Future Subs: Defence Department confirms talks of a Plan B should Naval Group project collapse

Defence is preparing a contingency plan should the $89 billion subs project fall over, as Scott Morrison prepares to discuss the issue with the French President.

A Plan B for the Future Submarines is being investigated in case the $89 billion project with French company Naval Group cannot go ahead, the Defence Department has confirmed.

It comes as Scott Morrison is expected to have frank discussions with French President Emmanuel Macron about the troubled Attack Class submarine project when he travels to the G7 next week.

The Prime Minister will meet Mr Macron for bilateral talks in Paris after he travels to the UK for the world leaders meeting.

French President Emmanuel Macron meets Prime Minister Scott Morrison at the G7 Summit in Biarritz, France in 2019. Picture: Adam Taylor/PMO

While the Defence Department denies it is looking at German-made submarines, Defence Secretary Greg Moriarty on Wednesday confirmed the department was doing “prudent contingency planning” for the Future Subs, which are set to be built in Adelaide from 2024.

More than $2.04 billion has been spent on the project, which has been underway since 2016 when then-Prime Minister Malcolm Turnbull announced French company DCNS, now Naval Group, would design the subs.

“It is prudent that Defence is looking at alternatives if we are unable to proceed with Attack,” Mr Moriarty told a Senate Estimates hearing in Canberra on Wednesday.

“We are very committed to delivering the Attack but it is appropriate that we would be looking at alternatives if we are unable to proceed. I think that’s just prudent planning.”

The Future Subs will replace Australia’s Collins Class fleet.

Mr Moriarty confirmed he had provided advice to the federal Defence Minister recently on “alternative capability pathways”, and said he had been thinking about the matter “for quite some time”.

“I have certainly thought more about this issue over the last 12 months,” Mr Moriarty said in response to questions from Labor Senator Penny Wong.

“It became clear to me that we were having challenges with the Attack Class program over the last 15-12 months so, of course, you do reasonably prudent thinking about what one of those options might be or what you might be able to do if you were unable to proceed,” he said.

“But the government is absolutely committed to trying to work through with Naval Group and build a regionally superior submarine in Adelaide.”

There have been tensions between Naval Group and the Defence Department over the cost and time frame of the Future Submarines, but it is Mr Moriarty’s strongest remarks to date on “challenges” with the project.

Defence Department secretary Greg Moriarty at Senate Estimates in Parliament House in Canberra. Picture: Martin Ollman

Asked whether Defence was considering submarine designs by German company TKMS or Swedish defence firm Saab, which designed Australia’s Collins class, Mr Moriarty said: “I am not going to go into those pathways, but the Chief of Navy said yesterday we are not looking at the TKMS.”

He would not reveal details, saying: “Some of it is highly classified, and it has to do with our interpretation of the threat environment.”

In response to Senator Wong’s questions, Mr Moriarty referred to last year’s defence strategic update, which outlined how the strategic environment had changed and Australia could no longer expect a 10-year warning time for conflict.

“We are absolutely committed to providing good advice to government on how we can meet the challenges of our strategic environment,” he said.

“Some of that involves adjustments to capability, some of that involves recommendations to bring capability early, some of it might mean modifications to capability.”

Director-General Submarines Timothy Brown appears at Senate Estimates at Parliament House in Canberra. Picture: Martin Ollman

A top Navy official, Commodore Tim Brown, was asked about the inquiry he is conducting into the Navy’s future requirementsfor undersea warfare, which includes Australia’s subs fleet, but said he could not answer as it was classified.

State Opposition leader Peter Malinauskas said it was “incredibly disconcerting” for thousands of South Australians who were looking to the Future Subs project as a source of work in the state.

He said the Federal Government’s “indecisiveness” on Defence projects, including the future location of Collins Class submarine maintenance, was “undermining job projects in our state”.

He called for “clarity and transparency”, and urged Premier Steven Marshall to “apply maximum pressure to the Commonwealth to start making decisions”.

Mr Marshall said the Federal Government was “committed to building submarines in Adelaide” and the State Government was “committed to growing a world-class defence manufacturing sector that continues to generates jobs for South Australians.”

A Naval Group spokesman said the company was “fully committed to continuing to achieve important program milestones.”

“Significant progress has already been made on submarine design, workforce growth and Australian industry involvement,” he said.

Labor’s defence spokesman Brendan O’Connor said the government must explain any changes to the Future Subs project, while SA Labor Senator Penny Wong accused the government of “failing to deliver on the jobs promised to SA and failing to deliver on the submarine capability Australia needs”.

“Officials have confirmed there’s likely to be almost 300 submarines based in the Indo-Pacific by 2035,” she said.

“By that time Australia will be lucky to have seven - and that’s only if there’s a life-of-type extension on all of the Collins class submarines.

“These failures aren’t making Australians safer.”

SA Senator Rex Patrick, a former submariner, welcomed confirmation Defence was looking at Plan B and said any solution should be done in SA.

The Australian Industry & Defence Network said any secondary option for the Future Submarines must include consultation with Australian industry.

AIDN chief executive Brent Clark said: “Whilst AIDN will not speculate on the relationship between Naval Group and the Department of Defence, AIDN does see merit in Government pursuing a backup plan, should unforeseeable issues prevent the current program from being delivered.”

He said Australian industry “must be included in the design process from the outset” in order to maximise local involvement.

“It is important that Australian industry is directly included in these discussions rather than just bureaucrats with little to no practical industrial experience making binding decisions or assumptions,” Mr Clark said.

“Equally relying solely on foreign-owned overseas prime contractors to be assessing the in-country capabilities of Australian industry, when they have pressure from their overseas supply chain and potentially other international obligations, is not appropriate.”

Naval or not, they must build here

Analysis – Claire Bickers

A plan B is never a bad idea.

All projects need contingencies in case something goes wrong – and particularly the most expensive military acquisition in Australia’s history.

So Defence Department Secretary Greg Moriarty’s confirmation that Defence is “very committed” to delivering the $89 billion Future Submarines but is looking at “alternatives” as part of “prudent contingency planning” is welcome. But the No.1 one question for South Australia is where would a Plan B be built if the Naval Group contract doesn’t go ahead?

It’s something Defence and the Federal Government must make clear for the sake of Australian defence businesses and for South Australians.

Thousands of future SA-based jobs and billions of dollars of investment are tied up in the project to deliver 12 Attack Class subs, which has been under way for five years.

More than 250 people are already employed in Australia by Naval Group Australia, with most based out of the company’s Port Adelaide HQ, which opened last year.

A new shipyard is rising from the dust at Osborne specifically designed to build the Future Subs. And more than $2 billion has already been spent on the Future Subs project, according to the federal budget.

But if there is a risk the subs could be delayed due to “challenges” in the Attack Class project, then an interim option or alternatives must be considered for the sake of national security. Taxpayers also deserve to know as soon as possible if the project cannot go ahead in its current form. Given SA’s shipbuilding history and commitment to develop a workforce, any Plan B – if it gets that far – should be done here.