Australia to pay $830m compo over scrapped French submarines that were to be build in Adelaide

Australian businesses that spent a fortune preparing to join the Naval Group building submarines have missed out on compensation, but French taxpayers will do OK.

Australian businesses that spent a fortune preparing to join the Naval Group building submarines have missed out on compensation, while the federal government prepares to pay an $830m package to the French company for scrapping the $90bn contract, its former boss says.

Former Naval Group interim chief executive – now Australian Industry and Defence Network chief executive – Brent Clark said Naval Group was 63 per cent owned by the French government.

“That means the Australian taxpayer is giving the French taxpayer about $560m but we are yet to hear of any compensation to Australian companies,” he said.

Mr Clark said up to 2000 Australian companies had attempted to get into the Naval Group supply chain to build 12 submarines in Adelaide, and estimated at least 600 had pre-qualified.

“Some would have spent a couple of hundred thousand dollars to pre-qualify,” he said.

“There has been silence on compensation for these companies, which included Adelaide companies.”

Mr Clark called for companies that had built up their capabilities to be brought into other defence programs.

“If not, there is a case to be made whether the government should look at compensation,” he said. “But rather than taxpayers writing a cheque, let’s take the investment they have made and their upgraded capability and put it into creating solid defence projects.”

If each spent an average of $100,000 to pre-qualify, that would mean $60m spent preparing for the abandoned deal.

Australian Industry and Defence Network chief executive Brent Clark. Picture: Supplied

Australian Strategic Policy Institute senior analyst Marcus Hellyer

Australian Strategic Policy Institute senior analyst Marcus Hellyer said Prime Minister Anthony Albanese was underestimating the cost of the dumped project at $3.4bn.

“We will have spent $4bn with nothing to show for it,” Mr Hellyer said.

“You have to add in another $200m for the early stages of the program, including running the competition, and another $400m building the shipyard in Adelaide for the French submarines.

“Not a lot will be relevant for nuclear submarines so mo-st of the $400m is a sunk cost.”

Mr Albanese said his government and the French government had agreed on an $830m settlement with Naval Group after the Morrison government’s decision to scrap the contract, which followed advice on the capability requirements of the Australian Defence Force and the move to pursue nuclear-powered submarines under the AUKUS partnership.

Labor supported this advice in opposition but Mr Albanese said the way the government handled the decision caused “enormous tension” in the relationship between Australia and “important ally” France.

Prime Minister Anthony Albanese Picture: Christian Gilles - Pool/Getty Images

“This is a fair and an equitable settlement that has been reached,” Mr Albanese said.

“It follows as well discussions that I’ve had with President Macron and I thank him for those discussions and the cordial way in re-establishing a better relationship between Australia and France.”

Opposition foreign affairs spokesman, SA Senator Simon Birmingham, said: “It was a difficult but necessary decision to break the contract for diesel-powered submarines when it became possible for Australia to secure far more capable nuclear-powered submarines.”

A Defence spokesman said it had worked closely with businesses that had been preparing to bid for submarine work with Naval Group.

Originally published as Australia to pay $830m compo over scrapped French submarines that were to be build in Adelaide