BAE Systems boss asked if designs for Hunter-fleet frigates have been ‘compromised’

The boss of Australia’s largest defence company has been grilled over claims of a cyber security hack that may have compromised a $45b warship program.

The head of Australia's largest defence manufacturer, BAE Systems Australia has faced claims their cyber security system had been “hacked in recent weeks,” while facing a parliamentary inquiry.

The company’s chief executive Ben Hudson was asked by committee chair Julian Hill on Friday whether BAE Systems had been “hacked in recent weeks”. The Labor MP said it had “been suggested” to him that potential breaches had “comprised some of this material”.

While Mr Hudson took the question on notice – meaning he will supply an answer to the question at a later date – he said: “You can imagine a company like BAE, like every other major defence company in Australia is a constant target.”

The question appeared to catch Mr Hudson off guard.

“We work in partnership with the Australian Cybersecurity Center, we’re a (Defence Industry Security Program) certified company,” said Mr Hudson.

“And I won’t go and talk about specific issues that we have but there are always threats that are bound, that the company is dealing with.”

Mr Hill then asked whether “plans for the SEA 5000 (Hunter class frigates) been compromised in anyway due to the cybersecurity hacks”?

Mr Hudson said that they had not, to the “best of my knowledge”.

“And that’s a very careful answer,” he said.

BAE Systems boss Ben Hudson Hunter Class Frigate.

The defence boss’ appearance before a joint inquiry follows a scathing Australian National Audit Office (ANAO) report which said the nine-ship British Type 26 fleet, which will be built by BAE Systems, would cost substantially more than the $45bn allocated in the budget.

The 10,000 tonne warships will be optimised for anti-submarine warfare and will replace the Anzac class frigates.

Questions were also raised around the weight of the warships, which Mr Hill feared would impact the speed, fuel usage and cooling requirements of the vessels.

Mr Hudson was grilled over whether BAE Systems oversold the capabilities of the warships prior to securing the procurement tender.

Mr Hill also questioned why BAE Systems was awarded the procurement contract by the Turnbull government in June 2018 without a “value for money assessment” for a “ship that didn’t exist”.

This was despite other “mature options” which were also competing for the tender.

Facing the questions, Mr Hudson was adamant the frigates met the “Navy’s requirements for range and payload”.

“Nobody pretended that a Type 26 was in the water and our executive summary included a picture of the status of the ship at that stage in the production yard,” he said.

BAE Systems chief executive Ben Hudson. Picture: Parliament of Australia

Although the frigates would be heavier, Mr Hudson said their performance “meets the Navy’s requirements for range, speed and payload”.

“In terms of the anti-submarine warfare capabilities, my understanding to the best of my knowledge is the ship meets the Navy’s requirements,” he said.

Asked whether BAE Systems “fundamentally underestimated the difficulty of the project,” Mr Hudson said the “significant changes,” and multiple, multiple evolutions” of the frigates will ultimately improve the final product.

“I am absolutely convinced that this is going to be the shift that needs (to happen). It will bring our sailors home safe. I do contest that it is the right solution for the nation,” he said.

Mr Hudson admitted the program wasn’t “without its challenges,” but said the progress since Covid had been “amazing”.

He said supply strain pressures due to the pandemic and the Ukraine war drove the price of steel up by 71 per cent, doubled the cost of electronics and semiconductors, and tripled freight costs.

“Unfortunately, as the program was still mobilising, the world went into lockdown. The strain this has placed on all aspects of the program can’t be understated,” he said.

Prior to the commencement of the hearing, both Mr Hill and former defence minister Linda Reynolds reiterated the inquiry wasn’t about assigning blame or finding a “gotcha” moment.

“I’ve got a principle view that it’s about time that we stopped using people in uniform as human shields for the performance or otherwise of defence contractors,” said Mr Hill.

“I think this is something that the committee should normalise and be able to talk directly with industry.”