Press Conference on Submarines – 20 February, 2015

MINISTER ANDREWS:
Good morning. I’m very pleased to be here this morning and be joined by the Chief of Navy, Vice Admiral Tim Barrett and the Acting CEO of the Defence Material Organisation, Mr Harry Dunstall. The first responsibility of a national Government is the safety and security of its people. In our case the safety and security of all Australians, and everything that is done through the Defence portfolio must be seen through this prism. Indeed, it is incumbent upon me as the Defence Minister to help build a safe and secure Australia. The Australian Government will not leave this country undefended. Now I acknowledge that there has been some anxiety over past times about the future submarine programme. So today I am announcing an acquisition plan that will maximise Australian industry participation in this programme. The Future Submarine Programme is the largest Defence procurement programme in Australia’s history it represents an investment of some $50 billion in Australia’s security. The history of defence acquisition has shown that around two thirds of this investment will be spent in Australia during the lifetime of the future submarine; we’re talking about a half a century into the future. The Government expects that significant work will be undertaken in Australia during the build phase of the future submarine including – but not necessarily limited to – combat system integration, design assurance and land based testing. This will result in the creation of at least 500 new high-skill jobs in Australia for the life of the program, the majority of which will be in South Australia. So this is good news for Australian industry, it is good news for the Australian economy, it is particularly good news for Australian jobs and can I say to anybody in South Australia who may be listening or watching this is particularly good news for South Australia. The Government recognises the value of naval shipbuilding jobs and wants to see a sustainable naval shipbuilding industry in Australia where industry participation is maximised where possible. So what I’m saying, what I’m making explicit on behalf of the Government is that there is now a pathway for Australian industry to maximise their involvement in the future submarine programme, whilst not compromising capability, cost, programme schedule or risk. Today’s announcement includes further details of the competitive evaluation process that will be undertaken by the Department of Defence. Successive governments have used various kinds of competitive evaluation processes for major Defence capability procurements. The competitive process will help the Government balance the important considerations including significantly capability, cost, schedule, and the risk and also interoperability with our alliance partner, the United States is also an important consideration. But I stress again involvement of Australian industry in this future submarine program is very much something that the Government is stressing today. Harry Dunstall, the Acting CEO of the Defence Materiel Organisation, will speak to these points in more detail shortly. The government has also received advice from Defence that for Australian industry to have the best opportunity to maximise their involvement in the future submarine programme, then they need to work with an international partner. And to that end, Defence has identified France, Germany, and Japan as potential international partners. All three of these countries have proven submarine design and build capabilities and they are currently producing submarines and Mr Dunstall can say a bit more about that. So let me stress that submarines are an essential component of Australia’s naval capability and the government will ensure that the future submarine provides the best possible capability and value for money for Australian taxpayers. And again Harry can address these. Ladies and gentleman, could I now ask Chief of Navy, Vice Admiral Barrett to say a few words?

VICE ADMIRAL BARRETT:

Thank you Minister. Firstly let me reiterate as Chief of Navy that submarines are an essential component of the Australian defence capability. Defence takes a long term view of our submarine capability, there is a requirement for us to replace the Collins, we cannot have a capability gap and I believe the plan that is being announced today will demonstrate that we can achieve that without compromising cost or capability. The view is around sustainment of the submarine in the long term but we need to look at all levels of engagement, both within Australia and with our partners to be able to achieve this and I think what is being announced today will allow us to move forward in that regard.

MINISTER ANDREWS:

Thanks Admiral. Harry.

HARRY DUNSTALL (ACTING CEO OF DMO):

Thank you Minister. As you have said, for Australian industry to have the best opportunity to maximise their involvement in this programme, they will need to work with an international partner. Based on the work that we’ve done today in Defence, we’ve identified as you said France, Germany, and Japan. They have emerged as our potential design partners. This is because each of those countries have a current design and production capacity, they are producing submarines today. All those countries (inaudible). Defence will invite the potential international partners to seek opportunities for Australian industry in the program. As part of the process, we’ll be seeking proposals form potential partners for their; pre-concept designs based on our requirements, we’ll be seeking options for design and build overseas, in Australia, or indeed a hybrid approach. And also rough order of magnitude costs and schedule. The competitive evaluation process will take around ten months, by which time we’ll be in a position to provide advice to Government about the selection of a design partner. Further details about the Australian industry involvement will also be expected to be known at that point and we will be engaging with Australian industry now in terms of what the process will be for them going forward. Thanks Minister.

MINISTER ANDREWS:

Thanks very much, any questions?

QUESTION:

Minister to clarify this, what you’re announcing today is that any Australian involvement will require an international partner. Does that mean there will be no, any building of subs in Australia or they’ll be doing the capability and the installation work?

MINISTER ANDREWS:

Part of what we are asking for as Mr Dunstall said is the options that they can afford and those options could include build overseas build in Australia, or a hybrid of both of those things. Now we can’t prejudge that it will depend on the companies and the firms concerned as to what they can afford. But even as ASC said yesterday they don’t have the ability to build a submarine from scratch in Australia and they acknowledge that this will have be a partnership, that’s what we envisage and what I’m stressing and making explicit today is that we are seeking to maximise Australian industry involvement.

QUESTION:

(Inaudible) any key criteria so if there are tenders that come in that have maximised Australian content will get a green light?

MINISTER ANDREWS:

What I’m saying is that there’s a range of criteria that we have to take into account. Let me be quite clear, the capability of the submarine over its lifetime, which is a number of decades, is first and foremost in looking at this. I mean as I said the primary responsibility of a national government is the defence of the nation so we have to have a submarine which is capable of doing the job. But there are other criteria as well which will also be given obvious weight in this process; cost, sustainability, the schedule, the interoperability particularly of the West weapon system and the maximising of Australian involvement by industry. So this is it and what as I said I’m making explicit is that criteria of maximising Australian content is clearly part of this process and it will be evaluated as part of this process.

QUESTION:

You said up to 500 new jobs was it?

MINISTER ANDREWS:

We expect at least 500 new high skilled jobs, the majority of which we would expect to be in South Australia. That’s at least, now there may be many more than that depending on what is the final option which is chosen by the Government and where it’s built and how it’s built and where the weapons systems are fitted. All of those sorts of issues are to be determined through this process.

QUESTION:

Will this international partnership involve the selling of all or part of ASC to a foreign entity in that partnership?

MINISTER ANDREWS:

What I’m announcing today is nothing to do with the ownership of ASC. That’s a matter for the Finance Minister, who is the shareholder not me. We are saying this process is available to ASC or any other defence industries in Australia and as I said one of the, if you look at one part of defence industry in Australia namely our development of surveillance equipment, radars and the like we have some of the most sophisticated equipment in the world, leading edge equipment in the world. It’s a great example of how we can have a very successful defence industry.

QUESTION:

You named France Germany and Japan as potential partners, there was a report this morning saying Swedish Defence Company Saab would build a submarine in Adelaide in ten years (Inaudible). Would they be considered?

MINISTER ANDREWS:

Ah Mr Dunstall can give some more detail about this but the reality is that the only three countries in which there is a continuous build and has been, the three that I named, namely France, Germany and Japan. I don’t think Sweden has built a submarine since the early 1990s so it’s in a different category. But if you wanted to add to that?

HARRY DUNSTALL:

Thanks Minister. Look obviously we’ve done a lot of work today in terms to try and identify potential design partners. We have a lot of respect for Sweden and for Saab particularly they are a very good supplier of defence capability. However Sweden are in the process of re-establishing their submarine design and production capability. They have as the Minister noted, they haven’t built a submarine since, I think, 1996 and they are just re-establishing their capability to be able
to build submarines for themselves. So at this point to minimise risk in our program we were really looking for design partners who have that current design and production capability. We have, I’ve written to my Swedish counterpart, I wish them the best in terms of re-establishing their capability and for their program. I think for our program we need to go with established design and production partners. Thanks.

MINISTER ANDREWS:

And can I add again that capability in the future is very significant because we know that the Collins Class Submarine, those vessels will begin to be retired from about 2026 onwards. There’s been a neglect in making a decision by the previous Government. They didn’t make a decision about the submarines so we cannot allow to the best of our ability any capability risk to open up and therefore we are looking at, as we said, those nations which have experience in
terms of continuous build of submarines.

QUESTION:

So just want to clear about being invited to participate in this competitive evaluation process. Will you only be accepting submissions that meet a certain requirement say in terms of the number of Australian jobs they provide, in terms of the percentage of the constructions made in Australia, have you set a bar for that?
MINISTER ANDREWS:

Look all of these things are there for the process. What I’m announcing is a process today, an evaluation process there’s some detail, and more details are obviously going to be available for those industries, and firms and businesses that are interested in doing this through the Defence Materiel Organisation. So that will be there, but we can’t prejudge what the outcome of this process is. The very questions you’re asking are obviously part of what I expect the firms will be
talking to defence about.

QUESTION:

Has Japan made any representations indicating that they would be prepared to participate in a tender process?

MINISTER ANDREWS:

Well let me stress again this is not an open tender process, it would be very odd to have an open tender process for an acquisition that involves such sensitivity, and secondly an open tender process I’m advised could take up to five years and that’s why that would be a very substantial risk in terms of capability. But obviously Japan, along with France and Germany, are countries that are in continuous build of submarines and we would expect that there will be ongoing engagement with all countries involved in this. Indeed I hope to be able to visit myself all three countries and see their ship building activities. Thanks very much.