The builder of the Hunter frigates says the project budget has not blown out by $20 billion

The builder of the Hunter-class frigates has rejected government-backed claims the budget for the project has blown out to $65bn.

The Evolved Hunter Class design for guided missile frigate. Picture: Supplied

The builder of the navy’s Hunter-class frigates, BAE Systems Australia, has rejected government-backed claims that the budget for the project has blown out by $20bn to $65bn, saying the true cost of the project is far lower.

The government has cut the planned number of Hunter frigates from nine to six as part of its 20-year overhaul of the navy’s surface fleet. The day before the announcement it leaked an estimate by an independent analysis team that claimed the cost of building all nine Hunter frigates had soared from $45bn to $65bn.

The new $65bn estimate was not included in the public material released during Tuesday’s announcement. However, it appears to have played a key part in the ­government’s decision to slash the program by one third.

But Craig Lockhart, managing director maritime for BAE Systems Australia, which is building the ships in Adelaide, is mystified by the $65bn figure which, he said, came as a complete surprise.

“I don’t recognise that number at all,” he told The Australian.

“I can only have confidence in the number that I’ve given to the commonwealth which has been worked up in complete transparency with the team.

“I don’t know where the $65bn is coming from. I don’t know where the additional $20bn is coming from … I don’t know where that money is being spent.”

BAE Systems learned of the new estimate of the project only from media reports on Tuesday, the day of the government’s ­announcement.

The Australian understands that BAE’s estimate for designing and building nine frigates is roughly $24bn and that this estimated cost has grown by only 10 per cent since 2018.

However, BAE costs are only a part of the total project costs and do not include the shipyard, construction equipment and the cost of modified add-ons such as combat system, radars and weapons. The company has no insight into those costs.

“You’d have to ask the commonwealth because that’s the bit I can’t square the circle on,” Mr Lockhart said.

When the Hunter-class project was announced in 2018 it was projected overall to cost $35bn, but this rose to $45bn in 2020 ­before the independent analysis team commissioned by the government to review the surface fleet lifted the Hunter estimate to $65bn.

Neither the public version of the independent review, nor the government itself, has explained why the cost of the project jumped so far so quickly.

The Hunter frigate, which is an Australianised version of Britain’s Type 26 frigate, has been plagued by weight and design issues that delayed the construction of the first ship.

Mr Lockhart said the confirmation that the Hunter project would continue, even in a reduced form, had given certainty to the workers and for the future of the shipyard at Osborne.

“We’ve got certainty that we can go into full-scale production for several decades providing the same configuration to ships for six ships,” he said.

Mr Lockhart said he believed the worst problems in the project, including the fact the ship was initially too heavy, have now been rectified and he saw no reason why the six ships could not now be produced on time and on budget.

“The much-publicised weight and margin issue is well behind us,” he said. “We’ve been able to accommodate changes that reduce the burden on the ship.’

He said he believed the first ship would be delivered in 2032, as expected: “I’ve got growing confidence that this yard and this workforce will be able to deliver against that schedule.”

The smaller Hunter project is part of a major overhaul of the navy’s surface fleet that includes the acquisition of 11 new general purpose frigates to replace the ageing Anzac-class frigates.

The plan also includes the construction in Australia of six large semi-autonomous ships called large optionally crewed surface vessels, which each have 32 vertical launch missile cells.

The revamp will lift the navy’s total surface fleet from 11 to 20 major combatants.