising strategic threats mean some or all of them should be built overseas.

Defence Industry Minister Melissa Price said firms that had contracts with Naval Group and combat system supplier Lockheed Martin would not be abandoned.

“I want to assure those businesses that I have their backs,” she told The Australian.

“As has been flagged previously, Australian SMEs with contracts with Naval Group or Lockheed Martin will go through a contract termination process.

“There are also SMEs that did not have contracts … but were preparing their business to compete with other SMEs for opportunities in it. We must ensure that they are fully supported as they seek out those opportunities.”

Ms Price said an “SME support cell” had been created within Defence to help affected firms bid for other contracts. She said there was “no doubt immense” benefits would flow to Australia’s defence industry from the decision to acquire nuclear submarines.