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"Not one local job" in new defence contract

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South Australian senator Nick Xenophon says he is “shocked” at revelations the Federal Government has signed a contract for two new navy supply ships to be built in Spain in a deal with $130 million worth of Australian content – but with no work for Australian shipbuilders.

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The two supply ships will be constructed by Spanish firm Navantia at a cost of $646 million, with $130.4 million in Australian content for communications, the combat system and on-board cranes. But Xenophon says the deal will not employ a single Australian shipyard worker.

Defence officials made the revelation in a Senate estimates committee hearing this morning that the contract – first flagged by Defence Minister Marise Payne in March – was signed only yesterday.

They said Australia lacked the infrastructure to construct the large hull blocks needed or to launch such large vessels.

“I’m shocked,” Xenophon told InDaily.

“I can’t believe the admission that there’ll not be one Australian shipbuilding job in this contract – it’s just unforgivable.”

Navy chief Vice Admiral Tim Barrett told the inquiry the navy wanted to replace the 30-year-old HMAS Success, which is approaching end of life, and tanker HMAS Sirius, which can transport oil but not other supplies.

He said the Navantia deal meant the new vessels would be delivered sooner than anticipated – ship number one in 2019 rather than 2020-21 and number two in 2020 rather than 2023-24.

But that was only possible because they are being constructed mostly in parallel in the Navantia yard in Cadiz, he said.

“It will be able to relieve the current capability deficiency with the two existing tankers,” Vice Admiral Barrett said.

Head of the defence capability group Kim Gillis said the deal required $130.4 million worth of Australian content, involving Australian firms.

But he said Australia lacked the infrastructure to construct the large hull blocks needed or to launch such large vessels.

“So there will be no Australian shipbuilders building the supply ships,” Xenophon said.

The ships are also unlikely to include any Australian steel. Gillis said Defence had negotiated with Navantia to contact Australian steel companies, identifying their requirements for cost, schedule and capability, but that the Spanish shipbuilder had traditionally sourced their steel on the international market, including from Korea, China and Europe.

Gillis said to avoid looming job losses in Adelaide, with ASC set to shed another 640 jobs by the end of next year – contracts for local construction should have been signed during the term of the former Labor government.

“Those decisions should have been made multiple years before,” he said.

Peter Croser, defence director-general of ship acquisition, said even if a contract for construction of the two ships in Australia had been signed yesterday, it would take another two to three years for construction to start.

Meanwhile, Payne says the Government will aim for more than 70 per cent Australian content in the new Future Submarines, including high grade steel produced in Australia.

The government is now launching contract negotiations with French shipbuilder DCNS, with work to finalise the design expected to run for about five years, the first steel to be cut about 2022-23 and the first submarines in the water by about the end of next decade.

New submarines will roll off the production line in Adelaide at the rate of one every two years.

“The Government will make the quantity as high as it possibly can,” she told the Senate estimates committee hearing.

“I will be asking the department to aim higher than [70 per cent].”

Arrium’s administrators told InDaily last month the Whyalla operation did not make the type of steel required for the build.

-with AAP, Tom Richardson

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