Hunter-class frigates acquired without key assessment, parliament told

A major step in Australia’s defence future was made without a value for money assessment, as the program’s costs rise and wait time blows out.

The former Coalition government acquired the navy’s Hunter-class frigates without a value for money assessment, it’s been revealed.

The program, which at the time the Turnbull government signed the agreement in 2018 was estimated to cost $35bn, has already blown out to $46bn, and an Auditor-General report last week suggested the cost could climb further.

The report revealed the program – originally slated to ensure the submarine chasers were in the water by mid-2032 to replace the Anzac-class frigates – is already 18 months behind schedule due to the “immaturity” of the British-designed vessel, with the report warning of more delays.

The report prompted an extended session of the federal parliament’s Joint Committee of Public Accounts and Audit on Friday. It was told key records pertaining to the procurement process and related advisory processes were missing.

Officials told the committee on Friday that the Hunter program appeared to be the only defence procurement program audited since 2016 that did not have a value for money assessment.

Senior defence officials could not point to any other occasion where a value for money assessment wasn’t provided to ministers but said there was an internal review process under way. Finance officials said they would work to ensure such an oversight did not happen again.

The first nine Hunter-class frigates were slated to be in the water by 2032 but are running 18 months behind schedule. Picture: BAES

Committee chair Julian Hill questioned how ministers reading the relevant cabinet papers at the time could have failed to notice the lack of value for money assessment.

Questioning whether they were playing a game of “pin the tail on the donkey” or “spin the bottle”, Mr Hill said it appeared the former government had made a major, multibillion-dollar defence decision based on “the vibe of the thing”.

“It’s up to Scott Morrison, Marise Payne, Peter Dutton, and those sitting who made the decision to explain why they picked an immature design with extreme risk with no value for money assessment,” he said.

“And they’ve left it up to our government to get the critical project back on track.”

He told the inquiry the former government bore a “significant degree of responsibility” for having made such a big decision, since the program was assessed as being of “significant risk” without a value for money assessment.

The frigates have already been plagued by serious design issues. Picture: BAE

The frigates, based on the British Type 26 warship and being built in Adelaide, have already suffered serious design issues, including being heavier than originally designed and potentially slower.

British BAE Systems beat Spanish and Italian rivals in 2018 to secure the contract to build the anti-submarine frigates despite evidence the latter options were better suited to Australia’s naval needs.

In the release of the Defence Strategic Review last month, a review of the navy’s future was announced, likely to include a scaling back of the BAE contract in favour of other smaller, faster, cheaper, and bigger vessels with greater missile capabilities.

Mr Hill has requested written submissions by mid next month from the contractor BAE Systems, as well as the British High Commission, in what could signal a chink in the AUKUS armour.

Given the role the frigates were to play in the AUKUS program, the Auditor-General’s report suggested the serious issues with the Hunters were likely to create strains.