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The French state-owned company designing Australia’s submarine fleet has already asked for a 15-month extension to deliver the design, the auditor general has found.
In February last year Naval Group asked for the extension to turn in its work in order to minimise delays down the track, which would extend the design completion date from July 2022 to September 2023.
Defence and Naval Group settled on a nine-month extension to the project, which has already been delayed. A further three-year delay would force Defence into the costly and potentially risky position of having to extend the life of the current submarine fleet, or risk a capability gap, something the parliament was warned about during estimates hearings last year.
“The program is currently experiencing a nine-month delay in the design phase against Defence’s pre-design contract estimates, and two major contracted milestones [related to design] were extended,” the auditor general found. “As a result, Defence cannot demonstrate that its expenditure of $396m on design of the future submarine has been fully effective in achieving the program’s two major design milestones to date.”
The $396m spent on design so far accounts for almost half the program’s expenditure to September last year.
Labor’s defence spokesman, Richard Marles, said it was just the latest in a long series of delays since the then prime minister, Malcolm Turnbull, announced the program in 2016.
“It is deeply concerning that this program is already experiencing a nine-month delay in the design phase and that Defence cannot demonstrate that its expenditure of nearly $400m in taxpayers’ money has been fully effective in achieving two major design milestones,” Marles said.
“This comes on top of recent revelations that the future submarines will cost around $80bn to acquire and $145bn to sustain, and that construction of the first future submarine has been pushed back a year.
“On all three measures of this program – on time of delivery, on the cost of the project and on the amount of Australian content – the numbers are all going the wrong way.”
At this still early stage of the project, the auditor general had no recommendations other than to encourage a close and long-term working relationship between Defence and Naval Group, with the submarines scheduled to be delivered and begin service in the 2030s.
The auditor general’s report also confirmed “fabrication of complex hull parts” of the first submarine will be completed in France. Naval Group will construct the remaining submarine parts in Adelaide.
The $80bn program, which will deliver Australia 12 submarines, was established to replace the six ageing Collins-class submarines but has been beset with delays and frustrations almost from inception. It is the largest Defence procurement Australia has undertaken but the decision to design and build submarines rather than purchase “off the shelf” models has increased the risk associated with the program.