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.
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.