When he announced that the federal government intends to establish a continuous build program for surface warships in Adelaide, the Prime Minister admitted when questioned that it might be cheaper to have the work done overseas.
While it may very well have been “a day of unalloyed joy” for the South Australian public, as Education Minister Christopher Pyne declared, should taxpayers more generally be worried?
“Look, it is possible that if we said to the range of shipbuilders out there ‘you can build it anywhere’ that we might get a modestly lower price, but there are benefits to be had from a domestic build,” Prime Minister Tony Abbott said. “Now, those benefits do not overcome all cost differentials, but nevertheless there are significant benefits that flow from a domestic build.
“The RAND report tells us that under the right conditions we can build surface naval ships here in Australia efficiently and effectively, and that is why we have gone down this path.”
Of course, it was the RAND Corporation report that concluded that domestic production of naval ships currently carries a price premium estimated to be between 30 and 40 per cent, compared with similar ships built overseas.
RAND stated that this premium could be cut in half with the adoption of a continuous build strategy, if Australia begins building with mature designs and minimises changes during production, and encourages a cultural shift within industry towards continuous improvement.
Abbott stated that the Future Frigates will be built in South Australia beginning in 2020, following a competitive evaluation process that is due to start in October.
At this stage it is not known how closely this process will resemble the Future Submarine program’s Competitive Evaluation Process that is currently being undertaken by Defence, which has seen three potential international partners being invited to participate.
Back in March, Defence Minister Kevin Andrews said that Defence and industry were already conducting risk-reduction design studies to investigate possible options for the SEA 5000 Future Frigates, including an evolved Hobart class Air Warfare Destroyer design, an option that according to reports has now been dropped. Other possibilities likely to be considered include the FREMM multi-mission frigate and the Royal Navy’s Type 26 Global Combat Ship, among others, Andrews stated.
RAND recommended adopting a strategy that would see the construction of a new surface combatant every 18 months to two years. But it seems we will have to wait for the 2015 Defence White Paper to discover how exactly the government proposes to implement its continuous build strategy centring on South Australia, and what it is willing to pay to achieve this goal.