Comment: The Australian Submarine Corporation's hands are tied

ASC interim chief executive Stuart Whiley reacts at a Senate inquiry at Parliament House in Canberra. (AAP)

There is so much talk about $60 billion submarine project at the moment it is hard to keep up, writes Catherine McGrath.

Yesterday at a Senate committee hearing the Australian Submarine Corporation found itself being chastised by Liberal Senator Sean Edwards for not doing enough to chase up information about new rules for the so-called “competitive evaluation process” from either the defence minister or the Defence Department.

“Have you reached into the defence minister's office and sought him out?” Senator Edwards asked the ASC’s Stuart Whiley.

“No” was the answer.

The Senator wanted ASC to actively ask the government for more information. 

He said ASC should be “kicking the door down” asking about the process.

“Have you reached into the defence minister's office and sought him out?” Senator Edwards asked the ASC’s Stuart Whiley. “No” was the answer.

Senator Edwards was the one who extracted the commitment from Prime Minister Tony Abbott in the run up to the leadership spill motion that the ASC would be able to bid for work on the submarine project.

It is a crucial issue in South Australia.  

It was believed at first the prime minister was offering an open tender but in later information Mr Abbott described it as a “competitive evaluation process.”

Confusing? Yes! The government hasn’t yet been able to clear it up.

Defence Minister Kevin Andrews says he will have more information and detail later.

In the meantime the ASC is left wondering and, as a government-owned company, it is a bit hard for it to kick down the government’s door asking for answers. If it did that it would be unlikely to get a solid or helpful response from their owner, the Department of Finance.

“For a company in the ASC’s position there is quite a fine line between following direction from government and being proactive. They are unlikely to be thanked for trying to hurry the government along on such a big decision," Dr Andrew Davies, the country’s foremost submarine expert, says.

"Confusing? Yes! The government hasn’t yet been able to clear it up."

Dr Davies, a senior analyst from the Australian Strategic Policy Institute is an expert on tendering, capability and strategy and earlier worked for the Department of Defence itself.

Dr Davies was appointed by the defence minister in 2014 as a member of the expert panel advising on the development of the next Defence White Paper. He also teaches strategic studies at the Australian National University. There is no one more knowledgeable about this issue in Australia than he. His views are worth taking into account right now.

On the role of the ASC now, Dr Davies says this:

“ASC should be putting together an information package for the government for the competitive evaluation process and talking to all potential bid partners. But they can’t do that unless they get approval from the Department of Finance.

"It is likely as the government’s thinking clears up the ASC will get a firm direction," Dr Davies says. 

"For a company in the ASC’s position there is quite a fine line between following direction from government and being proactive," Dr Davies says. 

So effectively, for the moment, the ASC has to sit tight.

In Thursday’s Committee hearing, ASC’s Stuart Whiley said a bid for the submarine project couldn’t go in at this point as they have “no information to prepare a bid against.”

So tender or no tender? What is going on and should the ASC be bidding if the Europeans and the Japanese are getting into the process?

It is hard to bid when the government hasn’t determined the size or scope of the submarine it wants. Further the ASC wouldn’t be designing its own submarine it would be doing (if successful) some of the work for one of the international bidders.

The government has made it clear it favours the Japanese submarine but there is no guarantee that it can buy from the Japanese as who have never sold defence equipment internationally before. There are many issues to resolve including what does Japan do about its top secret design technology that it wants to protect? Will it pass that information over to Australia?

The Europeans have been lobbying hard for years. All potential bidders have offices here. The contenders from France were the last to get to town. They arrived in Canberra last year and set up a two-person office. They all want to be part of this defence contract. Not many countries are spending big on defence these days and all these nations want to be a part of it.

There has been little clarity around the process. The Swiss, German and French companies are now positioning themselves in the belief that if the Japanese plan falls over one of them could become the “compromise” choice.

Still facing criticism over the process, Kevin Andrews said on Thursday there had never been an open tender in earlier submarines programs.

"There are many issues to resolve including what does Japan do about its top secret design technology that it wants to protect? Will it pass that information over to Australia?"

“I am advised by defence there has never been an open tender for a submarine at any stage anywhere,” he said.

Kevin Andrews is right but it is important to say that the process this time around for the submarines has been substantially different from the last.

For the Collins class submarines there was what is called a Request for Information (RFI) where potential bidders gave information about what they could build. That was followed by a Request for Tender (RFT) where companies/countries were invited by the government to bid and provide more detailed information. Seven companies or countries were asked to bid for the Collins in a process that was effectively a “restricted” tender.

The Collins tender was won by the Swedish company Kockums with the submarines built by the Australian Submarine Corporation in Adelaide.

It is those jobs at the ASC in Adelaide that government members like Senator Sean Edwards are trying desperately to protect. While in the South Australia State Government is trying hard itself as well.

A lot of this issue as discussed in Australia is dominated by the question of jobs in Australia.

Defence strategy is crucial also. Andrew Davies is clear on that too:

“Ultimately what is important here is getting a submarine able to operate well into the 21st century, because surface ships will find the environment increasingly hazardous to operate in.”

That discussion is crucial and hasn’t had the public attention it deserves.

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