In our previous post, we considered the likelihood of the US providing Australia with Virginia-class submarines this decade. Doing so would require the US Navy to give up two of its nuclear-powered attack submarines (SSNs) at a time it is facing a capability crunch of its own. While anything is possible, it seems unlikely, particularly when we also consider that Australia will also need to demonstrate that it can exercise responsible stewardship of the nuclear capability.
What, then, can Australia do to accelerate the development of a usable SSN capability? To really unpack that question, we first need to have an uncomfortable conversation about sovereignty. The term is almost omnipresent in discussions of defence capability and industry. In 2017, the previous government released 10 sovereign industrial capability priorities, which later grew to 14. It also announced a sovereign guided-weapons enterprise. But what people mean by sovereignty, what an acceptable level of sovereignty is (if there really is such a thing as partial sovereignty), and how we are to achieve it vary considerably.
The bottom line is that there are very few military capabilities in which Australia is truly sovereign. One of the original 10 sovereign industrial capability priorities was "Collins Class submarine maintenance and technology upgrade" (although Defence still hasn't released an industry and implementation plan for it). When measured by the percentage of Australian components used in the sustainment of the Collins-class, a high degree of sovereignty has been achieved. But its Mark 48 heavyweight torpedo is American, and if we were denied resupply of torpedoes in a conflict, that capability would degrade quickly.
There was little that was truly sovereign about the construction of the Collins even though it was done in Adelaide; we used an overseas design and most of the major components came from overseas. Similarly, the Collins life-of-type extension will install replacement diesel generators and main motors sourced overseas.
We are constantly making decisions about where we can accept dependence or reliance and where we want to spend the money, time and effort to achieve greater levels of sovereignty or self-reliance. The Royal Australian Air Force has felt no need to have a sovereign aircraft design and construction industry, instead preferring buying off the shelf and putting its effort into local sustainment. It's an approach that has worked well.
In maritime capabilities, we've built ships here (on and off), but there's no evidence to say that we need to do that in order to sustain them here. While local construction can be helpful for establishing local sustainment (although we've struggled to sustain some locally built vessels), the evidence would suggest that the additional cost of local construction has not led to commensurate sustainment savings.
When we look at SSNs, it's important to accept up front that this is a capability where we will have relatively low levels of sovereignty. Certainly, we should aim for a level of sovereignty that enables an Australian captain to carry out the intent of the Australian government. We should aim for the ability to do as much sustainment as possible in Australia, including deep maintenance. It's unacceptable to have to return a boat to the parent nation whenever maintenance is needed. But we also need to accept that we will always be dependent on supply chains back to the submarine's parent nation.
One of the key questions the multi-agency nuclear-powered submarine taskforce will need to address is whether constructing SSNs here provides any benefits to the sovereign operation and sustainment of the capability in return for the significant increase in cost, schedule and overall risk that will inevitably arise from establishing local production. Our own sense is that any benefits are far outweighed by the costs.
Ultimately, this is a capability that can only be delivered, operated and sustained with a high level of ongoing cooperation with the parent navy and nation. Once we accept that, we can explore how conducting the SSN enterprise as a joint one between Australia, the UK and the US enhances the combined military capability of all three countries—which is, after all, the intent of AUKUS.
Before committing to build all of the SSNs here, we need to examine industrial strategies that better meet the intent of AUKUS. Once we open the aperture of the lens with which we are scrutinising possible industrial strategies to look beyond the approach of building all boats in Australia, new options come into view that can potentially accelerate the production schedule, increase alliance capability and, importantly, generate enduring industrial benefits for Australia.
The first of these options is the concept we discussed in our previous post of building the first boats on an existing production line in the parent country and then building the remaining boats in Australia. That has many benefits. From an industrial perspective, it allows the shipyard workforce to be trained by working in mature, functioning shipyards. It gets submarines delivered earlier. If we accept that the initial boats will primarily have a training function for the first five or so years, early boats can help develop a uniformed workforce on the job. It can also help develop the "nuclear mindset" necessary for a mature SSN capability.
In the early years, novel approaches to command and crewing will be needed. The first boat may even need to remain a USN boat until Australia's navy meets the high bar of nuclear stewardship. There will no doubt be challenging legal, political and cultural issues to tackle. But an extended transition period working with a small number of co-crewed SSNs will help mitigate the shock of the new. Can the Australian navy really move straight from an ageing Collins capability with a relatively small workforce to a conveyor belt of SSNs being delivered on a two- or three-year drumbeat? Such a rapid transition will likely break the submarine force.
When we open the aperture even further, another approach comes into view, which we termed "a joint submarine enterprise". This approach starts by accepting that Australia's SSN enterprise will never be separate from the parent nation's. Consequently, rather than inefficiently seeking to duplicate the entire enterprise, it pursues a division of labour that benefits both nations. This approach would consciously avoid the cost, schedule and risk overhead of building boats here. Noting that the intent of the submarine taskforce appears to be acquiring precisely the same design as that operated by the parent navy, building here only introduces design risk since there will inevitably be modifications introduced into the design (as the sorry saga of the Hunter-class frigate forcefully reminds us).
That doesn't mean Australian industry misses out. First, we could adopt a joint strike fighter approach of supplying components, sub-assemblies or even modules into overseas production lines. That involves Australian industry in the construction of a fleet of more than 60 boats (if we go with the US), rather than eight. This approach also benefits the US by expanding its own effective production capabilities. It also avoids the impossibly contorted gymnastics involved in trying to establish a viable continuous build program around a fleet of only eight boats. If those Australian-made components are ones that are essential to the sustainment of the boat, even better.
And that gets us to the key point. In an environment where our human, financial and industrial resources are limited, does it make sense to dilute them by splitting them between construction and sustainment? Sovereignty rests in our ability to sustain the boats, so that should be the priority. Even that will create huge industrial demand. Our earlier analysis noted that a deep-maintenance activity on a Virginia-class submarine was nearly three times as much effort as a Collins full-cycle docking. Indeed, the sustainment of a fleet of eight SSNs would likely involve more work than the build of the Attack-class and the sustainment of the Collins-class combined. Put another way, if we are trying to both build and sustain SSNs here, we may fall short of being able to do either.
Another element of the JSF approach is that Australia has become a regional maintenance hub for the international F-35 fleet. By taking this approach with SSNs, we can provide significant value to our AUKUS partners. The USN is facing a huge maintenance backlog for its nuclear submarine force. By focusing Australia's industrial efforts on sustainment, we not only avoid adding to that problem, but can potentially help to reduce it. Again, there are significant, unprecedented issues here around the USN's willingness to have maintenance done at an overseas yard, but if it means that its boats spend less time out of service, then it would be a win for all partners.
Co-written with Andrew Nicholls, a former director in KPMG Australia's Finance Strategy and Performance Division and a former senior official in the Australian Department of Defence.
