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First 90pc, then 60pc, French still won't commit to local sub parts

Monday, August 10, 2020 12:00 AM | Alanna Mahlakolisane (Administrator)

A commitment by the French designer of the navy's new $90 billion fleet of submarines to source at least 60 per cent of components from Australian companies is yet to be locked in, more than six months after it was offered amid complaints local industry is being denied work.

Despite the Defence Department pressing Naval Group to enshrine its promise in a contract, The Australian Financial Review has been told the French company dragged its feet during negotiations with the Commonwealth.

Defence Minister Linda Reynolds wants a promise to have Australian suppliers contribute at least 60 per cent of contract value for the new submarine.

Documents released to Labor under freedom of information show Defence Minister Linda Reynolds told her French counterpart Florence Parly in March she considered it important to "capture the commitment" in the Strategic Partnering Agreement, the head contract that is meant to govern the relationship between Australia and Naval Group for the next 50 years.

"Naval Group was selected on the basis that they were most likely to be able to meet both our exacting capability needs but also our Australian industry and sovereignty requirements," Senator Reynolds wrote on March 30.

Senator Reynolds initiated crisis talks with Ms Parly and extracted Naval Group's public commitment to 60 per cent of the contract value being spent in Australia after its local chief executive, John Davis, gave a disastrously-received interview in February where he said Australian firms may not get 50 per cent of the work and local industry needed help to lift its capability.

A Defence Department spokeswoman said: "The commitment made by Naval Group will be formalised in an update to the SPA, which continues to be drafted".

Naval Group insisted it stood by its promise.

"We have made our strong commitment to Australian industry and jobs absolutely clear and we are working with the Commonwealth and Defence department officials to ensure the SPA reflects this," a company spokesman said.

Opposition defence industry spokesman Matt Keogh said the failure to enshrine the 60 per cent commitment after six months was just the latest example of the government's mismanagement of the project, which was the nation's most expensive defence acquisition.

The French Naval Group is leading Australia's future submarine project.

"How can local defence industry trust government announcements of work for them if they can’t negotiate the right outcomes with the French," Mr Keogh said.

"You can’t trust a word this government has to say about the future submarine program. On all three measures of this program – delivery schedule, cost and Australian content – the numbers are all going the wrong way."

The Australian Industry and Defence Network, which represents homegrown small and medium defence firms, said Naval Group's commitment needed to be made part of the contract.

"AIDN understands the complexity of finalising contract change proposals, it is rather concerning that months after Naval Group's commitment at a Senate hearing to ensure 60 per cent Australian industry content that nothing appears to have happened," said chief executive Brent Clark, a former Naval Group executive.

"AIDN has called for and continues to call for this commitment to be included into the SPA, otherwise this is just an unenforceable public relations statement from the French company."

In 2016, Naval Group's predecessor company DCNS said local content would make up 90 per cent of the submarine.

Andrew Tillett Political correspondent


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