Naval build program in holding pattern

Both the RAN and the country’s naval shipbuilding industry now await the outcome of the additional, external review requested by the DSR on the size, structure and composition of the navy’s surface combatant fleet.

The Hunter-class anti-submarine warfare frigate program faces another cost blowout. Picture: BAE Systems Maritime Australia

Far from benefitting from the clarity of vision expected from the recent Defence Strategic Review (DSR), both navy and the country’s naval shipbuilding industry now face several months on tenterhooks awaiting the outcome of the additional, external review requested by the DSR on the size, structure and composition of the RAN’s surface combatant fleet.

This review has been specifically tasked with determining the ship mix that will best complement the capabilities that will be provided by Australia’s future nuclear-powered submarine fleet, and must be completed by September.

It must also assess the cost, schedule, risks and the continuous shipbuilding potential of each option – a big ask for the three-strong review team comprising retired US Vice-Admiral William Hilarides (since 2021 chair of Defence’s Naval Shipbuilding Expert Advisory Panel); former Finance Department Secretary Rosemary Huxtable; and retired RAN Rear Admiral Stuart Mayer.

However, the general thrust of the review has already been established with the DSR declaring that the RAN’s capability in long-range maritime and land strike, air defence and anti-submarine warfare requires the acquisition of a contemporary optimal mix of Tier 1 and Tier 2 surface combatants “consistent with a strategy of a larger number of smaller surface vessels”.

The DSR does not, however, recommend specific capabilities as it does for the land and air domains. Nor does it refer to the potential implications for the troubled $45bn Hunter-class anti-submarine warfare frigate program and the $4bn Arafura offshore patrol vessel (OPV) program, amid continuing speculation about their futures.

This swirls around the possibility of Hunter-class construction being cut from nine to six hulls and three more Hobart-class Air Warfare Destroyers (AWDs) or their equivalent being built to boost missile numbers afloat. It also relates to the possibility of the 12 planned and lightly-armed 1640-tonne Arafura-class OPVs being reduced to six and supplanted by larger, better-armed corvettes or small frigates.

Brent Clark, chief executive of the Australian Industry Defence Network (AIDN) (and a former RAN submariner) noted that industry had anticipated that the DSR would be a definitive document “but the document is not definitive, and the new review creates uncertainty, it creates nervousness, it creates stress, and it creates delay.

“If we’re going to have less Hunters then all the assumptions made by industry in terms of becoming part of that supply chain will be wrong, as will costs.

“And how would the smaller ships be selected? Will a ship be mandated or will there be a competition that will take a couple of years? Will the construction yard need modifying? And if a replacement is to be built by a different company, then it’s a whole different design philosophy”.

Nevertheless there’s certainly no lack of interest or choice in providing greater lethality to the surface fleet.

In an unsolicited proposal to the DSR, Spanish shipbuilder Navantia offered to build in Spain or Australia three more Hobart-class AWDs for $2bn each to join the three now in service with the RAN, along with six of its Alpha 3000 corvettes for about $600m each if built in Spain and $800m each if constructed in Australia – although where that would be is not clear.

Luerssen Australia, a subsidiary of Germany’s NVL Group and prime contractor for the OPV program, is understood to have offered the navy two multi-purpose 90-metre corvette designs; the K 130 class in service with the German navy and the C 90 class under construction for the Bulgarian navy.

If selected, construction in Australia would benefit from taking over the current Arafura production line at Henderson , system similarities, and an established supply chain.

The difference in capability between an Arufura-class OPV and, for example, the 2100-tonne C-90 corvette proposed by Luerssen, is stark.

While the Arafura is slated for constabulary, maritime patrol and response missions, with (currently) a 25mm cannon and two .50 calibre machine guns, C-90s under construction for Bulgaria have anti-air, anti-surface, anti-submarine and electronic warfare capabilities. These include a 76mm main gun, a 35mm close-in weapon system, eight vertical-launch missile cells, four surface-to-surface missiles, two .50 calibre machine guns, two triple torpedo launch systems, hull-mounted and towed array sonar systems, and a hangar and landing deck for a multi-mission helicopter.

‘The new review creates uncertainty, it creates nervousness, it creates stress, and it creates delay.’

Brent clark, CEO, Austrliaan Industry Defence Network

Meanwhile BAE Systems Maritime Australia, poised to cut steel at Osborne on the first of the nine proposed Hunter-class frigates with first delivery scheduled for 2031, has dismissed unsourced reports that it has advanced a program alternative of six Hunter-class frigates and three anti-air warfare variants, the latter each deploying up to 150 vertical-launch missile cells.

The company has confirmed its ability to provide options, where and when required, for improving the lethality of existing platforms within timescale and cost parameters. “And as ship designers and builders, but more importantly the yard that is spearheading sovereign capability, are constantly conducting options studies to look at accelerated capability”, a spokesperson stated.

The company also emphasised the importance to the national continuous naval shipbuilding program of a common hull, whether for facilitating accelerated lethality or for planning the next generation of surface warfare combat vessels.

The outlook for the Hunter-class program has now been further clouded by an Australian National Audit Office (ANAO) report released on May 10 warning of a likely cost increase “significantly beyond” the $45.6bn figure disclosed by government in mid-2020 – which itself was $10bn more than the official figure given in 2018.

“As of March 2023, while Defence had advised portfolio ministers that the program is under extreme cost pressure, it had not advised government of its revised acquisition cost estimate, on the basis that it is still refining and validating the estimate”, the audit report disclosed.

Defence’s procurement process “lacked a value for money focus and key records, including the rationale for the procurement approach, were not retained”, the audit stated.

Further, contract expenditure to date had not been effective in delivering on project milestones and “lack of design maturity” had resulted in an 18-month delay to the project, with the first Hunter-class vessel now expected to be delivered in mid-2032 rather than early 2031.

Tellingly, the audit report stated that Defence’s general approach to applying Common-wealth Procurement Rules and the core principle of value for money in the Hunter-class procurement “suggests that further training and oversight may be required of Defence officials involved in high-level planning and advising on major capital acquisition projects, at all levels”.

Meanwhile defence analyst Dr Marcus Hellyer has pointed out that the DSR is silent on the roles proposed for larger numbers of smaller ships “so it’s a bit hard to know whether that’s the right way to go”.

“Everything we see is driving our ships bigger and it’s the same with the US; I’m not quite sure how a US Admiral is going to solve that problem for us because the US itself has not been able to solve it”, he warned.