Slower Australian frigates build to raise cost

Australia’s next-generation future frigates could be built faster and more cheaply, but their construction is being deliberately slowed.

Australia’s next-generation future frigates could be built faster and more cheaply, but their construction is being deliberately slowed to provide ongoing work for the ­nation’s defence sector.

Defence says a revised $45bn cost to deliver nine Hunter-class frigates, up from an estimated $30bn in 2016, is in part due to the need to maintain a continuous shipbuilding industry.

“Continuous naval shipbuilding means the Hunter-class frigate program has been constructed at a deliberate drumbeat over a longer period of time, increasing the cost over a faster build program,” the ­department told The Australian.

Defence said an 80 per cent jump in the forecast cost of ­acquiring 450 new infantry fighting vehicles for the army was due to the need to procure more spares and ammunition, and deliver supporting infrastructure and training ranges.

It said a “longer, more feasible and sustainable vehicle build schedule” had also lifted the cost of the project.

The cost of the tanklike vehicles rose to an estimated $18bn-$27bn in a new plan released this month, up from a forecast $10bn-$15b in 2016.

The slower, more expensive building schedule is the result of a 2018 federal government policy to create a continuous shipbuilding industry. It aims to end the “boom and bust” cycle of naval shipbuilding, delivering more certainty for the nation’s defence industry and ensuring skilled workers do not face unemployment at the end of a program.

Defence said the frigate delivery schedule would allow industry to transition to building the replacement for the nation’s three Hobart-class air warfare destroyers, commissioned in 2017, 2018 and 2019, immediately after the ninth Hunter-class frigate was completed.

It said while developing a continuous naval shipbuilding industry meant construction costs had risen this would be offset by improved domestic industrial capabilities, and the creation of “multi-generational employment opportunities”.

A fall in the value of the dollar had also pushed up the forecast cost of the frigate program over its lifetime, Defence said.

Australian Strategic Policy Institute defence budget expert Marcus Hellyer said the planned two-year “drum beat” for the Hunter-class build was determined by the anticipated lifespan of the ships, and the planned construction of their replacements.

“Warships are generally designed for a life of 25 to 35 years. But what they’re doing is having a two-year drumbeat. So the last ship is delivered when the first ship is 24 years old,” Dr Hellyer said. “So you may not get a full return on your investment. And even to do that you have to artificially slow down the build. That increases the cost both through inefficiency, and because of ­inflation, which operates in the military at a far higher rate.”

He said the “build it here” mantra, in which defence procurement is used to boost jobs and regional investment, came at a premium over “off the shelf” procurement.

“Generally when we build stuff here it’s pretty good. It just inherently costs more because of Australian wage structures, (and) deliberately doing it slowly to stretch it out,” Dr Hellyer said.

The Hunter-class frigates will be built in Adelaide, entering service from the late 2020s.