Australia’s Hunter-class Frigate Procurement Process Was Flawed While Australia Faces Unprecedented China Tensions

A review into Australia’s procurement of the Hunter-class frigate has found serious issues with the procurement process that led to the BAE Systems Type 26 design being selected for the Royal Australian Navy’s future frigates.

While the review criticizes the Hunter-class Frigate procurement process, it also makes clear that BAE Systems’ proposal best fulfilled the Anti-Submarine Warfare (ASW) requirements of the program as they were set out at the time. 

China Tensions

Australia, with only 26 million people, has another problem all of its own: A strained political and economic relationship with the giant in the Asia-Pacific neighborhood­­­­­: China.

Prime Minister Albanese may have initially thought he could take a more open and conciliatory approach, but China’s aggressive foreign policy has made it unpopular with Australians. Beijing’s use of diplomatic and economic coercion to punish Australia for leading the call for an investigation of the Covid-19 origins turned more Australians against China. While mutual economic sanctions and low public opinion persist, the relationship has been relatively quiet in the seven months since the Albanese government took office. Some of this was due to  Beijing’s own interest in keeping its foreign affairs quiet in the lead-up to an important congress of the Chinese Communist Party in October. With that event over, tensions could resume.

The prime minister and Chinese President Xi Jinping met for 30 minutes on November 15, 2022, at the G20 summit in Bali, Indonesia. Both leaders described the talks as cordial and frank while calling for improved relations. The Albanese government is trying to strike a balance between supporting the United States and Western countries in their stricter approach to China while also trying to show it has agency in partnering with middle powers.

Frigate Blunder

According to the review the Type 26 was the only design out of the shortlisted three that met both ASW and mission system requirements. The two competing bids, from Navantia with a modified F100 and Fincantieri with modified Bergamini FREMM, each only met one of the two requirements. 

One of the non-BAE designs, the identity of which has not been disclosed, had its ASW capabilities judged as “marginal” with the caveat that it was closer to the “not meeting requirements” end of the spectrum.

Navantia Australia proposed a version of the F100 frigate for the Hunter class requirement. (Navantia Australia)
Navantia Australia proposed a version of the F100 frigate for the Hunter class requirement. (Navantia Australia)

Naval News understands that this was likely Navantia’s proposal, based on the F100, which utilized Combined Diesel or Gas (CODOG) propulsion arrangement where the engines directly power the propeller shaft. In comparison, both the Bergamini-type FREMM and Type 26 used variants of a Combined Diesel Electric and Gas (CODLAG) system, wherein the shaft can be driven by an electric motor isolated from the hull.

All three designs were described as carrying “medium risk” in relation to their mission and ASW systems, with the exception of the Type 26, which had its ASW capabilities described as “low risk” and mission systems as “medium risk”.  

Requirement BAE Systems Competitor One Competitor Two 
Mission Systems Meets Requirements, Medium Risk Marginal, Medium Risk Marginal (closer to meets requirements), Medium Risk 
ASW Performance Meets Requirements, Low risk Meets Requirements (closer to marginal), Medium Risk Marginal (closer to does not meet requirements), Medium Risk 
Head Contract Compliance Marginal, Medium Risk Marginal, Low Risk Marginal, Low Risk 
Pricing and Payment Arrangements Does Not Meet Requirements, High Risk Marginal, High Risk Marginal, High Risk 
Financial and Corporate Viability, Capability and CapacityMeets Requirements, Medium Risk Meets Requirements, Low Risk Meets Requirements, Low Risk 

An evaluation of the three shortlisted proposals (Hunter Class Frigate Procurement Review).

A Flawed Procurement Process: Audit Review

While the review supports BAE Systems’ claim that the Hunter-class frigate is one of the most advanced ASW-combatants in the world, it doesn’t pull any punches with respect to the procurement and evaluation process that led to it being selected. The BAE proposal, according to the review, carried a “medium” level of contract and compliance risk, compared to ratings of “low” for the other tenderers.

None of the proposals fit within the originally allocated budget and all were assessed as being at a “high risk” of deviating from the planned pricing and payment arrangements. The BAE proposal, however, “did not meet” the basic pricing and payment requirements laid out in the tender. 

According to the review though, this information was not accurately conveyed to the National Security Committee of Cabinet (NSC), which is responsible for signing off all major Defence procurement decisions. While the details aren’t clear, due to redactions in the version of the review released publicly, it appears that the Defence submission to the NSC effectively argued that the Hunter was the best technical choice out of a field of over-budget contenders. 

What the submission failed to do, according to the review, was to take a “holistic view” of the “compliance and risks of each tender” especially in regard to their relative merit in terms of affordability and schedule. In particular, the review notes, the submission to cabinet didn’t consider how each design measured up against the requirement to build nine ships commencing construction in 2022. 

“ Key documented outcomes of the tender process reflecting the evaluation of tenders under a documented process by designated personnel were not included in the second pass cabinet submission. These included compliance and risk assessments with respect to project objectives including delivering nine ASW frigates based on a MOTS design with minimum change, commencing prototyping in 2020 and construction in 2022, and affordability.” 
– Hunter Class Frigate Procurement Review

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