Hunter-class frigates to face another cost blowout and schedule delay

A new report is warning of another major cost blowout and fresh delays to the troubled Hunter-class frigate program.

The troubled Hunter-class frigate program is facing another huge cost blowout and a fresh delay, the auditor-general has warned in a sobering new report.

It will fuel speculation the number of ships planned for construction in Adelaide will be dramatically slashed amid the federal government’s naval surface fleet review.

Published on Wednesday, the auditor-general’s report revealed Defence’s internal estimate of the program’s total cost was “significantly higher” than the budgeted $45bn.

It would be the second major cost blowout to afflict BAE Systems’ project, which started with an initial price tag of $30bn.

A digital impression of the planned Hunter-class frigate.

The report said Defence had briefed portfolio ministers on the expected cost blowout, but had not provided a revised estimate, “on the basis that it is still refining and validating” the figure.

Defence told the auditor-general it would be “inappropriate” to provide an updated cost, as a “large amount of uncertainty remains in elements of the estimate”.

The auditor-general was scathing of Defence, critcising the department of failing to properly assess the value for taxpayer money when it assessed three competing ship designs.

In response, Defence said “all procurement advice” considers “value for money and whole-of-life cost estimates”.

The report also revealed BAE was expecting another delay for the delivery of the first ship – despite the company announcing in August last year construction was largely back on track after significant design issues were ironed out.

Instead of the first ship being completed in early 2031, it is now expected to be delivered in mid-2032.

The Surface Ships Advisory Committee reported in January that shipbuilders were constructing just one unit – a portion of a ship block – every 25 days during prototyping. In order to achieve 2031 delivery, productivity would need to increase to one unit every 10 days.

The total number of Hunter-class ships to be built at Adelaide’s Osborne shipyard is under doubt as a new review of the navy’s surface fleet considers acquiring smaller warships, such as Corvettes, which could replace a number of the nine planned frigates.

Shipbuilders at Osborne aren’t constructing units fast enough to meet the 2031 deadline for the delivery of the first ship. Pictured is completed “block” constructed in the prototyping phase.

BAE Systems declined to comment on the auditor-general’s report, but a spokeswoman said the Hunter-class program continued to make “strong progress”, with first steel to be cut this week.

“We remain committed to building nine anti-submarine warfare frigates for the Royal Australian Navy,” the spokeswoman said.

“The program is the cornerstone to delivering continuous naval shipbuilding in Australia and developing a competitive and cost-effective naval shipbuilding and sustainment industry over the coming decades.”

Defence Industry Minister Pat Conroy said the auditor-general’s report showed the “bungling and mismanagement” of defence projects by the former Coalition government.

“The Albanese Government is reforming defence procurement processes and improving the management of defence capability projects, including by establishing a new project management office within Defence, requiring regular projects of concern reporting to Ministers and holding regular Projects of Concern Ministerial summits,” Mr Conroy said.

SA Liberal senator Simon Birmingham criticised Labor for creating “more uncertainty or delays” by triggering the surface fleet audit after the Defence Strategic Review.

“Liberals established a continuous shipbuilding strategy and got construction underway on Hunter Class frigates in Adelaide, which Labor need to ensure proceed in ways where delays or difficulties are avoided and not compounded,” Senator Birmingham said.

In February, a separate auditor-general report shed light on Defence’s concerns the Hunter-class frigates would lack the firepower to counter “current and emerging threats”.

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