Government launches warships plan
The Abbott government hasn’t always been kind to Australian shipbuilders.
In a fit of frustration, its first defence minister David Johnston said he wouldn’t trust the government-owned ASC to build a canoe.
In June last year, Finance Minister Mathias Cormann warned shipbuilders the government could look overseas for new frigates if they didn’t lift their game.
This scorn was directed at the troubled $8.5 billion air warfare destroyer (AWD) project, running two years late and about $1 billion over budget.
Now all is forgiven with the government signing off on an $89 billion shipbuilding package – $39 billion to build new frigates and offshore patrol ships $50 billion for new submarines.
This work will be centred in South Australia. Prime Minister Tony Abbott says that’s because it’s where the shipbuilding infrastructure is located.
It’s also where polling suggested the government could lose perhaps four seats in an electoral backlash driven by concerns that new submarines could be built in Japan rather than Adelaide. This is an especially potent political issue for SA where the Holden plant will close by the end of 2017.
Abbott says Australia can build good ships. West Australian shipbuilder Austal sells vessels to the US military, although US law means they must be built there.
The Anzac FRigates project is billed as a triumph, with 10 vessels launched from the Williamstown shipyards in Melbourne, now operated by BAE Systems, between 1994 and 2004.
Anzacs were based on the German Meko 200 design. After the expected learning curve, maximum efficiency was achieved mid-way the project with vessels delivered on time and within budget.
Five years after that project concluded, work started on the $8.5 billion AWD project and there have been numerous problems.
The skilled workforce needed to be rebuilt, while the design by Spanish shipbuilder Navantia wasn’t configured for export. The innovative AWD Alliance – a partnership between ASC, the Defence Materiel Organisation and US firm Raytheon rather than a single prime contractor – is unlikely to be repeated.
A government-commissioned study by Rand Corporation found the boom-bust nature of Australian shipbuilding – the long gaps between projects – meant Australia paid a 30-40 per cent premium for local construction.
But that could improve with a rolling build, turning out a new vessel every 18-24 months, potentially for decades.
That’s what the government is proposing for replacement of the Navy’s eight Anzac frigates which reach retirement age from the middle of next decade.
It’s also what’s planned for replacement of the 14 Armidale-class patrol boats and a range of assorted minehunters and hydrographic vessels. There’ll be perhaps 20 vessels of a single type around 2000 tonnes able to do all these tasks.
The Anzac frigates are the Navy’s workhorses: versatile, reliable vessels which have been progressively upgraded, most recently with the world-leading Australian CEA Technologies radar and missile defence system.
A rolling build process will have a couple of consequences – Anzacs are likely to retire earlier and the new vessels will remain in service for about 20 years rather than the current 30 years.
There are some downsides, as the Australian Strategic Policy Institute has pointed out. This will create a single monopoly shipbuilder, likely around a privatised ASC. Backed by state governments and unions, it will have vast sway over defence procurement practices.
Potentially, the navy could end up with more ships than it needs or can man, with perfectly good vessels retired early to make way for the next.
Construction of new offshore patrol vessels will start in 2018 and frigates in 2020. The government plans to start a competitive evaluation process in October to select the new types – already a number of foreign companies are pitching frigate designs for Australian consideration.
But even starting early won’t save many shipyard job from the “valley of death”, as Abbott acknowledges.
That’s the period of years between end of current projects and start of new work, when shipbuilders have to lay off skilled workers.
Abbott says the shipbuilding workforce should rebuild to about 2500 ongoing positions by 2020.
This announcement has impressed everyone, particularly those missing out. That includes the governments of WA and Victoria, although the magnitude of these projects means there will be plenty of work to share around.
Labor says if the government can build warships in Australia, why not submarines too. Under the competitive evaluation program, the government is considering bids from submarines builders in Japan, Germany and France with a decision set to be announced first quarter next year.
Labor always promised the new subs would be built in SA and so did the coalition, before the 2013 federal election.
But since winning government, the coalition has hedged.
Labor accuses Abbott of a secret deal to build the new subs in Japan, but the potential loss of coalition seats is making that look increasingly unlikely.
The coalition accuses Labor of doing nothing on new subs during six years in government even though there was actually much preliminary work.
The coalition says Labor in government commissioned no new ships from Australian yards. The only vessel acquired under Labor was the surplus British vessel, now HMAS Choules.
Labor accuses the coalition of responsibility for the “valley of death”.
But this problem was well known before the coalition won government.
Last year, defence department secretary Denis Richardson said decisions to avoid the valley of death needed to have been taken two years earlier – that is, when Julia Gillard was PM.
Her successor Kevin Rudd certainly came up with a plan to preserve shipyard jobs through acquisition of two new navy supply ships, built entirely or partly in Australia.
He announced it on August 29, 2013, just over a week out from the election.