Breakthrough for $89bn Future Subs contract as Naval, Defence sign 60 per cent agreement

Despite fears in recent weeks the $89bn Future Submarines contract could be axed, Naval Group and Defence have reached a major breakthrough overnight.

Claire Bickers Federal Politics Reporter

March 23, 2021 - 9:22AM

At least 60 per cent of the $89bn Future Submarines contract will be spent in Australia after French company Naval Group and the Defence Department officially locked the promise into the contract overnight.

It comes a year after Naval Group first made the promise, after Australian defence companies voiced concerns they may not get enough work on the lucrative military contract.

Acting Defence Minister Marise Payne said the agreement would maximise Australian industry involvement “in all phases” of the Future Submarines project.  Industry had raised concerns over the time it was taking to sign the promise into the contract to build 12 Attack Class submarines in Adelaide.

Defence and Naval Group had disagreed over the details but reached a deal last month when Naval Group’s global chief executive Pierre Eric Pommellet visited Australia.

Mr Pommellet today said: “Naval Group is fully committed to supporting the development of Australia’s sovereign submarine capability.”

“I have been very impressed by the existing capacity of Australia’s manufacturing sector, and its enthusiasm for the Attack Class project.”

He added the project would deliver 12 “regionally-superior” submarines specially designed for Australia’s unique conditions.

“It will also create a new and sovereign submarine building industry in Australia,” he said. “Strong local supply chains will ensure that Australia has new self-reliance in this critical defence capability.”

The Australian Industry & Defence Network, which represents local defence companies, said the details of the agreement needed to be made public.

AIDN chief executive Brent Clark said: “The finalisation of the negotiations for the contractual minimum of 60 per cent Australian industry content is applauded.”

“AIDN remains of the view that the details of how AIC is going to be ramped up over the course of the acquisition phase, the plan for transferring IP and technical know-how to Australian companies and how any commercial issues will be addressed to ensure that there are no blockers to ensuring this happens needs to be made public,” he said.

“This is the only way to ensure public and Australian business confidence going forward.”

Naval Group Australia chief executive John Davis said his staff were already working with hundreds of local businesses. “There will be increasing levels of local content in each of the 12 Attack Class submarines, as we continue working with local businesses to boost Australia’s sovereign capability,” Mr Davis said.

Work will start on the subs in 2023 at the Osborne shipyard.

Click here to read the article.

SHAKE UP OF NAVAL SHIPBUILDING AS CONCERNS GROW OVER FUTURE SUBMARINES, FRIGATES

A powerful new Cabinet committee has been formed to tackle problems with Australia's multi-billion-dollar Naval Shipbuilding Plan as more concerns emerge over the complex future submarine and frigate projects.

The ABC can also reveal the National Shipbuilding Advisory Board (NSAB) has been abolished, although its former Chair, Professor Don Winter, is now working as special advisor to Prime Minister Scott Morrison.

In recent weeks, the Morrison government established the new Naval Shipbuilding Enterprise Governance Committee, which will work under the auspices of Cabinet's National Security Committee (NSC).

Scott Morrison will chair the new committee, which includes the Foreign Minister and Defence Minister, but the government says its decisions will still have to be endorsed by the NSC.

"The committee will ensure the naval shipbuilding enterprise and each component of it is on track to deliver against Commonwealth agreed outcomes, and emergent or forecast risks are identified that may impact or prevent achieving delivery of milestones," the government said.

"Agreed outcomes and actions are identified to address these risks."

Since being released in 2017, the Coalition's Naval Shipbuilding Plan has been beset by contractual disputes, design problems, cost blowouts and varying delays.

The ABC has confirmed that the now-defunct National Shipbuilding Advisory Board will be replaced by a smaller panel that will not include former female members Lisa Paul and Lesley Seebeck.

Inside defence and industry ranks, there is some disquiet over Professor Winter's appointment as special advisor to the Prime Minister on shipbuilding, with several figures privately questioning whether the former United States Navy Secretary is the right person.

"The reservations that many had about Don Winter's ability to understand the Australian small-scale, sovereign and non-nuclear submarine program seem to have been borne out," one former Defence official told the ABC, speaking on the condition of anonymity.

Future programs to come under further scrutiny

Sources have told the ABC that Prime Minister Scott Morrison has become increasingly worried in recent months about Defence's ability to deliver massive projects and has relayed his concerns directly to the Department's National Naval Shipbuilding Enterprise team.

Last month, the visiting global boss of French defence giant Naval Group was bluntly reminded by the government of Australia's expectations on local industry content in the massive $90 billion Future Submarine contract.

"We will continue to work closely and ensure collaboration to create thousands of jobs in the Australian supply chain while creating business opportunities for Australian companies, up-skill Australian industry, through the transfer of technology," Pierre Éric Pommellet said before returning to France.

At the same time, there are growing concerns inside the Defence Department and industry circles over the $45 billion Future Frigate program being run by British company BAE Systems.

The UK-owned company insists it is exceeding its requirements for Australian industry content, but Brent Clark from the Australian Industry Defence Network says local suppliers are concerned.

"We really need to see evidence that local industry is being given every opportunity to compete in a fair and equitable way across all the programs because otherwise we just cannot achieve what the government's outcome was, which is the sovereign capability," Mr Clark told the ABC.

"Australia needs to look after itself and have a robust and vibrant industry."

During Senate estimates hearings this week, Defence officials are expected to be grilled about progress on designing the new Hunter-class anti-submarine warships, which are based on the British T26 frigate.

Click here to read the article.

Posted 22 March 2021

AIDN National 1st Quarter 2021 Newsletter

Op-Ed: The disastrous costs of failing to back AIC

Defence must adopt a bolder AIC strategy or risk bearing the high cost of dependence on foreign suppliers for capability enhancement, AIDN chief executive Brent Clark warns.

“The long-feared day arrived, on May 1st , with the PLAN launching an invasion convoy across the Taiwan Straits. President Biden responded to calls from Taiwanese President Tsai Ing-wen for support, with assets from the third and seventh fleets joining into a maritime engagement.

President Biden issued an ultimatum to Chinese President Xi Jinping to call back the PLAN fleet or face immediate consequences, and called on allied nations to join an international naval coalition to engage the PLAN and enforce the peace in the Taiwan Straits.

Australian Prime Minister Scott Morrison responded to this call, by deploying a task group to the naval coalition. HMAS Sydney, which had been in a stand-off position 350km south of Taiwan, immediately joined the fray, firing multiple salvos of long range Evolved Sea Sparrow missiles (ESSM) at PLAN targets in the Straits.

Apparently, the USN and RAN action was successful, with no PLAN ships reaching Taiwan. Media reports suggested that the ESSM’s had been particularly effective and had scored many direct hits on PLAN vessels. PLAN launches of DF-26 anti-ship missiles at HMAS Sydney were ineffective, and foiled by use of advanced electronic countermeasures (ECM).

The silence from Beijing from May 3 suggested that President Xi was licking his wounds, and considering how to back out of a crisis he had engineered without losing face. Polls taken in both the US and Australia indicated that each country’s public strongly supported their government’s military action.

Unbeknownst in Washington and Canberra, the real posture in Beijing was very different. During the initial engagement, the PLAN had collected a wide range of Electronic Intelligence (ELINT) covering the operation of the ESSM’s guidance system, and the operation of the ECM deployed against their own DF-26 missiles. This intelligence was immediately transferred to the China Electronics Technology Group (CETG) Corporation that had designed the guidance system of the DF-26, and the ECM utilized on PLAN warships. The CETG engineers had an intimate understanding of the strengths and weaknesses of the algorithms used within their systems, and within two days had understood why the DF-26 missiles had been deceived into missing their targets. And on the third day their engineers pieced together the puzzle of how the ESSM guidance system had remained locked onto their ships while their own ECM was deployed. Armed with this understanding, CETG’s engineers updated the algorithms of the DF-26 guidance system and the fleet’s ECM suite, implemented the changes within the software systems, and used the collected ELINT to ‘replay’ the engagement, but this time with the updated algorithms in place. The replay suggested a reversal of the outcome.

Chen Zhaoxiong, CETG’s Managing Director and his senior executives hastily arranged a meeting with VADM Shen Jinlong (Commander of PLAN) and described the outcome of the technical investigation. During the meeting, VADM Shen signed an order for the immediate update of all of the missiles and the fleet’s ECM suite. BY May 9 th, all the updates had been made, and a second invasion fleet sailed towards Taiwan.

As previously, USN and RAN assets conducted long range strikes against the PLAN fleet. Unfortunately, the reports indicated that these were not successful, and PLAN vessels were able to cross the straits reaching Taiwan. Even worse, DF-26 launches against USN and RAN vessels scored direct strikes. Media reports indicated appalling scenes; opinion polls indicated that the Australian public’s support of the war had plummeted.

President Biden was also shocked by the loss of USN vessels. His military experts updated him on how the PLAN’s successes had been based on recent improvements they had made to the EW capabilities of their systems, but also that American military industry was itself working round the clock to overturn those advantages. Re-assured that the pendulum would swing back to the USN, President Biden declared that the US would continue to fight for the freedom of Taiwan.

Prime Minister Morrison discussed with Biden whether the RAN would also be able to receive the equipment updates. After all, without the updates, the RAN’s ESSM’s were now effectively useless against the PLAN. And the ships of the RAN task group were in grave danger unless their ECM was updated to cope with the new versions of the DF-26. The US President assured Prime Minister Morrison that the RAN would receive the updates. This would occur after the USN fleet was itself updated, and once the military communications satellite link to Australia had been re-assured as being secure. This was a factor PM Morrison had not expected, and enquired further about the link. Unfortunately, during the week after May 1, US intelligence had identified that the link had been breached by cyber-attack, and it could not be used to relay to Australia the software updates until the exact nature of the breach had been understood and rectified. Apparently this might take some time, as the US had other internal cyber-breaches that needed to be addressed as higher priorities.

Prime Minister Morrison hastily convened the National Security Committee of cabinet, and demanded from his minister’s answers to two questions: How was it that after the hundreds of billions the government had invested in Defence capability, that Australian forces were left vulnerable and unable to have their capability updated to match our adversary; and: Had we not learned anything from the COVID crisis about the need for self-reliance”.

While the tale above is fiction, it largely follows actual events that occurred between Israel and the US during the 1973 middle-east war. In that war, the Israel Air Force (IAF) was surprised by new model SA-6’s Surface Air Missiles which the IAF’s existing electronic countermeasures (ECM) could not handle. The SA-6 was downing unsustainably large numbers of aircraft. The IAF was forced to suspend close air support missions on the Golan Heights, where the Syrian army was on the verge of defeating the Israeli army. Whether for political reasons, or simply because it still did not have them, the US did not supply Israel with updated ECM effective against the newer SA-6’s.

However, there is a key difference between the two stories.

Unlike Australia, Israel had for many years nurtured within its domestic industry the capacity to undertake scientifically and technologically advanced tasks. When the hour of need arose, industry (Rafael1 ) was able to rapidly implement a countermeasure that did defeat the SA-6 threat, restoring the IAF’s freedom of action over the battlefield.

The purpose of relaying these tales – both fiction and fact – is to set out the real risks that face the ADF if we continue to rely on off-shore supply of military equipment.

In the current environment, warfare between high-end adversaries with technology based warfighting materiel, becomes an arm wrestle between the algorithms and software of one side’s systems against the equivalent capabilities of the adversary’s systems. During warfare, these systems rapidly become obsolescent as each side analyses how their opponent’s equipment works, and how the algorithms and software within their own side’s equipment can be adjusted to defeat the adversary. This work 1 Page 75, ”On Flexibility, Recovery from technological and Doctrinal Surprise on the Battlefield”, Meir Finkel, 2007 is done by technologists who have been intimately involved in the design of the algorithms and software of the original equipment.

A nation that does not have access to sufficient scientific and technological smarts in industry to keep pace with these modifications, is a nation that is willing to place its servicemen and women in grave risk. AIDN cannot accept that Australia is willing to treat its brave service people this way.

Yet, Australia’s consistent approach to procure military equipment on the basis of price competitiveness does exactly this, and deprives the ADF of critical industrial support from its domestic industry.

AIDN’s position is clear. CASG must adjust its approach to procurement, if the issue is one of policy or procurement rules, then Government must revise both of these to ensure that Australian controlled Industry is able to provide this service to the Government and therefore the ADF.

The reflexive assumption that all advanced, science-based systems must be procured from overseas, rather than be developed in Australia must stop. Australia must be allowed to develop these industries. Doing otherwise undermines the ADF’s ability to sustain operations against technologically capable adversaries.

Published in Defence Connect on 19 February 2021

Government frustrations and concerns grow over Australia's multi-billion-dollar submarine and warship programs

Exclusive by defence correspondent Andrew Greene
Posted 24 February 2021

Defence Minister Linda Reynolds has expressed "frustration" and "disappointment" with the French company building Australia's $90 billion future submarines as she prepares to confront its visiting global boss over crucial contract negotiations.

A year after Naval Group pledged to spend 60 per cent of the massive contract value on local suppliers, the company is yet to enshrine the figure in a formal deal with the Commonwealth.

At the same time, there are fears Australia's ambitious $45 billion program to construct new anti-submarine frigates could go the way of a related Canadian warship project which is experiencing massive cost and time blowouts.

Sources have said Prime Minister Scott Morrison has become increasingly worried in recent months about Defence's ability to deliver the massive projects and has relayed his concerns directly to the Department's National Naval Shipbuilding Enterprise team.

Ahead of her meeting with Naval Group, Senator Reynolds has told Parliament she is annoyed with the slow progress of the negotiations with the French.

On Wednesday, Naval Group's global chief executive, Pierre Eric Pommellet, is expected to meet with Senator Reynolds in Canberra after flying into Adelaide where he completed a mandatory two-week quarantine stint.

"I am frustrated and I'm very disappointed that Naval Group have yet been able to finalise this contract with Defence, but it will not be done at the expense of Australian jobs, and Australian industry," Senator Reynolds said on Tuesday.

"This capability is far too important for our nation to do that."

The ABC understands the Commonwealth is insisting on annual audits of Australian Industry Content (AIC) in the project to construct 12 Attack Class submarines, but the French are so far resisting.

Despite the tense and protracted negotiations, the government insists the complex submarine build schedule remains on track.

"Defence continues to work closely with Naval Group to progress this project to ensure it is delivered on-time, on-spec and on-budget," a government spokesperson told the ABC.

Naval Group has also restated its commitment to Australian industry ahead of Mr Pommellet's meeting with the Defence Minister.

"Naval Group Australia is fully committed to maximising Australian industry capability and content in the design and construction of the Attack Class fleet," a company spokesperson said.

"We remain in productive discussions with our Commonwealth partners about the best way to achieve this common goal and including our commitment in the Australian future submarine program's Strategic Partnering Agreement."

Defence insists $45 billion warship program on track

The Defence Department has dismissed concerns Australia's $45 billion Future Frigate Program may also be facing problems, as a related warship project in Canada faces intense scrutiny for cost and schedule blowouts.

In 2018, British owned company BAE Systems was selected to build nine new anti-submarine Hunter-class warships for the Australian Navy, based on the United Kingdom's Type 26 frigate, a decision soon followed by Canada.

However, the Canadian Surface Combatant project to construct 15 British-designed warships is already facing delays and significant cost increases, with the price tag climbing to $70 billion.

On Wednesday, the Canadian Parliamentary Budget Office will release a report on the controversial project, and a day later the auditor-general of Canada is expected to table a report on the country's National Shipbuilding Strategy.

Independent Senator Rex Patrick said the warning signs in Canada should be taken seriously in Australia.

"The Canadian frigate and the Australian frigate are based on the same design, it is highly likely similar problems would be occurring here in Australia," Senator Patrick has told the ABC.

A Defence spokesperson said the department was closely monitoring developments in Canada and the United Kingdom.

"Defence has a close and cooperative relationship with defence counterparts in both Canada and the UK and regularly discusses a range of topics relating to the Global Combat Ship program shared across the three nations," the spokesperson said.

"As the lead nation currently constructing the Type 26, the UK is feeding lessons learnt into the Australian Hunter Class program."

Australian Industry and Defence Network chief executive Brent Clark said local companies also appeared to be missing out on work in the $45 billion Future Frigate Program.

"Australian companies can be at a disadvantage because they're only being asked to quote for small numbers on the program, whereas the overseas supply chain companies are being asked to quote for the entire global program," he said.

BAE Systems has rejected the assertion, claiming it is already exceeding its goal of a minimum of 58 per cent Australian content and insisting the company is "absolutely confident of maximising Australian industry involvement".

"The Hunter Class Frigate Program is a program that will not only deliver nine of the most modern anti-submarine warfare frigates but is also designed to put in place a sovereign shipbuilding industry," a spokesperson said.

"To achieve that we need Australian companies involved."

Content supplied by:

ABC News

Left High and Dry

An AIDN National Op-ed

Written by AIDN National CEO Brent Clark 

“The long-feared day arrived, on May 1st, with the PLAN launching an invasion convoy across the Taiwan Straits. President Biden responded to calls from Taiwanese President Tsai Ing-wen for support, with assets from the third and seventh fleets joining into a maritime engagement.

President Biden issued an ultimatum to Chinese President Xi Jinping to call back the PLAN fleet or face immediate consequences, and called on allied nations to join an international naval coalition to engage the PLAN and enforce the peace in the Taiwan Straits.

Australian Prime Minister Scott Morrison responded to this call, by deploying a task group to the naval coalition. HMAS Sydney, which had been in a stand-off position 350km south of Taiwan, immediately joined the fray, firing multiple salvos of long range Evolved Sea Sparrow missiles (ESSM) at PLAN targets in the Straits.

Apparently, the USN and RAN action was successful, with no PLAN ships reaching Taiwan. Media reports suggested that the ESSM’s had been particularly effective and had scored many direct hits on PLAN vessels. PLAN launches of DF-26 anti-ship missiles at HMAS Sydney were ineffective, and foiled by use of advanced electronic countermeasures (ECM).

The silence from Beijing from May 3 suggested that President Xi was licking his wounds, and considering how to back out of a crisis he had engineered without losing face. Polls taken in both the US and Australia indicated that each country’s public strongly supported their government’s military action.

Unbeknownst in Washington and Canberra, the real posture in Beijing was very different. During the initial engagement, the PLAN had collected a wide range of Electronic Intelligence (ELINT) covering the operation of the ESSM’s guidance system, and the operation of the ECM deployed against their own DF-26 missiles. This intelligence was immediately transferred to the China Electronics Technology Group (CETG) Corporation that had designed the guidance system of the DF-26, and the ECM utilized on PLAN warships. The CETG engineers had an intimate understanding of the strengths and weaknesses of the algorithms used within their systems, and within two days had understood why the DF-26 missiles had been deceived into missing their targets. And on the third day their engineers pieced together the puzzle of how the ESSM guidance system had remained locked onto their ships while their own ECM was deployed. Armed with this understanding, CETG’s engineers updated the algorithms of the DF-26 guidance system and the fleet’s ECM suite, implemented the changes within the software systems, and used the collected ELINT to ‘replay’ the engagement, but this time with the updated algorithms in place. The replay suggested a reversal of the outcome.

Chen Zhaoxiong, CETG’s Managing Director and his senior executives hastily arranged a meeting with VADM Shen Jinlong (Commander of PLAN) and described the outcome of the technical investigation. During the meeting, VADM Shen signed an order for the immediate update of all of the missiles and the fleet’s ECM suite. BY May 9th, all the updates had been made, and a second invasion fleet sailed towards Taiwan.

As previously, USN and RAN assets conducted long range strikes against the PLAN fleet. Unfortunately, the reports indicated that these were not successful, and PLAN vessels were able to cross the straits reaching Taiwan. Even worse, DF-26 launches against USN and RAN vessels scored direct strikes. Media reports indicated appalling scenes; opinion polls indicated that the Australian public’s support of the war had plummeted.

President Biden was also shocked by the loss of USN vessels. His military experts updated him on how the PLAN’s successes had been based on recent improvements they had made to the EW capabilities of their systems, but also that American military industry was itself working round the clock to overturn those advantages. Re-assured that the pendulum would swing back to the USN, President Biden declared that the US would continue to fight for the freedom of Taiwan.

Prime Minister Morrison discussed with Biden whether the RAN would also be able to receive the equipment updates. After all, without the updates, the RAN’s ESSM’s were now effectively useless against the PLAN. And the ships of the RAN task group were in grave danger unless their ECM was updated to cope with the new versions of the DF-26. The US President assured Prime Minister Morrison that the RAN would receive the updates. This would occur after the USN fleet was itself updated, and once the military communications satellite link to Australia had been re-assured as being secure. This was a factor PM Morrison had not expected, and enquired further about the link. Unfortunately, during the week after May 1, US intelligence had identified that the link had been breached by cyber-attack, and it could not be used to relay to Australia the software updates until the exact nature of the breach had been understood and rectified. Apparently this might take some time, as the US had other internal cyber-breaches that needed to be addressed as higher priorities.

Prime Minister Morrison hastily convened the National Security Committee of cabinet, and demanded from his minister’s answers to two questions: How was it that after the hundreds of billions the government had invested in Defence capability, that Australian forces were left vulnerable and unable to have their capability updated to match our adversary; and: Had we not learned anything from the COVID crisis about the need for self-reliance”

While the tale above is fiction, it largely follows actual events that occurred between Israel and the US during the 1973 middle-east war. In that war, the Israel Air Force (IAF) was surprised by new model SA-6’s Surface Air Missiles which the IAF’s existing electronic countermeasures (ECM) could not handle. The SA-6 was downing unsustainably large numbers of aircraft. The IAF was forced to suspend close air support missions on the Golan Heights, where the Syrian army was on the verge of defeating the Israeli army. Whether for political reasons, or simply because it still did not have them, the US did not supply Israel with updated ECM effective against the newer SA-6’s.

However, there is a key difference between the two stories.

Unlike Australia, Israel had for many years nurtured within its domestic industry the capacity to undertake scientifically and technologically advanced tasks. When the hour of need arose, industry (Rafael ) was able to rapidly implement a countermeasure that did defeat the SA-6 threat, restoring the IAF’s freedom of action over the battlefield.

The purpose of relaying these tales – both fiction and fact – is to set out the real risks that face the ADF if we continue to rely on off-shore supply of military equipment.

In the current environment, warfare between high-end adversaries with technology-based warfighting materiel, becomes an arm wrestle between the algorithms and software of one side’s systems against the equivalent capabilities of the adversary’s systems. During warfare, these systems rapidly become obsolescent as each side analyses how their opponent’s equipment works, and how the algorithms and software within their own side’s equipment can be adjusted to defeat the adversary. This work is done by technologists who have been intimately involved in the design of the algorithms and software of the original equipment.

A nation that does not have access to sufficient scientific and technological smarts in industry to keep pace with these modifications, is a nation that is willing to place its servicemen and women in grave risk. AIDN cannot accept that Australia is willing to treat its brave service people this way.

Yet, Australia’s consistent approach to procure military equipment on the basis of price competitiveness does exactly this, and deprives the ADF of critical industrial support from its domestic industry.

AIDN’s position is clear. CASG must adjust its approach to procurement, if the issue is one of policy or procurement rules, then Government must revise both of these to ensure that Australian controlled Industry is able to provide this service to the Government and therefore the ADF.

The reflexive assumption that all advanced, science-based systems must be procured from overseas, rather than be developed in Australia must stop. Australia must be allowed to develop these industries. Doing otherwise undermines the ADF’s ability to sustain operations against technologically capable adversaries.

1. Page 75, ”On Flexibility, Recovery from technological and Doctrinal Surprise on the Battlefield”, Meir Finkel, 2007

AIDN National 4th Quarter Newsletter 2020

AIDN National Announces the Election of New Board Members and Appointment of New Chair

AIDN National has elected three new board members for a two-year tenure on the AIDN National Board.

The newly elected members are Emily Frizell, Toff Idrus and Graham Priestnall.

All three members bring with them a vast amount of experience working in the Australian Defence Industry sector and join ongoing members Carl Quarterman and Julie Savage. The board represents the diversity of AIDNs membership with members from Queensland, Western Australia, South Australia and the ACT

Graham Priestnall has been elected as Chair of AIDN National replacing outgoing Chair, Lester Sutton.

“I want to thank Lester for his devotion to AIDN National and his personal drive to ensure that the organisation becomes the peak industry body for Australian Defence Companies, in particular the Small to Medium Enterprises” newly elected Chair Graham Priestnall said.

I would also like to thank Angus Hutchinson and Kerryn Smith as outgoing board members for their efforts.” Graham Priesntall said.

The new board looks forwarded to working with the CEO of AIDN National in finalising the process for a national organisation, an organisation that is represented by member companies Australia wide.

About AIDN

AIDN is a member-based organisation established over 25 years ago, to represent the interests of Australian Industry with a particular focus on the SME community.

Media Enquires – ceo@aidn.org.au

A Machiavellian Tale – Or a Tale of Self-Reliance

Written by AIDN National CEO Brent Clark

Italy from 1450 through 1550 was a tumultuous time. The land comprised a series of independent city states which were often warring with each other, with the central papal authority and with external influences from France, Spain and Austria.

The Princes of the city states were certainly living in (to use the PM's terminology from the July 1 Defence Strategic Update) a "challenging strategic environment", and weighty decisions over how to prepare their principality for conflict had to be made.

Foremost of these was how best to raise an army. Recruiting personnel, equipping them, training them was an expensive proposition. And the establishment of such an army was just the start, keeping the army available was a continuing drain of resources. Could this expense be justified if for most of the time the army was not actually being deployed?

And then there was the question of risk; would a home-grown army actually be effective?  

These considerations led to an alternative approach becoming the norm; the use of mercenaries.

This brought various advantages. Mercenaries offered a ready built ("off the shelf") system.  All of the costs of raising and training an army were averted, as they were already battle-ready.

Mercenaries could be used for the shorter intervals of pressing need, and did not need to be engaged over a longer period. This was economically attractive.

An active market of mercenaries existed, so their supply was seemingly assured.  Most of all, they had experience in war-fighting, experience that a home-grown army could not match.

From a rational assessment of cost, and an evaluation of the risk of campaign loss, the use of mercenary forces became the prevalent model.

The results were disastrous.

Ultimately, in the heat of battle, the agenda of a mercenary was not aligned with the agenda of the principality that hired them. If the battle turned, at the very moment that a Prince really needed to rely on them, the mercenaries would melt away.

Prince Machiavelli wrote:

"I say, then, that the arms with which a Prince defends his state are either his own, or they are those of mercenaries or auxiliaries, or mixed troops. The mercenaries and auxiliaries are useless and dangerous".

What Machiavelli understood, but which the rational "value for money" assessment applied by the Princes entirely missed, was the value of self-reliance.

Machiavelli's point has applicability well beyond the armed services themselves, and extends to questions of supply of equipment to our armed forces.

Which brings us to the current debate on military industrial supply.

Australia has a defence procurement model that has been designed for the more benign strategic environment that prevailed until recently. The underlying assumption has been that a market for supply will always be available, and that the rational choice is to select suppliers that are cheapest and have existing equipment that we can readily procure. This minimises the risk that acquisition projects will fail to deliver, or that costs will increase beyond planned.

The outcome is that Australia overwhelmingly imports the bulk of its military materiel.

Yet, in the more challenging strategic environment that Australia is now confronting, the question must be asked whether this procurement model remains fit for our purpose?

Clearly, Australia is not self-reliant for supply of the defence materiel the ADF uses. How much of a risk does this pose to Australia?

The view of AIDN is that the risk is substantial, and is being consistently underplayed by our procurement organisation.

Why? Consider what may occur should a serious theatre war arise against an adversary that is equipped with technologically advanced weaponry.

We will want our brave service people to not only have the best equipment possible on the day that such a conflict commenced, but continually thereafter and for the entire duration of the conflict.

That includes the resupply of consumables that are expended, and the rapid repair of equipment and assets to enable their return to the battlespace. Yet if much of our materiel is imported, would the ADF be reliant on repair facilities located offshore? This creates serious risks if sea lanes and air corridors are cut.

A more serious issue relates to addressing the accelerated obsolescence of military technology during armed conflict. Modern military systems are rooted in technology, yet unforeseen vulnerabilities of those technologies are rapidly exposed when fielded against an adversary that also has advanced technologies. Rapid evolution of technology is required so that the equipment in the ADF's hands stays a step ahead of the adversary's equipment. Yet if the ADF's technology systems are sourced from overseas, those updates will need to occur in foreign industry.

But will they be interested? Maybe their own forces will have their own pressing needs, and their engineers' attention will of course turn to meet the needs of their own forces first, "ADF, I know it is urgent, but you are in the queue, we are getting through our queue as quickly as possible".

Even if the foreign industrial resource is available to update the algorithms in our equipment quickly; how will we receive delivery? Use communications networks to "download" the patch?

When confronting a technologically sophisticated adversary, such networks are vulnerable both to cyber and physical attack. Would we want to download an update to our sonar algorithms and risk having our adversary intercept that download and understand the updated design?

Reliance on foreign supply creates massive risks that the ADF will not be able to keep pace with the evolution of technology as the conflict progresses, and that our troops will be left vulnerable.

As with Machiavelli's assessment of the use of mercenaries over home-grown forces, the question of relying on foreign industrial supply over domestic supply boils down to a question of self-reliance.

Yes, there are costs associated with developing a home grown industry, and yes there are risks associated with asking Australian industry to develop certain technologies.

But what are the risks to the ADF by continuing a course of reliance on foreign industry?

Where and how does this factor enter into source supply evaluations routinely conducted by CASG?

Our world has changed. We are now in an era where the ADF may be called upon to engage an adversary significantly more capable than those it has confronted in recent times.

Our procurement model must be changed to not only address the needs of our troops on Day 1 of a future conflict, but on Days 2, 3 and throughout the full duration of conflict.

That means correctly accounting for the value to the ADF of an independent Australian military industry when assessing value for money of procurement decisions.

Published by Defence Connect

Sovereignty and the Curious Case of the Attack Class

Submarine Main Batteries

By Brent Clark

As the debate rages as to how best achieve the Governments stated requirement to establish a sovereign industrial capability to ensure that Australia can be as self-reliant as possible when it comes to the support of the nation’s defence equipment a strange decision was made.

In March this year there was an announcement made by Naval Group that Australia’s main battery supplier to the Collins Class submarines was awarded contracts for studies and the design of the Attack Class submarine.

The ‘awarding’ of these contracts was not to be the sole source supplier, rather the Australian company was awarded a contract to compete with the Greek company Sunlight Systems.

Despite being the supplier of submarine main batteries for Australia for around 30 years, despite the fact that the Australian company has been funded to undertake expensive R&D activities into submarine batteries, despite the fact that the Federal Government funded the company to build new facilities to clear the path for the submarine construction yard in South Australia – the decision was made to put the Australian company into a competition with a foreign owned company with zero presence in Australia.

An interesting point to note is that in February, a month prior to the Australian competitive process being announced, the Executive Vice President Development Naval Group, Alain Guillou, released Naval Groups long term cooperation plan, developed to support the acquisition program for two Frigates for the Hellenic navy, in this launch he also stated that Naval Group had been working with Hellenic industry for many years and that Sunlight Systems in particular is a strategic supplier for Naval Groups submarine programs.

Submarine main batteries are one of the top five equipment sets for the Attack Class submarine, the others being; the submarine main motor, the weapons discharge system, the diesel generators and the main DC Switchboards. These four systems were awarded sole sourced to overseas suppliers and at least in one case the logic of not undertaking a competitive process for the main motor supplier is not readily obvious, given the battery decision. The rationale of ensuring the best technology available to be part of the Australian program produced in a competitive, value for money way should (if we follow Defence’s argument) mean that wherever possible competitive processes are undertaken.

Defence has released guidance on what constitutes sovereign industrial capability priorities, according to Defence these priorities are capabilities that are critical to Defence and must be developed or supported by Australian Industry. These include Collins Class submarine maintenance and technology upgrade and continuous shipbuilding (including submarine acquisition), they specifically mention in their own document that particular importance is placed on submarine endurance and that endurance includes batteries for energy systems. In the continuous ship building and submarine acquisition section Defence clearly states that Australian Industry will need to be integrated into global supply chains.

Unless Defence has made the decision that submarine endurance and therefore submarine batteries will not be a sovereign industrial capability for the Attack Class submarine, it would appear that on every measure the Australian SME PMB is a sovereign industrial capability.

The creation of sovereign industrial capability is fully supported and given the reality of the COVID-19 pandemic and how exposed Australia was to the requirements of foreign Governments own domestic pressures combined with the hit to the Australian economy, it should be a requirement of Government to all government departments, not just Defence, that Australian industry is initially sourced to supply equipment.  If Australian industry cannot supply 100% of a piece of equipment, then measures need to be put into place to understand why not, and what is needed to ensure that it can.

There should only be very specific equipment that are not sourced domestically or at the very least involve some measure of Australian Industrial input.

But what of PMB and the decision made by Defence to compete a sovereign capability?

This Adelaide based Australian SME has been at the forefront of battery technologies for decades and it continues to expand its’ footprint globally. Earlier this year the company secured the battery design contract for the UK Ministry of Defence and it will do this with newer Nickle Zinc battery cell technology. It has also recently acquired the EnerSys’ submarine battery business and secured the contract to supply the Royal Canadian Navy with submarine main batteries. This Australian SME continues to grow its domestic footprint at the same time continuing to increase its defence export market, another requirement of the Australian Government. Should PMB be unsuccessful in securing the Attack Class opportunity the potential to damage its global position is obvious.

But sovereignty also provides the Australian Government with technology control, if we accept that Australian companies produce world leading technology, then the Government should be able to control where that technology goes and have the ability to develop these technologies for the sole benefit of Australia and Australia’s allies.

The only way to ensure that there is no military technology leakage is for the Government to have the right to refuse export sales, this currently exists with PMB, there is no ability for the Australian Government, nor Defence, to prevent a Greek owned company selling technology anywhere and to whomever it chooses.

AIDN has consistently advocated for Australian companies to be able to compete in a fair and equitable manner, we acknowledge that there are occasions when equipment may require to be sole sourced as the capability and the ability to supply from within the Australia market does not exist or the equipment provides a unique and necessary capability. If a company like PMB, a company that is by Defences own definition providing a sovereign capability, a company that has been supplying to Defence for decades, if this company does not justify being sole sourced then it is hard to imagine a scenario where any Australian company can be. This decision further undermines Australian companies already sceptical opinion of the procurement system.