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France wins $50bn Australian submarine deal

Barracuda

The Australian government has chosen a French state company as its partner to design and build its next fleet of 12 long-haul, super-quiet submarines in a $50 billion contract – the largest tender Canberra has ever negotiated. It will lead to a revival of the country’s shipbuilding industry, based in Adelaide.

Making the announcement at the South Australian shipyard where the vessels will be built, prime minister Malcolm Turnbull said his government accepted the recommendation of its year-long competitive evaluation process that was unequivocal that the bid by France’s Cherbourg-based DCNS was the best for Australia’s needs as an island nation in the Asia Pacific.

Within hours, Japan’s defence minister, General Nakatani, who had personally lobbied for the Soryu-based design in the bid led by Mitsubishi Heavy Industries, was demanding to know why Canberra has not picked his country’s design.

Turnbull had already answered that question. “The recommendation of our competitive evaluation process, the department of defence, the experts who oversaw it, was unequivocal, that the French offer represented the capabilities best able to meet Australia’s unique needs,” he said.

Defence minister Marise Payne added a further technical explanation. She said, “We need submarines with considerable range. We need the capacity to remain undisturbed and undetected for extended periods, we need submarines that are quiet, that have advanced sensor technology to detect other submarines.”

That apart, the French won because they undertook to build all 12 submarines at a new yard to be established in Adelaide, to retrain the Australian Submarine Corporation’s existing and future workforce, and to transfer, for the first time, France’s advanced technology used in the Barracuda submarine. It will, in effect, be setting up a Franco-Australian joint venture that will create 4,000 jobs in France and almost as many in South Australia.

Some commentators have long argued that the contract would go to Japan for strategic reasons, and because it was seen as the requirement of the United States, Australia’s ally in the ANZUS treaty, whose sophisticated weaponry will be fitted on the vessels.

The government dismissed this, noting that two retired American admirals were on the panel of experts that conducted the competitive evaluation process.

The other losing bidder, the German Thiess Krupp Marine group, accepted the verdict rather more gracefully than Tokyo, their chairman saying they respected the decision, and would be happy to help with other future needs.

The corporate structure of the new venture has not been revealed pending contract negotiations, but it is expected that ACS will be recapitalized with both countries holding a stake.

Why the French won, by Hans Ohff, former CEO of the Australian Submarine Corporation