Subs builder commits to 30 per cent less local work than first flagged

The French company building Australia’s 12 Future Submarines in Adelaide has confirmed local companies will get just two thirds of the work pledged when it bid for the $80 billion contract five years ago.

Feb 25, 2020, updated Feb 25, 2020


Naval Group last night further back-pedalled on comments made to The Australian newspaper earlier this month by its Australian chief executive John Davis, who would not commit to a local build content of 50 per cent, citing “specific challenges… new to Naval Group”.

“We didn’t know the Australian market before we joined the program… we [now] recognise there is a lot more work to be done than we anticipated,” he said at the time.

At a senate hearing last night, senior executive Jean-Michel Billig recommitted the company “to a level of Australian industry capability that will have the effect of at least 60 per cent of the Naval Group contract value spent in Australia”.

“We are confident this can be achieved as we will be building the entire fleet of 12 submarines in Australia,” he said.

However, that’s still a far cry from the 90 per cent figure spruiked by the company during the Federal Government’s Competitive Evaluation Process in 2015, when Naval – then called DCNS Australia – detailed plans “for the creation of 2900 jobs”.

“While we have no preference on a build option – that choice is a matter for the Government – DCNS is prepared to deliver thousands of high-skilled jobs for the Australian economy and a significant amount of local content for the submarine program,” then-CEO Sean Costello said in a media release dated October 1, 2015.

Costello said at the time that it was “important to be upfront with South Australians about what [DCNS] wants to do”.

“Under a hybrid build, the percentage of local content would be over 70 per cent and for an onshore build over 90 per cent… while both the onshore and hybrid options will deliver the same number of jobs, the latter will see submarines delivered more quickly and at a lower cost.”

The latter option was the one for which it was contracted.

Defence Minister Linda Reynolds last night said she had received an assurance about the 60 per cent local content from her French counterpart after meetings in Munich.

“The Morrison government will hold Naval Group to account on their contractual commitment to maximise Australian industry involvement in this program,” she said in a statement.

Billig said the company had beat its local content goals for projects in India and Brazil, and believed it would do the same in Australia despite it being a “much more demanding customer”.

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Davis told the hearing three contracts had been signed so far, all with overseas suppliers. However, he added that they all contained significant Australian industry content.

Centre Alliance SA senator Rex Patrick was suspicious about the claims the company had made in its submission to the committee.

“I’m concerned this document is a bit of a fraud,” he told the Naval Group representatives.

However, he told InDaily today he “welcomes Naval Group’s recent statement of at least 60 per cent local content”, adding that “this time the statement needs to be translated into a legally binding contractual commitment to Defence”.

“They made a statement during the CEP – they may make another statement [so] until it’s contractually binding, it’s not significant because it could change again,” he said.

More than $834 million has been spent on the program so far, with Defence conceding last year that the “out-turn cost” – the final cost of the build calculated at the end of the project – was now estimated to be at least $80 billion, instead of the oft-quoted $50 billion.

Davis said the project was still in the design process, arguing that it was too early to be engaging with vendors.

The last of the 12 submarines promised under the program is expected to be finished by 2054.

Then-defence industry minister Christopher Pyne inked the deal with Naval Group in 2016, saying at the time the government should insist on at least 60 per cent local content.

-with AAP

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