Japan bid favorite as Canberra mulls decision
GEOFF HISCOCK, Contributing writer
SYDNEY -- Japan, Germany and France are likely to know within the next few months which is the winner of one of the world's biggest defense projects -- the mid-2030s replacement of the Australian submarine fleet.
Industry experts say Japan has emerged as the frontrunner to partner the South Australian shipbuilder ASC in designing and building between eight and 12 large conventional submarines to replace the six Collins-class vessels in the Australian fleet, each of which displaces 3,100 metric tons. However, the French and German bidders have not given up hope, and vigorous lobbying is continuing.
The project is the largest in Australia's defense history, valued at $50 billion Australian dollars over the next 50 years, if ongoing maintenance work is included. The three contenders submitted their proposals before a Nov. 30 deadline, and the Australian Defense Department is expected to make a recommendation by March. A final decision is likely from mid-year onwards.
Canberra has said it will not rush the process, but Graeme Dunk, executive manager of the Australian Business Defense Industry group of equipment suppliers, said his "money was on Japan" being chosen. Dunk said all the contenders were technically capable of delivering the project, but Japan offered the best strategic outcome for Australia.
If Japan gets the nod for a design based on its Soryu class submarine, which displaces 4,200 metric tons, it would be its first big military export project. Dunk said this would add an element of domestic political risk that would have to be factored into the Australian government's competitive evaluation process, which began early last year. In contrast, he said, France and Germany had a track record of supplying submarines to overseas customers.
Germany's ThyssenKrupp Marine Systems is offering a design based on an enlarged version of its Type 216 concept, while DCNS, a French state-controlled naval equipment manufacturer that is 35% owned by Thales, the French defense equipment group, is pitching a diesel-electric version of its Barracuda nuclear-powered submarine, which displaces 4,000 metric tons. The Japanese government's bid is in partnership with Mitsubishi Heavy Industries and Kawasaki Shipbuilding Corp., the joint builders of the Soryu class for the Japanese Maritime Self-Defense Force.
Peter Jennings, a former senior Australian defense official who is now executive director of the Australian Strategic Policy Institute think tank, said it was a "relatively even competition" in which all three contenders were equipped to deliver design options that suited the Royal Australian Navy.
He said that while the U.S. wanted Australia to have a viable submarine capacity and would be a "critical partner" in the selection and design of weapons systems and sensors, Washington's view was that the design choice was a matter for Australia. He said the project would be a trilateral undertaking in which the U.S., Australia and the successful bidder would have to work together closely.
One external risk factor is China's potentially unfavorable reaction to a Japanese win. While China is Australia's biggest trading partner, it has been critical of the close military ties between Australia, the U.S. and Japan. Former Australian Prime Minister Tony Abbott described Japan as "Australia's closest friend in Asia" and indicated during a 2014 visit there that he favored Japan's submission for the submarine deal. However, Chinese Foreign Minister Wang Yi said later the same year that while China might not be Australia's closest friend, it could surely become its "most sincere friend."
Malcolm Turnbull, who took over from Abbott as prime minister in September 2015, has expressed no preference on a submarine partner. Most experts think the U.S. favors a Japanese deal, however. Two days before Turnbull met U.S. President Barack Obama at the White House on Jan. 19, Michael Green and Andrew Shearer of the Washington-based Center for Strategic and International Studies wrote in The National Interest magazine that senior U.S. officials and military officers had no doubt of the "superior capability" of the Soryu submarines. Green and Shearer said U.S. officials saw long-term strategic benefit to the U.S. and the Asia-Pacific region in "an interoperable fleet of Australian and Japanese conventional submarines equipped with U.S. combat systems."
Dunk also said he believed the U.S. was "quite keen" to see Japan and Australia work together on the submarine project. "It would consolidate strategic partnerships in the Asia-Pacific region," he said.
In Jennings' view, China accepts that Australia needs submarines and will have an overseas design partner that might be Japan. "There may be the usual anonymous comments in the Global Times [an English language Chinese newspaper known for reflecting official views], but China will not risk its own relationship with us by being too vociferous," he said.
China's only direct official comment on the submarine competition came in June 2014, when a Chinese foreign ministry spokesperson, replying to a question on potential Japanese involvement, said China "always maintains that countries in the Asia-Pacific should carry out friendly cooperation without harming the interests of the third party, and jointly safeguard regional stability, peace and prosperity."
Australia's Collins class submarines were built in South Australia by the Australian Submarine Corporation (now ASC) between 1990 and 2003 to a design derived from the Swedish shipbuilder Kockums' smaller Vastergotland class.
They suffered from construction flaws, delivery delays, cost over-runs and heavier-than-expected maintenance requirements, but are now regarded as highly capable vessels. Kockums, now owned by Saab, was not invited to bid for the replacement project, but is expected to have a role in extending the life of the Collins class submarines beyond the mid-2020s into the 2030s.
The Collins class vessels are among the largest conventionally powered submarines in the world, with a surface range of 21,300km at 10 knots. The Australian government has stipulated that the replacement boats must have similar range and endurance, and superior sensor and stealth performance. It will use the U.S.-built AN/BYG-1 combat system, used by the U.S. navy in its submarines.
Australian Defense Minister Marise Payne said on Nov. 30 that the competitive evaluation process would help inform the government's decision on its choice of international partner for what it calls the Future Submarine project. "Through this process, we will assess the ability of the participants to work closely with us," she said. "Once the partner is selected, there will be about three years of further development work before we finalize the Future Submarine's capability and cost."
All three bidding countries have lobbied hard for the contract. During a visit to Australia in November, Japanese Defense Minister Gen Nakatani said choosing the Japanese bid would provide a model for strategic cooperation between Australia, the U.S. and Japan, and would contribute to ensuring freedom of navigation in the Asia-Pacific.
In the same month, during a visit to Germany by Turnbull, German Chancellor Angela Merkel said her government supported the private TKMS bid, which she described as "attractive" in terms of the company's ability to produce in Australia.
The French bid includes a proposed government-to-government agreement between France and Australia. The DCNS "Shortfin Barracuda" bid breaks new ground, replacing the nuclear reactor in the Barracuda design with a conventional diesel-electric engine and batteries. DCNS is confident it can deliver such a vessel quickly and cheaply.
Although the competitive evaluation process requires the bidders to offer three options -- design and build overseas, a mix of overseas and Australian production, or an all-Australian build -- the expectation is that all the submarines will be built in Australia by ASC and the chosen foreign partner.
According to Jennings, the competitive evaluation process has been successful, with the "great result" that three viable partners are competing to deliver the best capability, cost and industry outcomes. He said it was not simply a "rigid exercise in cost control," but a long-term collaborative effort between government and industry.
In keeping with Australian public sentiment, the submarines will not be nuclear-powered, though that is not seen as a great performance handicap given Australia's requirements -- conventional submarines have a more limited range than nuclear-powered boats, but can be more difficult to detect. In an August 2002 exercise off Hawaii, the Collins-class HMAS Sheean quietly maneuvered into position against its mock adversary, the nuclear-powered fast attack submarine USS Olympia, and "killed" the much larger American vessel with a simulated torpedo attack.
Dunk said that from a technology viewpoint, any of the contenders could do the job. "Culturally, we are used to dealing with European and American suppliers of military equipment. That means there will need to be some bridge-building if Japan gets the nod," he said. Dunk also noted that one consideration for the government was the potential for "leakage" of Australian intellectual property in the stealth and combat system areas to other submarine customers of the bidders. In that sense, he said, Japan was a safer option because it had no other customers.
David Nicholls, executive director of the Submarine Institute of Australia -- the main Australian submarine promotion and research organization -- said the SIA did not see any of the three contenders as a frontrunner, and "operational capability" should be the prime consideration. He noted that the U.S. had said it would be comfortable with whichever partner Australia chooses. Nicholls said a government announcement in the second quarter of 2016 was consistent with other factors, including evaluation of the tender for the combat system integrator and the government's need to hold a federal election by the end of 2016.
Jennings said that all defense equipment decisions in Australia were ultimately political. "Our system is designed to make them that way and, contrary to some perceptions, often delivers great outcomes," he said.