KADEX 2024 Banner 728x90In a previous article we explained that there is no refund clause for the $9.4 billion Australia is giving to the submarine industries of the US and UK during the next few years. Just as bad, there is a stunning lack of detail and accountability about what the money will be used for and whether or not Australia will have any visibility of the outcomes.

Led by VADM Jonathon Mead, during Senate Estimates on June 6, he and several other Australian Submarine Agency (ASA) officials showed that they had no idea of the detail of agreements with London and Washington under the AUKUS Pillar 1 umbrella.  One of the major items in the UK part of the deal is funding Rolls Royce for work on the nuclear reactor that will supposedly power the AUKUS SUB to be built in the late 2030s, initially in Scotland and then at Osborne in South Australia.

In a previous article we focussed on the US and the failure of Australian officials to negotiate a refund clause – and note the continuing silence of the relevant Ministers, Richard Marles and Pat Conroy.  The situation regarding the forthcoming transfer of cash to UK industry is no clearer.  Greens Senator David Shoebridge tried his luck with VADM Mead, to no avail.

Sen Shoebridge: How much have we committed to give Rolls Royce?

VADM Mead: £2.4 billion, which I think equates to $4.4 billion.

Sen Shoebridge: Is any of the payment being made in FY 2024-25?

ASA official: Yes

Sen Shoebridge: How much?

ASA officials confer, then one says: I’ll clarify, that’s to Rolls Royce and for design.

Sen Shoebridge: Of the $4.4 billion, how much is going to Rolls Royce and how much is going to other entities?

ASA official: We agreed to a fixed contribution with the UK government, which covers our contribution to the design of SSN AUKUS across each of the UK government’s design partners, as well as to the uplift of Rolls Royce.

Sen Shoebridge: Is it for the UK to determine where the money goes?

ASA official: We agreed to a fixed contribution to the scope that I just described.

Sen Shoebridge: Yes, but within the $4.4 billion, is the UK government going to choose where to allocate it, or is it set out in the agreement?

VADM Mead: We had discussions with the UK government about what was required – what we required – and they provided detail about where the money was going to go. We provided that advice to government and we agreed on that contribution.

Sen Shoebridge: Is it legally binding? Has the UK government said “yes, it’s going to those poor struggling people at Rolls Royce”?  Is that what the agreement provides?

VADM Mead: The UK government has given a commitment where the money is going to go and they will have traceability and visibility of where the money is going to go.

Sen Shoebridge: So how much is going to Rolls Royce?

No answer from ASA officials as they look at each other.

Sen Shoebridge: You say you have traceability and visibility, so how much is going to Rolls Royce?

This was followed by what appeared to be an ASA finance expert and VADM Mead disagreeing about whether the amount being handed over is a fixed lump or whether it is in discrete amounts.  When this was pointed out to them, they said they were in fact talking about the same thing.

Sen Shoebridge: So how much is it to Rolls Royce?

VADM Mead: The total is £2.4 billion.

Senator Shoebridge pointed out that – being a Budget Estimates hearing – he was expecting to receive specific answers to his questions.

VADM Mead:  I’ll have to take that question on notice if you want the specifics of the breakdown.

Sen Shoebridge: Of course I do.

Never in the history of Defence acquisition have so few people signed off on so much money with so little accountability.  The money being given to the UK is also not refundable.

Is this the single most inept performance of Defence officials in front of Senate Estimates, ever?  If people want to subject themselves to the torture of watching VADM Mead and his colleagues duck, weave and obfuscate, the relevant part of the day-long hearing starts at 18:02 for the US questions and non-answers and at 18:15 for the UK segment: https://www.aph.gov.au/News_and_Events/Watch_Read_Listen/ParlView/video/2510108

But let’s not forget that VADM Mead and the others supposedly answer to politicians.  AUKUS was dreamt up by Scott Morrison but since the change of government in 2022 it has been the responsibility of Anthony Albanese and the Labor Cabinet.  They are the ones ultimately responsible for a process as poor as this one.

Since the announcement of AUKUS in September 2021, Australian officials – mainly from Defence, the RAN and more recently the ASA – have spent around $500 million on salaries, travel and expenses.  Next Financial Year, the wage bill alone for the Australian Submarine Agency is forecast to hit $330 million – and to that can be added $20 million worth of Business class airfares and hotels in Washington and London.

With the ASA unable to negotiate a refund clause for Australia’s massive payments and unable to explain even the slightest detail of where billions of dollars of taxpayer money is going, we are entitled to ask if anyone actually knows what is going on.  Unfortunately, apart from APDR and a Greens Senator, no one else seems to care.

Hopefully the Australian National Audit Office (ANAO) will examine this mess at some point.  Given the growing number of ex-politicians seeking financial gain from AUKUS, there might also be a forthcoming referral to the National Anti-Corruption Commission (NACC).

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Kym Bergmann
Kym Bergmann is the editor for Asia Pacific Defence Reporter (APDR) and Defence Review Asia (DRA). He has more than 25 years of experience in journalism and the defence industry. After graduating with honours from the Australian National University, he joined Capital 7 television, holding several positions including foreign news editor and chief political correspondent. During that time he also wrote for Business Review Weekly, undertaking analysis of various defence matters.After two years on the staff of a federal minister, he moved to the defence industry and held senior positions in several companies, including Blohm+Voss, Thales, Celsius and Saab. In 1997 he was one of two Australians selected for the Thomson CSF 'Preparation for Senior Management' MBA course. He has also worked as a consultant for a number of companies including Raytheon, Tenix and others. He has served on the boards of Thomson Sintra Pacific and Saab Pacific.

26 COMMENTS

  1. We could probably just say “ASA officials clueless” and leave it at that because this latest fiasco is just another one in a long run of abject failures by them, by Defence and by whoever has been in Government at the time

  2. This just gets better and better. The more I hear and read about the AUKUS deal the more I’m convinced that we’ve all fallen for an elaborate Practical Joke. Honestly, nobody is this stupid.

  3. Big call to say that it is potentially corrupt behaviour, it get why, but still a big call.

    The video is extremely damning for Defence and the ASA, they should have had the answers to hand for all these questions.
    This AUKUS boondoggle is fast becoming the bane of a fit for purpose Australian Defence Force.

  4. Reminds me of the efficiencies of the Collins class when the fishermen out of outer harbour could find the subs faster than the RAN

  5. If you’re agitated about how Australian taxpayers’ Dollars are spent, which is fair, can I correct you on a small point? We don’t build reactors here in Scotland, that sort of thing hasn’t been done for years. The entire Dounreay facility is undergoing long-term decommissioning. We are currently set quite firmly against nuclear power in any respect, and even the last civil reactor complex, south of Edinburgh is not scheduled to be replaced.
    Rolls-Royce propulsion systems do the bulk of their work at Derby, in England, at a facility which is due to double in size, due to orders not just for the AUKUS boats, which, of course, are also going to the RN, but also the ongoing Dreadnought SSBN project which has increased priority now, partly due to tensions with parts East, but also because the V-class boats have been hard run, and badly need replacing.
    So I would reckon that you might have a closer look at the Derby operations to see what your money is being spent on in the power area.
    All other primary aspects of the boats’ construction are, as you will be aware, handled by BAE Systems Barrow-in-Furness, another facility which is basically doubling in size, and for the same reasons.

  6. Quite a few errors in that article, The UK builds submarines in Barrow in England not Scotland so who knows what else is wrong?

    • You are correct Redshift, that UK Submarine construction is at Barrow in England. Perhaps if the DoD and ASA answered questions about AUKUS and were somewhat more transparent (one of the things this Government based it’s Election on) errors like this wouldn’t occur. Whether they are built in England or Scotland isn’t the point. The point is we are Donating A$4.4 Billion to UK industry seemingly without any Idea how or where it will be spent.

  7. It is being invested in Rolls Royce in Derby and BAe in Barrow would be my guess as both of these facilities need to grow to meet AUKUS needs, see my links posted above about investment in these locations.

  8. It might be a stretch to say this is a failing of the Defence Dept. As the matter may have been organised at a higher level (ie PM or Ministerial) and the Defence Dept are not clueless due to ignorance they are clueless due to being kept in the dark.

    The better question to ask is who created this plan, are they still in office/employeed.

    • We don’t know who cooked up these payments. If I had to make a guess it would be a cringing Australian Admiral slobbering all over the boots of a couple of USN Admirals.

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