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Submarine pricetag "way off the mark": former ASC boss

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The mooted $50 billion pricetag for 12 Future Submarines is “way off the mark”, according to the former head of ASC who oversaw the delivery of the Collins class vessels.

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Former ASC managing director Hans Ohff will tell a Submarine Institute of Australia conference in Adelaide today that the Federal Government will be paying more than twice as much as it should for the contract if it pursues an “uncompetitive” selection process with a single-source provider.

Ohff argues the six Collins Class subs were delivered for around $5 billion, a price that included “the establishment of a new, purpose-built, shipyard near Adelaide, the design, procurement and development of the combat system and the construction of the platforms”.

“By extrapolating the contract price for the six Collins class boats it would be safe to deduce that the $50 billion price-tag the media attaches to a 12-boat future submarine project is way off the mark,” his speech notes explain.

“A unit cost of $1.6 billion Australian dollars in today’s money and exchange rate should be a more realistic figure…unless of course the Government pursues the uncompetitive single-source selection process for a very large ocean-going submarine class that I believe is currently envisaged under the Competitive Evaluation Process”.

Ohff says the Government must adopt a “buyer beware” mentality.

“The award of the (submarine) contract will be celebrated with Champagne, Sekt or Sake; but it will end in a hangover if the lessons of the Collins class and more recently the (Air Warfare Destroyers) are not heeded,” he argues.

“My main concern is that more attention be paid to quality control, which would cut immediate costs and save the Navy from unexpected expenditures following commissioning.”

He says the program needs a “comprehensive Quality Management Plan … to minimise the risk of costly rework, schedule delays and budget overruns”.

“The Collins class building program is an achievement that is unrivalled in modern Australian industrial history,” he says.

“With hindsight, of course, the Collins class design and building contract could also have been delivered more efficiently, with fewer performance deficiencies and in a shorter time frame … much more of the Collins work was performed overseas than is usually acknowledged; and many of the problems with the class were from imported material…”

He says the Future Submarines will be even more reliant on the quality of imported material.

New Defence Minister Marise Payne told the conference this morning that while Australia needs a new fleet of highly capable, agile and potent vessels, they must be delivered at a competitive price.

“We don’t see the submarines as an option but a necessity,” she said.

Labor’s federal Defence spokesman Stephen Conroy will this afternoon tell the conference the competitive evaluation process “was premised on a lie”.

“It was never about getting the best submarines, at the best price, while maximising Australian content… It was a political fix cooked up at the height of Liberal leadership tensions to save Tony Abbott’s Prime Ministership,” he will say.

“While Tony Abbott is gone, his legacy of a deeply flawed process remains.”

Labor argues a Request for Tender process involving Germany, France, Japan and Sweden, whittled down to a shortlist of two “who would then provide full design definitions and fixed price contract bids” is a more robust process.

Nonetheless, “Labor has been clear that we will honour any contracts signed by the current Government”, he says.

The three groups – from Japan, France and Germany – bidding to build Australia’s next fleet of submarines are also making presentations to the conference.

Industry spokesman Chris Burns said the federal defence portfolio has suffered from “decision paralysis” with three ministers over the past two years.

“For years governments have failed to lead the nation towards a continuous shipbuilding strategy. As a result, the Australian shipbuilding industry is being forced to lay off workers in the absence of a clear direction, depleting our skilled workforce,” he said.

“Industry is in an impossible situation, unable to justify sustaining their workforce while we wait without any clear indication for the future.”

-Additional reporting by AAP

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