SEA 1000- The future submarine project in trouble – and the ‘Barracuda’ reference design

SEA 1000 The future submarine project in trouble – and the ‘Barracuda’ reference design Kym Bergmann / Paris & Canberra Despite continuing official denials, it is becoming increasingly clear that SEA 1000 is in trouble because of a breakdown in the relationship between Australia and platform prime contractor, the French company Naval Group.  A reflection of this is the inability of the two sides to sign an over-arching Strategic Partnership Agreement, which in turn has been frustrated by the refusal of Naval Group to accept a fair share of commercial risk in this gigantic multi-billion dollar program.  It is very noteworthy that BAE Systems inked a similar commitment for the future frigate program after only a few weeks of talks, while fruitless efforts with the French have continued for more than one year. But first some background. It is not often that an absence of information is at the heart of a story, but that is the case when it comes to trying to understand the reasons for repeated delays to the French ‘Barracuda’ submarine program.  Back in happier days when Naval Group – previously DCNS – were bidding for the massively lucrative Australian SEA 1000 order the company, along with the French Navy, were happy to highlight the success of the nuclear powered ‘Barracuda’ build, going so far as give their local diesel-electric offering the snappy marketing name of the ‘Shortfin Barracuda Block 1A.’ So on a recent visit to France looking at various naval activities, the author thought it would be helpful for Australian readers to have an update about what has been happening on the parent program.  The result was silence so complete as to be a metaphor for the supposed stealth characteristics of the submarine itself.  Requests for meetings and briefings from Naval Group were either ignored or rejected.  During discussions with both the French Navy and the DGA – the Government procurement agency – as soon as the word ‘Barracuda’ was mentioned people who a few seconds previously had shown a good understanding of the English language suddenly started experiencing comprehension difficulties. Even subcontractors appeared cowed into silence, only fearfully mentioning that sea trials might start sometime next year – although without an anticipated launch date for the first of class ‘Suffren’ that must be speculative.  Even in a best case scenario, this would mean that the program is already three years late – a major delay by anyone’s standards.  The French media is similarly in the dark about what is or isn’t going on, with comments along the lines that once the topics “submarine” and “nuclear” appeared in the same sentence the result is a total blackout on information by the Government.  Since Naval Group is 62% owned by the French state it is hardly independent – though it claims to be – and the cone of silence covers it as well. There are rumours – which of course are amplified in the absence of actual facts – that there are final stage integration problems on ‘Suffren’ which are at the heart of the delay.  Certainly when the author was invited to Cherbourg as part of a media charm offensive almost exactly three years ago the submarine was in an advanced stage of construction with all hull sections joined and major equipment installed – with the exception of the nuclear reactor, which for obvious reasons is fairly much the last thing to be fitted. Speaking of which, when another small group of Australian journalists were on a French Government media tour a year ago, one of them asked about delays to the Barracuda program and received the answer from Naval Group that – improbably – it was all the fault of the reactor supplier, the majority Government-owned Orano (previously Areva).  French military reactors are unusual because they use commercial grade uranium, unlike enriched uranium favoured by all other navies. Having said that, Orano has a huge amount of experience and since the K15 50 MW reactor for the Barracuda is a derivative of the ones powering the aircraft carrier Charles de Gaulle – themselves a version of the nuclear reactors developed for the Triomphant class SSBNs – so it seems unlikely that this is the real cause of the delay. In summary, we know that the Barracuda is at least three years late – and counting – but we do not know why.  It matters because Naval Group have limited human resources – like any company – and needs to allocate skilled people appropriately.  If the French program has gone off the rails and is absorbing the time and energy of senior people that means that the Australian effort will by definition be under resourced. A continuing worry is that the situation might get worse because France is undergoing something of a naval recapitalisation – and work has already started on the next generation of strategically vital nuclear ballistic missile firing submarines. All of these platforms – surface and subsurface – will be designed and built by Naval Group.  The company is the monopoly supplier of warships to the French Navy and is considered by many to be a branch office of the DGA, so the Government is calling all of the shots. The main problem that Naval Group appears to be facing in Australia is cultural rather than technical – though that side of the equation cannot be ignored either.  Our Defence procurement system is highly structured and includes penalties for things such as late deliveries and inadequate performance.  This is based on a complex and structured set of rules that are legally binding, with many developed by other agencies such as the Department of Finance.  Australian procurements are also open to regular scrutiny not only by Parliament but also bodies such as the Australian National Audit Office. Australian Defence contracting history is littered with examples where companies have been penalised for poor performance.  Probably the most noteworthy recent example was the huge hit that Boeing took for failing to meet schedule on the ‘Wedgetail’ AEW&C program – which is a salutary lesson because the system is now working exceptionally well, but might not have done so without the Commonwealth waving a very large stick in the form of liquidated damages.  Another relevant case was when Defence stopped payments to Airbus as a consequence of problems with Tiger helicopters. Apparently this is not the way that Naval Group does business in France.  Since they are effectively part of the Government, more money keeps being poured into a program until a submarine or ship is eventually delivered.  This is definitely not how things are done in Australia – but the French management are trying to proceed on the basis that eventually Defence will have no choice but to give in. This means that the program is reaching if not a crisis point then at least a stage where someone is going to have to back down.  Even if Defence wanted to show more leniency in contract negotiations it is highly unlikely that Cabinet would be prepared to sign off on an approach that guaranteed Naval Group potentially massive profits without a commensurate willingness to accept commercial risk. Another big problem for the French is that apparently some of the senior management do not feel bound by commitments made during the Competitive Evaluation Process.  The atmospherics of trying to walk away from important parts of the deal look bad and have undoubtedly contributed to what can only be described as a major erosion of confidence on the part of Defence.  This lack of trust has been conveyed to Defence Minister Christopher Pyne. Another factor in this messy situation is the belief on the part of the French that SEA 1000 has bipartisan support – and will go ahead no matter how they behave.  This is a risky strategy. At this point in the electoral cycle – and especially after the loss in the Wentworth by election – it is worth exploring what will happen if and when there is a change of Government. APDR put a number of questions to Shadow Defence Minister Richard Marles, including about the Competitive Evaluation Process that led to the selection of Naval Group, whether he was satisfied with progress to date, what would happen if there were a dilution in local content and whether Labor had an alternative plan if things with Naval Group grind to a halt. Rather than answer to each point – perhaps out of caution about being wedged by the Government on anything to do with national security – he instead supplied an omnibus response: “Labor has held the view that a significant defence industry provides high end manufacturing jobs to Australians and adds to our nation’s sovereign capability for a long time. A defence industry serves a strategic purpose. “That’s not been the Coalition’s way. As recently as the Abbott Government they sent the supply ships to be built in Spain and were open to our submarines being built in Japan. Only the deindustrialistion they have overseen through the loss of the car industry has brought them round in the idea. “They are attached to a sovereign defence industry for political reasons, not strategic ones.  “Defence thinkers have a saying about how intent changes a lot faster than capability. You can say the same about political circumstances compared to strategic ones.  “The strategic circumstances that drive the imperative in our approach to submarines don’t change. We have a lot of coastline and our economy depends on seaborne trade. These unchanging facts lie behind the need for 12 long-range submarines. “There is no doubt politics played a large part in the Government’s process for the new submarine procurement. It was there in the timing as an election loomed. It was there when it was an issue in the party room during their leadership challenge.  “That’s not a comment on who they chose. In the end, in Naval Group, they’ve chosen a very high-calibre partner with a demonstrated track record. But it is to say it’s not how strategic decisions should be made. It’s the opposite.  “The Government does need to give us a plan for what happens next with Collins. The last of the crew are yet to be born. My career will be done and dusted well before the Collins is. We need a plan to keep them regionally superior, and given the timelines and the workforce it will take, we need it sooner rather than later.  “There are two things the Government must do with the Strategic Partnership Agreement: they need to get it signed, and they need to make sure it reflects our national interest. The Government has let political needs and timing intrude on this process too many times already. “They can’t afford to do it again.” Richard Marles raises an interesting point regarding the future of the Collins class.  Given that the risk to schedule for SEA 1000 is now acute, surely the time has come when work needs to be undertaken on a major life extension program for the existing fleet of six submarines.  To not do so would mean that Australia will be facing a gap in submarine capability in the late 2020s – exactly at a time when the nation might need a deterrent capability the most, particularly coupled with a relative decline in US strength. The way forward is not clear – a typical case of the irresistible force meeting the immovable object.  Naval Group seem to think that their preferred way of doing business will prevail; the reality is that in Australia it will not.