Frigate tender blasted as ‘goat rodeo’ amid conflict of interest claim

Richard Marles’ green light for a potential South Korean takeover of the monopoly shipbuilder in WA has sparked conflict of interest claims ahead of an $8bn navy frigate tender.

Defence Minister Richard Marles in Melbourne on Wednesday. Picture: Getty Images

Richard Marles’s green light for a potential South Korean takeover of the government’s monopoly shipbuilder in Western Australia has sparked conflict of interest claims ahead of an $8bn tender to build eight new navy frigates in Perth.

Korean defence giant Hanwha, which is stalking Perth-based Austal, is one of the companies vying for the frigate contract. The vessels would be built at Austal’s Henderson yard.

A source linked to one of Hanwha’s competitors said the company was considering pulling out of the frigate race, arguing it could not protect its intellectual property if a rival was allowed to build its ship.

“This is about more than just Austal. This is about the global market and handing your design to a competitor,” the source said.

Another industry source familiar with the frigate process said: “The whole thing is a goat rodeo.

“How can one bidder for the frigates attempt to buy the shipyard that the government has mandated to build the vessels, and have that course of action endorsed by the minister?”

Hanwha and fellow Korean company Hyundai Heavy Industries are up against Germany’s TKMS, Spain’s Navantia, and Japan’s Mitsubishi and Mitsui in the contest to build the frigates.

Defence last week issued an information bulletin to approved tenderers, saying it was “committed to transparent communications with all parties to ensure compliance” with commonwealth procurement rules and probity policies. “This means Defence must be equitable in our engagement with all parties,” the advisory said.

Hanwha’s Redback infantry fighting vehicle selected for the army by the Albanese government last year. The vehicles are being built at a plant in Mr Marles’ electorate. Picture: ADF

An official request for tender is yet to be issued, amid “delays and confusion”, an industry source said.

Austal was named last year as the government’s strategic shipbuilder at WA’s Henderson shipyards, ensuring the company’s involvement in the promised frigate program no matter which design is chosen.

Austal in April rejected Hanwha’s $1bn offer for the company, saying the purchase was unlikely to gain regulatory approval from Australian and US authorities.

Mr Marles – who has a Hanwha plant in his electorate – said on Wednesday that the Albanese government would not stand in the way of the sale.

“Ultimately this is a matter for Austal. From the government’s perspective, we don’t have any concern about Hanwha moving in this direction,” he said after defence and diplomatic talks with Korean counterparts in Melbourne, driving up Austal shares by 3 per cent.

His comments caught defence industry figures by surprise. A day earlier, Mr Marles had been more circumspect when asked about the government’s attitude towards a potential Hanwha takeover of Australia’s biggest homegrown defence company. “I’m not about to comment on the ownership structure of Austal,” Mr Marles told the ABC on Tuesday.

Austal was blindsided by his apparent change of mind; it continues to refuse access to Hanwha to confidential documents necessary for due diligence.

A source close to Hanwha said its interest in Austal had nothing to do with the frigate program, and it wanted to acquire the shipbuilder even if the frigate bid was unsuccessful.

Mr Marles said any deal involving Austal would require strict security arrangements.