Future Submarines: Naval Group and Defence Department close to signing deal for next phase of contract

Days after fears the $89bn Future Subs contract could be scrapped, a deal to lock in two more years of work in Adelaide is close.

A deal to lock in the next phase of the $89bn Future Submarines contract is close to being inked, securing future jobs for South Australia.

The breakthrough comes just days after fears the contract could be scrapped, prompted by reports last week that the Federal Government was looking at options for Australia’s submarine fleet, including how to terminate its agreement with Naval Group.

The Advertiser understands the Defence Department and French defence giant Naval Group are close to signing a contract for the next two years of work on the project.

The next phase will cover detailed design work for the submarines and Naval Group’s input into the construction of a new shipyard in Port Adelaide, which cements Adelaide as the location for building the 12 Attack Class subs.

The deal will be reviewed by Defence over the next few weeks but is likely to be signed in April, sources told The Advertiser.

The Future Submarines will be built in Adelaide over the next two decades to replace Australia’s ageing Collins Class fleet. Picture: Royal Australian Navy

It puts to rest fears the Federal Government could walk away from the contract, which industry sources believed were partly leaked to media to pressure Naval Group into offering a more affordable estimate for costs for the next phase of the project.

It’s understood Naval Group’s initial cost estimate was much higher than Defence expected.

The company submitted its latest estimates last week while Naval Group’s global chief executive Pierre Eric Pommellet was in Canberra meeting with top Defence officials and federal government ministers.

“Pierre Eric and I held very constructive and welcoming meetings with ministers and defence officials during his visit to Australia last week,” Naval Group Australia chief executive John Davis said.

“I believe significant progress has been made on the Commonwealth Government and Naval Group’s joint plans to continue creating Australian jobs.”

Finance Minister Simon Birmingham speaking with Naval Group global chief executive Pierre Eric Pommellet on Saturday at the new Osborne shipyard, where the Future Subs will be built. Picture: Mike Burton

Finance Minister Simon Birmingham said at the weekend the government was pleased Naval Group had been able to submit “further information” to Defence during Mr Pommellet’s visit to Australia.

“We look forward to working carefully with Naval Group towards the progress that can be made from this visit and to give everybody the certainty that naval capability will be delivered in the future,” Senator Birmingham said.

Mr Pommellet also downplayed concerns about the contract at the weekend, saying his primary concern was delivering the project.

“I think what our customer is expecting from us is transparency, and when we say something, we do what we say, and so my message here was all about that,” he told The Advertiser.

He also said the submarine project was on cost and on time.