Subs builder Naval Group agrees to terms of local content

Defence and Naval Group were expected to sign a formal contract overnight amending their partnership agreement for achieving 60 per cent local industry content for 12 submarines.

Naval Group chief executive Pierre-Eric Pommellet. Picture: Mike Burton

The Defence Department and the French ship builder Naval Group were expected to sign a formal contract overnight amending their partnership agreement to lay out the timetable and scope for achieving 60 per cent local industry content for 12 submarines to be built in Australia.

Naval Group chief executive Pierre-Eric Pommellet convened a special board meeting to ratify the legal agreement.

The Australian revealed the two sides had reached an in-principle agreement on the 60 per cent local content during Mr Pommellet’s visit to Australia in at the end of February.

Both sides needed to refine the text which will now become legally binding. Under the agreement each phase of work will include a fixed minimum per­centage of Australian industry content. This will start in the earliest stages of work below 60 per cent, with the level of Australian content increasing with each successive phase of work over the life of the design and build of the 12 subs.

The final phases will contain more than 60 per cent Australian industry content so that the 60 per cent figure will be reached for the whole project by the time the final submarine is delivered in the early 2050s — although the subs could be delivered earlier than that if Canberra chooses to accelerate production.

Negotiations are ongoing for the formal contract covering the next phase of work, known as Core Scope Work Two. This is expected to be finalised within a matter of weeks and will involve several years’ work and billions of dollars of expenditure.

Speaking to The Australian during his visit, Mr Pommellet said: “We are committed to 60 per cent (spent in Australia) as a minimum on the project.”

Separate modelling by both Naval Group and Defence indicate that the 60 per cent Australian content figure is likely to be surpassed in the program

Construction of the first submarine hull is scheduled to start in 2023 and Mr Pommellet said he was confident the first boat could be in service in 2034.

The government is believed to be looking at ways in which the program can be accelerated.

Once the production line is under way, the shipyard will have the capability to build two submarines at once, provided enough workers can be found.