Australian DoD projected $80 billion costs for submarines

Defence officials knew Australia’s new fleet of attack submarines would cost almost $80 billion as early as 2015, despite publicly stating at the time the estimated price tag was $50 billion.

The admission by the Department of Finance was made to a parliamentary inquiry last week, with a Defence spokeswoman telling this masthead it did not disclose the figure for commercial reasons as the tender process had not been completed.

It was revealed in Senate estimates last year that the “out-turn cost” – the actual cost of the build calculated at the end of the project – was estimated to be at least $80 billion. The cost of the 12 new French-designed submarines then blew out this year to $90 billion.

But it has now been revealed the government budgeted for the project to cost $78.9 billion as far back as October 2015. This was the same month Defence officials told a Senate estimates hearing the out-turn cost was $50 billion.

The disclosure was made by the Department of Finance in response to a question on notice from a parliamentary inquiry into Australia’s shipbuilding program.

Opposition defence spokesman Richard Marles said the revelation showed the government had “refused to be upfront about the true cost of the program”.

“There is now evidence which proves the government knew for years there was a $30 billion cost difference between what they knew and what they were telling the Australian public,” he said. “The question here is, why is the government hiding what they knew? Why has the government continued to lie about this for years?”

Marcus Hellyer, a senior analyst at the Australian Strategic Policy Institute, said the revelations suggested the estimates were “deliberately sanitised to take the sting out of it”.

Mr Hellyer said Defence should have provided a band instead of giving an exact estimate that was incorrect.

“One would suspect if they did give a band, the submarines would be $50 billion to $100 billion, and it would be such a huge number it would terrify the Australian public into not wanting to go down that path,” he said.

Australia’s new 12-strong submarines fleet will be built in South Australia, with France’s DCNS winning the $50 billion contract. Courtesy ABC News 24.

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“In front of Senate estimates in sworn testimony, Defence said it was $50 billion. How is the Senate meant to exercise its role of contestability and scrutinising budgets when it is not actually being given anything resembling what Defence thinks the actual number is?”

“I think it’s a poor state of affairs with accountability and disclosure when the Senate itself has been given a completely inaccurate figure.”

The Finance Department also told the parliamentary inquiry last week the estimated cost of Australia’s nine new naval frigates was $9.3 billion higher than had been publicly disclosed by the government in 2018. Defence officials said at the time the frigates would cost $35 billion, but the cost has now been upgraded to $45.6 billion.

Finance has disclosed the actual estimate in 2018 was $44.3 billion.

A spokeswoman for Defence said it did not publicise the actual provision of money at the outset of any acquisition project to protect its commercial position in negotiations.

“The costs for both the Future Submarine and Future Frigate have not changed since government approval after taking into account foreign exchange rate adjustments,” the Defence spokeswoman said.

“In the 2016 Defence white paper, the government publicly advised the Future Submarine program would involve an investment of greater than $50 billion. Similarly for the Future Frigate program, the 2017 Naval Shipbuilding Plan outlined its plan would involve an investment of greater than $35 billion, noting for both programs the need at the time to protect the commercial position of the Commonwealth during negotiations.”

The Australian government selected French company DCNS, now Naval Group, in 2016 to build Australia’s new attack-class submarines to replace its ageing Collins-class fleet.

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