Nuclear subs’ $13bn cost tip of the iceberg

The Defence budget papers for the 2023-24 financial year show for the first time that the approved four-year spend on nuclear-powered attack submarines is $13.6bn. But this does not include the submarines themselves, just some of the preparatory costs.

The Virginia-class fast-attack submarine USS Washington (SSN 787) at Naval Station Norfolk, Virginia, US in December 2023. Picture: US Navy

The Defence budget papers for the 2023-24 Financial Year show for the first time that the approved four-year spend on nuclear-powered attack submarines is $13.6bn. This is just the tip of the iceberg because it does not include the submarines themselves, just some of the preparatory costs.

The Defence department is notoriously vague about many details of project funding, and it is only by deduction that this figure involves a gift that will eventually reach a total of $4.6bn to the US submarine industrial base. It also seems to include a smaller, undefined payment to the UK industry for some long lead time nuclear reactor components – but over time that will also reach an identical $4.6bn figure. No one outside a handful of officials knows how these huge numbers were calculated.

In preparation for the delivery of the first of two, three, or possibly five Virginia-class SSNs, Australian sailors have started training in the US. On April 18, three members of the RAN graduated from the USN’s Submarine Officer Basic Course (SOBC) at the Naval Submarine School in Groton, Connecticut. Each Virginia submarine has a complement of 15 officers and 120 crew, so there’s some way to go but it’s a start.

According to the US Navy, the Submarine Officer Basic Course is the last step in the USN’s 15-month nuclear submarine training pipeline before assignment to the fleet. The three RAN officer graduates will be assigned to Virginia-class attack submarines based out of Pearl Harbor, Hawaii. Upon assignment, the graduates serve as division officers, leading a team of highly trained enlisted submariners. In this capacity, they will be tested and qualified on the ship’s systems and in various warfighting and leadership roles.

Also in the US, additional funds are now being committed to submarine construction to boost output. After something of a shaky start, supplemental funding of $3bn has finally been approved by Congress. This is in addition to two lots of $4.7bn in successive financial years which means that funding should no longer be an issue.

It is unknown whether these amounts include the Australian contributions or whether they are treated separately. What is at stake for Australia is a requirement for the USN to have sufficient excess Virginia-class submarines so some can be sold to Australia. The magic number is the construction of 2.33 SSNs per year, an increase in the long-term annual average of 1.4.

Several US companies such as Electric Boat and Huntington ­Ingalls have also been on massive recruitment drives hiring thousands of workers and investing in new facilities.

Another development is that in the complex web of funding negotiations, Congress is now seeking to put the construction of two new Virginia boats back into the budget for the 2025 financial year, which in the US starts on October 1.

Somewhat surprisingly the Presidential Budget Request for next year included just a single Virginia – a move criticised by supporters of the AUKUS deal as slowing down production at a time when it needs to be ramped up.

The summary is that the US is definitely increasing submarine production, with new Colombia-class nuclear missile-firing SSBNs the top priority.

What remains unclear is the date when production will reach the 2.33 level and what happens to the Australian sale if the target slips by a few years. The overall SSN schedule is about three years late and there is a huge maintenance backlog for older boats.

In the next few years, the USN’s fleet of attack submarines declines as older Los Angeles boats face retirement faster than Virginias can be built. There are some work-arounds such as slowing down the retirement process, but numbers will remain tight for a while.

For the sale to Australia to go ahead, a future US president will need to legally certify that the transfer of SSNs will not negatively impact USN capabilities, which is another hurdle that will need to be overcome. In Australia, preparations are under way for the expansion of HMAS Stirling in Western Australia to handle the rotational deployment of nuclear-powered submarines from the US and the UK beginning in 2027.

Defence Industry Minister Pat Conroy has frequently said this involves a $7bn investment – though that number could not be found anywhere in the budget documents either.